<PAGE>
As filed with the Securities and Exchange Commission on October 30, 1996
Registration No. 33-97598
811-9102
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 1 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 4 /X/
(CHECK APPROPRIATE BOX OR BOXES)
FOREIGN FUND, INC.*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
C/O PFPC INC. 19809
400 BELLEVUE PARKWAY (Zip Code)
WILMINGTON, DELAWARE
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (302) 791-3239
NATHAN MOST
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
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)(1)
/X/ on January 2, 1997 pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) 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 HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE RULE 24f-2 NOTICE AND OPINION FOR THE REGISTRANT'S FISCAL YEAR
ENDED AUGUST 31, 1996 WAS FILED ON OCTOBER 25, 1996.
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* Prior to the effectiveness of this post-effective amendment, the
Registrant expects to change its name to "WEBS Index Fund, Inc."
Accordingly, most references to Registrant herein have been changed to
reflect the expected new name.
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
N-1A ITEM NO. LOCATION
PART A
Item 1. Cover Page. . . . . . . . . . . . Cover Page
Item 2. Synopsis. . . . . . . . . . . . . Summary Expenses
Item 3. Condensed Financial Information . Financial Highlights
Item 4. General Description of
Registrant. . . . . . . . . . . . Cover Page; WEBS Index Fund, Inc.
and its Investment Objective;
Investment Policies; General
Information
Item 5. Management of the Fund. . . . . . Summary Expenses; Management of
the Fund
Item 6. Management's Discussion of
Fund Performance. . . . . . . . . Not Applicable
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
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
Auditors
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
<PAGE>
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.
<PAGE>
[LOGO]
WORLD EQUITY BENCHMARK SHARES-SM-
WEBS INDEX FUND, INC.
WEBS Index Fund, Inc. (the "Fund") is an "index" fund consisting of separate
series (each, a "WEBS 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 WEBS Index Series offered by this Prospectus
are the Australia WEBS Index Series, the Austria WEBS Index Series, the Belgium
WEBS Index Series, the Canada WEBS Index Series, the France WEBS Index Series,
the Germany WEBS Index Series, the Hong Kong WEBS Index Series, the Italy WEBS
Index Series, the Japan WEBS Index Series, the Malaysia WEBS Index Series, the
Mexico (Free) WEBS Index Series, the Netherlands WEBS Index Series, the
Singapore (Free) WEBS Index Series, the Spain WEBS Index Series, the Sweden WEBS
Index Series, the Switzerland WEBS Index Series and the United Kingdom WEBS
Index Series.
The investment objective of each of the initial seventeen WEBS Index Series
is to seek to provide investment results that correspond generally to the price
and yield performance of publicly traded securities in the aggregate in
particular markets, as represented by a particular foreign equity securities
index compiled by Morgan Stanley Capital International ("MSCI"). THE MSCI
INDICES (AS DEFINED HEREIN) UTILIZED BY THE FUND REFLECT THE REINVESTMENT OF NET
DIVIDENDS (EXCEPT FOR THE MSCI MEXICO (FREE) INDEX UTILIZED BY THE MEXICO (FREE)
WEBS INDEX SERIES, WHICH REFLECTS THE REINVESTMENT OF GROSS DIVIDENDS).
The shares of common stock of each are sometimes referred to as "World
Equity Benchmark Shares-SM-" or "WEBS-SM-". The WEBS are listed for trading on
the American Stock Exchange, Inc. (the "AMEX"). The non-redeemable WEBS trade on
the AMEX during the day at prices that differ to some degree from their net
asset value. There can be no assurance that an active trading market will
develop or be maintained for the WEBS. See "Investment Considerations and Risks"
for a discussion of certain investment considerations and risks that should be
considered by potential investors.
The Fund issues and redeems WEBS of each WEBS Index Series only in
aggregations of a specified number of shares (each, a "Creation Unit") at net
asset value. EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE
SECURITIES OF THE FUND.
The Fund is managed and advised by Barclays Global Fund Advisors (the
"Adviser"). PFPC Inc. (the "Administrator") provides certain administrative
services to each WEBS Index Series of the Fund. Funds Distributor, Inc. (the
"Distributor") serves as the principal underwriter and distributor of the Fund's
shares. The Distributor does 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 January 2, 1997, 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 WEBS Index Series' address is WEBS Index Fund,
Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809.
DISTRIBUTOR:
FUNDS DISTRIBUTOR, INC.
INVESTOR INFORMATION: 1-800-810-WEBS(9327)
PROSPECTUS DATED JANUARY 2, 1997
<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
-----
<S> <C>
Prospectus Summary......................................................................................... 3
Summary of Fund Expenses................................................................................... 6
Financial Highlights....................................................................................... 13
The Fund and its WEBS Index Series......................................................................... 15
WEBS Index Fund, Inc. and its Investment Objective....................................................... 15
World Equity Benchmark Shares: "WEBS".................................................................... 16
Who Should Invest?....................................................................................... 16
Investment Policies...................................................................................... 16
Implementation of Policies............................................................................... 18
Investment Limitations................................................................................... 20
The Benchmark MSCI Indices Utilized by the WEBS Index Series............................................. 21
Management of the Fund................................................................................... 29
Exchange Listing and Trading of WEBS..................................................................... 31
Investment Considerations and Risks...................................................................... 32
Determination of Net Asset Value......................................................................... 34
Creation Units........................................................................................... 35
Purchase and Issuance of WEBS in Creation Units.......................................................... 36
Redemption of WEBS in Creation Units..................................................................... 36
Dividends and Capital Gains Distributions................................................................ 37
Tax Matters.............................................................................................. 37
Book-Entry Only System................................................................................... 39
Performance.............................................................................................. 40
General Information...................................................................................... 40
Available Information.................................................................................... 41
</TABLE>
------------------------
"World Equity Benchmark Shares" and "WEBS" are service marks of Morgan
Stanley Group Inc. used under license by the Fund. "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 WEBS Index
Series........................... WEBS Index Fund, Inc. (the "Fund") is an "index" fund
consisting of separate series (each, a "WEBS Index
Series"), the Australia WEBS Index Series, the Austria
WEBS Index Series, the Belgium WEBS Index Series, the
Canada WEBS Index Series, the France WEBS Index Series,
the Germany WEBS Index Series, the Hong Kong WEBS Index
Series, the Italy WEBS Index Series, the Japan WEBS
Index Series, the Malaysia WEBS Index Series, the Mexico
(Free) WEBS Index Series, the Netherlands WEBS Index
Series, the Singapore (Free) WEBS Index Series, the
Spain WEBS Index Series, the Sweden WEBS Index Series,
the Switzerland WEBS Index Series and the United Kingdom
WEBS Index Series.
Investment Objective of the WEBS
Index Series..................... The investment objective of each of the WEBS Index
Series is to seek to provide investment results that
correspond generally to the price and yield performance
of publicly traded securities in the aggregate in
particular markets, as represented by a particular
foreign equity securities index compiled by Morgan
Stanley Capital International ("MSCI"). Such indices are
referred to herein as "MSCI Indices". 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) WEBS INDEX SERIES, WHICH
REFLECTS THE REINVESTMENT OF GROSS DIVIDENDS).
WEBS.............................. The shares issued in respect of each WEBS Index Series
are referred to as "World Equity Benchmark Shares" or
"WEBS". WEBS of a WEBS 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............................. The WEBS have been listed for secondary market trading
on the American Stock Exchange. A "round lot" of WEBS is
100 shares. There can be no assurance of this price
range or that an active trading market will develop or
be maintained for WEBS of a particular WEBS Index
Series.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
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 WEBS 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. Barclays Global Fund Advisors is the Adviser
to the Fund and, subject to the supervision of the Board
of Directors of the Fund, is responsible for the
investment management of each WEBS Index Series.
ADMINISTRATOR. PFPC Inc. is the Administrator of the
Fund, and performs 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 Com-
pany serves as the Custodian for the cash and portfolio
securities of each WEBS Index Series, as well as Lending
Agent of the portfolio securities of each WEBS Index
Series.
</TABLE>
4
<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 WEBS INDEX 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, OR PROMOTED BY
MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY MEMBER OF THE
PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE
WEBS OF ANY WEBS INDEX SERIES PARTICULARLY OR THE ABILITY OF THE INDICES
IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS
THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN
STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK
("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO
MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND
CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX SERIES OR THE ISSUER
THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS
OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX SERIES OR THE OWNERS OF THE WEBS OF
ANY WEBS INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR
CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN
STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS
RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN, THE DETERMINATION OF THE TIMING
OF, PRICES AT, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED
OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY WEBS
INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE
CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, 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.
5
<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 WEBS 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 December, 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 WEBS Index Series would have been as follows: the Australia WEBS Index
Series, $ ; the Austria WEBS Index Series, $ ; the Belgium WEBS
Index Series, $ ; the Canada WEBS Index Series, $ ; the France
WEBS Index Series, $ ; the Germany WEBS Index Series, $ ; the
Hong Kong WEBS Index Series, $ ; the Italy WEBS Index Series,
$ ; the Japan WEBS Index Series, $ ; the Malaysia WEBS Index
Series, $ ; the Mexico (Free) WEBS Index Series, $ ; the
Netherlands WEBS Index Series, $ ; the Singapore (Free) WEBS Index
Series, $ ; the Spain WEBS Index Series, $ ; the Sweden WEBS
Index Series, $ ; the Switzerland WEBS Index Series, $ ; and the
United Kingdom WEBS Index Series, $ . The foregoing values are estimates
based on information available on December , 1996. The actual dollar value on
any particular day will fluctuate and may be greater or less than such values.
6
<PAGE>
<TABLE>
<CAPTION>
AUSTRALIA
WEBS INDEX AUSTRIA WEBS BELGIUM WEBS CANADA WEBS FRANCE WEBS
SERIES INDEX SERIES INDEX SERIES INDEX SERIES INDEX 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*..................
Total Operating Expenses.........
<CAPTION>
HONG KONG
GERMANY WEBS WEBS INDEX ITALY WEBS JAPAN WEBS
INDEX 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)........................... $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*..................
Total Operating Expenses.........
</TABLE>
* Other Expenses are estimates only.
NOTE: ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE AMOUNTS SHOWN.
7
<PAGE>
<TABLE>
<CAPTION>
MEXICO SINGAPORE
MALAYSIA (FREE) NETHERLANDS (FREE)
WEBS INDEX WEBS INDEX WEBS INDEX WEBS INDEX
SERIES SERIES 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*..................
Total Operating Expenses.........
<CAPTION>
SWITZERLAND UNITED
SPAIN WEBS SWEDEN WEBS WEBS INDEX KINGDOM WEBS
INDEX SERIES INDEX SERIES 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*..................
Total Operating Expenses.........
</TABLE>
* Other Expenses are estimates only.
NOTE: ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE AMOUNTS SHOWN.
8
<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 WEBS 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 WEBS 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 WEBS 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 WEBS Index Series are being purchased pursuant to any one
purchase order except in the case of the Malaysia WEBS 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 WEBS Index Series. The
variable charge represents stamp duty or "put through" fees imposed when
securities are delivered in the local market. The charge for Malaysia is
.30% 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 WEBS 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 WEBS Index Series. The
basic redemption transaction fees are the same no matter how many Creation
Units of a given WEBS 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 does 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
are 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 a WEBS Index Series may pay more in total sales
charges than the economic equivalent of the maximum front-end sales charges
otherwise permitted by the rules of the National Association of Securities
Dealers, Inc.
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
9
<PAGE>
vary from such estimates. See "Purchase and Issuance of WEBS in Creation
Units" and "Redemption of WEBS in Creation Units" in this Prospectus and in
the Statement of Additional Information for an explanation of how these
charges apply.
B. Annual Series Operating Expenses are based on estimated "Other Expenses".
Actual expenses may vary from these estimates and will be affected by, among
other things, the levels of average net assets of a WEBS Index Series and
the Fund. Management fees are paid to the Adviser to provide each WEBS 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
based on assumed average daily net assets of each WEBS Index Series of
$ million. From time to time, PFPC may waive the administration fees
otherwise payable to it or may reimburse the Fund for its operating
expenses. 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.
EXAMPLES OF EXPENSES
(a) WEBS in less than Creation Units are not redeemable. The Fund redeems
Creation Units principally on an in-kind basis for Deposit Securities. See
"Redemption of WEBS in Creation Units" herein and in the Statement of
Additional Information. 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
10
<PAGE>
following expenses on a $1,000 investment (payment with a deposit of Deposit
Securities), assuming (1) a 5% annual return and (2) redemption (delivery of
Deposit Securities), at the end of each indicated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
($) ($)
----------- -----------
<S> <C> <C>
Australia WEBS Index Series................................................................
Austria WEBS Index Series..................................................................
Belgium WEBS Index Series..................................................................
Canada WEBS Index Series...................................................................
France WEBS Index Series...................................................................
Germany WEBS Index Series..................................................................
Hong Kong WEBS Index Series................................................................
Italy WEBS Index Series....................................................................
Japan WEBS Index Series....................................................................
Malaysia WEBS Index Series.................................................................
Mexico (Free) WEBS Index Series............................................................
Netherlands WEBS Index Series..............................................................
Singapore (Free) WEBS Index Series.........................................................
Spain WEBS Index Series....................................................................
Sweden WEBS Index Series...................................................................
Switzerland WEBS Index Series..............................................................
United Kingdom WEBS Index Series...........................................................
</TABLE>
(b) Such an investor would pay the following expenses on the same investment,
assuming no redemptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
($) ($)
----------- -----------
<S> <C> <C>
Australia WEBS Index Series................................................................
Austria WEBS Index Series..................................................................
Belgium WEBS Index Series..................................................................
Canada WEBS Index Series...................................................................
France WEBS Index Series...................................................................
Germany WEBS Index Series..................................................................
Hong Kong WEBS Index Series................................................................
Italy WEBS Index Series....................................................................
Japan WEBS Index Series....................................................................
Malaysia WEBS Index Series.................................................................
Mexico (Free) WEBS Index Series............................................................
Netherlands WEBS Index Series..............................................................
Singapore (Free) WEBS Index Series.........................................................
Spain WEBS Index Series....................................................................
Sweden WEBS Index Series...................................................................
Switzerland WEBS Index Series..............................................................
United Kingdom WEBS Index Series...........................................................
</TABLE>
The examples above illustrate the estimated expenses associated with a
$1,000 investment in a Creation Unit of WEBS on an in-kind basis over periods of
1 and 3 years, based on the expenses in the
11
<PAGE>
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 WEBS Index Series
expenses or performance, both of which may vary. The expenses associated with a
$1,000 investment in WEBS include a pro rata portion of shareholder transaction
expenses associated with the purchase or sale of a Creation Unit, which would
have been valued as of December , 1996 at between $ and $ ,
depending on the WEBS Index Series, assuming for this purpose that the net asset
value of a Creation Unit was the same as the value of the Deposit Securities as
of such date. See the second paragraph under Summary of Fund Expenses.
12
<PAGE>
FOR THE PERIOD MARCH 12, 1996* THROUGH AUGUST 31, 1996
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following financial highlights for each WEBS Index Series have been
derived from the financial statements of the Fund for the fiscal period ended
August 31, 1996. The financial highlights for the fiscal period ended August 31,
1996 have been audited by Ernst & Young, LLP, independent auditors, whose report
on the financial statements and financial highlights of the Fund is incorporated
by reference in the Statement of Additional Information. The tables should be
read in conjunction with the financial statements and related notes incorporated
by reference in the Statement of Additional Information. Further information
about the performance of the Fund is available in the annual report to
shareholders, which may be obtained by calling the Distributor.
<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>
Per Share Operating
Performance
Net asset value,
beginning of period
(1)................... $ 9.95 $ 10.91 $ 14.92 $ 10.17 $ 12.42 $ 13.23 $ 12.83 $ 13.62 $ 14.79
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Investment
Income/(loss) (+)..... 0.10 0.04 0.40 0.04 0.17 0.06 0.15 0.25 (0.07)
Net realized and
unrealized gain/(loss)
on investments,
foreign currency
related transactions,
and translation of
other assets and
liabilities
denominated in foreign
currencies (1)........ 0.29 (0.41) 0.36 0.43 0.45 0.47 0.27 0.31 (0.39)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net
increase/(decrease)
in net assets
resulting from
operations.......... 0.39 (0.37) 0.76 0.47 0.62 0.53 0.42 0.56 (0.46)
Less distributions
Dividends from net
investment income..... (0.08) (0.02) (0.54) (0.03) (0.09) (0.03) (0.13) (0.14) --
Dividends from excess
of net investment
income................ (0.05) (0.01) (0.09) (0.01) (0.01) (0.01) (0.02) (0.03) --
Distributions from net
realized capital
gains................. (0.02) (0.03) (0.06) -- 0.00** -- (0.01) (0.14) --
Distributions from
excess of net realized
gains................. -- -- -- 0.00** -- (0.01) -- -- --
Return of capital...... (0.04) (0.08) -- 0.00** (0.21) (0.07) (0.04) (0.08) --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions....... (0.19) (0.14) (0.69) (0.04) (0.31) (0.12) (0.20) (0.39) --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
period................ $ 10.15 $ 10.40 $ 14.99 $ 10.60 12.73 $ 13.64 $ 13.05 $ 13.79 $ 14.33
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Investment Return
(2)(4).................. 3.88% (3.39)% 5.01% 4.63% 4.95% 4.00% 3.22% 4.11% (3.11)%
Ratios/Supplemental Data
Net assets, end of
period (in 000's)..... $12,177 $13,520 $ 1,800 $13,776 $22,930 $28,664 $ 7,845 $35,170 $103,164
Ratios of expenses to
average net assets
(3)(5)................ 1.59% 1.56% 2.29% 1.44% 1.84% 1.68% 1.52% 1.43% 1.37%
Ratios of net
investment
income/(loss) to
average net assets
(3)(5)................ 2.18% 0.87 5.67% 0.79% 2.72% 1.00% 2.37% 3.69% (1.01)%
Portfolio turnover
(4)(6)................ 8.84% 9.60% 6.25% 0.00% 0.00% 0.00% 0.00% 19.80% 21.54%
Average commission rate
paid.................. $0.0085 $0.2986 $0.4327 -- $0.3956 -- $0.0007 $0.0046 $0.0152
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on
the first day and a sale at the net asset value per share on the last day of the period reported. Dividends
and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset
value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange. If such waivers had not been made the ratios of
expenses to average net assets and ratios of net investment income/(loss) to average net assets would have
been as follows:
Ratios of expenses
to average net
assets before
waivers (3)......... 1.60% 1.57% 2.30% 1.45% 1.85% 1.69% 1.53% 1.44% 1.38%
Ratios of net
investment
income/(loss) to
average net assets
before waivers
(3)................. 2.17% 0.86% 5.66% 0.78% 2.71% 0.99% 2.36% 3.68% (1.02)%
(6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in
Creation Unit(s).
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
MEXICO SINGAPORE UNITED
MALAYSIA (FREE) NETHERLANDS (FREE) SPAIN SWEDEN SWITZERLAND KINGDOM
INDEX INDEX INDEX INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net asset value, beginning
of period (1).............. $ 13.24 $ 9.95 $ 15.91 $ 12.24 $ 13.28 $ 13.22 $ 12.07 $ 12.14
--------- --------- --------- --------- --------- --------- --------- ---------
Net Investment Income/(loss)
(+)........................ (0.02) 0.00** 0.24 0.04 0.14 0.20 0.08 0.21
Net realized and unrealized
gain/(loss) on investments,
foreign currency related
transactions, and
translation of other assets
and liabilities denominated
in foreign currencies
(1)........................ 0.59 1.59 1.54 (0.86) 0.98 1.67 0.24 1.06
--------- --------- --------- --------- --------- --------- --------- ---------
Net increase/(decrease) in
net assets resulting from
operations............... 0.57 1.59 1.78 (0.82) 1.12 1.87 0.32 1.27
Less distributions
Dividends from net
investment income.......... -- -- (0.14) (0.03) (0.18) (0.23) (0.10) (0.20)
Dividends from excess of net
investment income.......... -- (0.01) (0.01) (0.01) -- (0.07) -- (0.03)
Distributions from net
realized capital gains..... -- -- (0.08) -- (0.13) (0.12) -- 0.00**
Distributions from excess of
net realized gains......... -- -- (0.01) -- -- -- -- --
Return of capital........... (0.01) (0.01) (0.09) -- -- -- -- (0.03)
--------- --------- --------- --------- --------- --------- --------- ---------
Total dividends and
distributions............ (0.01) (0.02) (0.33) (0.04) (0.31) (0.42) (0.10) (0.26)
--------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
period..................... $ 13.80 $ 11.52 $ 17.36 $ 11.38 $ 14.09 $ 14.67 $ 12.29 $ 13.15
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Total Investment Return
(2)(4)....................... 4.28% 15.93% 11.19% (6.73)% 8.45% 14.13% 2.60% 10.41%
Ratios/Supplemental Data
Net assets, end of period
(in 000's)................. $ 9,318 $ 5,759 $ 6,962 $ 9,107 $ 4,227 $ 4,400 $ 6,158 $15,790
Ratios of expenses to
average net assets
(3)(5)..................... 1.58% 1.75% 1.63% 1.56% 1.76% 1.75% 1.82% 1.61%
Ratios of net investment
income/(loss) to average
net assets (3)(5).......... (0.35%) 0.01% 2.93% 0.69% 2.04% 3.05% 1.39% 3.62%
Portfolio turnover (4)(6)... 0.00% 0.00% 4.32% 26.29% 4.73% 5.87% 17.06% 0.00%
Average commission rate
paid....................... -- -- $0.0651 $0.0118 $0.0723 $0.0561 $0.7852 --
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
Total investment return is calculated assuming a purchase of capital stock at net asset value per share
(2) on the first day and a sale at the net asset value per share on the last day of the period reported.
Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at
the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange. If such waivers had not been made the ratios
of expenses to average net assets and ratios of net investment income/(loss) to average net assets would
have been as follows:
Ratios of expenses
to average net
assets before
waivers (3)......... 1.59% 1.76% 1.64% 1.57% 1.77% 1.76% 1.83% 1.62%
Ratios of net
investment
income/(loss) to
average net assets
before waivers
(3)................. (0.36)% 0.00% 2.92% 0.68% 2.03% 3.04% 1.38% 3.61%
(6) Excludes portfolio securities received or delivered as a result of processing capital share transactions
in Creation Unit(s).
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
THE FUND AND
ITS WEBS INDEX SERIES
WEBS INDEX 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.
Seventeen WEBS Index Series of the Fund currently issue shares: the Australia
WEBS Index Series, the Austria WEBS Index Series, the Belgium WEBS Index Series,
the Canada WEBS Index Series, the France WEBS Index Series, the Germany WEBS
Index Series, the Hong Kong WEBS Index Series, the Italy WEBS Index Series, the
Japan WEBS Index Series, the Malaysia WEBS Index Series, the Mexico (Free) WEBS
Index Series, the Netherlands WEBS Index Series, the Singapore (Free) WEBS Index
Series, the Spain WEBS Index Series, the Sweden WEBS Index Series, the
Switzerland WEBS Index Series and the United Kingdom WEBS Index Series. Each of
the Canada WEBS Index Series, the France WEBS Index Series, the Japan WEBS Index
Series and the United Kingdom WEBS 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 WEBS Index Series
is to seek to provide investment results that correspond generally to the price
and yield performance of publicly traded securities in the aggregate in
particular markets, as represented by a particular foreign equity securities
index. Each of the WEBS Index Series 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) WEBS Index Series, which reflects the
reinvestment of gross dividends). See "The Benchmark MSCI Indices Utilized by
the WEBS Index Series" below. Each MSCI Index is a market capital weighted index
of equity securities traded on the principal securities exchange(s) and, in some
cases, the over-the-counter market, of the respective country. The investment
objective of each WEBS Index Series is a fundamental policy and cannot be
changed without the approval of the holders of a majority of the respective WEBS
Index Series' voting securities (as defined in the 1940 Act).
There can be no assurance that the investment objective of any WEBS Index
Series will be achieved. In this regard, it should be noted that the benchmark
indices are unmanaged and bear no management, administration, distribution,
transaction or other expenses or taxes, while each WEBS Index Series must bear
these expenses and is also subject to a number of limitations on their
investment flexibility. The WEBS Index Series utilize a portfolio sampling
technique and do not invest in all of the securities in their respective MSCI
Indices. As a result, a WEBS Index Series' performance will differ from that of
the benchmark MSCI Index to a greater extent than if it invested in all of the
securities in the benchmark. In addition, the MSCI Indices assume that dividends
are received throughout a year ("dividend smoothing") while the WEBS Index
Series record them on the ex date and this can cause the performance of a WEBS
Index Series to diverge from that of the benchmark, particularly over periods of
less than a year. See "Implementation of Policies." In addition, certain WEBS
Index Series are subject to foreign tax withholding at rates different than
those assumed by the relevant benchmark index. See "The Benchmark MSCI Indices
Utilized by the WEBS Index Series". Investing in WEBS of a WEBS Index Series
involves special risks of investing in securities of the relevant foreign
country. For a discussion of certain special considerations and risk factors
relevant to an investment in WEBS, see "Investment Considerations and Risks".
15
<PAGE>
WORLD EQUITY BENCHMARK SHARES: "WEBS"
The shares of common stock, par value $.001 per share, of each WEBS Index
Series are referred to herein as "World Equity Benchmark Shares" or "WEBS".
EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF
THE FUND. The WEBS are listed for trading on the American Stock Exchange, Inc.
(the "AMEX"). The non-redeemable WEBS trade on the AMEX during the day at prices
that differ to some degree from their net asset value. See "Determination of Net
Asset Value", "Exchange Listing and Trading", "Investment Considerations and
Risks" and "Redemption of WEBS in Creation Units".
WHO SHOULD INVEST?
The WEBS of each WEBS 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 WEBS Index Series seek to provide investment results
that correspond generally to the price and yield performance of their respective
benchmark indices.
It is generally recognized that international diversification of an
investment portfolio reduces risk. Many of the foreign equity securities held by
the WEBS Index Series are difficult to purchase or hold, or are, as a practical
matter, not available to retail investors. The 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 WEBS Index Series may be volatile, and investors should be able to
tolerate sudden, sometimes substantial fluctuations in the value of their
investment. No assurance can be given that any WEBS Index Series will achieve
its stated objective and shareholders should understand that they will be
exposed to the risks inherent in international equity investing. Because of the
risks associated with international equity investments, a WEBS Index Series is
intended to be a long-term investment vehicle and is not designed to provide
investors with a means of speculating on short-term market movements. See
"Investment Considerations and Risks".
INVESTMENT POLICIES
The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
each WEBS Index Series of the Fund, utilizing a "passive" or indexing investment
approach, attempts to approximate the investment performance of its benchmark
index by investing in a portfolio of stocks selected through the use of
quantitative analytical procedures. Stocks are selected for inclusion in a WEBS
Index Series in order to have aggregate investment characteristics (based on
market capitalization and industry weightings), fundamental characteristics
(such as return variability, earnings valuation and yield) and liquidity
measures similar to those of the subject MSCI Index taken in its entirety. WEBS
Index Series generally will not hold all of the stocks in their respective
benchmark indices but will typically hold a representative subset of such stocks
selected through the Adviser's application of portfolio sampling techniques.
However, each WEBS Index Series reserves the right to invest in all of the
stocks in its benchmark index and where a WEBS Index Series benchmark index is
comprised of relatively few securities it may do so on a regular basis. In
addition, a WEBS Index Series may hold stocks that are not in the relevant MSCI
Index if the Adviser determines this to be appropriate in light of the WEBS
Index Series' investment objective and relevant investment constraints.
16
<PAGE>
Each WEBS Index Series has the policy to remain as fully invested as
practicable in a pool of equity securities the performance of which will
approximate the performance of the subject MSCI Index taken in its entirety. A
WEBS Index Series will normally invest at least 95% of its total assets in
stocks that are included in the relevant market, and will at all times invest at
least 90% of its total assets in such stocks. A WEBS 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, local currency, forward
currency exchange contracts and Short-Term Investments that are intended to
provide the WEBS Index Series with exposure to such stocks (the WEBS Index
Series will not use such instruments to leverage their investment portfolios).
"Short-Term Investments" are short-term high quality debt securities that
include: obligations of the United States Government and its agencies or
instrumentalities; commercial paper (rated Prime-1 by Moody's Investors
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; and shares of
money market funds (subject to applicable limits under the Investment Company
Act).
A WEBS Index Series will not invest in cash reserves or Short-Term
Investments or utilize futures contracts, options or swap agreements as part of
a temporary defensive strategy to protect against potential stock market
declines. A WEBS Index Series may enter into forward currency exchange contracts
in order to facilitate settlements in local markets, in connection with
positions in stock index futures, and to protect against currency exposure in
connection with its distributions to shareholders, but not as part of a
defensive strategy to protect against fluctuations in exchange rates. See
"Implementation of Policies" for a description of these and other investment
practices of the Fund.
Each WEBS Index Series has a policy to concentrate its investments in an
industry or industries if, and to the extent that, its benchmark index
concentrates in such industry or industries, except where the concentration of
the relevant index is the result of a single stock. As a result of this policy,
a WEBS Index Series will maintain at least 25% of the value of its assets in
securities of issuers in each industry for which its benchmark index has a
concentration of more than 25% (except where the concentration of the index is
the result of a single stock). No WEBS Index Series will concentrate its
investments otherwise. If the benchmark index for a WEBS Index Series has a
concentration of more than 25% because of a single stock (i.e., if one stock in
the benchmark index accounts for more than 25% of the index and it is the only
stock in the index in its industry), the WEBS Index Series will invest less than
25% of its assets in such stock and will reallocate the excess to stocks in
other industries. Changes in a WEBS Index Series' concentration (if any) and
non-concentration would be made "passively" -- that is, any such changes would
be made solely as a result of changes in the concentrations of the benchmark
index's constituents. At the date of this Prospectus, as a result of this
policy, the Austria WEBS Index Series concentrates in the Banking industry, the
Hong Kong WEBS Index Series concentrates in the Real Estate industry, the Mexico
(Free) WEBS Index Series concentrates in the Telecommunications industry, the
Netherlands WEBS Index Series concentrates in the Energy Sources industry, the
Singapore (Free) WEBS Index Series concentrates in the Banking industry, the
Spain WEBS Index Series concentrates in the Utilities (Electrical & Gas) and
Banking industries, the Sweden WEBS Index Series concentrates in the Electrical
& Electronics industry, and the Switzerland WEBS Index Series concentrates in
the Health & Personal Care industry. Since the concentration of
17
<PAGE>
each WEBS Index Series is based on that of its benchmark index, changes in the
market values of the WEBS Index Series' portfolio securities will not
necessarily trigger changes in the portfolio of such WEBS Index Series.
The concentration policy of each WEBS Index Series is a fundamental policy
that may be changed only with shareholder approval. Each of the other investment
policies of each WEBS Index Series is a nonfundamental policy that may be
changed by the Board of Directors without shareholder approval. However,
shareholders would be notified prior to any material change in these policies.
See "Investment Limitations" herein and "Investment Policies and Restrictions"
in the Statement of Additional Information for a listing of limitations on
investment practices that may only be changed with shareholder approval.
IMPLEMENTATION OF POLICIES
A WEBS Index Series generally will not hold all of the issues that comprise
the subject MSCI Index, due in part to the costs involved and, in certain
instances, the potential illiquidity of certain securities. Instead, each WEBS
Index Series will attempt to hold a representative sample of the securities in
the MSCI Index, which will be selected by the Adviser utilizing quantitative
analytical models in a technique known as "portfolio sampling". Under this
technique, each stock is considered for inclusion in the WEBS Index Series based
on its contribution to certain capitalization, industry and fundamental
investment characteristics. The Adviser will seek to construct the portfolio of
each WEBS Index Series so that, in the aggregate, its capitalization, industry
and fundamental investment characteristics perform like those of the subject
MSCI Index. Over time, the portfolio composition of a WEBS Index Series may be
altered (or "rebalanced") to reflect changes in the characteristics of the
subject MSCI Index or with a view to bringing the performance and
characteristics of the WEBS Index Series more in line with that of the relevant
MSCI Index. Such rebalancings will require the WEBS Index Series to incur
transaction costs and other expenses. As noted above, each WEBS Index Series
reserves the right to invest in all of the securities in the benchmark index,
and WEBS Index Series with benchmark indices comprised of relatively few stocks
may do so on a regular basis.
Due to the use of this portfolio sampling technique and the other factors
discussed herein, a WEBS Index Series is not expected to track its benchmark
index with the same degree of accuracy as would an investment vehicle that
invested in every component security of the subject index. The Adviser expects
that, over time, the "expected tracking error" of a WEBS Index Series relative
to the performance of its benchmark index will be less than 5% and that the
tracking error will generally be greater for WEBS Index Series that have
benchmark indices with fewer rather than greater numbers of component stocks. An
expected tracking error of 5% means that there is a 68% probability that the net
asset value of the WEBS Index Series will be 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 WEBS 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
requirements of the Internal Revenue Code of 1986 (the "Internal Revenue Code"),
the fact that the MSCI Indices "smooth" dividend payments evenly over a year
while the Fund records dividends on the ex date, and the fact that the MSCI
Indicies utilized by certain WEBS Index Series assume a different foreign tax
withholding rate than that applicable to such WEBS Index Series, may adversely
impact the tracking of the performance of a WEBS Index Series to that of its
benchmark index. The Adviser will monitor the tracking error of each WEBS Index
Series on an ongoing basis and will seek to minimize tracking error
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to the maximum extent possible. See also the discussion of portfolio sampling in
the preceding paragraph. There can be no assurance that any WEBS Index Series
will achieve any particular level of tracking error relative to the performance
of the relevant benchmark index. Semiannual and annual reports of the 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 WEBS Index Series of the Fund is to remain
substantially fully invested in equity securities, a WEBS Index Series may also
invest in combinations of certain stock index futures contracts, options on such
futures contracts, stock index options, stock index swaps and cash and
Short-Term Investments that are intended to provide the WEBS Index Series with
exposure to such equity securities, and in certain Short-Term Investments that
are not associated with related positions in stock index futures contracts,
options on such futures contracts, stock index options or stock index swaps.
Such investments may be made to invest uncommitted cash balances or, in limited
circumstances, to assist in meeting shareholder redemptions of Creation Units of
WEBS.
A WEBS Index Series may purchase stock index futures contracts, options on
such futures contracts and stock index options and may enter into stock index
swaps to 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 WEBS Index Series to gain exposure to the
underlying equities at a lower cost than by making direct investments in the
cash market. While each of these instruments can be used to leverage an
investment portfolio, no WEBS Index Series may use them to leverage its net
assets.
A WEBS Index Series may enter into foreign currency forward and foreign
currency futures contracts to facilitate settlements in local markets, in
connection with stock index futures positions, and to protect against currency
exposure in connection with its distributions to shareholders, but may not enter
into such contracts for speculative purposes or as a way of protecting against
anticipated adverse changes in exchange rates between foreign currencies and the
U.S. dollar. A foreign currency forward contract is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract.
The Fund may lend securities from the portfolio of a WEBS Index Series to
brokers, dealers and other financial institutions desiring to borrow securities
to complete transactions and for other purposes. Because the government
securities or other assets that are pledged as collateral to the Fund in
connection with these loans generate income, securities lending enables a WEBS
Index Series to earn income that may partially offset the expenses of the WEBS
Index Series, and thereby reduce the effect that expenses have on a WEBS Index
Series' ability to provide investment results that correspond generally to the
price and yield performance of its benchmark index. These loans may not exceed
33% of a WEBS Index Series' total assets. The documentation for these loans will
provide that the WEBS Index Series will receive collateral equal to at least
100% of the current market value of the loaned securities, as marked to market
each day that the net asset value of the WEBS Index Series is determined,
consisting of government securities or other assets permitted by applicable
regulations and interpretations. A WEBS Index Series will pay reasonable
administrative and custodial fees in connection with the loan of securities. The
WEBS Index Series will invest collateral in Short-Term Investments, and the WEBS
Index Series will bear the risk of loss of the invested collateral. In
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addition, a WEBS Index Series will be exposed to the risk of loss should a
borrower default on its obligation to return the borrowed securities. Morgan
Stanley Trust Company serves as Lending Agent of the Fund and, in such capacity,
shares equally with the respective WEBS Index Series any net income earned on
invested collateral. A WEBS Index Series' share of income from the loan
collateral will be included in the WEBS Index Series' gross investment income.
The Fund will comply with the conditions for securities lending established by
the SEC staff.
Although each WEBS Index Series generally seeks to invest for the long term,
the WEBS Index Series retain the right to sell securities irrespective of how
long they have been held. However, because of the "passive" investment
management approach of the Fund, the portfolio turnover rate for each WEBS Index
Series is expected to be under 50%, a generally lower turnover rate than for
many other investment companies. A portfolio turnover rate of 50% would occur if
one half of a WEBS Index Series' securities were sold within one year.
Ordinarily, securities are sold by a WEBS Index Series only to reflect certain
administrative changes in an Index (including mergers or changes in the
composition of the Index) or to accommodate cash flows out of the WEBS Index
Series while seeking to keep the performance of the WEBS Index Series in line
with that of its benchmark index. In addition, securities may be sold from a
WEBS Index Series in certain circumstances to ensure the WEBS Index Series'
compliance with the diversification and other requirements of the Internal
Revenue Code and with other requirements, which would tend to raise the
portfolio turnover rate of such WEBS Index Series. Purchases and sales of
securities in connection with such compliance will involve transaction costs
which will be borne by the respective WEBS Index Series.
A WEBS Index Series may borrow money from a bank up to a limit of 33% of the
market value of its assets, but only for temporary or emergency purposes (e.g.,
to facilitate distributions to shareholders or to meet redemption requests (in
connection with Creation Units of WEBS that the Fund agrees to redeem for cash)
prior to the settlement of securities already sold or in the process of being
sold by the WEBS Index Series). To the extent that a WEBS Index Series borrows
money prior to receiving distributions on its portfolio securities or prior to
selling securities in connection with a redemption, it may be leveraged; at such
times, the WEBS Index Series may appreciate or depreciate in value more rapidly
than its benchmark index. A WEBS Index Series will not make cash purchases of
securities when the amount of money borrowed exceeds 5% of the market value of
its total assets.
INVESTMENT LIMITATIONS
Each WEBS Index Series of the Fund intends to observe certain limitations on
its investment practices. Specifically, a WEBS Index Series may not:
(i) lend any funds or other assets except through the purchase of all or
a portion of an issue of securities or obligations of the type in which it
is permitted to invest (including participation interests in such securities
or obligations) and except that a WEBS Index Series may lend its portfolio
securities in an amount not to exceed 33% of the value of its total assets;
(ii) issue senior securities or borrow money, except borrowings from
banks for temporary or emergency purposes in an amount up to 33% of the
value of the WEBS Index Series' total assets (including the amount
borrowed), valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing is made, and
the WEBS Index Series will not purchase securities while borrowings in
excess of 5% of the WEBS Index Series' total assets are outstanding,
provided, that for purposes of this restriction, short-term credits
necessary for the clearance of transactions are not considered borrowings;
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(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 a WEBS Index Series' borrowing policy and illiquid
securities policy, all percentage limitations apply immediately after a purchase
or initial investment, and any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the WEBS Index Series' portfolio.
The investment limitations described in (i) through (iv) above and the preceding
paragraph, and certain additional limitations described in the Statement of
Additional Information, may be changed with respect to a WEBS Index Series only
with the approval of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of such WEBS Index Series.
THE BENCHMARK MSCI INDICES UTILIZED BY THE WEBS INDEX SERIES
Each WEBS Index Series uses the corresponding MSCI Index listed below as its
benchmark (the Australia WEBS Index Series uses the MSCI Australia Index, etc.).
The Malaysia WEBS Index Series intends to utilize the MSCI Malaysia (Free) Index
Series as its benchmark and to change its name accordingly should MSCI commence
publication of such index. 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 WEBS 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, Austria and Germany WEBS Index Series. So-called
"un-franked" dividends from Australian companies are withheld at a 30% rate to
Luxembourg residents and a 15% rate to the Australia WEBS Index Series (there is
no difference in the treatment of "franked" dividends). Austrian companies
impose a 15% dividend withholding on Luxembourg residents and an 11% rate on the
Austria WEBS Index Series. German companies impose a 15% dividend withholding on
Luxembourg residents and a 10% rate on the Germany WEBS Index Series. The Mexico
(Free) WEBS 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.
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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.
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 August
30, 1996, the MSCI Australia consisted of 56 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.
(17.25%), National Australia Bank (9.13%) and News Corp. (6.87%) for a total of
approximately 33.15% of the MSCI Australia. As of August 30, 1996, the ten
largest constituents comprised approximately 59.12% of the market capitalization
of the MSCI Australia. As of August 30, 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 (19.14%), Banking
(14.85%) and Metals -- Non-Ferrous (11.63%), for a total of approximately 49.08%
of the MSCI Australia. The MSCI Australia represented approximately 57.4% of the
aggregate capitalization of the Australian equity markets at August 30, 1996.
THE MSCI AUSTRIA INDEX ("MSCI AUSTRIA"). The MSCI Austria consists
primarily of stocks that are traded on the Vienna Stock Exchange. On August 30,
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 (19.68%), OMV AG, (11.50%), and Verbund
Oesterr Elek A (9.54%) for a total of approximately 40.72% of the MSCI Austria.
As of August 30, 1996, the ten largest constituents comprised approximately
83.70% of the market capitalization of the MSCI Austria. As of August 30, 1996,
the three most highly represented industry sectors
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in the MSCI Austria, and the approximate percentages of the MSCI Austria
represented thereby, were Banking (32.89%), Energy Sources (11.50%) and
Machinery/Engineering (9.67%), for a total of approximately 54.06% of the MSCI
Austria. The MSCI Austria represented approximately 61.9% of the aggregate
capitalization of the Austrian equity markets at August 30, 1996.
THE MSCI BELGIUM INDEX ("MSCI BELGIUM"). The MSCI Belgium consists
primarily of stocks that are traded on the Brussels Stock Exchange. On August
30, 1996, the MSCI Belgium consisted of 17 stocks. As of August 30, 1996, the
three largest constituents of the MSCI Belgium and the respective approximate
percentages of the MSCI Belgium represented thereby were Electrabel (18.79%),
Petrofina (11.44%) and Tractebel (9.18%), for a total of approximately 39.41% of
the MSCI Belgium. As of August 30, 1996, the ten largest constituents comprised
approximately 83.81% of the market capitalization of the MSCI Belgium. As of
August 30, 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 (18.79%), Multi-Industry (16.38%)
and Banking (15.93%), for a total of approximately 51.10% of the MSCI Belgium.
The MSCI Belgium represented approximately 60.2% of the aggregate capitalization
of the Belgian equity markets at August 30, 1996.
THE MSCI CANADA INDEX ("MSCI CANADA"). The MSCI Canada consists primarily
of stocks that are traded on the Toronto Stock Exchange. On August 30, 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 Northern Telecom (5.78%), BCE Inc. (5.58%) and Seagram (5.51%) for
a total of approximately 16.87% of the MSCI Canada. As of August 30, 1996, the
ten largest constituents comprised approximately 42.23% of the market
capitalization of the MSCI Canada. As of August 30, 1996, the three most highly
represented industry sectors in the MSCI Canada, and the approximate percentages
of the MSCI Canada represented thereby, were Banking (12.70%), Energy Sources
(12.37%) and Metals -- Non-Ferrous (11.67%), for a total of approximately 36.74%
of the MSCI Canada. The MSCI Canada represented approximately 58.8% of the
aggregate capitalization of the Canadian equity markets at August 30, 1996.
THE MSCI FRANCE INDEX ("MSCI FRANCE"). The MSCI France consists primarily
of stocks that are traded on the Paris Stock Exchange. On August 30, 1996, the
MSCI France consisted of 71 stocks. The three largest constituents of the MSCI
France and the respective approximate percentages of the MSCI France represented
thereby were L'Oreal (6.12%), Elf Aquitaine (5.76%) and Carrefour (5.63%) for a
total of approximately 17.51% of the MSCI France. As of August 30, 1996, the ten
largest constituents comprised approximately 44.49% of the market capitalization
of the MSCI France. As of August 30, 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 (10.90%), Merchandising (10.53%)
and Banking (9.31%), for a total of approximately 30.74% of the MSCI France. The
MSCI France represented approximately 65.2% of the aggregate capitalization of
the French equity markets at August 30, 1996.
THE MSCI GERMANY INDEX ("MSCI GERMANY"). The MSCI Germany consists
primarily of stocks that are traded on the Frankfurt Stock Exchange. On August
30, 1996, the MSCI Germany consisted of 66 stocks. The three largest
constituents of the MSCI Germany and the respective approximate percentages of
the MSCI Germany represented thereby were Allianz Holding (10.19%), Siemens
(7.59%) and Daimler-Benz (7.18%), for a total of approximately 24.96% of the
MSCI Germany. As of
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August 30, 1996, the ten largest constituents comprised approximately 63.1% of
the market capitalization of the MSCI Germany. As of August 30, 1996, the three
most highly represented industry sectors in the MSCI Germany, and the
approximate percentages of the MSCI Germany represented thereby, were Insurance
(16.70%), Banking (13.58%) and Utilities -- Electrical & Gas (11.26%), for a
total of approximately 41.54% of the MSCI Germany. The MSCI Germany represented
approximately 64.1% of the aggregate capitalization of the German equity markets
at August 30, 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 August 30, 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 Sun Hung Kai
Properties (12.93%), Hutchison Whampoa (12.13%) and Hang Seng Bank (10.97%), for
a total of approximately 36.03% of the MSCI Hong Kong. As of August 30, 1996,
the ten largest constituents comprised approximately 80.41% of the market
capitalization of the MSCI Hong Kong. As of August 30, 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
(37.58%), Multi-Industry (20.05%) and Banking (13.78%), for a total of
approximately 71.41% of the MSCI Hong Kong. The MSCI Hong Kong represented
approximately 58.0% of the aggregate capitalization of the Hong Kong equity
markets at August 30, 1996.
THE MSCI ITALY INDEX ("MSCI ITALY"). The MSCI Italy consists primarily of
stocks that are traded on the Milan Stock Exchange. On August 30, 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 (14.36%), Telecom Italia Mobile (12.06%) and Telecom
Italia Ordinary (9.36%), for a total of approximately 35.78% of the MSCI Italy.
As of August 30, 1996, the ten largest constituents comprised approximately
68.29% of the market capitalization of the MSCI Italy. As of August 30, 1996,
the three most highly represented industry sectors in the MSCI Italy, and the
approximate percentages of the MSCI Italy represented thereby, were
Telecommunications (21.28%), Insurance (19.31%) and Energy Sources (14.36%), for
a total of approximately 54.95% of the MSCI Italy. The MSCI Italy represented
approximately 63.5% of the aggregate capitalization of the Italian equity
markets at August 30, 1996.
THE MSCI JAPAN INDEX ("MSCI JAPAN"). The MSCI Japan consists primarily of
stocks that are traded on the Tokyo Stock Exchange. On August 30, 1996, the MSCI
Japan consisted of 310 stocks. The three largest constituents of the MSCI Japan
and the respective approximate percentages of the MSCI Japan represented thereby
were Bank of Tokyo-Mitsubishi (4.70%) Toyota Motor Corp. (4.51%) and Sumitomo
Bank (2.86%) for a total of approximately 12.07% of the MSCI Japan. As of August
30, 1996, the ten largest constituents comprised approximately 25.64% of the
market capitalization of the MSCI Japan. As of August 30, 1996, the three most
highly represented industry sectors in the MSCI Japan, and the approximate
percentages of the MSCI Japan represented thereby, were Banking (21.42%),
Automobiles (6.56%) and Machinery/Engineering (4.99%), for a total of
approximately 32.97% of the MSCI Japan. The MSCI Japan represented approximately
60.1% of the aggregate capitalization of the Japanese equity markets at August
30, 1996.
THE MSCI MALAYSIA INDEX ("MSCI MALAYSIA"). The MSCI Malaysia consists
primarily of stocks that are traded on the Kuala Lumpur Stock Exchange. On
August 30, 1996, the MSCI Malaysia consisted of 76 stocks. As of August 30,
1996, the three largest constituents of the MSCI Malaysia and the respective
approximate percentages of the MSCI Malaysia represented thereby were Telekom
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Malaysia (12.98%), Tenaga Nasional (8.23%) and Malayan Banking (7.99%), for a
total of approximately 29.20% of the MSCI Malaysia. As of August 30, 1996, the
ten largest constituents comprised approximately 52.04% of the market
capitalization of the MSCI Malaysia. As of August 30, 1996, the three most
highly represented industry sectors in the MSCI Malaysia, and the approximate
percentages of the MSCI Malaysia represented thereby, were Telecommunications
(14.44%), Multi-Industry (13.26%) and Banking (12.56%), for a total of
approximately 40.26% of the MSCI Malaysia. The MSCI Malaysia represented
approximately 53.4% of the aggregate capitalization of the Malaysian equity
markets at August 30, 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
August 30, 1996, the MSCI Mexico (Free) consisted of 41 stocks. As of August 30,
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 (19.02%), Kimberly Clark-Mexico (7.33%) and Grupo
Televisa (6.77%), for a total of approximately 33.12% of the MSCI Mexico (Free).
As of August 30, 1996, the ten largest constituents comprised approximately
63.33% of the market capitalization of the MSCI Mexico (Free). As of August 30,
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 (25.13%), Beverages & Tobacco (11.98%) and
Merchandising (10.43%), for a total of approximately 47.54% 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
August 30, 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 (34.03%),
ING GROEP (10.11%) and Unilever NV (9.77%) for a total of approximately 53.91%
of the MSCI Netherlands. As of August 30, 1996, the ten largest constituents
comprised approximately 89.9% of the market capitalization of the MSCI
Netherlands. As of August 30, 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 (34.03%), Financial
Services (10.11%) and Food & Household Products (9.77%), for a total of
approximately 53.91% of the MSCI Netherlands. The MSCI Netherlands represented
approximately 72.4% of the aggregate capitalization of the Dutch equity markets
at August 30, 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 August 30, 1996, the MSCI Singapore (Free) consisted of 38
stocks. The three largest constituents of the MSCI Singapore (Free) and the
respective approximate percentages of the MSCI Singapore (Free) represented
thereby were Singapore Telecom (15.35%), Singapore Airlines (14.06%) and
Oversea-Chinese Banking Corp. (12.44%), for a total of approximately 41.85% of
the MSCI Singapore (Free). As of August 30, 1996, the ten largest constituents
comprised approximately 82.49% of the market capitalization of the MSCI
Singapore (Free). As of August 30, 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 (29.85%),
Telecommunications (15.35%) and Real Estate (14.37%), for a total
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of approximately 59.57% of the MSCI Singapore (Free). The MSCI Singapore (Free)
represented approximately 67.1% of the aggregate capitalization of the
Singaporean equity markets at August 30, 1996.
THE MSCI SPAIN INDEX ("MSCI SPAIN"). The MSCI Spain consists primarily of
stocks that are traded on the Madrid Stock Exchange. On August 30, 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 Telefonica de Espana (16.95%), Endesa (14.71%) and Repsol (9.46%),
for a total of approximately 41.12% of the MSCI Spain. As of August 30, 1996,
the ten largest constituents comprised approximately 83.90% of the market
capitalization of the MSCI Spain. As of August 30, 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
(31.51%), Banking (25.40%) and Telecommunications (16.95%), for a total of
approximately 73.86% of the MSCI Spain. The MSCI Spain represented approximately
63.0% of the aggregate capitalization of the Spanish equity markets at August
30, 1996.
THE MSCI SWEDEN INDEX ("MSCI SWEDEN"). The MSCI Sweden consists primarily
of stocks that are traded on the Stockholm Stock Exchange. On August 30, 1996,
the MSCI Sweden consisted of 31 stocks. As of August 30, 1996, the three largest
constituents of the MSCI Sweden and the respective approximate percentages of
the MSCI Sweden represented thereby were Ericsson (LM) (18.02%), Astra (17.10%),
and ABB AB (5.82%), for a total of approximately 40.94% of the MSCI Sweden. As
of August 30, 1996, the ten largest constituents comprised approximately 67.94%
of the market capitalization of the MSCI Sweden. As of August 30, 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 (26.16%), Health & Personal Care (20.93%) and Banking (7.28%), for
a total of approximately 54.37% of the MSCI Sweden. The MSCI Sweden represented
approximately 59.4% of the aggregate capitalization of the Swedish equity
markets at August 30, 1996.
THE MSCI SWITZERLAND INDEX ("MSCI SWITZERLAND"). The MSCI Switzerland
consists primarily of stocks that are traded on the Zurich Stock Exchange. On
August 30, 1996, the MSCI Switzerland consisted of 41 stocks. The three largest
constituents of the MSCI Switzerland and the respective approximate percentages
of the MSCI Switzerland represented thereby were Roche Holding (16.02%), Nestle
(13.81%) and Sandoz Ltd. (12.47%), for a total of approximately 42.30% of the
MSCI Switzerland. As of August 30, 1996, the ten largest constituents comprised
approximately 82.80% of the market capitalization of the MSCI Switzerland. As of
August 30, 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 (35.55%), Banking (17.78%) and Food &
Household Products (13.81%), for a total of approximately 67.14% of the MSCI
Switzerland. The MSCI Switzerland represented approximately 79.5% of the
aggregate capitalization of the Swiss equity markets at August 30, 1996.
THE MSCI UNITED KINGDOM INDEX ("MSCI UK"). The MSCI UK consists primarily
of stocks that are traded on the London Stock Exchange. On August 30, 1996, the
MSCI UK consisted of 142 stocks. The three largest constituents of the MSCI UK
and the respective approximate percentages of the MSCI UK represented thereby
were British Petroleum (5.78%), Glaxo Wellcome (5.33%), and British
Telecommunications (3.88%), for a total of approximately 14.99% of the MSCI UK.
As of August 30, 1996, the ten largest constituents comprised approximately
34.08% of the market capitalization of the MSCI UK. As of August 30, 1996, the
three most highly represented industry sectors in
26
<PAGE>
the MSCI UK, and the approximate percentages of the MSCI UK represented thereby,
were Health & Personal Care (11.15%), Banking (11.02%) and Merchandising
(8.89%), or a total of approximately 31.06% of the MSCI UK. The MSCI UK
represented approximately 64.5% of the aggregate capitalization of the United
Kingdom equity markets at August 30, 1996.
The graphs below present certain historical performance information, as
calculated by MSCI, for the MSCI Indices that are the benchmark indices for each
of the seventeen WEBS Index Series of the Fund. The MSCI Indices are unmanaged
securities indices and do not bear transactional or operating costs and
expenses, whereas the WEBS Index Series bear fees and expenses as described
herein. See "Summary of Fund Expenses". Such fees and expenses reduce the return
of each WEBS Index Series in comparison with its benchmark index. In addition,
because each WEBS Index Series does not invest in all the securities in its
benchmark index, the investment results do not necessarily correspond to those
of its benchmark index. Moreover, the WEBS Index Series are subject to various
limitations on their investment flexibility and these limits adversely affect
their ability to meet their investment objective. See "Investment Policies" and
"Implementation of Policies". The graphs measure total return based on the
period's change in price, dividends paid on stocks in the index, and the effect
of reinvesting dividends with adjustments for dividend withholding by foreign
governments (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) WEBS Index Series vary from the rates utilized by MSCI in
computing the benchmark indices for such WEBS 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%
1996
</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%)
1996
</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%
1996
</TABLE>
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%
1996
</TABLE>
27
<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%
1996
</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%
1996
</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%
1996
</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%
1996
</TABLE>
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%
1996
</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%
1996
</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%)
1996
</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%
1996
</TABLE>
<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%
1996
</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%
1996
</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%
1996
</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%
1996
</TABLE>
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%
1996
</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. Barclays Global Fund Advisors, formerly BZW Barclays Global Fund
Advisors, is the Adviser to the Fund and, subject to the supervision of the
Board of Directors of the Fund, is responsible for the investment management of
each WEBS Index Series, which includes 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, Barclays Global Investors, N.A., are
responsible for managing or providing investment advice for assets aggregating
in excess of $310 billion as of August 30, 1996. For its investment management
services to each
29
<PAGE>
WEBS Index Series, the Adviser is paid management fees equal to each WEBS Index
Series' allocable portion of: .27% per annum of the aggregate net assets of the
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 are accrued daily and paid by the Fund as soon as practical
after the last day of each calendar quarter. From time to time, a WEBS Index
Series, to the extent consistent with its investment objective, policies and
restrictions, may invest in the securities of companies with which the Adviser
has a lending relationship.
ADMINISTRATOR. PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of
PNC Bank Corp., is the Administrator of the Fund, and is responsible for certain
clerical, recordkeeping and bookkeeping services, except those 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 is paid aggregate fees equal to each
WEBS 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 (the "Standard Fee Schedule"). From time to time PFPC may
waive all or a portion of its fees. PFPC will charge an annual minimum fee of
$850,000 for fiscal year one, $1,275,000 for fiscal year two, and 1700,000 for
fiscal year three and thereafter (based on an annual minimum of $50,000, $75,000
and $100,000 per portfolio, respectively). PFPC's minimum fees are subject to a
maximum of an annual rate of .17% of average daily net assets. Any resulting
shortfall between the above required minimums and the asset based fee of .17%
will be recouped as the WEBS Index Series' asset levels reach thresholds to
permit such recovery of fees. Once the aggregate minimum fees are recouped, the
standard fee schedule, including minimum fee rates, will apply, subject to the
maximum charge of .17% of average daily net assets and future recoupment of any
deferred minimum fees.
If the administrator is terminated within the first three years of the
Fund's operations, each WEBS Index Series will repay the Administrator the
difference between the amounts calculated under the Standard Fee Schedule and
the amounts paid during the first year of operations. This repayment obligation
does not exist if the Administrator is removed (i) for failing to substantially
perform to the satisfaction of the Board its material obligations under the
Agreement or (ii) in order to comply with federal or state law, the Fund shall
pay any reasonable costs of time and material associated with the deconversion
and PFPC will recoup 100% of the fees waived during the first year.
DISTRIBUTOR. Funds Distributor, Inc. (the "Distributor") is the distributor
of WEBS. Its address is 60 State Street, Suite 1300, Boston, MA 02109. Investor
information can be obtained by calling 1-800-810-WEBS(9327). WEBS are sold by
the 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
30
<PAGE>
1940 Act ("Rule 12b-1 Plan"). Each WEBS Index Series operates the Rule 12b-1
Plan in accordance with its terms and the NASD Rules concerning maximum sales
charges. Under the Rule 12b-1 Plan, the Distributor is paid an annual fee as
compensation in connection with the offering and sale of shares of each WEBS
Index Series. The fees to be paid to the Distributor under the Rule 12b-1 Plan
are calculated and paid monthly with respect to each WEBS Index Series at an
annual rate of up to .25% of the average daily net assets of such WEBS 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 WEBS Index Series including
payments for any activities or expenses primarily intended to result in or
required for the sale of the WEBS Index Series' shares, including promotional
and marketing activities related to the sale of shares of the WEBS Index Series,
expenses related to the preparation, printing and distribution of prospectuses
and sales literature, certain communications to and with shareholders,
advertisements, and payments made to representatives or others for selling
shares of WEBS 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 WEBS Index Series
of the Fund. MSTC also serves as Lending Agent of the portfolio securities of
each WEBS Index Series. As Lending Agent, MSTC causes the delivery of loaned
securities from the Fund to borrowers, arranges for the return of loaned
securities to the Fund at the termination of the loans, requests deposit of
collateral, monitors daily the value of the loaned securities and collateral,
requests that borrowers add to the collateral when required by the loan
agreements, and provides recordkeeping and accounting services necessary for the
operation of the program. For its services as Lending Agent, the Fund will pay
MSTC, in respect of each WEBS Index Series, 50% of the net investment income
earned on the collateral for securities loaned. MSTC, 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.
In addition to the fees described above, the Fund is responsible for the
payment of expenses that include, among other things, organizational expenses,
compensation of the Directors of the Fund,
31
<PAGE>
reimbursement of out-of-pocket expenses incurred by the Administrator, exchange
listing fees, brokerage and other costs (including costs incurred by a WEBS
Index Series in connection with any rebalancing of its portfolio), legal and
audit fees, and litigation and extraordinary expenses.
EXCHANGE LISTING AND TRADING OF WEBS
The WEBS of each WEBS Index Series have been listed for trading on the AMEX.
WEBS trade on the AMEX at prices that differ to some degree from their net asset
value. See "Investment Considerations and Risks" and "Determination of Net Asset
Value". However, given that WEBS can be created or redeemed in Creation Unit
aggregations, the 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 or be maintained for the WEBS of any particular WEBS Index Series.
The AMEX may remove the WEBS of a WEBS Index Series from listing if (1)
following the initial twelve-month period beginning upon the commencement of
trading of a WEBS Index Series, there are fewer than 50 beneficial holders of
the WEBS of such WEBS Index Series for 30 or more consecutive trading days, (2)
the value of the underlying index or portfolio of securities on which such WEBS
Index Series is based is no longer calculated or available or (3) such other
event occurs or condition exists that, in the opinion of the AMEX, makes further
dealings on the AMEX inadvisable. In addition, the AMEX will remove the WEBS
from listing and trading upon termination of the Fund.
INVESTMENT CONSIDERATIONS AND RISKS
An investment in the WEBS of a WEBS Index Series involves risks similar to
those of investing in a broadly-based portfolio of equity securities traded on
exchanges in the relevant foreign securities market, such as market fluctuations
caused by such factors as economic and political developments, changes in
interest rates and perceived trends in stock prices. Investing in WEBS generally
involves certain risks and considerations not typically associated with
investing in a fund that invests in the securities of U.S. issuers. These risks
could include generally less liquid and less efficient securities markets;
generally greater price volatility; exchange rate fluctuations and exchange
controls; less publicly available information about issuers; the imposition of
withholding or other taxes; restrictions on the expatriation of funds or other
assets of a WEBS Index Series; higher transaction and custody costs; delays
attendant in settlement procedures; difficulties in enforcing contractual
obligations; lesser liquidity and the significantly smaller market
capitalization of most non-U.S. securities markets; lesser levels of regulation
of the securities markets; different accounting, disclosure and reporting
requirements; more substantial government involvement in the economy; higher
rates of inflation; greater social, economic, and political uncertainty and the
risk of nationalization or expropriation of assets and risk of war. Certain WEBS
Index Series-specific considerations are set forth in the 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
32
<PAGE>
(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.
FOREIGN CURRENCY FLUCTUATIONS
Because each WEBS Index Series' assets are generally invested in non-U.S.
securities, and because a substantial portion of the revenues and income of each
WEBS Index Series are received in a foreign currency, while WEBS Index Series
dividends and other distributions are paid in U.S. dollars, the dollar value of
a WEBS Index Series' net assets are adversely affected by reductions in the
value of subject foreign currency relative to the dollar and are positively
affected by increases in the value of such currency relative to the dollar.
Also, government or monetary authorities have imposed and may in the future
impose exchange controls that could adversely affect exchange rates. Any such
currency fluctuations will affect the net asset value of a WEBS Index Series
irrespective of the performance of its underlying portfolio. Other than to
facilitate settlements in local markets or to protect against currency exposure
in connection with its distributions to shareholders or borrowings, the Fund
does not expect to engage in currency transactions for the purpose of hedging
against the decline in value of any foreign currencies.
33
<PAGE>
CONCENTRATION AND LACK OF DIVERSIFICATION OF CERTAIN WEBS INDEX SERIES
Each WEBS Index Series of the Fund (except for the Canada WEBS Index Series,
the France WEBS Index Series, the Japan WEBS Index Series and the United Kingdom
WEBS Index Series) is classified as "non-diversified" for purposes of the 1940
Act, which means each of those WEBS Index Series is not limited by the 1940 Act
with regard to the portion of its assets that may be invested in the securities
of a single issuer. In addition, a number of WEBS Index Series concentrate their
investments in particular industries. See "Investment Policies" herein. However,
each WEBS Index Series, regardless of whether classified as non-diversified,
intends to maintain the required level of diversification and otherwise conduct
its operations so as to qualify as a "regulated investment company" for purposes
of the Internal Revenue Code, in order to relieve the WEBS Index Series of any
liability for Federal income tax to the extent that its earnings are distributed
to shareholders. See "Dividends and Capital Gains Distributions" and "Tax
Matters" in this Prospectus. Compliance with the diversification requirements of
the Internal Revenue Code severely limits the investment flexibility of certain
WEBS Index Series and makes it less likely that such WEBS Index Series will meet
their investment objectives.
The stocks of particular issuers, or of issuers in particular industries,
may dominate the benchmark indices of certain WEBS Index Series and,
consequently, the investment portfolios of such WEBS Index Series, which may
adversely affect the performance of such WEBS Index Series or subject such WEBS
Index Series to greater price volatility than that experienced by more
diversified investment companies. The WEBS of a WEBS Index Series may be more
susceptible to any single economic, political or regulatory occurrence than the
portfolio securities of an investment company that is more broadly invested than
the subject WEBS Index Series in the equity securities of the relevant market.
Information concerning the companies and industry sectors that represent the
largest components of the various benchmark indices is set forth above under
"The Benchmark MSCI Indices Utilized by the WEBS Index Series".
As indicated above, the WEBS have been listed for trading on the AMEX. There
can be no assurance that active trading markets for the WEBS will develop or be
maintained. The Distributor does not maintain a secondary market in WEBS.
Trading in WEBS on the AMEX may be halted due to market conditions or for
reasons that, in the view of the AMEX, make trading in WEBS inadvisable. In
addition, trading in WEBS on the AMEX is subject to trading halts caused by
extraordinary market volatility pursuant to AMEX "circuit breaker" rules that
require trading in securities on the AMEX to be halted in the event of specified
market moves. There can be no assurance that the requirements of the AMEX
necessary to maintain the listing of any WEBS Index Series will continue to be
met or will remain unchanged. See "Exchange Listing and Trading".
The net asset value of the WEBS of a WEBS Index Series fluctuate with
changes in the market value of the portfolio securities of the WEBS Index Series
and changes in the market rate of exchange between the U.S. dollar and the
subject foreign currency. The market prices of WEBS 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
34
<PAGE>
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.
LENDING OF SECURITIES
Although each WEBS Index Series receives collateral in connection with all
loans of portfolio securities, and such collateral is marked to market, the WEBS
Index Series would be exposed to the risk of loss should a borrower default on
its obligation to return the borrowed securities (E.G., the loaned securities
may have appreciated beyond the value of the collateral held by the Fund). In
addition, each WEBS Index Series bears the risk of loss of any collateral that
it invests in Short-Term Investments.
USE OF CERTAIN INSTRUMENTS
The risk of loss associated with futures contracts is potentially unlimited
due both to the low margin deposits required and the extremely high degree of
leverage involved in futures pricing. As a result, a relatively small price
movement in a futures contract may result in an immediate and substantial loss
or gain. However, no WEBS Index Series will use futures contracts, options or
swap agreements for speculative purposes or to leverage its net assets and each
WEBS Index Series will comply with applicable SEC requirements regarding the
segregation of assets in connection with futures positions. Accordingly, the
primary risks associated with the use of futures contracts, options and swap
agreements by a WEBS Index Series are: (I) imperfect correlation between the
change in market value of the stocks in the benchmark index or held by the WEBS
Index Series and the prices of futures contracts, options and swap agreements;
(ii) possible lack of a liquid secondary market for a futures contract or listed
option and the resulting inability to close futures or listed option positions
prior to their maturity date; and (iii) the risk of the counterparty or
guaranteeing agent defaulting. Over-the-counter options and swap agreements are
generally less liquid than exchange traded securities and the SEC staff
considers most over-the-counter options to be illiquid. The Fund will treat such
options as illiquid to the extent required by applicable SEC staff positions.
Illiquid assets may not represent more than 15% of the net assets of a WEBS
Index Series.
Since there are generally no futures traded on the MSCI Indices, it may be
necessary for a WEBS Index Series to utilize other futures contracts or
combinations thereof to simulate the performance of the relevant MSCI Index.
This process may magnify the "tracking error" of the WEBS Index Series'
performance compared to that of the MSCI Index, due to the lower correlation of
the selected futures with the MSCI Index. The Adviser will attempt to reduce
this tracking error by investing in futures contracts whose behavior is expected
to represent the market performance of the WEBS Index Series' underlying
securities, although there can be 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 WEBS Index Series of the Fund is computed
by dividing the value of the net assets of such WEBS Index Series (i.e., the
value of its total assets less total liabilities) by the total number of WEBS
outstanding, rounded to the nearest cent. Expenses and fees, including the
management, administration and distribution fees, are accrued daily and taken
into account for
35
<PAGE>
purposes of determining net asset value. The net asset value of each WEBS Index
Series is determined as of the close of the regular trading session on the New
York Stock Exchange, Inc. (ordinarily 4:00 p.m., New York City time) on each day
that such exchange is open.
In computing a WEBS Index Series' net asset value, the WEBS Index Series'
portfolio securities are valued based on their last quoted current price. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Securities regularly traded in the over-the-counter market
are valued at the latest quoted bid price. Other portfolio securities and assets
for which market quotations are not readily available are valued based on fair
value as determined in good faith by the Adviser in accordance with procedures
adopted by the Board of Directors of the Fund. Foreign currency values are
converted into U.S. dollars using the same exchange rates utilized by Morgan
Stanley Capital International in the calculation of the relevant MSCI Indices
(currently, exchange rates as of 4:00 p.m. London time, except that the exchange
rate for the MSCI Mexico (Free) Index is that as of 3:00 p.m. New York City
time).
CREATION UNITS
The Fund issues and redeems WEBS of each WEBS Index Series only in
aggregations of WEBS specified for each WEBS Index Series. The following table
sets forth the number of WEBS of a WEBS Index Series that constitute a Creation
Unit for such WEBS Index Series and the value of such Creation Unit at December
, 1996:
<TABLE>
<CAPTION>
VALUE PER
WEBS INDEX SERIES WEBS PER CREATION UNIT CREATION UNIT
- -------------------------------------------------------------------------- ----------------------- -------------
(IN DOLLARS)
<S> <C> <C>
Australia WEBS Index Series............................................... 200,000
Austria WEBS Index Series................................................. 100,000
Belgium WEBS Index Series................................................. 40,000
Canada WEBS Index Series.................................................. 100,000
France WEBS Index Series.................................................. 200,000
Germany WEBS Index Series................................................. 300,000
Hong Kong WEBS Index Series............................................... 75,000
Italy WEBS Index Series................................................... 150,000
Japan WEBS Index Series................................................... 600,000
Malaysia WEBS Index Series................................................ 75,000
Mexico (Free) WEBS Index Series........................................... 100,000
Netherlands WEBS Index Series............................................. 50,000
Singapore (Free) WEBS Index Series........................................ 100,000
Spain WEBS Index Series................................................... 75,000
Sweden WEBS Index Series.................................................. 75,000
Switzerland WEBS Index Series............................................. 125,000
United Kingdom WEBS Index Series.......................................... 200,000
</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 WEBS 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.
36
<PAGE>
PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS
THE FUND ISSUES AND SELLS WEBS OF A WEBS 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 a WEBS Index
Series is 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 WEBS Index Series from the Fund. Tendered securities in the Portfolio
Deposit are valued in the same manner as the relevant WEBS Index Series values
its portfolio securities. WEBS may also be issued and sold in Creation Units for
cash in certain circumstances; however, the Fund does not ordinarily permit cash
purchases of Creation Units and any WEBS Index Series that permits cash sales
reserves the right to suspend such sales at any time.
The Deposit Securities for each WEBS Index Series 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 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 WEBS 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 A WEBS INDEX SERIES ARE 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 redeems 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. A WEBS Index Series may also redeem Creation Units for cash
in certain circumstances; however, the Fund does not ordinarily permit cash
redemptions and any WEBS Index Series that permits cash redemptions reserves the
right to suspend such redemptions at any time.
37
<PAGE>
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 WEBS Index Series 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 a WEBS 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 also bear
the costs of transferring the Portfolio Deposit from the Fund to their account
or on their order.
Because the portfolio securities of a WEBS 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 WEBS Index Series, or to purchase or
sell WEBS on the AMEX, on days when the net asset value of such WEBS 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 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, are declared and paid at least annually and net realized securities
gains, if any, are distributed at least annually. Dividends may be declared and
paid more frequently than annually for certain WEBS Index Series to improve
tracking error or to comply with the distribution requirements of the Internal
Revenue Code. In addition, the Fund intends to distribute at least annually
amounts representing the full dividend yield on the underlying portfolio
securities of each WEBS Index Series net of expenses of such WEBS Index Series,
as if such WEBS Index Series owned such underlying portfolio securities for the
entire dividend period. As a result, some portion of each distribution may
result in a return of capital. See "Tax Matters". Dividends and securities gains
distributions are distributed in U.S. dollars and cannot be automatically
reinvested in additional WEBS. The Fund will inform shareholders within 60 days
after the close of the WEBS Index Series' taxable year of the amount and nature
of all distributions made to them.
TAX MATTERS
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 WEBS 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, a WEBS Index Series is not
subject to U.S. federal income tax on its income and gains that it
38
<PAGE>
distributes to shareholders, provided that it distributes annually at least 90%
of its investment company taxable income. Investment company taxable income
generally includes income from dividends and interest and gains and losses from
currency transactions net of operating expenses plus the WEBS Index Series' net
short-term capital gains in excess of its net long-term capital losses. Each
WEBS Index Series distributes to its shareholders at least annually all of its
investment company taxable income and any realized net long-term capital gains.
Dividends paid out of a WEBS 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 a WEBS Index Series generally
will not qualify for the deduction for dividends received by corporations.
Distributions in excess of a WEBS Index Series' current and accumulated earnings
and profits are treated as a tax-free return of capital to each of the WEBS
Index Series' investors to the extent of the investor's basis in its WEBS, and
as capital gain thereafter. Any dividend declared by a WEBS Index Series in
October, November or December of any calendar year and payable to investors of
record on a specified date in such a month shall be deemed to have been received
by each investor on December 31 of such calendar year and to have been paid by
the WEBS Index Series not later than such December 31 so long as the dividend is
actually paid by the WEBS Index Series during January of the following calendar
year. A distribution by a WEBS Index Series will reduce its net asset value per
share and may be taxable to the investor as ordinary income or net capital gain
as described above even though, from an investment standpoint, it may constitute
a return of capital and this phenomenon may be more pronounced given the WEBS
Index Series' policy of making distributions in excess of the sum of its
investment company taxable income and its net long-term capital gains.
Any gain or loss realized upon a sale or redemption of WEBS by a shareholder
that is not a dealer in securities is generally treated as 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 WEBS Index Series may be subject to foreign income taxes withheld at
source. As more than 50% of the value of the total assets of each WEBS Index
Series at the close of its taxable year will consist of stock or securities of
foreign corporations, a WEBS Index Series will be eligible (and intends) to file
an election with the Internal Revenue Service to "pass through" to its investors
the amount of foreign income taxes (including withholding taxes) paid by the
WEBS Index Series. 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.
39
<PAGE>
Internal Revenue Service that they are subject to backup withholding. Backup
withholding is not an additional tax; amounts withheld may be credited against
the investor's U.S. federal income tax liability.
An investor in a WEBS Index Series that is a foreign corporation or an
individual who is a nonresident alien for U.S. tax purposes will be subject to
significant adverse U.S. tax consequences. For example, dividends paid out of a
WEBS Index Series' investment company taxable income will generally be subject
to U.S. federal withholding tax at a rate of 30% (or lower treaty rate if the
foreign investor is eligible for the benefits of an income tax treaty). Foreign
investors are urged to consult their own tax advisors regarding the U.S. tax
treatment, in their particular circumstances, of ownership of shares in a WEBS
Index Series.
For further information on taxes see "Taxes" in the Statement of Additional
Information.
BOOK-ENTRY ONLY SYSTEM
The Depository Trust Company ("DTC") acts as securities depositary for the
WEBS. WEBS are represented by global securities, which are 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 is 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") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners 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 are not entitled to have WEBS registered in their names, will not
receive or are not entitled to receive physical delivery of certificates in
definitive form and are not 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 are made to DTC or its nominee, Cede & Co., as the
registered holder of all WEBS. DTC or its nominee, upon receipt of any such
distributions, will immediately credit DTC
40
<PAGE>
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in WEBS as shown on the records of DTC or its
nominee. Payments by DTC Participants to Indirect Participants and Beneficial
Owners of WEBS held through such DTC Participants are governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in a "street name," and
are 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 WEBS Index Series may be quoted in advertisements,
sales literature or reports to shareholders in terms of average annual total
return, cumulative total return and yield.
Quotations of average annual total return will be expressed in terms of
average annual rate of return of a hypothetical investment in a WEBS Index
Series over periods of 1, 5 and 10 years (or the life of the WEBS Index Series,
if shorter). Such total return figures reflect the deduction of a proportional
share of such WEBS Index Series' expenses on an annual basis, and assume that
all dividends and distributions are reinvested when paid.
Quotations of a cumulative total return are calculated for any specified
period by assuming a hypothetical investment in a WEBS Index Series on the date
of the commencement of the period and assume that all dividends and
distributions are reinvested on ex date. However, currently there is no dividend
reinvestment option available to shareholders of WEBS and such calculation is
provided for informational purposes only. The net increase or decrease in the
value of the investment over the period is divided by its beginning value to
arrive at cumulative total return. Total return calculated in this manner will
differ from the calculation of average annual total return in that it is not
expressed in terms of an average rate of return.
The yield of a WEBS Index Series refers to income generated by an investment
in such WEBS Index Series over a specified 30-day (one month) period. Yields for
the WEBS Index Series are expressed as annualized percentages.
Quotations of average annual total return, cumulative total return or yield
reflect only the performance of a hypothetical investment in a WEBS Index Series
during the particular time period on which the calculations are based. Such
quotations for a WEBS Index Series will vary based on changes in market
conditions and the level of such WEBS Index Series' expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
GENERAL INFORMATION
The Fund is organized as a Maryland corporation. The Articles of
Incorporation, as amended, 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 WEBS 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.
41
<PAGE>
The shares of each series are fully paid and non-assessable; have no
preference as to conversion, exchange, dividends, retirement or other features;
and have no pre-emptive rights. Each share has one vote with respect to matters
upon which a shareholder vote is required; shareholders have no cumulative
voting rights with respect to their shares. Shares of all series vote together
as a single class except that if the matter being voted on affects only a
particular WEBS Index Series it will be voted on only by that WEBS Index Series
and if a matter affects a particular WEBS Index Series differently from other
WEBS Index Series, that WEBS Index Series will vote separately on such matter.
Annual meetings of shareholders will not be held except as required by the 1940
Act and other applicable law.
Absent an applicable exemption, beneficial owners of 10% of the WEBS of a
WEBS Index Series are 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 WEBS 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 auditors for the Fund and audits
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.
42
<PAGE>
[LOGO]
FFCPROSP
<PAGE>
WEBS INDEX FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 2, 1997
This Statement of Additional Information is not a Prospectus, and should be
read in conjunction with the Prospectus dated January 2, 1997 (the "Prospectus")
for WEBS Index Fund, Inc. (the "Fund"), as it may be revised from time to time.
A copy of the Prospectus for the Fund may be obtained without charge by writing
to the Fund or the Distributor. The Fund's address is WEBS Index Fund, Inc., c/o
PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
<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. . . . 49
Brokerage Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Book Entry Only System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Purchase and Issuance of WEBS in Creation Units. . . . . . . . . . . . . . . . . 54
Redemption of WEBS in Creation Units . . . . . . . . . . . . . . . . . . . . . . 58
Determining Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Capital Stock and Shareholder Reports. . . . . . . . . . . . . . . . . . . . . . 63
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 65
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
APPENDICES
APPENDIX A: MSCI Indices as of _____________, 1996
APPENDIX B: Holidays Applicable to Each Index Series
APPENDIX C: Supplemental Educational Information on WEBS
- The Case For International Index Investing
- Individual Country Fact Sheets
Japan
Germany
France
Hong Kong
Australia
Mexico
Sweden
- Frequently Asked Questions (Q & A)
- WEBS Investment Highlights
- MSCI Index Performance Charts
</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 WEBS INDEX 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, OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY
MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES
GENERALLY OR IN THE WEBS OF ANY WEBS INDEX SERIES PARTICULARLY OR THE ABILITY
OF THE INDICES IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE.
MORGAN STANLEY IS THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE
NAMES OF MORGAN STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL
SERVICE MARK ("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA
AND LICENSED TO MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE
DETERMINED, COMPOSED AND CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS
INDEX SERIES OR THE ISSUER THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX
SERIES OR THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES INTO CONSIDERATION
IN DETERMINING, COMPOSING OR CALCULATING, IN THE CASE OF CIPSA, OR
DISSEMINATING, IN THE CASE OF MORGAN STANLEY, THE RESPECTIVE MSCI INDICES.
NEITHER MORGAN STANLEY NOR CIPSA IS RESPONSIBLE FOR, NOR HAVE THEY
PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES
OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED OR IN THE DETERMINATION OR
CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
i
<PAGE>
WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY
WEBS INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE
COMPLETENESS OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM
INDEPENDENT SOURCES. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, 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 1.3728
(__________), FRF 5.0425,(__________) DEM 1.4703 (__________), HKD 7.7315
(__________), ITL 1558.50 (__________), JPY 105.12,(__________) 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.
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GENERAL DESCRIPTION OF THE FUND
WEBS Index Fund, Inc. (the "Fund") is a management investment company
organized as a series fund. The Fund initially consists of seventeen series
(each, a "WEBS 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 WEBS Index
Series are referred to herein as "World Equity Benchmark Shares-SM-" or
"WEBS-SM-". The seventeen WEBS Index Series offered by the Fund are the
Australia WEBS Index Series, the Austria WEBS Index Series, the Belgium WEBS
Index Series, the Canada WEBS Index Series, the France WEBS Index Series, the
Germany WEBS Index Series, the Hong Kong WEBS Index Series, the Italy WEBS
Index Series, the Japan WEBS Index Series, the Malaysia WEBS Index Series,
the Mexico (Free) WEBS Index Series, the Netherlands WEBS Index Series, the
Singapore (Free) WEBS Index Series, the Spain WEBS Index Series, the Sweden
WEBS Index Series, the Switzerland WEBS Index Series and the United Kingdom
WEBS Index Series.
Each WEBS Index Series offers and issues 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 are listed and traded on the American
Stock Exchange (the "AMEX"). WEBS are also 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 WEBS Index Series has the policy to remain as
fully invested as practicable in a pool of equity securities the performance
of which will approximate the performance of the subject MSCI Index taken in
its entirety. A WEBS Index Series will normally invest at least 95% of its
total assets in stocks that are included in the relevant market, and will at
all times invest at least 90% of its total assets in such stocks. A WEBS
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 WEBS Index Series with exposure
to such stocks (the WEBS Index Series will not use such instruments to
leverage their investment portfolios). "Short-Term Investments" are
short-term high quality debt securities that include: obligations of the
United States Government and its agencies or instrumentalities; commercial
paper (rated Prime-1 by Moody's Investors 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).
A WEBS 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. A WEBS Index Series may
enter into forward currency exchange contracts and foreign currency futures
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contracts in order to facilitate settlements 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 WEBS Index
Series are 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 August 30, 1996, the total market capitalization
of the Australian equity markets was approximately AUD 338.6 billion or US$274.7
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.
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SIZE OF EQUITY MARKETS. As of August 30, 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 August 30, 1996, the total market capitalization
of the Belgian equity markets was approximately BEF 3,135.5 billion or US$108.7
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 August 30, 1996, the total market capitalization
of the Canadian markets was approximately CAD 480.8 billion or US$397.3 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 French equity market. All purchases or
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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 August 30, 1996, the total market capitalization
of the French equity markets was approximately FF 2,679.0 billion or US$559.5
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 August 30, 1996, the total market capitalization
of the Germany equity markets was approximately DM 894.8 billion or US$320.1
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 August 30, 1996, the total market capitalization
of the Hong Kong equity markets was approximately HKD 2,400.8 billion or
US$332.3 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
totaled 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 August 30, 1996, the total market capitalization
of the Italian markets was approximately ITL 299,512.6 billion or US$245.2
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 account for over 95% of total market capitalization. The Second
Section consists of over 400 issues with lower
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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 August 30, 1996, the total market capitalization
of the Japanese equity markets was approximately JPY 377,880.4 billion or
US$3,469.2 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 August 30, 1996, the total market capitalization
of the Malaysian equity markets was approximately MYR 543.5 billion or US$258.4
billion.
THE MEXICAN EQUITY MARKETS
GENERAL BACKGROUND. There is only one stock exchange in Mexico, the Bolsa
Mexicana de Valores (BMV), which was established in 1894 and is located in
Mexico City. The stock exchange is a private corporation whose shares are owned
solely by its authorized members and operates under the stock market laws passed
by the government. The National Securities Commission (CNV) supervises the stock
exchange. The Mexican exchange operates primarily via the open outcry method.
However, firm orders in writing can supersede this system, provided there is a
perfect match of the details of a buy and sell order. Executions on the exchange
can be done by members only. Membership of the stock exchange is restricted to
"Casas de Bolsa" ("brokerage houses") and "Especialistas Bursatiles" (stock
exchange specialists).
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REPORTING, ACCOUNTING AND AUDITING. Mexican reporting, accounting and auditing
standards differ substantially from U.S. standards. In general, Mexican
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of August 30, 1996, the total market capitalization
of the Mexican equity markets was approximately MXN__________ billion or
US$_____________ 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 August 30, 1996, the total market capitalization
of the Dutch equity markets was approximately NLG 492.8 billion or US$333.2
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 August 30, 1996, the total market capitalization
of the Singaporean markets was approximately SGD 222.1 billion or US$144
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 August 30, 1996, the total market capitalization
of the Spanish equity markets was approximately ESP 19,230.2 billion or US$167.4
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 August 30, 1996, the total market capitalization
of the Swedish equity markets was approximately SEK 1,192.9 billion or US$217.3
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 August 30, 1996, the total market capitalization
of the Swiss equity markets was approximately CHF 454.0 billion or US$410.9
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 August 30, 1996, the aggregate capitalization of
the United Kingdom equity markets was approximately L898.9 billion or US$1,495.1
billion.
OTHER FUND INVESTMENTS
Although the policy of each WEBS Index Series of the Fund is to remain
substantially fully invested in equity securities, a WEBS Index Series may
also invest in combinations of certain stock index futures contracts, options
on such futures contracts, stock index options, stock index swaps and cash
and Short-Term Investments that are intended to provide the WEBS Index Series
with exposure to such equity securities. A WEBS 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 WEBS Index Series generally seeks to invest for the long
term, the WEBS Index Series retain the right to sell securities irrespective
of how long they have been held. However, because of the "passive" investment
management approach of the Fund, the portfolio turnover rate for each WEBS
Index Series is expected to be under 50%, a generally lower turnover rate
than for many other investment companies. A portfolio turnover rate of 50%
would occur if one half of a WEBS Index Series' securities were sold within
one year. (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 a WEBS Index
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Series' portfolio composition or weighting.) Ordinarily, securities will be
sold from a WEBS Index Series only to reflect certain administrative changes
in an Index (including mergers or changes in the composition of the Index) or
to accommodate cash flows out of the WEBS Index Series while seeking to keep
the performance of the WEBS Index Series in line with that of its benchmark
index. In addition, securities may be sold from a WEBS Index Series in
certain circumstances to ensure the WEBS Index Series' compliance with the
diversification and other requirements of the Internal Revenue Code of 1986
(the "Internal Revenue Code") and with other requirements, which would tend
to raise the portfolio turnover rate of such WEBS Index Series. Purchases and
sales of securities involve transaction costs borne by the respective WEBS
Index Series.
a WEBS Index Series may borrow money from a bank up to a limit of 33%
of the market value of its assets, but only for temporary or emergency
purposes. A WEBS 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
WEBS Index Series. To the extent that a WEBS Index Series borrows money prior
to receiving distributions on its portfolio securities or prior to selling
securities in connection with a redemption, it may be leveraged; at such
times, the WEBS Index Series may appreciate or depreciate in value more
rapidly than its benchmark index. A WEBS Index Series will not make cash
purchases of securities when the amount of money borrowed exceeds 5% of the
market value of its total assets.
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 government securities or other assets
that are pledged as collateral to the Fund in connection with these loans
generate income, securities lending enables a WEBS Index Series to earn
additional income that may partially offset the expenses of such WEBS Index
Series, and thereby reduce the effect that expenses have on such WEBS 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 a WEBS Index Series' total assets. The documentation
for these loans provide that the WEBS Index Series will receive collateral
equal to at least 100% of the current market value of the loaned securities,
as marked to market each day that the net asset value of the WEBS Index
Series is determined, consisting of government securities or other assets
permitted by applicable regulations and interpretations. A WEBS Index Series
pays reasonable administrative and custodial fees in connection with the loan
of securities. The WEBS Index Series invests collateral in Short-Term
Investments. Morgan Stanley Trust Company ("MSTC") serves as Lending Agent of
the Fund and, in such capacity, shares equally with the respective WEBS Index
Series any net income earned on invested collateral. A WEBS Index Series'
share of income from the loan collateral is included in the WEBS 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 WEBS 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 WEBS Index Series must be able to terminate the loan at
any time; (4) the WEBS 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 WEBS Index Series may
pay only reasonable custodian fees in connection with the loan and will pay
no finder's fees; and (6) while voting rights on the loaned securities may
pass to the borrower, the Fund's Board of Directors (the "Board" or the
"Directors") must terminate the loan and regain the right to vote the
securities if a material event adversely affecting the investment occurs.
Although each WEBS Index Series will receive collateral in connection with
all loans of portfolio securities, and such collateral will be marked to
market, the WEBS Index Series will be exposed to the risk of loss should a
borrower default on its obligation
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to return the borrowed securities (E.G., the loaned securities may have
appreciated beyond the value of the collateral held by the Fund). In addition,
each WEBS Index Series bears the risk of loss of any cash collateral that it
invests in Short-Term Investments.
CURRENCY TRANSACTIONS
The investment policy of each WEBS Index Series is to remain as fully
invested as practicable in the equity securities of the relevant market.
Hence, no WEBS Index Series of the Fund expects to engage in currency
transactions for the purpose of hedging against declines in the value of the
WEBS Index Series' currency. a WEBS 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 WEBS 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 a WEBS 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 a WEBS Index Series and is unrelated to the interest rate on the
underlying instrument. In these transactions, the securities acquired by a
WEBS 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 monitors the Fund's repurchase agreement transactions generally
and has established guidelines and standards for review of the
creditworthiness of any bank, broker or dealer counterparty to a repurchase
agreement with a WEBS Index Series. No more than an aggregate of 15% of the
WEBS 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. A WEBS 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 a WEBS Index Series
not within the control of the WEBS Index Series and therefore the WEBS 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 WEBS 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
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<PAGE>
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 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 a WEBS 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 WEBS 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 WEBS 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
A WEBS 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 a WEBS 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 WEBS 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).
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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
index or asset. Although swap agreements entail the risk that a party will
default on its payment obligations thereunder, each WEBS Index Series seeks
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 a WEBS
Index Series' obligations over its entitlements with respect to each swap is
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 is
maintained in a segregated account at the Fund's custodian bank.
FUTURE DEVELOPMENTS
Each WEBS 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 WEBS Index Series or which are not currently available but which may
be developed, to the extent such opportunities are both consistent with a
WEBS Index Series' investment objective and legally permissible for the WEBS
Index Series. Before entering into such transactions or making any such
investment, the WEBS Index Series will provide appropriate disclosure.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions as
fundamental policies with respect to each WEBS Index Series. These
restrictions cannot be changed with respect to a WEBS Index Series without
the approval of the holders of a majority of such WEBS 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 a WEBS 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 WEBS Index Series present at such meeting, if
the holders of more than 50% of the outstanding voting securities of such
WEBS Index Series are present or represented by proxy, or (2) more than 50%
of the outstanding voting securities of the WEBS Index Series. a WEBS 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 a WEBS 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 WEBS Index Series' total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not including the
amount borrowed) valued at the time the borrowing is made, and the WEBS Index
Series will not purchase securities while borrowings in excess of 5% of the
WEBS Index Series' total assets are outstanding, provided, that for purposes
of this restriction, short-term credits necessary for the clearance of
transactions are not considered borrowings;
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 WEBS 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;
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6. Purchase, hold or deal in real estate, or oil, gas or mineral
interests or leases, but a WEBS 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 WEBS Index Series may be deemed an underwriter in connection with
the sale of securities in its portfolio;
8. Purchase securities on margin, except for such short-term credits
as are necessary for the clearance of transactions, except that a WEBS 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 WEBS Index Series observes the following
restrictions, which may be changed by the Board without a shareholder vote. a
WEBS 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 WEBS 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 WEBS Index Series'
investments in illiquid securities, with respect to each WEBS Index Series,
foreign equity securities, though not registered under the Securities Act of
1933 (the "Securities Act"), are not deemed illiquid if they are otherwise
readily marketable. Such securities ordinarily considered to be"readily
marketable" if they are traded on an exchange or other organized market and
are not legally restricted from sale by the WEBS Index Series. The Adviser
monitors the liquidity of restricted securities in each WEBS Index Series'
portfolio under the supervision of the Fund's Board of Directors. In reaching
liquidity decisions, the Adviser considers, 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 WEBS 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 a WEBS
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 a WEBS
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 a WEBS Index Series' return
with the performance of the corresponding MSCI Index and may lower the WEBS
Index Series' return. The WEBS 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 WEBS 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, a WEBS 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, a WEBS Index Series may be required to
make delivery of the instruments underlying futures contracts it holds.
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A WEBS 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 a WEBS 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 a WEBS 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 WEBS 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 a
WEBS Index Series may affect the holding period of such securities and,
consequently, the nature of the gain or loss on such securities upon
disposition. a WEBS 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 WEBS Index Series.
In order for a WEBS 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 WEBS 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 WEBS 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, a WEBS Index Series may be required to defer the
closing out of futures
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<PAGE>
contracts beyond the time when it would 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 WEBS 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 WEBS Index Series distributes to shareholders annually any net
capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the WEBS Index Series' fiscal year)
on futures transactions. Such distributions are combined with distributions
of capital gains realized on the WEBS Index Series' other investments and
shareholders are advised on the nature of the distributions.
CONTINUOUS OFFERING
The method by which Creation Units of WEBS are created and traded may
raise certain issues under applicable securities laws. Because new Creation
Units of WEBS are 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 WEBS 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.
17
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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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<PAGE>
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. 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
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scale 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 that 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>
1995 1994 1993 1992 1991 1990
---- ---- ---- ----- ----- -----
<S> <C> <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)
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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 protectionist 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
22
<PAGE>
government while the private sector continues to 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. There can be no assurance
that the transition to Chinese rule will not have serious adverse effects on
the value of Hong Kong stocks, and thus on the value of WEBS of the Hong Kong
Index Series. 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
23
<PAGE>
makes 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
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growth. The 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 defense 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)
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
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
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 exist 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.
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CANADIAN REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1995
1994 4.5
1993 2.2
1992 0.6
1991 -1.8
1990 -0.2
Source: World Economic Outlook, May 1995 (International Monetary 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 kidnaping 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 51.4%). 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, enhance 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.
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MEXICO REAL GDP RATE OF GROWTH (ANNUAL % CHANGE)
1995
1994 3.5
1993 0.6
1992 2.8
1991 3.6
1990 4.4
Source: World Economic Outlook, May 1995 (International Monetary 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 optimization process which involves maximizing
float and
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liquidity, reflecting accurately the market's size and industry profiles, and
minimizing cross-ownership. The optimization variables and their targets are:
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
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 the
same time, properly representing the lower capitalization end of
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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) WEBS Index Series, the Fund's WEBS 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, Austria and Germany WEBS Index
Series, such withholding rate currently differs from that applicable to
United States residents. So-called "un-franked" dividends from Australian
companies are withheld at a 30% rate to Luxembourg residents and a 15% rate
to the Australia WEBS Index Series (there is no difference in the treatment
of "franked" dividends). Austrian companies impose a 15% dividend withholding
on Luxembourg residents and an 11% rate on the Austria WEBS Index Series.
German companies impose a 15% dividend withholding on Luxembourg residents
and a 10% rate on the German WEBS Index Series. The Mexico (Free) WEBS WEBS
Index Series' benchmark Index, the MSCI Mexico (Free) WEBS 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
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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.
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. The exchange rate for the MSCI Mexico (Free) Index is that
prevailing as of 3:00 p.m. New York City time.
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.
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Each of the MSCI Indices utilized as the benchmark for an WEBS Index
Series of the Fund is calculated reflecting dividends reinvested. With the
exception of the Mexico (Free) WEBS Index Series, the Fund's WEBS 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 August 30, 1996, the MSCI Australia Index (with net dividends
reinvested) (the "MSCI Australia") consisted of 48 stocks with an aggregate
market capitalization of approximately AUD186.4 (_____) billion or US $157.6
billion. In percentage terms, the MSCI Australia represented approximately 57.4%
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:
1. Broken Hill Prop. Co . . . . . . . . . . . . . . . 17.25%
2. National Bank Australia. . . . . . . . . . . . . . 9.13%
3. News Corp . . . . . . . . . . . . . . . . . . . . 6.87%
4. Westpac Banking . . . . . . . . . . . . . . . . . 5.71%
5. Western Mining . . . . . . . . . . . . . . . . . . 4.98%
6. Coca-Cola Amatil . . . . . . . . . . . . . . . . . 4.15%
7. CRA . . . . . . . . . . . . . . . . . . . . . . . 3.21%
8. News Corp PLVO . . . . . . . . . . . . . . . . . . 2.83%
9. Lend Lease . . . . . . . . . . . . . . . . . . . . 2.49%
10. Amcor . . . . . . . . . . . . . . . . . . . . . . 2.49%
As of August 30, 1996, the largest five constituents together comprised
approximately 43.94% of the market capitalization of the MSCI Australia; the
largest ten constituents comprised approximately 59.12% of the market
capitalization of the MSCI Australia; and the largest 20 constituents comprised
approximately 77.73% 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 August 30, 1996 were:
1. Energy Sources. . . . . . . . . . . . . . . . . . 19.14%
2. Banking . . . . . . . . . . . . . . . . . . . . 14.85%
3. Metals - Non Ferrous . . . . . . . . . . . . . . 11.63%
4. Broadcasting & Publishing . . . . . . . . . . . . 9.70%
5. Beverages & Tobacco . . . . . . . . . . . . . . . 6.91%
6. Building Materials & Components . . . . . . . . . 6.16%
7. Real Estate . . . . . . . . . . . . . . . . . . 5.61%
8. Gold Mines. . . . . . . . . . . . . . . . . . . . 4.31%
9. Multi-Industry. . . . . . . . . . . . . . . . . . 3.23%
10. Merchandising . . . . . . . . . . . . . . . . . 2.75%
Appendix A hereto contains a complete list of the securities in the MSCI
Australia Index as of August 30, 1996.
THE MSCI AUSTRIA INDEX
On August 30, 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$22.8 billion. In
percentage terms, the MSCI Austria represented approximately 61.9% of the total
market capitalization of Austria.
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The ten largest constituents of the MSCI Austria and the respective
approximate percentages of the MSCI Austria represented by such constituents
were, in order:
1. Bank of Austria . . . . . . . . . . . . . . . . . 19.68%
2. OMV AG. . . . . . . . . . . . . . . . . . . . . . 11.50%
3. Verbund . . . . . . . . . . . . . . . . . . . . 9.54%
4. EA-Generali . . . . . . . . . . . . . . . . . . . 8.49%
5. VA Technologie. . . . . . . . . . . . . . . . . . 8.18%
6. Creditanstalt Stamm . . . . . . . . . . . . . . . 7.82%
7. Flughafen Wien. . . . . . . . . . . . . . . . . . 6.25%
8. Wienerberger Baustoff . . . . . . . . . . . . . . 5.53%
9. Boehler-Uddeholm. . . . . . . . . . . . . . . . . 3.66%
10. Creditanstalt Vorzug. . . . . . . . . . . . . . . 3.03%
As of August 30, 1996, the largest five constituents together comprised
approximately 57.40% of the market capitalization of the MSCI Austria; the
largest ten constituents comprised approximately 83.70% of the market
capitalization of the MSCI Austria; and the largest 20 constituents comprised
approximately 97.81% of the market capitalization of the MSCI Austria.
The ten most highly represented industry sectors in the MSCI Austria, and
the approximate percentages of the MSCI Austria represented thereby as of August
30, 1996 were:
1. Banking . . . . . . . . . . . . . . . . . . . . 32.89%
2. Energy Sources. . . . . . . . . . . . . . . . . . 11.50%
3. Machinery & Engineering . . . . . . . . . . . . . 9.67%
4. Utilities - Electrical & Gas . . . . . . . . . . 9.54%
5. Insurance . . . . . . . . . . . . . . . . . . . 8.89%
6. Business & Public Services. . . . . . . . . . . . 6.25%
7. Building Materials & Components . . . . . . . . . 5.53%
8. Misc. Materials & Commodities . . . . . . . . . . 4.13%
9. Metals - Steel . . . . . . . . . . . . . . . . . 3.66%
10. Beverages & Tobacco . . . . . . . . . . . . . . . 2.35%
Appendix A hereto contains a complete list of the securities in the MSCI Austria
Index as of August 30, 1996.
THE MSCI BELGIUM INDEX
On August 30, 1996, the MSCI Belgium Index (with net dividends reinvested)
(the "MSCI Belgium") consisted of 17 stocks with an aggregate market
capitalization of approximately BEF1,878.2 (____) billion or US$108.7 billion.
In percentage terms, the MSCI Belgium represented approximately 60.2% of the
total market capitalization of Belgium.
On August 30, 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:
1. Electrabel. . . . . . . . . . . . . . . . . . . . 18.79%
2. Petrofina . . . . . . . . . . . . . . . . . . . 11.44%
3. Tractebel . . . . . . . . . . . . . . . . . . . 9.18%
4. Generale Banque Groupe. . . . . . . . . . . . . . 8.64%
5. Fortis AG . . . . . . . . . . . . . . . . . . . . 8.18%
6. Solvay. . . . . . . . . . . . . . . . . . . . . . 7.63%
7. Kredietbank . . . . . . . . . . . . . . . . . . 6.43%
8. Royale Belge. . . . . . . . . . . . . . . . . . . 4.64%
9. Groupe Bruxelles Lambert. . . . . . . . . . . . . 4.58%
10. Delhaize-Le Lioh. . . . . . . . . . . . . . . . . 4.32%
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As of August 30, 1996, the largest five constituents together comprised
approximately 56.22% of the market capitalization of the MSCI Belgium; the
largest ten constituents comprised approximately 83.81% of the market
capitalization of the MSCI Belgium; and the largest 15 constituents comprised
approximately 97.97% 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 August
30, 1996 were:
1. Utilities - Electrical & Gas . . . . . . . . . . 18.79%
2. Multi-Industry. . . . . . . . . . . . . . . . . . 16.38%
3. Banking . . . . . . . . . . . . . . . . . . . . 15.93%
4. Insurance . . . . . . . . . . . . . . . . . . . 12.82%
5. Energy Sources. . . . . . . . . . . . . . . . . . 11.44%
6. Chemicals . . . . . . . . . . . . . . . . . . . 7.63%
7. Merchandising . . . . . . . . . . . . . . . . . . 4.32%
8. Electric Components . . . . . . . . . . . . . . . 3.25%
9. Metals - Non Ferrous . . . . . . . . . . . . . . 2.97%
10. Building Materials & Components . . . . . . . . . 2.68%
Appendix A hereto contains a complete list of the securities in the MSCI Belgium
Index as of August 30, 1996.
THE MSCI CANADA INDEX
On August 30, 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$232.6 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:
1. Northern Telecom. . . . . . . . . . . . . . . . . 5.78%
2. BCE Inc . . . . . . . . . . . . . . . . . . . . 5.58%
3. Seagram . . . . . . . . . . . . . . . . . . . . 5.51%
4. Thomson Corp . . . . . . . . . . . . . . . . . . 4.73%
5. Barrick Gold Corp.. . . . . . . . . . . . . . . . 4.33%
6. Royal Bank of Canada. . . . . . . . . . . . . . . 3.52%
7. Canadian Pacific. . . . . . . . . . . . . . . . . 3.43%
8. Alcan Aluminum. . . . . . . . . . . . . . . . . . 3.19%
9. Imperial Oil. . . . . . . . . . . . . . . . . . . 3.09%
10. Canadian Imperial Bank. . . . . . . . . . . . . . 3.06%
As of August 30, 1996, the largest five constituents together comprised
approximately 25.92% of the market capitalization of the MSCI Canada; the
largest ten constituents comprised approximately 42.23% of the market
capitalization of the MSCI Canada; and the largest 20 constituents comprised
approximately 64.31% 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 August
30, 1996 were:
1. Banking . . . . . . . . . . . . . . . . . . . . 12.70%
2. Energy Sources. . . . . . . . . . . . . . . . . . 12.37%
3. Metals - Non-Ferrous . . . . . . . . . . . . . . 11.67%
4. Gold Mines. . . . . . . . . . . . . . . . . . . . 8.45%
5. Multi-Industry. . . . . . . . . . . . . . . . . . 6.74%
6. Telecommunications. . . . . . . . . . . . . . . . 6.45%
7. Broadcasting & Publishing . . . . . . . . . . . . 6.22%
8. Beverages & Tobacco . . . . . . . . . . . . . . . 6.21%
9. Electrical & Electronics. . . . . . . . . . . . . 5.78%
10. Utilities - Electrical & Gas . . . . . . . . . . 4.92%
Appendix A hereto contains a complete list of the securities in the MSCI Canada
Index as of August 30, 1996.
THE MSCI FRANCE INDEX
On August 30, 1996, the MSCI France Index (with net dividends reinvested)
(the "MSCI France") consisted of 71 stocks with an aggregate market
capitalization of approximately FRF1,744.3 (____) billion or US$364.8 billion.
In percentage terms, the MSCI France represented approximately 65.2% 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:
1. L'Oreal . . . . . . . . . . . . . . . . . . . . 6.12%
2. Elf Aquitaine . . . . . . . . . . . . . . . . . . 5.76%
3. Carrefour . . . . . . . . . . . . . . . . . . . 5.63%
4. LVMH (Moet Vuitton) . . . . . . . . . . . . . . . 5.33%
5. Total SA. . . . . . . . . . . . . . . . . . . . . 5.14%
6. Alcatel Alsthom . . . . . . . . . . . . . . . . . 3.63%
7. Generale Eaux (CIE) . . . . . . . . . . . . . . . 3.37%
8. Air Liquide . . . . . . . . . . . . . . . . . . 3.27%
9. AXA . . . . . . . . . . . . . . . . . . . . . . 3.14%
10. Saint-Bobain. . . . . . . . . . . . . . . . . . . 3.09%
As of August 30, 1996, the largest five constituents together comprised
approximately 27.99% of the market capitalization of the MSCI France; the
largest ten constituents comprised approximately 44.49% of the market
capitalization of the MSCI France; and the largest 20 constituents comprised
approximately 67.10% 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 August
30, 1996 were:
1. Energy Sources. . . . . . . . . . . . . . . . . . 10.90%
2. Merchandising . . . . . . . . . . . . . . . . . . 10.53%
3. Banking . . . . . . . . . . . . . . . . . . . . 9.31%
4. Health & Personal Care. . . . . . . . . . . . . . 9.22%
5. Electrical & Electronics. . . . . . . . . . . . . 7.21%
6. Business & Public Services. . . . . . . . . . . . 7.03%
7. Beverages & Tobacco . . . . . . . . . . . . . . . 6.92%
8. Chemicals . . . . . . . . . . . . . . . . . . . 5.76%
9. Insurance . . . . . . . . . . . . . . . . . . . 5.11%
10. Building Materials & Components . . . . . . . . . 4.76%
Appendix A hereto contains a complete list of the securities in the MSCI France
Index as of August 30, 1996.
34
<PAGE>
THE MSCI GERMANY INDEX
On August 30, 1996, the MSCI Germany Index (with net dividends reinvested)
(the "MSCI Germany") consisted of 66 stocks with an aggregate market
capitalization of approximately DEM561.1 (____) billion or US$397.5 billion. In
percentage terms, the MSCI Germany represented approximately 64.1% 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:
1. Allianz Holding . . . . . . . . . . . . . . . . . 10.19%
2. Siemens . . . . . . . . . . . . . . . . . . . . 7.59%
3. Daimler-Benz. . . . . . . . . . . . . . . . . . . 7.18%
4. Veba. . . . . . . . . . . . . . . . . . . . . . . 6.57%
5. Bayer . . . . . . . . . . . . . . . . . . . . . 6.47%
6. Deutsche Bank . . . . . . . . . . . . . . . . . . 6.33%
7. Munchener Ruck. . . . . . . . . . . . . . . . . . 4.70%
8. BASF. . . . . . . . . . . . . . . . . . . . . . . 4.66%
9. Mannesmann. . . . . . . . . . . . . . . . . . . . 3.40%
10. RWE . . . . . . . . . . . . . . . . . . . . . . 3.15%
As of August 30, 1996, the largest five constituents together comprised
approximately 38.00% of the market capitalization of the MSCI Germany; the
largest ten constituents comprised approximately 60.25% of the market
capitalization of the MSCI Germany; and the largest 20 constituents comprised
approximately 82.27% 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 August
30, 1996 were:
1. Insurance . . . . . . . . . . . . . . . . . . . 16.70%
2. Banking . . . . . . . . . . . . . . . . . . . . 13.58%
3. Utilities - Electrical & Gas . . . . . . . . . . 11.26%
4. Chemicals . . . . . . . . . . . . . . . . . . . 11.13%
5. Automobiles . . . . . . . . . . . . . . . . . . 10.29%
6. Electrical & Electronics. . . . . . . . . . . . . 7.59%
7. Machinery & Engineering . . . . . . . . . . . . . 5.93%
8. Business & Public Services. . . . . . . . . . . . 4.40%
9. Health & Personal Care. . . . . . . . . . . . . . 3.89%
10. Multi-Industry. . . . . . . . . . . . . . . . . . 3.56%
Appendix A hereto contains a complete list of the securities in the MSCI Germany
Index as of August 30, 1996.
THE MSCI HONG KONG INDEX
On August 30, 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$192.6
billion. In percentage terms, the MSCI Hong Kong represented approximately
58.0% 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:
1. Sun Hung Kai Properties . . . . . . . . . . . . . 12.93%
2. Hutchison Whampoa . . . . . . . . . . . . . . . . 12.13%
3. Hang Seng Bank. . . . . . . . . . . . . . . . . . 10.97%
4. Hong Kong Telecom . . . . . . . . . . . . . . . . 10.49%
5. Cheung Kong . . . . . . . . . . . . . . . . . . 8.93%
6. Swire Pacific A . . . . . . . . . . . . . . . . . 7.81%
7. New World Development . . . . . . . . . . . . . . 4.71%
8. China Light & Power . . . . . . . . . . . . . . . 4.69%
9. Wharf (Holdings). . . . . . . . . . . . . . . . . 4.58%
10. Cathay Pacific Airways. . . . . . . . . . . . . . 3.17%
As of August 30, 1996, the largest five constituents together comprised
approximately 55.45% of the market capitalization of the MSCI Hong Kong; the
largest ten constituents comprised approximately 80.41% of the market
capitalization of the MSCI Hong Kong; and the largest 20 constituents comprised
approximately 94.34% 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
August 30, 1996 were:
1. Real Estate . . . . . . . . . . . . . . . . . . 37.58%
2. Multi-Industry. . . . . . . . . . . . . . . . . . 20.05%
3. Banking . . . . . . . . . . . . . . . . . . . . 13.78%
4. Telecommunications. . . . . . . . . . . . . . . . 10.49%
5. Utilities - Electrical & Gas . . . . . . . . . . 7.37%
6. Transportation - Airlines. . . . . . . . . . . . 3.17%
7. Leisure & Tourism . . . . . . . . . . . . . . . . 2.63%
8. Broadcasting & Publishing . . . . . . . . . . . . 1.92%
9. Merchandising . . . . . . . . . . . . . . . . . . 0.78%
10. Financial Services. . . . . . . . . . . . . . . . 0.49%
Appendix A hereto contains a complete list of the securities in the MSCI Hong
Kong Index as of August 30, 1996.
THE MSCI ITALY INDEX
On August 30, 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$155.7 billion.
In percentage terms, the MSCI Italy represented approximately 63.5% 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:
1. ENI . . . . . . . . . . . . . . . . . . . . . . 14.36%
2. Assicurazioni Generali. . . . . . . . . . . . . . 12.06%
3. Telecom Italia Mobile . . . . . . . . . . . . . . 9.36%
4. Telecom Italia. . . . . . . . . . . . . . . . . . 8.91%
5. Fiat. . . . . . . . . . . . . . . . . . . . . . . 6.93%
6. INA . . . . . . . . . . . . . . . . . . . . . . 3.90%
7. Mediaset. . . . . . . . . . . . . . . . . . . . . 3.70%
8. San Paolo di Torino . . . . . . . . . . . . . . . 3.51%
9. IMI Istituto Mobiliare. . . . . . . . . . . . . . 3.22%
10. Edison. . . . . . . . . . . . . . . . . . . . . . 2.35%
36
<PAGE>
As of August 30, 1996, the largest five constituents together comprised
approximately 51.62% of the market capitalization of the MSCI Italy; the largest
ten constituents comprised approximately 68.29% of the market capitalization of
the MSCI Italy; and the largest 20 constituents comprised approximately 85.35%
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 August 30,
1996 were:
1. Telecommunications. . . . . . . . . . . . . . . . 21.28%
2. Insurance . . . . . . . . . . . . . . . . . . . 19.31%
3. Energy Sources. . . . . . . . . . . . . . . . . . 14.36%
4. Banking . . . . . . . . . . . . . . . . . . . . 14.23%
5. Automobiles . . . . . . . . . . . . . . . . . . 8.70%
6. Broadcasting & Publishing . . . . . . . . . . . . 4.31%
7. Utilities - Electrical & Gas . . . . . . . . . . 3.89%
8. Multi-Industry. . . . . . . . . . . . . . . . . . 2.47%
9. Industrial Components . . . . . . . . . . . . . . 2.12%
10. Textiles & Apparel. . . . . . . . . . . . . . . . 1.60%
Appendix A hereto contains a complete list of the securities constituting the
MSCI Italy Index as of August 30, 1996.
THE MSCI JAPAN INDEX
On August 30, 1996, the MSCI Japan Index (with net dividends reinvested)
(the "MSCI Japan") consisted of 310 stocks with an aggregate market
capitalization of approximately JPY227,098.2 (____) billion or US$2,084.8
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:
1. Bank of Tokyo . . . . . . . . . . . . . . . . . . 4.70%
2. Toyota Motor Corp.. . . . . . . . . . . . . . . . 4.51%
3. Sumitomo Bank . . . . . . . . . . . . . . . . . . 2.86%
4. Industrial Bank of Japan. . . . . . . . . . . . . 2.68%
5. Fuji Bank . . . . . . . . . . . . . . . . . . . . 2.65%
6. Matsushita Electric Ind'l . . . . . . . . . . . . 1.76%
7. Nomura Securities Co. . . . . . . . . . . . . . . 1.70%
8. Tokyo Electric Power Co.. . . . . . . . . . . . . 1.64%
9. Sakura Bank . . . . . . . . . . . . . . . . . . . 1.63%
10. Hitachi . . . . . . . . . . . . . . . . . . . . . 1.52%
As of August 30, 1996, the largest five constituents together comprised
approximately 17.39% of the market capitalization of the MSCI Japan; the largest
ten constituents comprised approximately 25.64% of the market capitalization of
the MSCI Japan; and the largest 20 constituents comprised approximately 36.91%
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 August 30,
1996 were:
1. Banking. . . . . . . . . . . . . . . . . . . . . . . . 21.42%
2. Automobiles. . . . . . . . . . . . . . . . . . . . . . 6.56%
3. Machinery & Engineering. . . . . . . . . . . . . . . . 4.99%
4. Appliances & Household Durables. . . . . . . . . . . . 4.63%
5. Utilities -- Electrical & Gas. . . . . . . . . . . . . 4.22%
6. Chemicals. . . . . . . . . . . . . . . . . . . . . . . 4.11%
7. Transportation - Road & Rail . . . . . . . . . . . . . 3.84%
8. Merchandising. . . . . . . . . . . . . . . . . . . . . 3.76%
9. Construction - Housing . . . . . . . . . . . . . . . . 3.71%
10. Financial Services . . . . . . . . . . . . . . . . . . 3.65%
Appendix A hereto contains a complete list of the securities constituting the
MSCI Japan Index as of August 30,1996.
THE MSCI MALAYSIA INDEX
On August 30,1996, 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$137.9 billion. In
percentage terms, the MSCI Malaysia represented approximately 53.4% 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:
1. Telekom Malaysia . . . . . . . . . . . . . . . . . . . 12.98%
2. Tenaga Nasional. . . . . . . . . . . . . . . . . . . . 8.23%
3. Malayan Banking. . . . . . . . . . . . . . . . . . . . 7.99%
4. Sime Darby . . . . . . . . . . . . . . . . . . . . . . 5.80%
5. Resorts World. . . . . . . . . . . . . . . . . . . . . 4.39%
6. United Engineers (Malaysia). . . . . . . . . . . . . . 3.93%
7. Malaysia Int'l Shipping. . . . . . . . . . . . . . . . 2.25%
8. Rothmans Pall Mall (Mal) . . . . . . . . . . . . . . . 2.22%
9. Proton . . . . . . . . . . . . . . . . . . . . . . . . 2.15%
10. YTL Corp . . . . . . . . . . . . . . . . . . . . . . . 2.10%
As of August 30,1996, the largest five constituents together comprised
approximately 39.40% of the market capitalization of the MSCI Malaysia; the
largest ten constituents comprised approximately 52.04% of the market
capitalization of the MSCI Malaysia and the largest 20 constituents comprised
approximately 68.30% 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
August 30, 1996 were:
1. Telecommunications . . . . . . . . . . . . . . . . . . 14.44%
2. Multi-Industry . . . . . . . . . . . . . . . . . . . . 13.26%
3. Banking. . . . . . . . . . . . . . . . . . . . . . . . 12.56%
4. Utilities -- Electrical & Gas. . . . . . . . . . . . . 8.23%
5. Leisure & Tourism. . . . . . . . . . . . . . . . . . . 6.88%
6. Miscellaneous Materials & Commodities. . . . . . . . . 6.15%
7. Automobiles. . . . . . . . . . . . . . . . . . . . . . 5.62%
8. Financial Services . . . . . . . . . . . . . . . . . . 3.68%
9. Real Estate. . . . . . . . . . . . . . . . . . . . . . 3.35%
10. Building Materials . . . . . . . . . . . . . . . . . . 3.28%
38
<PAGE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Malaysia Index as of August 30,1996.
THE MSCI MEXICO (FREE) INDEX
On August 30,1996, the MSCI Mexico (Free) Index (with gross dividends
reinvested) (the "MSCI Mexico (Free)") consisted of 44 stocks. The MSCI Mexico
(Free) Index, as of January 31, 1996, had 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 August 30,1996, 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:
1. Telmex Telefonos Mex L . . . . . . . . . . . . . . . . 19.02%
2. Kimberly Clark Mexico. . . . . . . . . . . . . . . . . 7.33%
3. Grupo Televisa . . . . . . . . . . . . . . . . . . . . 6.77%
4. Telmex Telefonos Mex A . . . . . . . . . . . . . . . . 6.10%
5. Cifra B. . . . . . . . . . . . . . . . . . . . . . . . 5.42%
6. Grupo Modelo C . . . . . . . . . . . . . . . . . . . . 5.41%
7. Alfa . . . . . . . . . . . . . . . . . . . . . . . . . 3.83%
8. Empresas Moderna . . . . . . . . . . . . . . . . . . . 3.35%
9. Grupo Mexico B . . . . . . . . . . . . . . . . . . . . 3.05%
10. Cemex A. . . . . . . . . . . . . . . . . . . . . . . . 3.04%
As of August 30, 1996, the largest five constituents together comprised
approximately 44.64% of the market capitalization of the MSCI Mexico (Free); the
largest ten constituents comprised approximately 63.33% of the market
capitaliz ation of the MSCI Mexico (Free) and the largest 20 constituents
comprised approximately 86.49% 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 August 30,1996 were:
1. Telecommunications . . . . . . . . . . . . . . . . . . 25.13%
2. Beverages & Tobacco. . . . . . . . . . . . . . . . . . 11.98%
3. Merchandising. . . . . . . . . . . . . . . . . . . . . 10.43%
4. Building Materials & Components. . . . . . . . . . . . 9.67%
5. Health & Personal. . . . . . . . . . . . . . . . . . . 7.32%
6. Broadcasting & Publishing. . . . . . . . . . . . . . . 6.77%
7. Multi-Industry . . . . . . . . . . . . . . . . . . . . 5.94%
8. Metals -- Non Ferrous. . . . . . . . . . . . . . . . . 5.72%
9. Banking. . . . . . . . . . . . . . . . . . . . . . . . 5.23%
10. Food and Household Products. . . . . . . . . . . . . . 4.26%
Appendix A hereto contains a complete list of the securities constituting the
MSCI Mexico (Free) Index as of August 30, 1996.
THE MSCI NETHERLANDS INDEX
On August 30, 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$241.4
billion. In percentage terms, the MSCI Netherlands represented approximately
72.4% 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:
1. Royal Dutch Petroleum. . . . . . . . . . . . . . . . . 34.03%
2. Internationale Nederlanden Groep . . . . . . . . . . . 10.11%
3. Unilever NV. . . . . . . . . . . . . . . . . . . . . . 9.77%
4. ABN Amro Holdings. . . . . . . . . . . . . . . . . . . 7.31%
5. Koninklijke PTT Nederland. . . . . . . . . . . . . . . 6.90%
6. Phillips Electronics . . . . . . . . . . . . . . . . . 4.98%
7. Heineken NV. . . . . . . . . . . . . . . . . . . . . . 4.74%
8. Elsevier NV. . . . . . . . . . . . . . . . . . . . . . 4.49%
9. Ahold (Kon.) . . . . . . . . . . . . . . . . . . . . . 3.95%
10. Wolters Kluwer . . . . . . . . . . . . . . . . . . . . 3.62%
As of August 30, 1996, the largest five constituents together comprised
approximately 68.12% of the market capitalization of the MSCI Netherlands; the
largest ten constituents comprised approximately 89.90% of the market
capitalization of the MSCI Netherlands; and the largest 20 constituents
comprised approximately 99.52% 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 August 30, 1996 were:
1. Energy Sources . . . . . . . . . . . . . . . . . . . . 34.03%
2. Financial Services . . . . . . . . . . . . . . . . . . 10.11%
3. Food & Household Products. . . . . . . . . . . . . . . 9.77%
4. Broadcasting & Publishing. . . . . . . . . . . . . . . 8.10%
5. Banking. . . . . . . . . . . . . . . . . . . . . . . . 7.31%
6. Telecommunications . . . . . . . . . . . . . . . . . . 6.90%
7. Appliances & Household Durables. . . . . . . . . . . . 4.98%
8. Beverages & Tobacco. . . . . . . . . . . . . . . . . . 4.74%
9. Merchandising. . . . . . . . . . . . . . . . . . . . . 3.95%
10. Chemicals. . . . . . . . . . . . . . . . . . . . . . . 3.51%
Appendix A hereto contains a complete list of the securities in the MSCI
Netherlands as of August 30, 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 August 30, 1996, the MSCI
Singapore (Free) consisted of 38 stocks with an aggregate market capitalization
of approximately SGD124.3 (____) billion or US$96.7 billion. In percentage
terms, the MSCI Singapore (Free) represented approximately 67.1% 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:
1. Singapore Telecomm . . . . . . . . . . . . . . . . . . 15.35%
2. Singapore Airlines . . . . . . . . . . . . . . . . . . 14.06%
3. OCBC Bank. . . . . . . . . . . . . . . . . . . . . . . 12.44%
4. United Overseas Bank . . . . . . . . . . . . . . . . . 9.07%
5. Development Bank of Singapore. . . . . . . . . . . . . 8.33%
6. City Developments. . . . . . . . . . . . . . . . . . . 6.80%
7. Singapore Press Holdings . . . . . . . . . . . . . . . 6.07%
8. Keppel Corp. . . . . . . . . . . . . . . . . . . . . . 4.13%
9. DBS Land . . . . . . . . . . . . . . . . . . . . . . . 3.16%
10. Fraser & Neave . . . . . . . . . . . . . . . . . . . . 3.08%
40
<PAGE>
As of August 30, 1996, the largest five constituents together comprised
approximately 59.25% of the market capitalization of the MSCI Singapore (Free);
the largest ten constituents comprised approximately 82.49% of the market
capitalization of the MSCI Singapore (Free); and the largest 20 constituents
comprised approximately 93.05% 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 August 30, 1996 were:
1. Banking . . . . . . . . . . . . . . . . . . . . . 29.85%
2. Telecommunications. . . . . . . . . . . . . . . . 15.35%
3. Real Estate . . . . . . . . . . . . . . . . . . . 14.37%
4. Transportation -- Airlines. . . . . . . . . . . . 14.06%
5. Multi-Industry. . . . . . . . . . . . . . . . . . 7.04%
6. Broadcasting & Publishing . . . . . . . . . . . . 6.07%
7. Beverages & Tobacco . . . . . . . . . . . . . . . 3.08%
8. Automobiles . . . . . . . . . . . . . . . . . . . 2.32%
9. Leisure & Tourism . . . . . . . . . . . . . . . . 1.90%
10. Transportation -- Shipping. . . . . . . . . . . . 1.00%
Appendix A hereto contains a complete list of the securities in the MSCI
Singapore (Free) as of August 30, 1996.
THE MSCI SPAIN INDEX
On August 30, 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$105.4 billion.
In percentage terms, the MSCI Spain represented approximately 63.0% 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:
1. Telefonica de Espana. . . . . . . . . . . . . . . 16.95%
2. Endesa. . . . . . . . . . . . . . . . . . . . . . 14.71%
3. Repsol. . . . . . . . . . . . . . . . . . . . . . 9.46%
4. Banco Bilbao Vizcaya. . . . . . . . . . . . . . . 9.17%
5. Iberdrola . . . . . . . . . . . . . . . . . . . . 8.06%
6. Banco Santander . . . . . . . . . . . . . . . . . 7.96%
7. Gas Natural SGD . . . . . . . . . . . . . . . . . 6.95%
8. Argentaria Corp Bancaria. . . . . . . . . . . . . 5.03%
9. Banco Central Hispanoamericano. . . . . . . . . . 3.23%
10. Autopistas Cesa . . . . . . . . . . . . . . . . . 2.38%
As of August 30, 1996, the largest five constituents together comprised
approximately 58.35% of the market capitalization of the MSCI Spain; the largest
ten constituents comprised approximately 83.90% of the market capitalization of
the MSCI Spain and the largest 20 constituents comprised approximately 96.28% 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 August 30,
1996 were:
1. Utilities -- Electrical & Gas . . . . . . . . . . 31.51%
2. Banking . . . . . . . . . . . . . . . . . . . . . 25.40%
3. Telecommunications. . . . . . . . . . . . . . . . 16.95%
4. Energy Sources. . . . . . . . . . . . . . . . . . 9.46%
5. Business & Public Services. . . . . . . . . . . . 4.47%
6. Construction & Housing. . . . . . . . . . . . . . 1.85%
7. Real Estate . . . . . . . . . . . . . . . . . . . 1.65%
8. Beverages & Tobacco . . . . . . . . . . . . . . . 1.60%
9. Insurance . . . . . . . . . . . . . . . . . . . . 1.43%
10. Metals -- Steel . . . . . . . . . . . . . . . . . 1.27%
Appendix A hereto contains a complete list of the securities in the MSCI Spain
as of August 30,1996.
THE MSCI SWEDEN INDEX
On August 30, 1996, the MSCI Sweden Index (with net dividends reinvested)
(the "MSCI Sweden") consisted of 31 stocks with an aggregate market
capitalization of approximately SEK722.5 (____)billion or US$129.1 billion. In
percentage terms, the MSCI Sweden represented approximately 59.4% 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:
1. Ericsson (LM) . . . . . . . . . . . . . . . . . . 18.02%
2. Astra A . . . . . . . . . . . . . . . . . . . . . 17.10%
3. Abb Ab A. . . . . . . . . . . . . . . . . . . . . 5.82%
4. Volvo . . . . . . . . . . . . . . . . . . . . . . 5.52%
5. Astra B . . . . . . . . . . . . . . . . . . . . . 3.83%
6. Skanska . . . . . . . . . . . . . . . . . . . . . 3.80%
7. Skand. Enskilda . . . . . . . . . . . . . . . . . 3.53%
8. Hennes & Mauritz. . . . . . . . . . . . . . . . . 3.47%
9. Electrolux. . . . . . . . . . . . . . . . . . . . 3.43%
10. Svenska Handelsbk . . . . . . . . . . . . . . . . 3.42%
As of August 30, 1996, the largest five constituents together comprised
approximately 50.28% of the market capitalization of the MSCI Sweden; the
largest ten constituents comprised approximately 67.94% of the market
capitalization of the MSCI Sweden and the largest 20 constituents comprised
approximately 90.19% of the market capitalization of 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 August
30, 1996 were:
1. Electrical & Electronics. . . . . . . . . . . . . 26.16%
2. Health & Personal Care. . . . . . . . . . . . . . 20.93%
3. Automobiles . . . . . . . . . . . . . . . . . . . 7.98%
4. Banking . . . . . . . . . . . . . . . . . . . . . 7.28%
5. Forest Products & Paper . . . . . . . . . . . . . 7.02%
6. Construction & Housing. . . . . . . . . . . . . . 3.80%
7. Industrial Components . . . . . . . . . . . . . . 3.58%
8. Merchandising . . . . . . . . . . . . . . . . . . 3.47%
9. Appliances & Household Durables . . . . . . . . . 3.43%
10. Chemicals . . . . . . . . . . . . . . . . . . . . 3.17%
Appendix A hereto contains a complete list of the securities in the MSCI Sweden
as of August 30, 1996.
42
<PAGE>
THE MSCI SWITZERLAND INDEX
On August 30, 1996, the MSCI Switzerland Index (with net dividends
reinvested) (the "MSCI Switzerland") consisted of 41 stocks with an aggregate
market capitalization of approximately CHF355.0 (____) billion or US$326.6
billion. In percentage terms, the MSCI Switzerland represented approximately
79.5% 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:
1. Roche Holding . . . . . . . . . . . . . . . . . . 16.02%
2. Nestle. . . . . . . . . . . . . . . . . . . . . . 13.81%
3. Sandoz Ltd. . . . . . . . . . . . . . . . . . . . 12.47%
4. Ciba-Geigy. . . . . . . . . . . . . . . . . . . . 9.53%
5. Schweiz Bankgesell. . . . . . . . . . . . . . . . 6.17%
6. Roche Holding Inhaber . . . . . . . . . . . . . . 6.06%
7. CS Holdings . . . . . . . . . . . . . . . . . . . 5.85%
8. Schweiz Reuckvers . . . . . . . . . . . . . . . . 4.73%
9. Schweiz Bankverein. . . . . . . . . . . . . . . . 4.43%
10. Zuerich Versicherung. . . . . . . . . . . . . . . 3.74%
As of August 30, 1996, the largest five constituents together comprised
approximately 57.99% of the market capitalization of the MSCI Switzerland; the
largest ten constituents comprised approximately 82.80% of the market
capitalization of the MSCI Switzerland; and the largest 20 constituents
comprised approximately 95.27% 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 August 30, 1996 were:
1. Health & Personal Care. . . . . . . . . . . . . . 35.55%
2. Banking . . . . . . . . . . . . . . . . . . . . . 17.78%
3. Food & Household Products . . . . . . . . . . . . 13.81%
4. Chemicals . . . . . . . . . . . . . . . . . . . . 10.95%
5. Insurance . . . . . . . . . . . . . . . . . . . . 8.47%
6. Electrical & Electronics. . . . . . . . . . . . . 3.36%
7. Business & Public Services. . . . . . . . . . . . 2.71%
8. Building Materials & Components . . . . . . . . . 1.98%
9. Recreation. . . . . . . . . . . . . . . . . . . . 1.45%
10. Multi-Industry. . . . . . . . . . . . . . . . . . 1.43%
Appendix A hereto contains a complete list of the securities in the MSCI
Switzerland as of August 30, 1996.
THE MSCI UNITED KINGDOM INDEX
On August 30, 1996, the MSCI United Kingdom Index (with net dividends
reinvested) (the "MSCI UK") consisted of 142 stocks with an aggregate market
capitalization of approximately L582.8 (____) billion or US$964.3 billion. In
percentage terms, the MSCI UK represented approximately 64.5% 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:
1. British Petroleum . . . . . . . . . . . . . . . . 5.78%
2. Glaxo Wellcome. . . . . . . . . . . . . . . . . . 5.33%
3. Smithkline Beecham. . . . . . . . . . . . . . . . 3.88%
4. British Telecom . . . . . . . . . . . . . . . . . 3.41%
5. HSBC Holdings . . . . . . . . . . . . . . . . . . 3.25%
6. Lloyds TSB Group. . . . . . . . . . . . . . . . . 3.21%
7. Zeneca Group. . . . . . . . . . . . . . . . . . . 2.40%
8. Barclays. . . . . . . . . . . . . . . . . . . . . 2.30%
9. Marks & Spencer . . . . . . . . . . . . . . . . . 2.30%
10. BAT Industries. . . . . . . . . . . . . . . . . . 2.21%
As of August 30, 1996, the largest five constituents together comprised
approximately 21.66% of the market capitalization of the MSCI UK; the largest
ten constituents comprised approximately 34.08% of the market capitalization of
the MSCI UK; and the largest 20 constituents comprised approximately 50.96% 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 August 30, 1996
were:
1. Health & Personal Care. . . . . . . . . . . . . . 11.15%
2. Banking . . . . . . . . . . . . . . . . . . . . . 11.02%
3. Merchandising . . . . . . . . . . . . . . . . . . 8.89%
4. Telecommunications. . . . . . . . . . . . . . . . 6.65%
5. Energy Sources. . . . . . . . . . . . . . . . . . 6.52%
6. Multi-Industry. . . . . . . . . . . . . . . . . . 6.28%
7. Food & Household Products . . . . . . . . . . . . 4.61%
8. Leisure & Tourism . . . . . . . . . . . . . . . . 4.61%
9. Insurance . . . . . . . . . . . . . . . . . . . . 4.20%
10. Business & Public Services. . . . . . . . . . . . 4.15%
Appendix A hereto contains a complete list of the securities in the MSCI UK as
of August 30, 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 (39.40%),
the United Kingdom (16.55%), Germany (7.17%), France (6.47%), Switzerland
(6.21%), Netherlands (4.18%), Hong Kong (3.32%), Singapore (1.20%), Belgium
(1.17%), Malaysia (2.46%), Australia (2.69%), Spain (1.83%), Italy (2.23%),
Sweden (2.16%), Denmark (0.81%), Finland (0.52%), Norway (0.48%), New Zealand
(0.41%), Austria (0.45%) and Ireland (0.29%). The weightings shown
parenthetically are based on the EAFE Index as of August 30, 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
Unit listed in the Fund's prospectus under the heading
44
<PAGE>
"Creation Units", an investor might approximate the representation and weighting
of the MSCI EAFE Index by investing in the numbers of WEBS specified
for the following 15 Index Series, in order to achieve the basket weightings
listed below:
INDEX SERIES NUMBER OF WEBS % OF VALUE OF
------------ -------------- BASKET
------
Japan
United Kingdom
Germany
France
Switzerland
Netherlands
Hong Kong
Australia
Malaysia
Italy
Sweden
Spain
Singapore (Free)
Belgium
Austria
The total cost of the above basket of WEBS, again using
the values per Creation Unit in the Prospectus, would be $__________.
It should be noted that the WEBS basket set forth above does not include
representation of five countries included in the MSCI EAFE Index, representing
of the value of such index on December ____, 1996.
EXCHANGE LISTING AND TRADING
The WEBS of each WEBS Index Series have been listed for trading on the
AMEX. The AMEX has approved modifications to its Rules to permit the listing of
WEBS. The non-redeemable WEBS 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.
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 to range between $.015 to $.12 per share
for institutions and high net worth individuals.
In order to provide current WEBS pricing information, the AMEX
disseminates through the facilities of the Consolidated Tape Association an
updated "indicative optimized portfolio value" ("IOPV") for each WEBS Index
Series as calculated by Bloomberg, L.P ("Bloomberg"). The Fund is not involved
in or responsible for any aspect of the calculation or dissemination of the
IOPVs, and makes no warranty as to the accuracy of IOPVs. IOPVs are
disseminated on a per WEBS Index Series basis every 15 seconds during regular
AMEX trading hours of 9:30 a.m. to 4:00 p.m. New York time.
The IOPV has an equity securities value component and a cash component.
The equity securities values included in the IOPV are the values of the Deposit
Securities for each WEBS Index Series. While the IOPV reflects the current
market value of the Deposit Securities required to be deposited in connection
with the purchase of a Creation Unit of WEBS, it does not necessarily reflect
the precise composition of the current portfolio of securities held by the Fund
for each WEBS Index Series at a particular point in time, because the current
portfolio of a WEBS Index Series may include securities that are not a part of
the current
Deposit Securities. Therefore, the IOPV on a per WEBS basis disseminated during
AMEX trading hours should not be viewed as a real time update of the net asset
value of the Fund, which is calculated only once a day. It is possible that the
value of the portfolio of securities held by the Fund for a particular WEBS
Index Series may diverge from the applicable IOPV during any trading day. In
such case, the IOPV would not precisely reflect the value of a WEBS Index
Series' portfolio.
The equity securities included in the IOPV reflect the same market
capitalization weighing as the Deposit Securities of the particular Index
Series. In addition to the equity component described in the preceding
paragraph, the IOPV for each WEBS Index Series includes a cash component
consisting of estimated accrued dividend and other income, less expenses. Each
IOPV also reflects changes in currency exchange rates between the U.S. dollar
and the applicable home foreign currency. For the WEBS Index Series of
Australia, Japan, Malaysia, Hong Kong and Singapore (Free), there is no overlap
in trading hours between the foreign market and the AMEX. Therefore, for each
of these WEBS Index Series, Bloomberg utilizes closing prices (in applicable
foreign currency prices) in the foreign market for securities in the WEBS Index
Series portfolio, and converts the price to U.S. dollars. This value is updated
every 15 seconds during AMEX trading hours to reflect
changes in currency exchange rates between the U.S. dollar and the applicable
foreign currency. For WEBS Index Series which have trading hours overlapping
regular AMEX trading hours, Bloomberg updates the applicable IOPV every 15
seconds to reflect price changes in the principal foreign market, and
converts such prices into U.S. dollars based on the current currency exchange
rate. When the foreign market is closed but the AMEX is open, the IOPV is
updated every 15 seconds to reflect changes in currency exchange rates after
the foreign market closes.
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 five Directors.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND PRINCIPAL OCCUPATIONS
- ---------------- ---------------------- DURING PAST FIVE YEARS
----------------------
<S> <C> <C>
Nathan Most* Director, President and Senior Vice President (retired) (from 1992 to
P.O. Box 193 Chairman of the Board 1996) and Vice President (from 1980 to 1992)
Burlingame, CA 94011-0193 of the American Stock Exchange, Inc.;
Age President and CEO (retired) (from 1982 to
1996) of AMEX Commodities Corporation.
John B. Carroll Director Vice President of Investment Management
President (since 1984) of GTE Corporation; President
GTE Investment Management Corp. (since 1984) of GTE Investment Management
One Stamford Forum Corporation; Trustee and Member of the
Stamford, CT 06904 Executive Committee (since 1991) of The
Age Common Fund; Member of the Investment
Committee (since 1988) of the TWA Pilots
Annuity Trust Fund; Vice Chairman and
Executive Committee Member (since 1992) of
the Committee on Investment of Employee
Benefit Assets of the Financial Executive
Institute; and Member (since 1986) of the
Pension Advisory Committee of the New York
Stock Exchange.
Timothy A. Hultquist Director Advisory Director (since 1995) and Managing
Advisory Director Director (from 1985 to 1995) of Morgan
Morgan Stanley & Co. Incorporated Stanley & Co. Incorporated; Chairman (since
1251 Avenue of the Americas 1994) and Trustee (since 1985) of the Board of
23rd Floor Trustees of Macalester College; Trustee (since
New York, NY 10020 1995) of the Russell Sage Foundation; Member
Age (since 1994) of Wilmer Eye Institute Advisory
Counsel at John Hopkins University Hospital;
President (since 1992) of the Hultquist
Foundation.
46
<PAGE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND PRINCIPAL OCCUPATIONS
- ---------------- ---------------------- DURING PAST FIVE YEARS
----------------------
<S> <C> <C>
Lloyd N. Morrisett Director President (since 1969) of The John and Mary
President R. Markle Foundation; Member (since 1968)
The Markle Foundation of the Council on Foreign Relations; Member
75 Rockefeller Plaza (since 1970) of the American Association for
Suite 1800 the Advancement of Science; Chairman (since
New York, NY 10099 1970) of the Children's Television Workshop;
Age Director (since 1976) of Haskins Laboratories,
Inc.; Director (since 1990) of The Multimedia
Corporation; Director (since 1992) of
Classroom, Inc.; Director (since 1994) of
Infonautics Corporation; Member of Board of
Overseers (since 1995) of Dartmouth School of
Medicine; Director (since 1995) of Smith
College-Center for the Study of Social and
Political Change. Trustee (from 1973 to 1983,
from 1985 to 1995, and since 1996) of RAND.
W. Allen Reed Director President and CEO and Director (since 1994)
President of General Motors Investment Management
General Motors Investment Corporation; Vice President and Treasurer
Management Corp. (from 1991 to 1994) of Hughes Electronics;
767 Fifth Avenue President (from 1984 to 1991) of Hughes
New York, NY 10153 Investment Management Company; Director
Age (since 1995) of Taubman Centers, Inc. (a real
estate investment trust); Director (since 1992)
of FLIR Systems (an imaging technology
company); Director (since 1994) of General
Motors Acceptance Corporation; Director (since
1994) of Motors Insurance Corporation;
Director (since 1995) of Equity Fund of Latin
America; Director (since 1995) of the
Commonwealth Equity Fund; Member (since
1994) of the Pension Managers Advisory
Committee of the New York Stock Exchange;
Member (since 1995) of the New York State
Retirement System Advisory Board; Chairman
(since 1995) of the Investment Advisory
Committee of Howard Hughes Medical
Institute.
47
<PAGE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND PRINCIPAL OCCUPATIONS
- ---------------- ---------------------- DURING PAST FIVE YEARS
----------------------
<S> <C> <C>
Stephen M. Wynne Treasurer Executive Vice President and Chief Accounting
Executive Vice President Officer (since 1993) and Senior Vice President
PFPC Inc. and Chief Accounting Officer (from 1991 to
400 Bellevue Parkway 1993) of PFPC Inc.; Executive Vice President
Wilmington, DE 19809 (since 1995) of PFPC International; Vice
President and Chief Accounting Officer (since
1987) of PNC Institutional Management Corp.
R. Sheldon Johnson Secretary Managing Director, Institutional Equity
Managing Director Department, Morgan Stanley & Co.
Morgan Stanley & Co. Incorporated Incorporated.
1585 Broadway
New York, NY 10036
Stephen C. Beach Assistant Treasurer Senior Vice President -- Product and Client
Senior Vice President Development (since 1995) and Managing
PFPC Inc. Counsel (from 1990 to 1994) of PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
JoAnne M. Bennick Assistant Treasurer Vice President and Director of Quality
Vice President Assurance (since 1993) of PFPC Inc.; Audit
PFPC Inc. Manager (from 1990 to 1993) and Audit
103 Bellevue Parkway Associate (from 1985 to 1990) of Coopers &
Wilmington, DE 19809 Lybrand.
Gary M. Gardner Assistant Secretary Chief Counsel (since 1994) of PFPC Inc.;
Chief Counsel Associate General Counsel (from 1992 to
PFPC Inc. 1994) of The Boston Company, Inc.; General
400 Bellevue Parkway Counsel (from 1986 to 1992) of SunAmerica
Wilmington, DE 19809 Asset Management Inc.
Kathleen L. Thren Assistant Secretary Counsel of PNC Bank, N.A. (since 1996);
Counsel Attorney (1993-1996) of Drinker, Biddle &
PFPC Inc. Reath.
400 Bellevue Parkway
Wilmington, DE 19809
</TABLE>
__________
* "Interested" director, as defined in the Investment Company Act of 1940, by
reason of his position as President of the Fund.
48
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the remuneration of Directors and officers
of the Fund.
<TABLE>
<CAPTION>
NAME OF PERSON, POSITION AGGREGATE COMPENSATION PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM
- ------------------------ FROM REGISTRANT BENEFITS ACCRUED BENEFITS UPON REGISTRANT AND FUND
---------------------- AS PART OF RETIREMENT COMPLEX PAID TO DIRECTORS
FUND EXPENSES ---------------- -------------------------
----------------------
<S> <C> <C> <C> <C>
Nathan Most, Director, $20,000 per annum $5,000 NONE NONE $20,000 per annum $5,000
President and Chairman per Directors' meeting per Director's meeting
of the Board attended attended
John B. Carroll, $20,000 per annum $5,000 NONE NONE $20,000 per annum $5,000
Director per Directors' meeting per Director's meeting
attended attended
Timothy A. Hultquist, $20,000 per annum $5,000 NONE NONE $20,000 per annum $5,000
Director per Directors' meeting attended per Director's meeting
attended
Lloyd N. Morrisett, $20,000 per annum $5,000 NONE NONE $20,000 per annum $5,000
Director per Directors' meeting per Director's meeting
attended attended
W. Allen Reed, $20,000 per annum $5,000 NONE NONE $20,000 per annum $5,000
Director per Directors' meeting per Director's meeting
attended attended
</TABLE>
No officer of the Fund is entitled to any compensation, and no officer or
director is entitled to any pension or retirement benefits, from the Fund.
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
Barclays Global Fund Advisors (the "Adviser"), formerly BZW Barclays Global
Fund Advisors, acts as investment adviser to the Fund and, subject to the
supervision of the Board of Directors of the Fund, and is 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, Barclays Global Investors, N.A., are responsible for managing or
providing investment advice for assets aggregating in excess of $310 billion as
of August 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, manages 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 is 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
is 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
are 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,
49
<PAGE>
research and trading decisions, thereby justifying lower fees. Pursuant to the
Management Agreement, the Adviser is not 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 continues in effect for two years from its effective date,
and thereafter is 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).
For the period ended August 31, 1996, the Fund paid fees to the Adviser for its
advisory service as follows:
WEBS INDEX SERIES FEES PAID
- ----------------- ---------
Australia WEBS Index Series 10,350
Austria WEBS Index Series 9,748
Belgium WEBS Index Series 2,045
Canada WEBS Index Series 13,800
France WEBS Index Series 14,503
Germany WEBS Index Series 16,309
Hong Kong WEBS Index Series 7,597
Italy WEBS Index Series 25,345
Japan WEBS Index Series 105,230
Malaysia WEBS Index Series 7,550
Mexico (Free) WEBS Index Series 5,552
Netherlands WEBS Index Series 5,510
Singapore (Free) WEBS Index Series 8,578
Spain WEBS Index Series 6,162
Sweden WEBS Index Series 4,522
Switzerland WEBS Index Series 8,392
United Kingdom WEBS Index Series 14,599
THE ADMINISTRATOR
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.
(the "Administrator"), acts as administration and accounting agent of the Fund
pursuant to an Administration and Accounting Services Agreement with the Fund
and is 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 is 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. PFPC will charge an annual
minimum fee of $850,000 for fiscal year one, $1,275,000 for fiscal year two, and
$1,700,000 for fiscal year three and thereafter (based on an annual minimum of
$50,000, $75,000 and $100,000 per portfolio, respectively). PFPC's minimum fees
are subject to a maximum of an annual rate of .17% of average daily net assets.
Any resulting shortfall between the above required minimums and the asset based
fee of .17% will be recouped as the Index Series' asset levels reach thresholds
to permit such recovery of fees. Once the aggregate minimum fees are recouped,
the standard fee schedule, including minimum fee rates, will apply, subject to
the maximum charge of .17% of average daily net assets and future recoupment of
any deferred minimum fees.
If the administrator is terminated within the first three years of the
Fund's operations, each Index Series will repay the Administrator the difference
between the amounts calculated under the Standard Fee Schedule and the amounts
paid during the first year of operations. This repayment obligation does not
exist if the Administrator is removed (i) for failing to substantially
perform to the satisfaction of the Board its material obligations under the
Agreement or (ii) in order to comply with federal or state law, the Fund
shall pay any reasonable costs of time and material associated with the
deconversion and PFPC will recoup 100% of the fees waived during the first
year. Pursuant to the Administration and Accounting Services Agreement, the
Administrator is 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,
50
<PAGE>
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.
For the period ended August 31, 1996, the Fund paid fees to the
Administrator for its administrative services as follows:
WEBS INDEX SERIES FEES PAID
- ----------------- ---------
Australia WEBS Index Series 6,524
Austria WEBS Index Series 6,123
Belgium WEBS Index Series 1,289
Canada WEBS Index Series 8,682
France WEBS Index Series 9,081
Germany WEBS Index Series 10,284
Hong Kong WEBS Index Series 4,793
Italy WEBS Index Series 15,927
Japan WEBS Index Series 66,484
Malaysia WEBS Index Series 4,761
Mexico (Free) WEBS Index Series 3,503
Netherlands WEBS Index Series 3,475
Singapore (Free) WEBS Index Series 5,412
Spain WEBS Index Series 3,858
Sweden WEBS Index Series 2,878
Switzerland WEBS Index Series 5,251
United Kingdom WEBS Index Series 9,200
THE DISTRIBUTOR
Funds Distributor, Inc. (the "Distributor") is the principal underwriter
and distributor of WEBS. Its address is 60 State Street, Suite 1300, Boston, MA
02109, and investor information can be obtained by calling 1-800-810-WEBS(9327).
The Distributor has entered into an agreement with the Fund which will continue
for two years from its effective date, and which is renewable annually
thereafter (the "Distribution Agreement"), pursuant to which it distributes Fund
shares. WEBS will be continuously offered for sale by the Fund through the
Distributor only in
51
<PAGE>
Creation Units, as described below under "Purchase and Issuance of WEBS in
Creation Units." WEBS in less than Creation Units are not distributed by the
Distributor. The Distributor also acts 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 is 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 direct or indirect financial interest in the operation of the Plan
("Independent Directors"), evaluate the appropriateness of the Plan and its
payment terms on a continuing basis and in doing so 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.
During the period from commencement of operations through August 31, 1996,
the Distributor received the following amounts pursuant to the Plan with respect
to each Index Series, respectively: Australia Index Series, $9,583.13: Austria
Index Series, $9,026.04; Belgium Index Series, $1,893.69; Canada Index Series,
$12,780.00; France Index Series, $13,429.09; Germany Index Series, $15,100.34;
Hong Kong Index Series, $7,034.13; Italy Index Series, $23,467.69; Japan Index
Series, $97,435.42; Malaysia Index Series, 6,990.22; Mexico (Free) Index Series,
$5,140.57; Netherlands Index Series, $5,102.06; Singapore Index (Free) Index
Series, $7,942.98; Spain Index Series, $5,706.09; Sweden Index Series,
$4,187.36; Switzerland Index Series, $7,770.29; United Kingdom Index Series,
$13,517.57.
In the aggregate, the Distributor received $246,106.67 from the Index
Series pursuant to the Plan, retaining $19,688.53 and paying out the remainder
to unaffiliated third parties. The retained amount represents .02% of the
average daily net assets of the Index Series, which the Distributor receives for
monitoring the purchase and redemption of Creation Units, as described below
under the "Purchase and Issuance of WEBS in Creation Units" and "Redemption
of WEBS in Creation Units." During the period, the Distributor paid
$184,745.53, 26,779.36 and $14,893.25 in sales-related expenses,
advertising-related expenses and compensation to broker-dealers for
distribution assistance, respectively, which amounts were allocated to each
Index Series based on its average daily net assets for the period.
The Distribution Agreement provides 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 causes the
52
<PAGE>
delivery of loaned securities from the Fund to borrowers, arranges for the
return of loaned securities to the Fund at the termination of the loans,
requests deposit of collateral, monitors daily the value of the loaned
securities and collateral, requests that borrowers add to the collateral when
required by the loan agreements, and provides recordkeeping and accounting
services necessary for the operation of the program. MSTC, as Custodian and
Lending Agent, has no role in determining the investment
53
<PAGE>
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
WEBS Index Series (.10%); Austria WEBS Index Series (.10%); Belgium WEBS Index
Series (.10%); Canada WEBS Index Series (.07%); France WEBS Index Series (.11%);
Germany WEBS Index Series (.10%); Hong Kong WEBS Index Series (.12%); Italy WEBS
Index Series (.09%); Japan WEBS Index Series (.07%); Malaysia WEBS Index
Series (.13%); Mexico (Free) WEBS Index Series (.25%); Netherlands WEBS Index
Series (.10%); Singapore (Free) WEBS Index Series (.10%); Spain WEBS Index
Series (.10%); Sweden WEBS Index Series (.10%); Switzerland WEBS Index Series
(.10%); and United Kingdom WEBS Index Series (.08%). As remuneration for its
services in connection with lending portfolio securities of the Index Series,
MSTC is 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 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 is responsible for the
payment of expenses that include, among other things, organizational expenses,
compensation of the Directors of the Fund, reimbursement of out-of-pocket
expenses incurred by 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 pays 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 assumes general supervision over placing orders on behalf of
the Fund for the purchase or sale of portfolio securities. If purchases or sales
of portfolio securities of the Fund and one or more other investment companies
or clients supervised by the Adviser are considered at or about the same time,
transactions in such securities are 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
54
<PAGE>
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 "Implementation of 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 acts as securities depositary for the WEBS. WEBS of each WEBS Index
Series are represented by global securities 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 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 is 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") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will 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 are not entitled to have WEBS registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and are not 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
55
<PAGE>
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. 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. 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 has no responsibility or liability for any aspects of
the records relating to or notices to Beneficial Owners, or payments made on
account of beneficial ownership interests in such 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 issues and sells 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.
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.
56
<PAGE>
PORTFOLIO DEPOSIT
The consideration for purchase of a Creation Unit of WEBS of an Index
Series generally consists of 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"
enables 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.
The Adviser makes 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 is 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 changes 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 makes
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
57
<PAGE>
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 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 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 allow
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
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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 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 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
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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.
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 Y-- per US$1.
<TABLE>
<CAPTION>
UNIT CREATION UNIT CREATION DAILY NAV
CALCULATION CALCULATION CALCULATION
<S> <C> <C> <C>
Execution . . . . . . . . . . . . . . .
Commissions . . . . . . . . . . . . . .
Stamp Taxes . . . . . . . . . . . . . .
Risk Premium. . . . . . . . . . . . . .
Accued Income . . . . . . . . . . . . .
Creation Charge . . . . . . . . . . . .
WEBS Unit Value . . . . . . . . . . . .
Per WEBS. . . . . . . . . . . . . . . .
Shares. . . . . . . . . . . . . . . . .
</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 makes 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 consist of Deposit
Securities as announced by the
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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 is 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.
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 will 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 allow 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 is 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 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 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
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<PAGE>
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.
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 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.
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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.
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.
Foreign currency values are converted into US dollars using the same exchange
rates utilized by Morgan Stanley Capital International in the calculation of the
relevant MSCI Indices (currently, exchange rates as of 4:00 p.m. London time,
except that the exchange rate for the MSCI Mexico (Free) Index is that as of
3:00 p.m. New York City time). The AMEX also disseminates during its trading
day an indicative optimized portfolio value ("IOPV") for each WEBS Index Series.
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 are declared and paid at least
annually by each Index Series. Distributions of net realized securities gains,
if any, generally are 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 WEBS Index Series, net of expenses of such WEBS 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 are distributed, as described
below, on a pro rata basis to Beneficial Owners of such WEBS. Dividend payments
are made through the Depository and the Authorized Participants to Beneficial
Owners then of record with proceeds received from the Fund.
The Fund makes 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
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<PAGE>
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 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
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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
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 WEBS
Index Series, the Austria WEBS Index Series, the Belgium WEBS Index Series, the
Canada WEBS Index Series, the France WEBS Index Series, the Germany WEBS Index
Series, the Hong Kong WEBS Index Series, the Italy WEBS Index Series, the Japan
WEBS Index Series, the Malaysia WEBS Index Series, the Mexico (Free) WEBS Index
Series, the Netherlands WEBS Index Series, the Singapore (Free) WEBS Index
Series, the Spain WEBS Index Series, the Sweden WEBS Index Series, the
Switzerland WEBS Index Series, and the United Kingdom WEBS Index Series. 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 has 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 WEBS Index Series, 127.8 million shares;
the Austria WEBS Index Series, 19.8 million shares; the Belgium WEBS Index
Series, 136.2 million shares; the Canada WEBS Index Series, 340.2 million
shares; the France WEBS Index Series, 340.2 million shares; the Germany WEBS
Index Series, 382.2 million shares; the Hong Kong WEBS Index Series, 191.4
million shares; the Italy WEBS Index Series, 63.6 million shares; the Japan WEBS
Index Series, 2,124.6 million shares; the Malaysia WEBS Index Series, 127.8
million shares; the Mexico (Free) WEBS Index Series, 255 million shares; the
Netherlands WEBS Index Series, 255 million shares, the Singapore (Free) WEBS
Index Series, 191.4 million shares; the Spain WEBS Index Series, 127.8 million
shares; the Sweden WEBS Index Series, 63.6 million shares; the Switzerland WEBS
Index Series, 318.625 million shares; and the United Kingdom WEBS Index Series,
934.2 million shares. Fractional shares will not be issued. Shares have no
preemptive, exchange, subscription or
65
<PAGE>
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.
As of September 30, 1996, the name, address and percentage of ownership of
each DTC Participant that owned of record 5% or more of the outstanding shares
of each Index Series were as follows:
Brown Brothers Harriman & Co. 63 Wall Street, 8th Floor, New York, NY 10005,
Australia WEBS Index Series, 5.77%, Hong Kong WEBS Index Series, 5.01%, Italy
WEBS Index Series, 6.84%, Switzerland WEBS Index Series, 5.02%;
Prudential Securities Incorporated, 111 8th Avenue, 4th Floor, New York, NY
10011, Belgium WEBS Index Series, 7.02%;
Morgan Stanley & Co., Incorporated, One Pierrepont Plaza, 7th Floor, Brooklyn,
NY 11201, Austria WEBS Index Series, 31.33%, Belgium WEBS Index Series, 26.52%,
Canada WEBS Index Series, 17.41%, France WEBS Index Series, 7.35%, Germany WEBS
Index Series, 10.50%, Hong Kong WEBS Index Series, 33.74%, Italy WEBS Index
Series, 16.37% Japan WEBS Index Series 27.47%, Netherlands WEBS Index Series
15.43%, Singapore (Free) WEBS Index Series, 15.59%, Spain WEBS Index Series,
35.40%, Sweden WEBS Index Series, 27.18%, United Kingdom WEBS Index Series,
24.53%;
Lehman Brothers, Inc., c/o ADP Proxy Services, 51 Mercedes Way, Edgewood, NY
11717, Germany WEBS Index Series, 20.33%, Japan WEBS Index Series, 8.20%;
Merrill Lynch, Pierce, Fenner & Smith, Inc., 4 Corporate Place, Corporate Park
287, Piscataway, NJ 08855, Australia WEBS Index Series, 19.81%, France WEBS
Index Series, 11.87%, Hong Kong WEBS Index Series, 12.48%, Japan WEBS Index
Series 8.28%, Malaysia WEBS Index Series, 9.08%, Singapore (Free) WEBS Index
Series, 12.50%;
Schwab (Charles) & Co., Inc., 101 Montgomery, 10th Floor, 333-9, San Francisco,
CA 94104, Belgium WEBS Index Series, 5.11%, Singapore (Free) WEBS Index Series,
5.37%;
Paine, Webber, Inc., 1000 Harbor Blvd. Weehauken, NJ 07087, Germany WEBS Index
Series, 5.51%, Mexico (Free) Index Series, 19.00%;
Salomon Brothers Inc, c/o ADP Proxy Services, 51 Mercedes Way, Edgewood, NY
11717, Japan WEBS Index Series, 5.36%, Netherlands WEBS Index Series, 8.20%;
Bear Stearns Securities Corp., One Metrotech Center North, Brooklyn, NY 11201,
Hong Kong WEBS Index Series, 5.98%;
Smith Barney, Inc., 333 W. 34th Street, New York, NY 10001, Austria WEBS Index
Series, 5.08%, Belgium WEBS Index Series, 5.69%, Malaysia WEBS Index Series,
29.52%;
Spear, Leeds & Kellog, 120 Broadway, New York, NY 10271, Italy WEBS Index
Series, 10.00%, Netherlands WEBS Index Series, 19.99%, Spain WEBS Index Series,
12.68%, Sweden WEBS Index Series, 12.68%, Sweden WEBS Index Series, 18.43%,
Switzerland WEBS Index Series, 20.59%, United Kingdom WEBS Index Series, 14.99%;
66
<PAGE>
Chase Manhattan Bank, N.A. (The), One Chase Manhattan Plaza, 3B - Proxy
Department, New York, NY 10081, Switzerland WEBS Index Series, 11.30%;
Bankers Trust Company, c/o BT Services Tennessee Inc., Custody Services, 648
Grassmere Park Road, Nashville, TN 37211, Australia WEBS Index Series, 14.29%,
Mexico (Free) WEBS Index Series, 6.13%;
Citibank, N.A., 111 Wall Street, 20th Floor, Zone 9, New York, NY 10043, Mexico
(Free) Index Series, 8.00%;
Citibank/Private Banking Division, 20 Exchange Place, Level C, New York, NY
10043, Germany WEBS Index Series 7.35%;
Boston Safe Deposit & Trust Co., c/o ADP Proxy Services, 51 Mercedes Way,
Edgewood, NY 11717, Canada WEBS Index Series, 69.23%, Malaysia WEBS Index
Series, 6.90%;
SSB-Custodian, c/o ADP Proxy Services, 51 Mercedes Way, Edgewood, NY 11717,
Belgium WEBS Index Series, 9.83%, France WEBS Index Series, 13.11%, Germany WEBS
Index Series, 5.37%, Hong Kong WEBS Index Series, 7.24%, Italy WEBS Index
Series, 16.17%, Japan WEBS Index Series, 10.42%, Malaysia WEBS Index Series,
8.43%, Mexico (Free) WEBS Index Series, 32.83%, Netherlands WEBS Index Series,
8.79%, Singapore (Free) WEBS Index Series, 11.00%, Spain WEBS Index Series,
7.63%, Sweden WEBS Index Series, 9.90%, Switzerland WEBS Index Series, 8.48%,
United Kingdom WEBS Index Series, 24.23%;
Bank of New York - Smith New Court, One Wall Street, 4th Floor, New York, NY
10826, Austria WEBS Index Series, 33.33%, Belgium WEBS Index Series, 33.33%,
Italy WEBS Index Series, 11.11%, Netherlands WEBS Index Series, 12.47%, Spain
WEBS Index Series, 25.00%, Sweden WEBS Index Series, 25.00%, Switzerland WEBS
Index Series, 24.95%, United Kingdom WEBS Index Series, 16.65%;
Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, NY 11201, Austria
WEBS Index Series, 10.00%;
PNC Bank, N.A./Super Philadelphia, 400 Bellevue Parkway, Wilmington, DE 19809,
France WEBS Index Series, 33.44%, Germany WEBS Index Series, 25.06%, Malaysia
WEBS Index Series, 10.00%;
Merrill Lynch, Pierce, Fenner &, Smith Safekeeping, 4 Corporate Place, Corporate
Park 287, 2nd Floor , Piscataway, NJ 08855, Australia WEBS Index Series, 19.68%,
Germany WEBS Index Series, 5.13%.
The Fund does not have information concerning the beneficial ownership of the
WEBS held in the names of such DTC Participants.
The Fund issues 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 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) =
ERV (where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years and ERV = the ending redeemable value of a
hypothetical $1,000 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
67
<PAGE>
distributions are reinvested on ex date. However, currently there is no
dividend reinvestment option available to shareholders of WEBS and such
calculation is provided for informational purposes only. The net increase or
decrease in the value of the investment over the period 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
68
<PAGE>
during the period by the maximum offering price per share on the last day of the
6
period, according to the following formula: YIELD = 2[(a-b/cd + 1) -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, 787 Seventh Avenue, New York, New York 10019, serves as
the independent accountants of the Fund.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's Annual
Report to Shareholders for the fiscal year ended August 31, 1996 (the "1996
Annual Report") are incorporated in this Statement of Additional Information
by reference. No other parts of the 1996 Annual Report are incorporated by
reference herein. The financial statements included in the 1996 Annual
Report have been audited by the Fund's independent accountants, Ernst & Young
LLP, whose reports thereon are incorporated herein by reference. Such
financial statements have been incorporated herein in reliance upon such
reports given upon their authority as experts in accounting and auditing.
Additional copies of the 1996 Annual Report may be obtained at no charge by
telephoning the Distributor.
EDUCATIONAL MATERIALS
Attached as Appendix C to this Statement of Additional Information are
certain supplemental educational materials concerning WEBS.
69
<PAGE>
APPENDIX A-1
MSCI AUSTRALIA INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
BROKEN HILL PROP CO Energy Sources 26,809 17.25%
NATIONAL AUSTRALIA BANK Finance 14,200 9.13%
NEWS CORP Services 10,672 6.87%
WESTPAC BANKING Finance 8,878 5.71%
WMC Materials 7,747 4.98%
COCA-COLA AMATIL Consumer Goods 6,456 4.15%
CRA Materials 4,990 3.21%
NEWS CORP PLVO Services 4,403 2.83%
LEND LEASE Finance 3,876 2.49%
AMCOR Materials 3,873 2.49%
COLES MYER Services 3,766 2.42%
FOSTERS BREWING GROUP Consumer Goods 3,601 2.32%
CSR Materials 3,433 2.21%
BRAMBLES INDUSTRIES Services 3,306 2.13%
BORAL Materials 2,714 1.75%
ICI AUSTRALIA Materials 2,707 1.74%
PIONEER INTERNATIONAL Materials 2,563 1.65%
NORMANDY MINING Gold 2,532 1.63%
PACIFIC DUNLOP Multi-Industry 2,216 1.43%
NORTH Materials 2,092 1.35%
MIM HOLDINGS Materials 2,076 1.34%
WESTFIELD TRUST Finance 2,066 1.33%
SANTOS Energy Sources 2,058 1.32%
GIO AUSTRALIA HLDGS Finance 1,472 0.95%
SOUTHCORP HOLDINGS Multi-Industry 1,457 0.94%
AUSTRALIAN GAS LIGHT CO Energy Sources 1,402 0.90%
TABCORP HOLDINGS Services 1,378 0.89%
QBE INSURANCE GROUP Finance 1,365 0.88%
SMITH (HOWARD) Multi-Industry 1,346 0.87%
GENERAL PROPERTY TRUST Finance 1,303 0.84%
GOODMAN FIELDER Consumer Goods 1,271 0.82%
CROWN Services 1,160 0.75%
LEIGHTON HOLDINGS Capital Equipment 1,042 0.67%
RGC Materials 954 0.61%
PLUTONIC RESOURCES Gold 940 0.60%
QCT RESOURCES Energy Sources 883 0.57%
HARDIE (JAMES) IND Materials 868 0.56%
NEWCREST MINING Gold 862 0.55%
GREAT CENTRAL MINES Gold 784 0.50%
SYDNEY HBR CASINO PREF Services 780 0.50%
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
BURNS, PHILP & CO Consumer Goods 773 0.50%
STOCKLAND TRUST Finance 750 0.48%
SCHRODERS PROPERTY FUND Finance 728 0.47%
FAULDING (F.H.) & CO Consumer Goods 723 0.47%
EMAIL Consumer Goods 722 0.46%
TNT Services 686 0.44%
ROTHMANS (AUSTRALIA) Consumer Goods 685 0.44%
SONS OF GWALIA Gold 662 0.43%
AUSTRALIAN NATIONAL IND Materials 634 0.41%
JONES (DAVID) Services 504 0.32%
DELTA GOLD Gold 492 0.32%
RESOLUTE SAMANTHA Gold 421 0.27%
METAL MANUFACTURES Capital Equipment 402 0.26%
FUTURIS CORP Capital Equipment 377 0.24%
ASHTON MINING Materials 370 0.24%
ABERFOYLE Materials 225 0.14%
</TABLE>
2
<PAGE>
APPENDIX A-2
MSCI AUSTRIA INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
BANK AUSTRIA STAMM Finance 4,621 19.68%
OMV AG Energy Sources 2,700 11.50%
VERBUND OESTERR ELEK A Energy Sources 2,239 9.54%
EA-GENERALI STAMM Finance 1,993 8.49%
VA TECHNOLOGIE Capital Equipment 1,921 8.18%
CREDITANSTALT STAMM Finance 1,835 7.82%
FLUGHAFEN WIEN Services 1,468 6.25%
WIENERBERGER BAUSTOFF Materials 1,299 5.53%
BOEHLER-UDDEHOLM Materials 859 3.66%
CREDITANSTALT VORZUG Finance 712 3.03%
MAYR-MELNHOF KARTON Materials 564 2.40%
BBAG OESTERR BRAU STAMM Consumer Goods 551 2.35%
RADEX-HERAKLITH INDUSTR. Materials 406 1.73%
AUSTRIAN AIRLINES Services 365 1.55%
BANK AUSTRIA VORZUG Finance 313 1.33%
BANK AUSTRIA PART Finance 240 1.02%
BAU HOLDING STAMM Capital Equipment 239 1.02%
LENZING Materials 232 0.99%
AUSTRIA MIKRO SYSTEME Capital Equipment 207 0.88%
BWT STAMM Capital Equipment 195 0.83%
UNIVERSALE-BAU Capital Equipment 190 0.81%
STEYR-DAIMLER-PUCH Capital Equipment 154 0.66%
EA-GENERALI VORZUG Finance 94 0.40%
BAU HOLDING VORZUG Capital Equipment 77 0.33%
</TABLE>
3
<PAGE>
APPENDIX A-3
MSCI BELGIUM INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
ELECTRABEL Energy Sources 12,050 18.79%
PETROFINA Energy Sources 7,336 11.44%
TRACTEBEL Multi-Industry 5,890 9.18%
GENERALE BANQUE GROUPE Finance 5,541 8.64%
FORTIS AG Finance 5,247 8.18%
SOLVAY Materials 4,893 7.63%
KREDIETBANK Finance 4,122 6.43%
ROYALE BELGE Finance 2,976 4.64%
GROUPE BRUXELLES LAMBERT Multi-Industry 2,940 4.58%
DELHAIZE-LE LION Services 2,770 4.32%
BARCO Capital Equipment 2,086 3.25%
UNION MINIERE Materials 1,907 2.97%
CBR (CIMENTERIES) Materials 1,716 2.68%
BEKAERT Capital Equipment 1,701 2.65%
GEVAERT Multi-Industry 1,677 2.61%
GLAVERBEL (GROUPE) Materials 740 1.15%
KREDIETBANK VVPR Finance 556 0.87%
</TABLE>
4
<PAGE>
APPENDIX A-4
MSCI CANADA INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
NORTHERN TELECOM Capital Equipment 12,931 5.78%
BCE INC Services 12,485 5.58%
SEAGRAM CO Consumer Goods 12,324 5.51%
THOMSON CORP Services 10,576 4.73%
BARRICK GOLD CORP Gold 9,681 4.33%
ROYAL BANK OF CANADA Finance 7,887 3.52%
CANADIAN PACIFIC Multi-Industry 7,686 3.43%
ALCAN ALUMINIUM Materials 7,141 3.19%
IMPERIAL OIL Energy Sources 6,921 3.09%
CANADIAN IMPERIAL BANK Finance 6,858 3.06%
BANK MONTREAL Finance 6,407 2.86%
BANK NOVA SCOTIA Finance 5,855 2.62%
PLACER DOME Gold 5,775 2.58%
INCO COMMON Materials 5,355 2.39%
NORANDA INC Materials 5,346 2.39%
NEWBRIDGE NETWORKS CORP Capital Equipment 4,848 2.17%
IMASCO Multi-Industry 4,575 2.04%
NOVA CORP Energy Sources 4,306 1.92%
BOMBARDIER B Capital Equipment 3,485 1.56%
POTASH CORP SASKATCHEWAN Materials 3,445 1.54%
MAGNA INTERNATIONAL A Capital Equipment 3,358 1.50%
TRANSCANADA PIPELINES Energy Sources 3,322 1.48%
RENAISSANCE ENERGY Energy Sources 2,982 1.33%
TALISMAN ENERGY Energy Sources 2,693 1.20%
CAMECO CORP Materials 2,649 1.18%
LAIDLAW B Services 2,569 1.15%
CANADIAN OCCIDENTAL Energy Sources 2,256 1.01%
TECK CORP B Materials 2,042 0.91%
ALBERTA ENERGY CO Energy Sources 2,036 0.91%
DUPONT CANADA Materials 2,008 0.90%
CANADIAN NAT RESOURCES Energy Sources 1,981 0.89%
BRASCAN A Multi-Industry 1,977 0.88%
TELUS CORP Services 1,953 0.87%
SUNCOR Energy Sources 1,931 0.86%
COMINCO Materials 1,904 0.85%
TRANSALTA CORP Energy Sources 1,792 0.80%
MACMILLAN BLOEDEL Materials 1,790 0.80%
WESTON (GEORGE) Services 1,772 0.79%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
MOORE CORP Services 1,770 0.79%
LOEWEN GROUP Services 1,725 0.77%
POWER CORP OF CANADA Finance 1,722 0.77%
IPL ENERGY Energy Sources 1,619 0.72%
WESTCOAST ENERGY Energy Sources 1,582 0.71%
NORCEN ENERGY RESOURCES Energy Sources 1,509 0.67%
GULF CANADA RESOURCES Energy Sources 1,433 0.64%
NATIONAL BANK OF CANADA Finance 1,403 0.63%
ECHO BAY MINES Gold 1,385 0.62%
DOFASCO Materials 1,307 0.58%
ROGERS COMMUNICATIONS B Services 1,287 0.58%
BOMBARDIER A Capital Equipment 1,258 0.56%
ANDERSON EXPLORATION Energy Sources 1,229 0.55%
AVENOR Materials 1,130 0.51%
RIO ALGOM Materials 1,119 0.50%
QUEBECOR B Services 1,026 0.46%
DOMTAR Materials 1,020 0.46%
CANADIAN TIRE CORP A Services 1,016 0.45%
CAMBIOR Gold 914 0.41%
SOUTHAM Services 914 0.41%
MOLSON COS A Consumer Goods 894 0.40%
VIRIDIAN (SHERRITT) Materials 862 0.39%
CAE Capital Equipment 851 0.38%
EXTENDICARE MV Multi-Industry 838 0.37%
INCO VBN Materials 803 0.36%
RANGER OIL Energy Sources 675 0.30%
AGNICO-EAGLE MINES Gold 651 0.29%
OSHAWA GROUP A Services 585 0.26%
COREL CORP Services 572 0.26%
AIR CANADA COMMON Services 552 0.25%
STELCO A Materials 503 0.22%
PEGASUS GOLD Gold 491 0.22%
PROVIGO Services 487 0.22%
COTT CORP Consumer Goods 475 0.21%
REPAP ENTERPRISES Materials 456 0.20%
CO-STEEL Materials 453 0.20%
LAIDLAW A Services 453 0.20%
NUMAC ENERGY Energy Sources 406 0.18%
CCL INDUSTRIES B Materials 320 0.14%
INT'L FOREST PRODUCTS A Materials 295 0.13%
DOMINION TEXTILE Consumer Goods 227 0.10%
MOLSON COS B Consumer Goods 199 0.09%
SPAR AEROSPACE Capital Equipment 124 0.06%
INTER-CITY PRODUCTS CORP Capital Equipment 120 0.05%
TELE-METROPOLE B Services 107 0.05%
NOMA INDUSTRIES A Capital Equipment 92 0.04%
</TABLE>
6
<PAGE>
APPENDIX A-5
MSCI FRANCE INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
LOREAL Consumer Goods 21,153 6.12%
ELF AQUITAINE Energy Sources 19,906 5.76%
CARREFOUR Services 19,466 5.63%
LVMH Consumer Goods 18,437 5.33%
TOTAL SA Energy Sources 17,786 5.14%
ALCATEL ALSTHOM Capital Equipment 12,544 3.63%
GENERALE EAUX (CIE) Services 11,644 3.37%
AIR LIQUIDE Materials 11,303 3.27%
AXA Finance 10,853 3.14%
SAINT-GOBAIN Materials 10,691 3.09%
SOCIETE GENERALE Finance 10,092 2.92%
DANONE (GROUPE) Consumer Goods 10,041 2.90%
RHONE-POULENC ORD A Materials 8,615 2.49%
SANOFI Consumer Goods 8,283 2.40%
PARIBAS(CIE FINANCIERE)A Finance 7,805 2.26%
BNP BANQUE NTLE PARIS Finance 7,483 2.16%
PINAULT-PRINT.-REDOUTE Services 7,188 2.08%
UAP (COMPAGNIE) Finance 6,824 1.97%
SCHNEIDER Capital Equipment 5,938 1.72%
SUEZ (COMPAGNIE DE) Finance 5,877 1.70%
PEUGEOT SA Consumer Goods 5,748 1.66%
CANAL + Services 5,712 1.65%
MICHELIN B Capital Equipment 5,426 1.57%
LAFARGE (FRANCE) Materials 5,226 1.51%
LYONNAISE DES EAUX Services 5,098 1.47%
PROMODES Services 4,649 1.34%
HAVAS Services 4,317 1.25%
LEGRAND Capital Equipment 4,167 1.21%
BIC Consumer Goods 4,041 1.17%
ACCOR Services 4,010 1.16%
ERIDANIA BEGHIN-SAY Consumer Goods 3,659 1.06%
VALEO Capital Equipment 3,522 1.02%
PERNOD RICARD Consumer Goods 3,421 0.99%
USINOR SACILOR Materials 3,343 0.97%
THOMSON-CSF Capital Equipment 3,257 0.94%
SODEXHO Services 3,230 0.93%
COMPAGNIE BANCAIRE Finance 2,763 0.80%
ESSILOR INTERNATIONAL Consumer Goods 2,451 0.71%
CASINO ORD Services 2,430 0.70%
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
BOUYGUES Capital Equipment 2,317 0.67%
LAGARDERE Multi-Industry 2,274 0.66%
SAGEM Capital Equipment 2,264 0.65%
COMPTOIRS MODERNES Services 2,227 0.64%
PRIMAGAZ Energy Sources 2,167 0.63%
SEITA Consumer Goods 2,078 0.60%
PATHE Services 2,031 0.59%
IMETAL Materials 1,962 0.57%
SAINT LOUIS Multi-Industry 1,879 0.54%
SIDEL Capital Equipment 1,656 0.48%
EURAFRANCE Finance 1,480 0.43%
TECHNIP Capital Equipment 1,454 0.42%
SALOMON SA Consumer Goods 1,283 0.37%
SIMCO Finance 1,250 0.36%
SEFIMEG Finance 1,135 0.33%
CLUB MEDITERRANEE Services 1,022 0.30%
BONGRAIN Consumer Goods 969 0.28%
UNIBAIL Finance 965 0.28%
CREDIT NATIONAL Finance 936 0.27%
GTM-ENTREPOSE Capital Equipment 883 0.26%
CPR(CIE PARIS.REESCOMPTE Finance 849 0.25%
UNION IMMOBILIERE FRANCE Finance 660 0.19%
SOMMER-ALLIBERT Materials 553 0.16%
MOULINEX Consumer Goods 514 0.15%
CASINO ADP Services 449 0.13%
SKIS ROSSIGNOL Consumer Goods 383 0.11%
NORD-EST Materials 356 0.10%
EUROPE 1 Services 349 0.10%
CHARGEURS INTERNATIONAL Consumer Goods 277 0.08%
DMC DOLLFUS MIEG & CIE Consumer Goods 261 0.08%
GENERALE GEOPHYSIQUE Capital Equipment 251 0.07%
FINEXTEL Finance 170 0.05%
</TABLE>
8
<PAGE>
APPENDIX A-6
MSCI GERMANY INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
ALLIANZ HOLDING AKTIE Finance 39,752 10.19%
SIEMENS STAMM Capital Equipment 29,627 7.59%
DAIMLER-BENZ Consumer Goods 27,999 7.18%
VEBA Energy Sources 25,651 6.57%
BAYER Materials 25,251 6.47%
DEUTSCHE BANK Finance 24,715 6.33%
MUENCHENER RUECK NAM Finance 18,354 4.70%
BASF Materials 18,188 4.66%
MANNESMANN Capital Equipment 13,263 3.40%
RWE STAMM Energy Sources 12,310 3.15%
DRESDNER BANK Finance 12,153 3.11%
VOLKSWAGEN STAMM Consumer Goods 10,327 2.65%
SAP STAMM Services 10,173 2.61%
VIAG Multi-Industry 9,616 2.46%
BAYER VEREINSBANK STAMM Finance 8,837 2.26%
METRO STAMM Services 8,617 2.21%
BAYER HYPOTHEKEN BANK Finance 7,288 1.87%
SAP VORZUG Services 6,607 1.69%
MERCK KGAA Consumer Goods 6,320 1.62%
RWE VORZUG Energy Sources 5,986 1.53%
THYSSEN Materials 5,697 1.46%
LINDE Capital Equipment 5,233 1.34%
LUFTHANSA STAMM Services 5,057 1.30%
SCHERING Consumer Goods 4,995 1.28%
ADIDAS Consumer Goods 3,905 1.00%
BEIERSDORF Consumer Goods 3,865 0.99%
PREUSSAG Multi-Industry 3,607 0.92%
HOCHTIEF Capital Equipment 3,316 0.85%
AACHEN & MUNCH BET NAMEN Finance 3,299 0.85%
DEGUSSA Materials 3,036 0.78%
KARSTADT Services 2,956 0.76%
HEIDELBERGER ZEMENT STAM Materials 2,927 0.75%
MAN STAMM Capital Equipment 2,769 0.71%
CKAG COLONIA KONZ STAMM Finance 2,130 0.55%
VOLKSWAGEN VORZUG Consumer Goods 1,822 0.47%
CONTINENTAL Capital Equipment 1,594 0.41%
BILFINGER + BERGER Capital Equipment 1,437 0.37%
DOUGLAS HOLDING Services 1,306 0.33%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
PWA PAPIERWERKE WALDHOF Materials 1,020 0.26%
MAN VORZUG Capital Equipment 866 0.22%
FAG KUGELFISCHER Capital Equipment 792 0.20%
AACHEN & MUNCH BET INH Finance 679 0.17%
AGIV AG IND & VERKEHR Multi-Industry 660 0.17%
MUENCHENER RUECK INH Finance 581 0.15%
METRO VORZUG I Services 556 0.14%
DYCKERHOFF STAMM Materials 551 0.14%
IWKA Capital Equipment 485 0.12%
BRAU & BRUNNEN Consumer Goods 380 0.10%
LUFTHANSA VORZUG Services 376 0.10%
CKAG COLONIA KONZ VORZUG Finance 364 0.09%
DYCKERHOFF VORZUG Materials 338 0.09%
KLOECKNER-HUMBOLDT-DEUTZ Capital Equipment 327 0.08%
HOLSTEN-BRAUEREI Consumer Goods 255 0.07%
RHEINMETALL BERLIN STAMM Capital Equipment 240 0.06%
HERLITZ STAMM Services 210 0.05%
SALAMANDER Consumer Goods 193 0.05%
STRABAG STAMM Capital Equipment 190 0.05%
DIDIER-WERKE Capital Equipment 182 0.05%
HERLITZ VORZUG Services 178 0.05%
LINOTYPE-HELL Capital Equipment 153 0.04%
ESCADA STAMM Consumer Goods 136 0.03%
RHEINMETALL BERLIN VZG Capital Equipment 130 0.03%
ESCADA VORZUG Consumer Goods 112 0.03%
METRO VORZUG II Services 112 0.03%
DLW Materials 108 0.03%
STRABAG VORZUG Capital Equipment 21 0.00%
</TABLE>
10
<PAGE>
APPENDIX A-7
MSCI HONG KONG INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
SUN HUNG KAI PROPERTIES Finance 23,331 12.93%
HUTCHISON WHAMPOA Multi-Industry 21,887 12.13%
HANG SENG BANK Finance 19,795 10.97%
HONGKONG TELECOM Services 18,939 10.49%
CHEUNG KONG Finance 16,119 8.93%
SWIRE PACIFIC A Multi-Industry 14,095 7.81%
NEW WORLD DEVELOPMENT Finance 8,500 4.71%
CHINA LIGHT & POWER CO Energy Sources 8,470 4.69%
WHARF HOLDINGS Finance 8,274 4.58%
CATHAY PACIFIC AIRWAYS Services 5,712 3.17%
HONGKONG CHINA GAS Energy Sources 4,826 2.67%
BANK EAST ASIA Finance 3,956 2.19%
HYSAN DEVELOPMENT Finance 3,172 1.76%
HANG LUNG DEVELOPMENT CO Finance 2,545 1.41%
HOPEWELL HOLDINGS Finance 2,336 1.29%
SHANGRI-LA ASIA Services 2,065 1.14%
HONGKONG SHANGHAI HOTEL Services 1,863 1.03%
CHINESE ESTATES HOLDINGS Finance 1,668 0.92%
TELEVISION BROADCASTS Services 1,494 0.83%
SOUTH CHINA MORNING POST Services 1,218 0.67%
WING LUNG BANK Finance 1,121 0.62%
MIRAMAR HOTEL & INVEST. Finance 1,071 0.59%
PEREGRINE INVESTMENTS Finance 889 0.49%
SHUN TAK HOLDINGS Services 863 0.48%
JOHNSON ELECTRIC HLDGS Capital Equipment 850 0.47%
DICKSON CONCEPTS INT'L Services 819 0.45%
REGAL HOTELS INT'L Services 817 0.45%
ORIENTAL PRESS GROUP Services 747 0.41%
GIORDANO INTERNATIONAL Services 586 0.32%
TAI CHEUNG HOLDINGS Finance 475 0.26%
HONGKONG AIRCRAFT HAECO Capital Equipment 467 0.26%
KUMAGAI GUMI (HK) Capital Equipment 350 0.19%
LAI SUN GARMENT INT'L Finance 329 0.18%
WINSOR INDUSTRIAL CORP Consumer Goods 230 0.13%
STELUX HOLDINGS INT'L Multi-Industry 194 0.11%
ELEC & ELTEK INT'L HLDGS Capital Equipment 177 0.10%
PLAYMATES TOYS HOLDINGS Consumer Goods 167 0.09%
APPLIED INT'L HOLDINGS Capital Equipment 50 0.03%
</TABLE>
11
<PAGE>
APPENDIX A-8
MSCI ITALY INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
ENI Energy Sources 21,030 14.36%
ASSICURAZIONI GENERALI Finance 17,663 12.06%
TIM ORD (TELECOM IT MOB. Services 13,705 9.36%
TELECOM ITALIA ORD Services 13,045 8.91%
FIAT ORD Consumer Goods 10,151 6.93%
INA Finance 5,715 3.90%
MEDIASET Services 5,412 3.70%
SAN PAOLO DI TORINO ORD Finance 5,133 3.51%
IMI ISTITUTO MOBILIARE Finance 4,709 3.22%
EDISON ORD Energy Sources 3,434 2.35%
BANCA COMMERCIALE ORD Finance 3,409 2.33%
RAS ORD Finance 2,839 1.94%
CREDITO ITALIANO ORD Finance 2,604 1.78%
MEDIOBANCA Finance 2,554 1.74%
MONTEDISON ORD Multi-Industry 2,541 1.74%
TELECOM ITALIA RNC Services 2,520 1.72%
PIRELLI SPA ORD Capital Equipment 2,462 1.68%
ITALGAS Energy Sources 2,266 1.55%
OLIVETTI ORD Capital Equipment 1,901 1.30%
TIM RNC (TELECOM IT MOB. Services 1,892 1.29%
BENETTON GROUP Consumer Goods 1,886 1.29%
PARMALAT FINANZIARIA Consumer Goods 1,878 1.28%
FIAT PRIV Consumer Goods 1,473 1.01%
SIRTI Capital Equipment 1,365 0.93%
BULGARI Consumer Goods 1,213 0.83%
FIAT RNC Consumer Goods 1,118 0.76%
BANCO AMBROSIANO VEN ORD Finance 1,114 0.76%
ITALCEMENTI ORD Materials 1,091 0.75%
BANCA POPOLARE MILANO Finance 1,004 0.69%
SAI ORD Finance 1,004 0.69%
RINASCENTE ORD Services 959 0.65%
MONDADORI ORD Services 894 0.61%
SNIA BPD ORD Multi-Industry 641 0.44%
CARTIERE BURGO ORD Materials 584 0.40%
RAS RNC Finance 577 0.39%
MAGNETI MARELLI ORD Capital Equipment 554 0.38%
IMPREGILO ORD Capital Equipment 487 0.33%
MONTEDISON RNC Multi-Industry 391 0.27%
LANE G.MARZOTTO ORD Consumer Goods 347 0.24%
FALCK ORD Materials 326 0.22%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
BANCO AMBROSIANO VEN RNC Finance 311 0.21%
SASIB ORD Capital Equipment 301 0.21%
PREVIDENTE (LA) Finance 294 0.20%
ITALCEMENTI RNC Materials 273 0.19%
DANIELI & CO ORD Capital Equipment 221 0.15%
CEMENTIR Materials 197 0.13%
SAI RNC Finance 188 0.13%
DANIELI & CO RNC Capital Equipment 114 0.08%
SASIB RNC Capital Equipment 114 0.08%
RINASCENTE RNC Services 111 0.08%
LANE G.MARZOTTO RISP Consumer Goods 102 0.07%
PIRELLI SPA RNC Capital Equipment 92 0.06%
SAFFA A ORD Materials 92 0.06%
RINASCENTE PRIV Services 79 0.05%
SNIA BPD RNC Multi-Industry 46 0.03%
</TABLE>
13
<PAGE>
APPENDIX A-9
MSCI JAPAN INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
BANK TOKYO-MITSUBISHI Finance 94,780 4.70%
TOYOTA MOTOR CORP Consumer Goods 90,824 4.51%
SUMITOMO BANK Finance 57,557 2.86%
INDUSTRIAL BANK OF JAPAN Finance 54,019 2.68%
FUJI BANK Finance 53,363 2.65%
MATSUSHITA ELECT IND'L Consumer Goods 35,466 1.76%
NOMURA SECURITIES CO Finance 34,162 1.70%
TOKYO ELECTRIC POWER CO Energy Sources 33,012 1.64%
SAKURA BANK Finance 32,938 1.63%
HITACHI Capital Equipment 30,618 1.52%
MITSUBISHI HEAVY IND Capital Equipment 26,677 1.32%
ASAHI BANK Finance 25,884 1.28%
TOKAI BANK Finance 24,696 1.23%
SONY CORP Consumer Goods 23,505 1.17%
HONDA MOTOR CO Consumer Goods 22,519 1.12%
ITO-YOKADO CO Services 21,913 1.09%
NIPPON STEEL CORP Materials 21,824 1.08%
KANSAI ELECTRIC POWER CO Energy Sources 21,808 1.08%
MITSUBISHI TRUST Finance 19,547 0.97%
NISSAN MOTOR CO Consumer Goods 18,812 0.93%
EAST JAPAN RAILWAY CO Services 18,711 0.93%
NIPPONDENSO CO Capital Equipment 18,060 0.90%
SHARP CORP Consumer Goods 17,735 0.88%
TOKIO MARINE & FIRE Finance 17,694 0.88%
MITSUBISHI CORP Services 17,461 0.87%
FUJITSU Capital Equipment 16,599 0.82%
NEC CORP Capital Equipment 16,522 0.82%
MITSUBISHI ESTATE CO Finance 15,911 0.79%
CANON INC Capital Equipment 15,829 0.79%
FUJI PHOTO FILM CO Consumer Goods 15,496 0.77%
DAIWA SECURITIES CO Finance 15,229 0.76%
TAKEDA CHEMICAL IND Consumer Goods 15,160 0.75%
MITSUBISHI ELECTRIC CORP Capital Equipment 13,780 0.68%
JAPAN AIRLINES CO Services 13,268 0.66%
DAI NIPPON PRINTING CO Services 13,259 0.66%
MITSUI & CO Services 13,132 0.65%
BRIDGESTONE CORP Capital Equipment 13,112 0.65%
ASAHI GLASS CO Materials 13,094 0.65%
KYOCERA CORP Capital Equipment 12,704 0.63%
MITSUI TRUST & BANK CO Finance 12,027 0.60%
KINKI NIPPON RAILWAY CO Services 11,414 0.57%
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
SANKYO CO Consumer Goods 11,176 0.55%
KAWASAKI STEEL CORP Materials 10,928 0.54%
KIRIN BREWERY CO Consumer Goods 10,854 0.54%
TOHOKU ELECTRIC POWER CO Energy Sources 10,836 0.54%
SANYO ELECTRIC CO Consumer Goods 10,061 0.50%
MITSUI FUDOSAN CO Finance 10,025 0.50%
ASAHI CHEMICAL IND CO Materials 9,697 0.48%
NIPPON EXPRESS CO Services 9,467 0.47%
SUMITOMO ELECTRIC IND Capital Equipment 9,426 0.47%
JUSCO CO Services 9,413 0.47%
TOKYO GAS CO Energy Sources 9,367 0.46%
NKK CORP Materials 9,312 0.46%
BANK YOKOHAMA Finance 9,253 0.46%
MITSUBISHI CHEMICAL CORP Materials 9,199 0.46%
SUMITOMO CORP Services 8,988 0.45%
SHIZUOKA BANK Finance 8,966 0.44%
SUMITOMO METAL IND Materials 8,892 0.44%
TOPPAN PRINTING CO Services 8,822 0.44%
FANUC Capital Equipment 8,749 0.43%
TORAY INDUSTRIES Materials 8,737 0.43%
OSAKA GAS CO Energy Sources 8,707 0.43%
ITOCHU CORP Services 8,649 0.43%
KAJIMA CORP Capital Equipment 8,622 0.43%
KOMATSU Capital Equipment 8,532 0.42%
MURATA MANUFACTURING CO Capital Equipment 8,491 0.42%
KUBOTA CORP Capital Equipment 8,281 0.41%
NIPPON OIL CO Energy Sources 7,531 0.37%
SEKISUI HOUSE Capital Equipment 7,488 0.37%
SECOM CO Services 7,349 0.36%
YAMAICHI SECURITIES CO Finance 7,345 0.36%
SHIMIZU CORP Capital Equipment 7,333 0.36%
MARUBENI CORP Services 7,262 0.36%
DAIWA HOUSE IND CO Capital Equipment 7,250 0.36%
MARUI CO Services 7,224 0.36%
TOKYU CORP Services 7,221 0.36%
DAIEI Services 7,163 0.36%
KAO CORP Consumer Goods 7,139 0.35%
SUMITOMO CHEMICAL CO Materials 7,048 0.35%
ROHM CO Capital Equipment 6,912 0.34%
TAISHO PHARMACEUTICAL CO Consumer Goods 6,881 0.34%
AJINOMOTO CO Consumer Goods 6,872 0.34%
YAMANOUCHI PHARM. Consumer Goods 6,689 0.33%
TOYO SEIKAN KAISHA Materials 6,483 0.32%
TAISEI CORP Capital Equipment 6,470 0.32%
KAWASAKI HEAVY IND Capital Equipment 6,381 0.32%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
TOSTEM CORP Materials 6,249 0.31%
NIPPON YUSEN K.K Services 6,213 0.31%
OBAYASHI CORP Capital Equipment 6,189 0.31%
CHIBA BANK Finance 6,160 0.31%
SHIN-ETSU CHEMICAL CO Materials 6,050 0.30%
NEW OJI PAPER CO Materials 6,034 0.30%
SEKISUI CHEMICAL CO Materials 5,997 0.30%
ACOM CO Finance 5,887 0.29%
JOYO BANK Finance 5,849 0.29%
NIPPON PAPER IND CO Materials 5,677 0.28%
YASUDA TRUST & BANK CO Finance 5,517 0.27%
MITSUBISHI MATERIALS Materials 5,483 0.27%
TOYODA AUTOMATIC LOOM Capital Equipment 5,429 0.27%
SUMITOMO MARINE & FIRE Finance 5,219 0.26%
TOBU RAILWAY CO Services 5,187 0.26%
GUNMA BANK Finance 5,140 0.26%
MITSUI MARINE & FIRE Finance 5,049 0.25%
HITACHI ZOSEN CORP Capital Equipment 4,891 0.24%
SHISEIDO CO Consumer Goods 4,870 0.24%
OMRON CORP Capital Equipment 4,803 0.24%
HANKYU CORP Services 4,758 0.24%
TEIJIN Materials 4,756 0.24%
ODAKYU ELECTRIC RAILWAY Services 4,735 0.23%
EISAI CO Consumer Goods 4,714 0.23%
ASAHI BREWERIES Consumer Goods 4,691 0.23%
SUMITOMO METAL MINING CO Materials 4,676 0.23%
TOTO Materials 4,480 0.22%
MYCAL CORP (NICHII CO) Services 4,466 0.22%
MITSUKOSHI Services 4,341 0.22%
EBARA CORP Capital Equipment 4,340 0.22%
SEGA ENTREPRISES Consumer Goods 4,309 0.21%
SMC CORP Capital Equipment 4,248 0.21%
DAIICHI PHARMACEUTICAL Consumer Goods 4,157 0.21%
TAKASHIMAYA CO Services 4,157 0.21%
KINDEN CORP Capital Equipment 4,066 0.20%
NIKON CORP Capital Equipment 4,019 0.20%
YAMATO TRANSPORT CO Services 4,001 0.20%
TOKYO ELECTRON Capital Equipment 3,915 0.19%
HOKURIKU BANK Finance 3,860 0.19%
KYOWA HAKKO KOGYO CO Consumer Goods 3,859 0.19%
JAPAN ENERGY CORP Energy Sources 3,767 0.19%
NAGOYA RAILROAD CO Services 3,759 0.19%
YAMAZAKI BAKING CO Consumer Goods 3,753 0.19%
NGK INSULATORS Capital Equipment 3,731 0.19%
NSK Capital Equipment 3,710 0.18%
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
SEVENTY-SEVEN BANK Finance 3,700 0.18%
HOYA CORP Consumer Goods 3,689 0.18%
COSMO OIL CO Energy Sources 3,665 0.18%
PIONEER ELECTRONIC CORP Consumer Goods 3,638 0.18%
FURUKAWA ELECTRIC CO Capital Equipment 3,583 0.18%
ASHIKAGA BANK Finance 3,580 0.18%
MITSUBISHI OIL CO Energy Sources 3,505 0.17%
DAINIPPON INK Materials 3,461 0.17%
NIPPON FIRE & MARINE Finance 3,443 0.17%
KOKUYO CO Services 3,431 0.17%
KURARAY CO Materials 3,413 0.17%
UNY CO Services 3,329 0.17%
MITSUI OSK LINES Services 3,323 0.16%
CREDIT SAISON CO Finance 3,282 0.16%
MINEBEA CO Capital Equipment 3,252 0.16%
AUTOBACS SEVEN CO Capital Equipment 3,219 0.16%
NISSIN FOOD PRODUCTS CO Consumer Goods 3,213 0.16%
NIPPON MEAT PACKERS Consumer Goods 3,168 0.16%
NICHIDO FIRE & MARINE Finance 3,125 0.16%
SAPPORO BREWERIES Consumer Goods 3,108 0.15%
YAMAHA CORP Consumer Goods 3,074 0.15%
YAMAGUCHI BANK Finance 3,039 0.15%
TOKYO DOME CORP Services 3,020 0.15%
NANKAI ELECTRIC RAILWAY Services 3,015 0.15%
ISETAN CO Services 3,003 0.15%
SHOWA DENKO K.K Materials 2,982 0.15%
ADVANTEST CORP Capital Equipment 2,965 0.15%
NTN CORP Capital Equipment 2,963 0.15%
UBE INDUSTRIES Materials 2,932 0.15%
KEIHIN ELECTRIC EXPRESS Services 2,878 0.14%
MITSUI TOATSU CHEMICALS Materials 2,828 0.14%
CHICHIBU ONODA CEMENT Materials 2,827 0.14%
TOHO CO Services 2,826 0.14%
TOKYO STEEL MFG CO Materials 2,788 0.14%
KURITA WATER INDUSTRIES Capital Equipment 2,776 0.14%
SHIONOGI & CO Consumer Goods 2,745 0.14%
AMADA CO Capital Equipment 2,723 0.14%
NIPPON LIGHT METAL CO Materials 2,709 0.13%
TBS TOKYO BROADCASTING Services 2,673 0.13%
MITSUBISHI WAREHOUSE Services 2,668 0.13%
FUJIKURA Capital Equipment 2,621 0.13%
DAIKIN INDUSTRIES Capital Equipment 2,599 0.13%
SHIMANO Consumer Goods 2,598 0.13%
NISHIMATSU CONSTRUCTION Capital Equipment 2,569 0.13%
SUMITOMO FORESTRY CO Materials 2,550 0.13%
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
SEIYU Services 2,535 0.13%
CITIZEN WATCH CO Consumer Goods 2,520 0.13%
MITSUBISHI RAYON CO Materials 2,513 0.12%
TOSOH CORP Materials 2,478 0.12%
KONICA CORP Consumer Goods 2,470 0.12%
OLYMPUS OPTICAL CO Capital Equipment 2,433 0.12%
ORIX CORP Finance 2,425 0.12%
KUMAGAI GUMI CO Capital Equipment 2,420 0.12%
CASIO COMPUTER CO Consumer Goods 2,404 0.12%
KANDENKO CO Capital Equipment 2,401 0.12%
ONWARD KASHIYAMA CO Consumer Goods 2,379 0.12%
FUJITA KANKO Services 2,372 0.12%
HANKYU DEPARTMENT STORES Services 2,369 0.12%
HIROSE ELECTRIC CO Capital Equipment 2,364 0.12%
NITTO DENKO CORP Materials 2,318 0.12%
MAKITA CORP Capital Equipment 2,313 0.11%
TOYOBO CO Consumer Goods 2,310 0.11%
HONSHU PAPER CO Materials 2,307 0.11%
INAX CORP Materials 2,298 0.11%
NGK SPARK PLUG CO Capital Equipment 2,263 0.11%
SEINO TRANSPORTATION CO Services 2,253 0.11%
MEIJI SEIKA KAISHA Consumer Goods 2,245 0.11%
MITSUI ENGINEERING&SHIP. Capital Equipment 2,234 0.11%
YOKOGAWA ELECTRIC CORP Capital Equipment 2,233 0.11%
ARABIAN OIL CO Energy Sources 2,226 0.11%
CHUGAI PHARMACEUTICAL CO Consumer Goods 2,190 0.11%
NISSHINBO INDUSTRIES Consumer Goods 2,171 0.11%
KAMIGUMI CO Services 2,168 0.11%
PENTA-OCEAN CONSTRUCTION Capital Equipment 2,165 0.11%
NIHON CEMENT CO Materials 2,163 0.11%
TAKARA SHUZO CO Consumer Goods 2,151 0.11%
KANEKA CORP Materials 2,149 0.11%
SANWA SHUTTER CORP Materials 2,141 0.11%
JGC CORP Capital Equipment 2,112 0.10%
ALPS ELECTRIC CO Capital Equipment 2,111 0.10%
CHIYODA CORP Capital Equipment 2,103 0.10%
SUMITOMO HEAVY IND Capital Equipment 2,103 0.10%
HOUSE FOODS(HOUSE FD IND Consumer Goods 2,078 0.10%
ORIENT CORP Finance 2,069 0.10%
MITSUBISHI GAS CHEMICAL Materials 2,057 0.10%
SNOW BRAND MILK PRODUCTS Consumer Goods 2,044 0.10%
NICHIREI CORP Consumer Goods 2,018 0.10%
DAICEL CHEMICAL IND Materials 1,990 0.10%
NIPPON SHINPAN CO Finance 1,986 0.10%
FUJITA CORP Capital Equipment 1,962 0.10%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
DAIDO STEEL CO Materials 1,932 0.10%
CSK CORP Services 1,925 0.10%
AOYAMA TRADING CO Services 1,923 0.10%
WACOAL CORP Consumer Goods 1,902 0.09%
NIPPON SHEET GLASS CO Materials 1,890 0.09%
SKYLARK CO Services 1,883 0.09%
OKUMURA CORP Capital Equipment 1,865 0.09%
MITSUI MINING & SMELTING Materials 1,863 0.09%
SUMITOMO OSAKA CEMENT CO Materials 1,857 0.09%
HIGO BANK Finance 1,854 0.09%
DAITO TRUST CONSTRUCTION Capital Equipment 1,793 0.09%
KOYO SEIKO CO Capital Equipment 1,774 0.09%
UNI-CHARM CORP Consumer Goods 1,754 0.09%
MEIJI MILK PRODUCTS CO Consumer Goods 1,737 0.09%
KOMORI CORP Capital Equipment 1,733 0.09%
MITSUBISHI PAPER MILLS Materials 1,720 0.09%
NIPPON SHOKUBAI CO Materials 1,695 0.08%
DAIMARU Services 1,683 0.08%
KAWASAKI KISEN KAISHA Services 1,682 0.08%
LION CORP Consumer Goods 1,641 0.08%
TEIKOKU OIL CO Energy Sources 1,640 0.08%
TOKYO STYLE CO Consumer Goods 1,640 0.08%
ITOHAM FOODS Consumer Goods 1,626 0.08%
MORI SEIKI CO Capital Equipment 1,611 0.08%
DENKI KAGAKU KOGYO K.K Materials 1,602 0.08%
HASEKO CORP Capital Equipment 1,601 0.08%
MAEDA ROAD CONSTRUCTION Capital Equipment 1,574 0.08%
OYO CORP Services 1,558 0.08%
KISSEI PHARMACEUTICAL CO Consumer Goods 1,537 0.08%
NIPPON COMSYS CORP Capital Equipment 1,529 0.08%
NAMCO Services 1,514 0.08%
TAKARA STANDARD CO Consumer Goods 1,484 0.07%
SHIMACHU CO Services 1,466 0.07%
DAIFUKU CO Capital Equipment 1,455 0.07%
Q. P. CORP Consumer Goods 1,454 0.07%
NORITAKE CO Consumer Goods 1,452 0.07%
DAIWA KOSHO LEASE CO Finance 1,449 0.07%
KIKKOMAN CORP Consumer Goods 1,440 0.07%
SATO KOGYO CO Capital Equipment 1,401 0.07%
AOKI CORP Capital Equipment 1,400 0.07%
BROTHER INDUSTRIES Consumer Goods 1,398 0.07%
GUNZE Consumer Goods 1,375 0.07%
NIPPON SHARYO Capital Equipment 1,351 0.07%
SANKYO ALUMINIUM IND CO Materials 1,350 0.07%
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
IWATANI INTERNATIONAL Energy Sources 1,349 0.07%
DAINIPPON SCREEN MFG CO Capital Equipment 1,345 0.07%
EZAKI GLICO CO Consumer Goods 1,334 0.07%
KANSAI PAINT CO Materials 1,319 0.07%
KANEBO Consumer Goods 1,318 0.07%
TAIYO YUDEN CO Capital Equipment 1,312 0.07%
NAGASE & CO Materials 1,267 0.06%
UNITIKA Materials 1,267 0.06%
OKUMA CORP Capital Equipment 1,264 0.06%
KATOKICHI CO Consumer Goods 1,237 0.06%
DAIKYO Finance 1,227 0.06%
HAZAMA CORP Capital Equipment 1,218 0.06%
NOF CORP Materials 1,216 0.06%
TSUBAKIMOTO CHAIN CO Capital Equipment 1,214 0.06%
AMANO CORP Capital Equipment 1,210 0.06%
NIPPON SUISAN KAISHA Consumer Goods 1,204 0.06%
TOA CORP Capital Equipment 1,203 0.06%
TOKYO TATEMONO CO Finance 1,202 0.06%
JACCS CO Finance 1,200 0.06%
TOKYOTOKEIBA CO Services 1,192 0.06%
NIIGATA ENGINEERING CO Capital Equipment 1,166 0.06%
TAKUMA CO Capital Equipment 1,154 0.06%
KUREHA CHEMICAL IND CO Materials 1,153 0.06%
MISAWA HOMES CO Capital Equipment 1,135 0.06%
ISHIHARA SANGYO KAISHA Materials 1,080 0.05%
MITSUI-SOKO CO Services 1,078 0.05%
TOYO ENGINEERING CORP Capital Equipment 1,074 0.05%
JAPAN STEEL WORKS Capital Equipment 1,071 0.05%
KONAMI CO Services 1,057 0.05%
TOEI CO Services 1,051 0.05%
KYUDENKO CORP Capital Equipment 1,038 0.05%
TOYO EXTERIOR CO Materials 1,035 0.05%
SANDEN CORP Capital Equipment 1,031 0.05%
MARUHA CORP Consumer Goods 1,022 0.05%
KURABO INDUSTRIES Consumer Goods 967 0.05%
RENOWN Consumer Goods 956 0.05%
UNIDEN CORP Capital Equipment 890 0.04%
OKAMOTO INDUSTRIES Multi-Industry 883 0.04%
TRANS COSMOS Services 863 0.04%
MAKINO MILLING MACHINE Capital Equipment 823 0.04%
SANRIO CO Services 817 0.04%
GAKKEN CO Services 712 0.04%
KAKEN PHARMACEUTICAL CO Consumer Goods 699 0.03%
NIPPON BEET SUGAR MFG CO Consumer Goods 686 0.03%
JAPAN METALS & CHEMICALS Materials 615 0.03%
</TABLE>
20
<PAGE>
APPENDIX A-10
MSCI UK MALAYSIA AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
TELEKOM MALAYSIA Services 17,611 12.98%
TENAGA NASIONAL Energy Sources 11,172 8.23%
MALAYAN BANKING Finance 10,847 7.99%
SIME DARBY Multi-Industry 7,871 5.80%
RESORTS WORLD Services 5,954 4.39%
UNITED ENGINEERS (MAL) Multi-Industry 5,335 3.93%
MALAYSIA INT'L SHIPPING Services 3,048 2.25%
ROTHMANS PALL MALL (MAL) Consumer Goods 3,006 2.22%
PROTON Consumer Goods 2,913 2.15%
YTL CORP Capital Equipment 2,844 2.10%
AMMB HOLDINGS Finance 2,691 1.98%
MAGNUM CORP Services 2,423 1.79%
DCB HOLDINGS Finance 2,386 1.76%
EDARAN OTOMOBIL NASIONAL Consumer Goods 2,360 1.74%
NESTLE (MALAYSIA) Consumer Goods 2,341 1.73%
MALAYSIAN AIRLINE SYSTEM Services 2,300 1.70%
PUBLIC BANK Finance 2,097 1.55%
TECHNOLOGY RESOURCES IND Services 1,978 1.46%
KUALA LUMPUR KEPONG Materials 1,772 1.31%
COMMERCE ASSET-HOLDING Finance 1,713 1.26%
GOLDEN HOPE PLANTATIONS Materials 1,617 1.19%
MALAYSIAN RESOURCES CORP Finance 1,573 1.16%
JAYA TIASA HOLDINGS Materials 1,404 1.03%
PERLIS PLANTATIONS Materials 1,291 0.95%
HUME INDUSTRIES MALAYSIA Materials 1,272 0.94%
RASHID HUSSAIN Finance 1,239 0.91%
IOI CORP Materials 1,231 0.91%
TAN CHONG MOTOR HOLDINGS Consumer Goods 1,191 0.88%
ORIENTAL HOLDINGS Consumer Goods 1,163 0.86%
NEW STRAITS TIMES PRESS Services 1,113 0.82%
MBF CAPITAL Finance 1,113 0.82%
EKRAN Capital Equipment 1,093 0.81%
TIME ENGINEERING Capital Equipment 1,063 0.78%
MULTI-PURPOSE HOLDINGS Multi-Industry 1,048 0.77%
UMW HOLDINGS Capital Equipment 1,044 0.77%
HIGHLANDS & LOWLANDS Materials 1,028 0.76%
LEADER UNIVERSAL HLDGS Capital Equipment 945 0.70%
MALAYAN UNITED IND Multi-Industry 941 0.69%
MALAYSIA MINING CORP Materials 939 0.69%
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
LAND & GENERAL Multi-Industry 911 0.67%
SHELL REFINING CO (FOM) Energy Sources 902 0.66%
AMSTEEL CORP Materials 894 0.66%
SUNGEI WAY HOLDINGS Materials 881 0.65%
TA ENTERPRISE Finance 873 0.64%
METROPLEX Finance 859 0.63%
PAN MALAYSIA CEMENT WRKS Materials 827 0.61%
MALAYAN CEMENT Materials 822 0.61%
HONG LEONG PROPERTIES Finance 789 0.58%
RJ REYNOLDS Consumer Goods 755 0.56%
MALAYSIAN PACIFIC IND Capital Equipment 752 0.55%
KEDAH CEMENT HOLDINGS Materials 741 0.55%
IDRIS HYDRAULIC MALAYSIA Finance 737 0.54%
KIAN JOO CAN FACTORY Materials 687 0.51%
GUINNESS ANCHOR Consumer Goods 684 0.50%
MALAYSIAN OXYGEN Materials 677 0.50%
MULPHA INTERNATIONAL Multi-Industry 670 0.49%
HONG LEONG INDUSTRIES Multi-Industry 647 0.48%
BERJAYA GROUP Multi-Industry 561 0.41%
LANDMARKS Services 521 0.38%
IGB CORP Finance 488 0.36%
PROMET Capital Equipment 477 0.35%
MYCOM Finance 446 0.33%
BERJAYA LEISURE Services 429 0.32%
KEMAYAN CORP Materials 420 0.31%
SELANGOR PROPERTIES Finance 400 0.29%
MALAYSIAN MOSAICS Services 347 0.26%
AOKAM PERDANA Materials 312 0.23%
ANTAH HOLDINGS Finance 303 0.22%
GOLDEN PLUS HOLDINGS Materials 294 0.22%
JOHAN HOLDINGS Capital Equipment 276 0.20%
PILECON ENGINEERING Capital Equipment 249 0.18%
MALAYAWATA STEEL Materials 241 0.18%
PETALING GARDEN Finance 231 0.17%
KELANAMAS INDUSTRIES Materials 213 0.16%
PALMCO HOLDINGS Finance 204 0.15%
ALUMINIUM COMPANY OF MAL Materials 193 0.14%
</TABLE>
22
<PAGE>
APPENDIX A-11
MSCI MEXICO AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
TELMEX TELEFONOS MEX L Services 13,136 19.02%
KIMBERLY-CLARK MEXICO A Consumer Goods 5,061 7.33%
GRUPO TELEVISA CPO Services 4,676 6.77%
TELMEX TELEFONOS MEX A Services 4,211 6.10%
CIFRA B Services 3,742 5.42%
GRUPO MODELO C Consumer Goods 3,733 5.41%
ALFA Multi-Industry 2,648 3.83%
EMPRESAS MODERNA ACP Consumer Goods 2,315 3.35%
GRUPO MEXICO B Materials 2,109 3.05%
CEMEX A Materials 2,102 3.04%
APASCO Materials 1,874 2.71%
INDUSTRIAS PENOLES CP Materials 1,842 2.67%
CEMEX B Materials 1,804 2.61%
BIMBO ACP Consumer Goods 1,732 2.51%
FOMENTO ECONOMICO MEX. Consumer Goods 1,634 2.37%
GRUPO FIN BANACCI B Finance 1,586 2.30%
GRUPO ICA Capital Equipment 1,565 2.27%
DESC B Multi-Industry 1,458 2.11%
GRUPO FIN BANCOMER B Finance 1,266 1.83%
CIFRA C Services 1,231 1.78%
GRUPO IND'L MASECA B2 Consumer Goods 1,102 1.60%
LIVERPOOL (EL PUERTO) 1 Services 1,077 1.56%
CONTROL. COMERCIAL MEX B Services 984 1.43%
CEMEX CPO Materials 895 1.30%
GRUPO FIN BBV-PROBURSA B Finance 775 1.12%
TAMSA Capital Equipment 756 1.09%
VITRO Materials 708 1.02%
GRUPO CONTINENTAL Consumer Goods 592 0.86%
TRANSPORTACION MARIT. L Services 473 0.69%
GRUPO FIN BANACCI L Finance 411 0.59%
CYDSA Materials 263 0.38%
GRUPO FIN SERFIN B Finance 201 0.29%
CONSORCIO G GRUPO DINA Capital Equipment 187 0.27%
EMPAQUES PONDEROSA Materials 183 0.26%
LIVERPOOL (EL PUERTO) C1 Services 165 0.24%
GRUPO FIN SERFIN LCP Finance 152 0.22%
GRUPO MEX DESARROLLO L Capital Equipment 105 0.15%
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
GRUPO SITUR B Services 101 0.15%
GRUPO SIMEC B Materials 96 0.14%
GRUPO HERDEZ B Consumer Goods 54 0.08%
GRUPO HERDEZ A Consumer Goods 51 0.07%
GRUPO FIN BANACCI A Finance - 0.00%
GRUPO FIN BANCOMER A Finance - 0.00%
GRUPO FIN SERFIN ACP Finance - 0.00%
</TABLE>
24
<PAGE>
APPENDIX A-12
MSCI NETHERLANDS AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
ROYAL DUTCH PETROLEUM CO Energy Sources 80,253 34.03%
ING GROEP Finance 23,851 10.11%
UNILEVER NV CERT Consumer Goods 23,041 9.77%
ABN AMRO HOLDING Finance 17,251 7.31%
KON. PTT NEDERLAND Services 16,266 6.90%
PHILIPS ELECTRONICS Consumer Goods 11,741 4.98%
HEINEKEN NV Consumer Goods 11,182 4.74%
ELSEVIER Services 10,580 4.49%
AHOLD (KON.) Services 9,326 3.95%
WOLTERS KLUWER Services 8,528 3.62%
AKZO NOBEL Materials 8,278 3.51%
KLM Services 2,507 1.06%
KONINKLIJKE KNP BT Materials 2,369 1.00%
GETRONICS Capital Equipment 2,095 0.89%
OCE-VAN DER GRINTEN Capital Equipment 1,952 0.83%
IHC CALAND Capital Equipment 1,437 0.61%
HOOGOVENS (KON.) Materials 1,156 0.49%
STAD ROTTERDAM Finance 1,122 0.48%
STORK (VER MACHINE.) Capital Equipment 895 0.38%
PAKHOED (KON.) Capital Equipment 877 0.37%
HOLLANDSCHE BETON GROEP Capital Equipment 598 0.25%
NEDLLOYD (KON.) Services 540 0.23%
</TABLE>
25
<PAGE>
APPENDIX A-13
MSCI SINGAPORE AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
SINGAPORE TELECOM Services 14,825 15.35%
SINGAPORE AIRLINES FGN Services 13,580 14.06%
OCBC BANK FGN Finance 12,016 12.44%
UNITED OVERSEAS BANK FGN Finance 8,761 9.07%
DEVELOPMENT BK SING FGN Finance 8,050 8.33%
CITY DEVELOPMENTS Finance 6,567 6.80%
SINGAPORE PRESS HLDG FGN Services 5,867 6.07%
KEPPEL CORP Multi-Industry 3,985 4.13%
DBS LAND Finance 3,056 3.16%
FRASER & NEAVE Consumer Goods 2,975 3.08%
CYCLE & CARRIAGE Consumer Goods 2,242 2.32%
SINGAPORE TECH IND'L Multi-Industry 1,620 1.68%
UIC UNITED INDUSTRIAL Finance 1,287 1.33%
PARKWAY HOLDINGS Finance 929 0.96%
UNITED OVERSEAS LAND Finance 861 0.89%
STRAITS TRADING Materials 709 0.73%
OVERSEAS UNION ENT. Services 665 0.69%
HOTEL PROPERTIES Services 644 0.67%
NEPTUNE ORIENT LINES NOL Services 642 0.66%
FIRST CAPITAL CORP Finance 601 0.62%
AMCOL HOLDINGS Finance 576 0.60%
NATSTEEL Materials 536 0.55%
SHANGRI-LA HOTEL Services 522 0.54%
INCHCAPE BERHAD Multi-Industry 519 0.54%
COMFORT GROUP Services 507 0.52%
JURONG SHIPYARD Capital Equipment 506 0.52%
HAW PAR BROTHERS INT'L Multi-Industry 399 0.41%
VAN DER HORST Capital Equipment 385 0.40%
METRO HOLDINGS Services 385 0.40%
IPC CORP Capital Equipment 362 0.37%
CREATIVE TECHNOLOGY Capital Equipment 357 0.37%
HAI SUN HUP GROUP Services 320 0.33%
LUM CHANG HOLDINGS Multi-Industry 272 0.28%
SEMBAWANG MARITIME Services 256 0.27%
GOLDTRON Capital Equipment 252 0.26%
ROBINSON AND CO Services 244 0.25%
CHUAN HUP HOLDINGS Capital Equipment 169 0.17%
PRIMA Consumer Goods 140 0.14%
</TABLE>
26
<PAGE>
APPENDIX A-14
MSCI SPAIN INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
TELEFONICA DE ESPANA Services 17,468 16.95%
ENDESA EMPRESA NAL ELEC. Energy Sources 15,158 14.71%
REPSOL Energy Sources 9,752 9.46%
BANCO BILBAO VIZCAYA Finance 9,453 9.17%
IBERDROLA Energy Sources 8,309 8.06%
BANCO SANTANDER Finance 8,200 7.96%
GAS NATURAL SDG Energy Sources 7,162 6.95%
ARGENTARIA CORP BANCARIA Finance 5,189 5.03%
BANCO CENTRAL HISPANO Finance 3,334 3.23%
AUTOPISTAS CESA (ACESA) Services 2,453 2.38%
UNION ELECTRICA FENOSA Energy Sources 1,849 1.79%
AGUAS DE BARCELONA Services 1,708 1.66%
TABACALERA Consumer Goods 1,502 1.46%
MAPFRE (CORPORACION) Finance 1,471 1.43%
ACERINOX Materials 1,309 1.27%
ALBA (CORP FINANCIERA) Multi-Industry 1,271 1.23%
FOMENTO CONST Y CONTR Capital Equipment 1,177 1.14%
ZARDOYA OTIS Capital Equipment 935 0.91%
VALLEHERMOSO Finance 786 0.76%
METROVACESA Finance 751 0.73%
DRAGADOS Y CONSTRUCCION Capital Equipment 726 0.70%
EBRO AGRICOLAS Consumer Goods 529 0.51%
PORTLAND VALDERRIVAS Materials 458 0.44%
URALITA Materials 444 0.43%
PROSEGUR Services 441 0.43%
ENCE EMPR NAC CELULOSAS Materials 316 0.31%
VISCOFAN Materials 314 0.30%
SARRIO Materials 214 0.21%
URBIS (INMOBILIARIA) Finance 165 0.16%
AGUILA (EL) Consumer Goods 148 0.14%
ERCROS Materials 76 0.07%
</TABLE>
27
<PAGE>
APPENDIX A-15
MSCI SWEDEN AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
ERICSSON (LM) B Capital Equipment 22,365 18.02%
ASTRA A Consumer Goods 21,228 17.10%
ABB AB A (ASEA A) Capital Equipment 7,222 5.82%
VOLVO B Consumer Goods 6,851 5.52%
ASTRA B Consumer Goods 4,749 3.83%
SKANSKA B Capital Equipment 4,721 3.80%
SKAND.ENSKILDA BANKEN A Finance 4,381 3.53%
HENNES & MAURITZ B Services 4,303 3.47%
ELECTROLUX B Consumer Goods 4,262 3.43%
SVENSKA HANDELSBK A Finance 4,248 3.42%
SCA SV CELLULOSA B Materials 4,193 3.38%
STORA KOPPARBERG A Materials 3,680 2.96%
STADSHYPOTEK A Finance 3,163 2.55%
VOLVO A Consumer Goods 3,051 2.46%
ABB AB B (ASEA B) Capital Equipment 2,887 2.33%
ATLAS COPCO A Capital Equipment 2,454 1.98%
SKANDIA FORSAKRING Finance 2,406 1.94%
AGA A Materials 2,162 1.74%
AUTOLIV Capital Equipment 1,817 1.46%
SECURITAS B Services 1,810 1.46%
AGA B Materials 1,778 1.43%
SCANCEM A (EUROC A) Materials 1,715 1.38%
TRELLEBORG B Multi-Industry 1,543 1.24%
SKF B Capital Equipment 1,498 1.21%
SWEDISH MATCH Consumer Goods 1,331 1.07%
ATLAS COPCO B Capital Equipment 1,222 0.98%
SKF A Capital Equipment 1,124 0.91%
STORA KOPPARBERG B Materials 835 0.67%
SVENSKA HANDELSBK B Finance 404 0.33%
ESSELTE A Services 402 0.32%
ESSELTE B Services 322 0.26%
</TABLE>
28
<PAGE>
APPENDIX A-16
MSCI SWITZERLAND INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
ROCHE HOLDING GENUSS Consumer Goods 53,651 16.02%
NESTLE Consumer Goods 46,252 13.81%
SANDOZ NAMEN Consumer Goods 41,782 12.47%
CIBA-GEIGY NAMEN Materials 31,932 9.53%
SCHWEIZ BANKGESELL INH Finance 20,652 6.17%
ROCHE HOLDING INHABER Consumer Goods 20,308 6.06%
CS HOLDING Finance 19,610 5.85%
SCHWEIZ RUECKVERS Finance 15,834 4.73%
SCHWEIZ BANKVEREIN Finance 14,833 4.43%
ZUERICH VERSICHERUNG Finance 12,540 3.74%
ABB INH(BBC BROWN BOVERI Capital Equipment 9,930 2.96%
CIBA-GEIGY INHABER Materials 4,738 1.41%
ADECCO PORTEUR(ADIA PORT Services 4,619 1.38%
SCHWEIZ BANKGESELL NAMEN Finance 4,466 1.33%
HOLDERBANK INHABER Materials 3,902 1.16%
SANDOZ INHABER Consumer Goods 3,356 1.00%
ALUSUISSE-LONZA HLDG NAM Multi-Industry 3,217 0.96%
SGS SURVEILLANCE PORT Services 2,710 0.81%
SMH PORTEUR Consumer Goods 2,521 0.75%
SMH NOM Consumer Goods 2,328 0.69%
SWISSAIR NAMEN Services 2,110 0.63%
ALUSUISSE-LONZA HLDG INH Multi-Industry 1,580 0.47%
HOLDERBANK NAMEN Materials 1,552 0.46%
SULZER NAMEN Capital Equipment 1,452 0.43%
ABB NAM(BBC BROWN BOVERI Capital Equipment 1,314 0.39%
SGS SURVEILLANCE NOM Services 1,229 0.37%
SCHINDLER NAMEN Capital Equipment 752 0.22%
VALORA HLDG NAMEN(MERKUR Services 745 0.22%
KUONI REISEN NAMEN B Services 743 0.22%
SULZER PART Capital Equipment 667 0.20%
FORBO HOLDING Materials 602 0.18%
SCHINDLER PART Capital Equipment 596 0.18%
SIKA FINANZ INHABER Materials 591 0.18%
FISCHER (GEORG) INHABER Capital Equipment 540 0.16%
DANZAS HOLDING NAMEN Services 413 0.12%
JELMOLI HOLDING INHABER Services 251 0.07%
MOEVENPICK INHABER Services 191 0.06%
JELMOLI HOLDING NAMEN Services 163 0.05%
MOEVENPICK PART Services 113 0.03%
FISCHER (GEORG) NAMEN Capital Equipment 103 0.03%
DANZAS HOLDING PART Services 101 0.03%
</TABLE>
29
<PAGE>
APPENDIX A-17
MSCI UK INDEX AS OF AUGUST 30, 1996
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
BRITISH PETROLEUM Energy Sources 54,552 5.78%
GLAXO WELLCOME Consumer Goods 50,300 5.33%
BRITISH TELECOM Services 36,593 3.88%
SMITHKLINE BEECHAM Consumer Goods 32,182 3.41%
HSBC HOLDINGS (HKD 10) Finance 30,616 3.25%
LLOYDS TSB GROUP Finance 30,278 3.21%
ZENECA GROUP Consumer Goods 22,638 2.40%
BARCLAYS Finance 21,731 2.30%
MARKS & SPENCER Services 21,702 2.30%
BAT INDUSTRIES Multi-Industry 20,809 2.21%
REUTERS HOLDINGS Services 19,555 2.07%
GENERAL ELECTRIC PLC Capital Equipment 16,627 1.76%
UNILEVER PLC Consumer Goods 16,172 1.71%
BTR Multi-Industry 15,946 1.69%
RTZ CORP REG Materials 15,927 1.69%
GRAND METROPOLITAN Consumer Goods 15,516 1.65%
BRITISH SKY BROADCASTING Services 15,320 1.62%
HSBC HOLDINGS (GBP 0.75) Finance 15,137 1.61%
CABLE & WIRELESS Services 14,611 1.55%
GUINNESS Consumer Goods 14,416 1.53%
BRITISH GAS Energy Sources 14,021 1.49%
ABBEY NATIONAL Finance 12,974 1.38%
PRUDENTIAL CORP Finance 12,931 1.37%
HANSON Multi-Industry 12,767 1.35%
GRANADA GROUP Services 11,545 1.22%
VODAFONE GROUP Services 11,537 1.22%
BASS Services 11,423 1.21%
SAINSBURY (J) Services 11,163 1.18%
GREAT UNIVERSAL STORES Services 10,242 1.09%
TESCO Services 10,220 1.08%
REED INTERNATIONAL Services 10,138 1.08%
EMI GROUP (THORN EMI) Consumer Goods 9,703 1.03%
IMPERIAL CHEMICAL ICI Materials 9,162 0.97%
BOOTS CO Services 8,794 0.93%
CADBURY SCHWEPPES Consumer Goods 7,960 0.84%
BRITISH AIRWAYS Services 7,890 0.84%
NATIONAL POWER Energy Sources 7,147 0.76%
KINGFISHER Services 6,858 0.73%
BRITISH AEROSPACE Capital Equipment 6,667 0.71%
BOC GROUP Materials 6,533 0.69%
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
SCOTTISH & NEWCASTLE Services 6,497 0.69%
COMMERCIAL UNION Finance 6,215 0.66%
ROYAL BANK OF SCOTLAND Finance 6,130 0.65%
PEARSON Services 5,941 0.63%
BRITISH STEEL Materials 5,919 0.63%
RANK ORGANISATION Services 5,830 0.62%
SAFEWAY (ARGYLL GROUP) Services 5,772 0.61%
GKN Capital Equipment 5,743 0.61%
ASSOCIATED BRITISH FOODS Consumer Goods 5,603 0.59%
LEGAL & GENERAL GROUP Finance 5,560 0.59%
SCOTTISH POWER Energy Sources 5,533 0.59%
LAND SECURITIES Finance 5,447 0.58%
ROLLS-ROYCE Capital Equipment 5,076 0.54%
UNITED UTILITIES Services 4,955 0.53%
GENERAL ACCIDENT Finance 4,929 0.52%
PEN & ORIENTAL STEAM Services 4,865 0.52%
NATIONAL GRID GROUP Energy Sources 4,638 0.49%
ROYAL & SUN ALLIANCE INS Finance 4,472 0.47%
CARLTON COMMUNICATIONS Services 4,337 0.46%
SCHRODERS Finance 4,225 0.45%
BLUE CIRCLE INDUSTRIES Materials 4,224 0.45%
RMC GROUP Materials 4,195 0.44%
WOLSELEY Materials 4,089 0.43%
TI GROUP Multi-Industry 4,036 0.43%
LADBROKE GROUP Services 3,806 0.40%
SMITHS INDUSTRIES Capital Equipment 3,574 0.38%
REDLAND Materials 3,561 0.38%
GUARDIAN ROYAL EXCHANGE Finance 3,559 0.38%
NEXT Services 3,397 0.36%
ARGOS Services 3,365 0.36%
BURMAH CASTROL Energy Sources 3,309 0.35%
LUCAS INDUSTRIES Capital Equipment 3,273 0.35%
WILLIAMS HOLDINGS Materials 3,207 0.34%
THAMES WATER Services 3,206 0.34%
PILKINGTON Materials 3,171 0.34%
BRITISH LAND CO Finance 3,100 0.33%
REXAM Materials 2,992 0.32%
LASMO Energy Sources 2,928 0.31%
TATE & LYLE Consumer Goods 2,865 0.30%
MEPC Finance 2,848 0.30%
BPB INDUSTRIES Materials 2,825 0.30%
MERCURY ASSET MGMT GROUP Finance 2,805 0.30%
COURTAULDS PLC Materials 2,735 0.29%
SOUTHERN ELECTRIC Energy Sources 2,715 0.29%
THORN Consumer Goods 2,619 0.28%
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
ELECTROCOMPONENTS Capital Equipment 2,561 0.27%
ANGLIAN WATER Services 2,456 0.26%
ARJO WIGGINS APPLETON Materials 2,374 0.25%
SEARS PLC Services 2,297 0.24%
DE LA RUE Services 2,243 0.24%
IMI Materials 2,136 0.23%
LONRHO Multi-Industry 2,124 0.23%
BBA GROUP Capital Equipment 2,110 0.22%
JOHNSON MATTHEY Multi-Industry 2,089 0.22%
CARADON Materials 2,082 0.22%
RAILTRACK GROUP Services 1,899 0.20%
PROVIDENT FINANCIAL Finance 1,888 0.20%
BICC Capital Equipment 1,854 0.20%
EAST MIDLANDS ELEC Energy Sources 1,742 0.18%
COATS VIYELLA Consumer Goods 1,734 0.18%
LONDON ELECTRICITY Energy Sources 1,716 0.18%
UNITED BISCUITS Consumer Goods 1,713 0.18%
HAMMERSON Finance 1,707 0.18%
FKI Capital Equipment 1,636 0.17%
HYDER (WELSH WATER) Services 1,596 0.17%
UNIGATE Consumer Goods 1,594 0.17%
SLOUGH ESTATES Finance 1,505 0.16%
HARRISONS & CROSFIELD Multi-Industry 1,485 0.16%
TARMAC Materials 1,454 0.15%
CHUBB SECURITY Services 1,413 0.15%
VICKERS Capital Equipment 1,405 0.15%
BOWTHORPE Capital Equipment 1,324 0.14%
RACAL ELECTRONICS Capital Equipment 1,309 0.14%
ENGLISH CHINA CLAYS Materials 1,210 0.13%
T & N Capital Equipment 1,151 0.12%
OCEAN GROUP Services 1,089 0.12%
LAIRD GROUP Capital Equipment 1,074 0.11%
RUGBY GROUP Materials 1,071 0.11%
HEPWORTH Materials 1,055 0.11%
SEDGWICK GROUP Finance 1,036 0.11%
TAYLOR WOODROW Capital Equipment 1,028 0.11%
GREAT PORTLAND ESTATES Finance 981 0.10%
BARRATT DEVELOPMENTS Capital Equipment 918 0.10%
COBHAM Capital Equipment 903 0.10%
DELTA PLC Capital Equipment 867 0.09%
WILLIS CORROON GROUP Finance 866 0.09%
NORTHERN ELECTRIC Energy Sources 853 0.09%
MEYER INTERNATIONAL Materials 797 0.08%
WIMPEY (GEORGE) Capital Equipment 753 0.08%
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---
<S> <C> <C> <C>
LEX SERVICE Services 689 0.07%
CALOR GROUP Energy Sources 666 0.07%
MARLEY Materials 652 0.07%
COURTAULDS TEXTILES Consumer Goods 508 0.05%
WILSON (CONNOLLY) HLDGS Capital Equipment 500 0.05%
TRANSPORT DEVELOPMENT Services 455 0.05%
LAING (JOHN) ORD Capital Equipment 394 0.04%
ST JAMES'S PLACE CAP(NEW Finance 375 0.04%
OXFORD INSTRUMENTS Capital Equipment 364 0.04%
AMEC Capital Equipment 300 0.03%
AMSTRAD Capital Equipment 250 0.03%
COSTAIN GROUP Capital Equipment 215 0.02%
DAWSON INTERNATIONAL Consumer Goods 203 0.02%
</TABLE>
33
<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 1997. The holidays
applicable to each Index Series during 1997 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 1997) are as
follows:
-- January 1, 1997
-- January 26, 1997
-- March 10, 1997
-- March 28, 1997
-- March 31, 1997
-- April 25, 1997
-- June 9, 1997
-- August 4, 1997
-- October 6, 1997
-- November 4, 1997
-- December 25, 1997
-- December 26, 1997
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 1997.
<PAGE>
THE AUSTRIA INDEX SERIES
REGULAR HOLIDAYS. The regular Austrian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 6, 1997
-- April 8, 1997
-- May 1, 1997
-- May 16, 1997
-- May 27, 1997
-- June 6, 1997
-- August 15, 1997
-- October 26, 1997
-- November 1, 1997
-- December 8, 1997
-- December 24, 1997
-- December 25, 1997
-- December 26, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Austria Index Series.
<PAGE>
THE BELGIUM INDEX SERIES
REGULAR HOLIDAYS. The regular Belgian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 31, 1997
-- March 28, 1997
-- May 1, 1997
-- May 8, 1997
-- May 9, 1997
-- May 19, 1997
-- July 21, 1997
-- August 15, 1997
-- November 3, 1997
-- November 11, 1997
-- December 25, 1997
-- December 26, 1997
-- December 31, 1997
--
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+9 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Belgium Index Series.
<PAGE>
THE CANADA INDEX SERIES
REGULAR HOLIDAYS. The regular Canadian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- March 28, 1997
-- May 19, 1997
-- June 24, 1997
-- July 1, 1997
-- August 1, 1997
-- September 1, 1997
-- October 13, 1997
-- November 11, 1997
-- December 25, 1997
-- December 26, 1997
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 1997.
<PAGE>
THE FRANCE INDEX SERIES
REGULAR HOLIDAYS. The regular French holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- March 28, 1997
-- March 31, 1997
-- May 1, 1997
-- May 8, 1997
-- May 19, 1997
-- July 14, 1997
-- August 15, 1997
-- November 10, 1997
-- November 11 1997
-- December 25, 1997
-- December 26, 1997
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 1997.
<PAGE>
THE GERMANY INDEX SERIES
REGULAR HOLIDAYS. The regular German holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 6, 1997
-- February 10, 1997
-- February 11, 1997
-- March 28, 1997
-- March 31, 1997
-- May 1, 1997
-- May 8, 1997
-- May 19, 1997
-- May 20, 1997
-- May 29, 1997
-- August 15, 1997
-- October 3, 1997
-- October 31, 1997
-- November 1, 1997
-- December 24, 1997
-- December 25, 1997
-- December 26, 1997
-- December 31, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Germany Index Series.
<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 1997) are as
follows:
-- January 1, 1997
-- February 19, 1997
-- February 20, 1997
-- February 21, 1997
-- April 4, 1997
-- April 5, 1997
-- April 8, 1997
-- June 17, 1997
-- June 20, 1997
-- August 26, 1997
-- September 28, 1997
-- October 21, 1997
-- December 25, 1997
-- December 26, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, 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.
<PAGE>
THE ITALY INDEX SERIES
REGULAR HOLIDAYS. The regular Italian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 1, 1997
-- March 31, 1997
-- April 25, 1997
-- May 1, 1997
-- August 15, 1997
-- December 8, 1997
-- December 24, 1997
-- December 25, 1997
-- December 26, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Italy Index Series.
<PAGE>
THE JAPAN INDEX SERIES
REGULAR HOLIDAYS. The regular Japanese holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 2, 1997
-- January 3, 1997
-- January 15, 1997
-- February 11, 1997
-- March 20, 1997
-- April 29, 1997
-- May 5, 1997
- July 21, 1997
-- September 15, 1997
-- September 23, 1997
-- October 10, 1997
-- November 3, 1997
-- November 24, 1997
-- December 23, 1997
-- December 31, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+13 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Japan Index Series.
<PAGE>
THE MALAYSIA INDEX SERIES
REGULAR HOLIDAYS. The regular Malaysian holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- February 1, 1997
-- February 7, 1997
-- February 8, 1997
-- February 9, 1997
-- February 10, 1997
-- April 18, 1997
-- May 1, 1997
-- May 6, 1997
-- May 21, 1997
-- June 7, 1997
-- July 17, 1997
-- August 31, 1997
-- October 30, 1997
-- December 25, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+11 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Malaysia Index Series.
<PAGE>
THE MEXICO (FREE) INDEX SERIES
REGULAR HOLIDAYS. The regular Mexican holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- February 5, 1997
-- March 21, 1997
-- March 26, 1997
-- March 27, 1997
-- March 28, 1997
-- May 1, 1997
-- May 5, 1997
-- May 10, 1997
-- September 1, 1997
-- November 2, 1997
-- November 20, 1997
-- December 12, 1997
-- December 24, 1997
-- December 25, 1997
-- December 31, 1997
-- December 31, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, 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.
<PAGE>
THE NETHERLANDS INDEX SERIES
REGULAR HOLIDAYS. The regular Netherlands holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- March 28, 1997
-- March 31, 1997
-- April 30, 1997
-- May 8, 1997
-- May 19, 1997
-- December 25, 1997
-- December 26, 1997
-- December 31, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+9 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Netherlands Index Series.
<PAGE>
THE SINGAPORE (FREE) INDEX SERIES
REGULAR HOLIDAYS. The regular Singaporean holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- February 7, 1997
-- February 8, 1997
-- February 9, 1997
-- February 10, 1997
-- April 18, 1997
-- May 1, 1997
-- May 21, 1997
-- August 9, 1997
-- October 31, 1997
-- December 25, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, 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.
<PAGE>
THE SPAIN INDEX SERIES
REGULAR HOLIDAYS. The regular Spanish holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 6, 1997
-- March 27, 1997
-- March 28, 1997
-- May 1, 1997
-- May 2, 1997
-- May 15, 1997
-- July 25, 1997
-- August 15, 1997
-- December 8, 1997
-- December 24, 1997
-- December 25, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+8 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Spain Index Series.
<PAGE>
THE SWEDEN INDEX SERIES
REGULAR HOLIDAYS. The regular Swedish holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 6, 1997
-- March 28, 1997
-- March 31, 1997
-- May 1, 1997
-- May 8, 1997
-- May 19, 1997
-- June 20, 1997
-- December 24, 1997
-- December 25, 1997
-- December 26, 1997
-- December 31, 1997
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 1997):
DATE HOLIDAY REDEMPTION REDEMPTION SETTLEMENT PERIOD
- ---- ------- ---------- ---------- -----------------
REQUEST DATE (R) SETTLEMENT DATE
---------------- ---------------
In 1997, R+10 calendar days would be the maximum number of calendar days
necessary to satisfy a redemption request made on the Sweden Index Series.
<PAGE>
THE SWITZERLAND INDEX SERIES
REGULAR HOLIDAYS. The regular Swiss (Zurich) holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- January 2, 1997
-- March 28, 1997
-- March 31, 1997
-- May 1, 1997
-- May 8, 1997
-- May 19, 1997
-- August 1, 1997
-- September 16, 1997
-- December 24, 1997
-- December 25, 1997
-- December 26, 1997
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 1997.
THE UNITED KINGDOM INDEX SERIES
REGULAR HOLIDAYS. The regular United Kingdom holidays affecting the relevant
securities markets (and their respective dates in calendar year 1997) are as
follows:
-- January 1, 1997
-- March 28, 1997
-- March 31, 1997
-- May 5, 1997
-- May 26, 1997
-- August 25, 1997
-- December 25, 1997
-- December 26, 1997
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 1997.
<PAGE>
APPENDIX C
2 FEATURES
Q What are "WEBS?"
A WEBS, an acronym for "World Equity Benchmark Shares,"
are shares issued in series by the Fund (each series
being a "WEBS Index Series").
Q Who should invest in WEBS?
A 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 a particular
foreign country.
Q What is the objective of each WEBS Index Series?
A The Fund is an index fund. The investment objective of
each of the WEBS Index Series is to seek to provide
investment results that correspond generally to the
price and yield performance of publicly traded securities
in the aggregate in particular markets, as represented
by a particular foreign equity securities index compiled
by MSCI.
Q Which countries are represented by WEBS Index Series?
A There are 17 WEBS Index Series of the Fund:
<TABLE>
<CAPTION>
AMEX Trading AMEX Trading AMEX Trading
Country Symbol Country Symbol Country Symbol
- ------- ------------ ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Australia ewa Hong Kong ewh Singapore (Free) ews
Austria ewo Italy ewi Spain ewp
Belgium ewk Japan ewj Sweden ewd
Canada ewc Malaysia ewm Switzerland ewl
France ewq Mexico (Free) eww United Kingdom ewu
Germany ewg Netherlands ewn
More WEBS Index Series may be added in the future.
</TABLE>
<PAGE>
Q When were WEBS introduced?
A WEBS were introduced for trading on the AMEX in
March, 1996.
Q What are the MSCI Indices?
A The MSCI Indices used by the WEBS Index Series as
benchmarks are market capitalization weighted
indices that seek to track the performance of
a particular country's publicly traded equity
securities. They generally reflect approximately
60% of the capitalization of a country's stock
market. The MSCI Indices balance the inclusiveness
of an "all share" index against the replicability
of a "blue chip" index.
MSCI Indices have covered the world's developed
markets since 1969, and the emerging markets since
1988. They are notable for the depth and breadth of
their coverage.
Q Can WEBS provide international and regional exposure?
A Yes. Shares in different WEBS Index Series can be
purchased in different weightings to achieve desired
international exposure, specifically or regionally,
including most of the components of the MSCI EAFE Index
(Europe, Australasia and Far East Index).
Q How are WEBS different from mutual fund shares?
A There are a number of important differences. WEBS
shares trade continuously on a secondary market,
the AMEX, during regular AMEX trading hours, like any
other publicly traded U.S. stocks listed on this
Exchange. In contrast, mutual fund shares do not
trade in the secondary market, and are normally
bought and sold from the issuing mutual fund at prices
determined only at the end of the day. WEBS may be bought
and sold on the AMEX in any amount, but may be purchased
from, and redeemed by, the Fund only in very large
"Creation Unit" aggregations. Mutual fund shares are
normally available from the issuing fund in much smaller
amounts, and are redeemable in units of as little as
one share.
Q How are WEBS different from closed-end funds?
A Closed-end funds, including other country or
region-specific funds, which also trade on U.S.
exchanges, frequently trade at discounts or
<PAGE>
premiums to their net asset value (NAV). This is
because the price of their shares reflects the
forces of supply and demand. Although as of
August 31, 1996 the WEBS had traded at an average
end-of-day premium of .04 over their NAV, the Fund
cannot predict whether the WEBS of its various WEBS Index
Series will trade at, above or below their NAVs in the
future. However, given the fact that WEBS can be
created or redeemed on any business day by institutional
investors in Creation Unit aggregations (see Creation
and Redemption section, page 7), the Fund believes that
large discounts or premiums to the NAV of WEBS are
unlikely to be sustainable.
Q Are WEBS leveraged derivatives?
A No. Each WEBS Index Series may not use derivatives for
the purpose of leveraging its investment portfolio, but
they may be used to "equitize" a cash position, and for
other limited purposes. A WEBS Index Series may also
borrow money from banks for temporary or emergency
purposes.
Q What is the expected price range for WEBS?
A The initial price per WEBS share of each Index Series
has ranged between $10 and $20, although there can be no
assurance of this price range in the future.
Q What is a round lot of WEBS?
A A round lot of shares of a WEBS Index Series is 100 WEBS.
BENEFITS
Q How can WEBS simplify the process of international
investing?
A WEBS offer a number of advantages compared to the
alternative of investing directly in a foreign
market:
- WEBS give investors broad market exposure for a
specific country, in one trade.
- WEBS give investors a way to gain exposure
internationally yet trade locally, on the AMEX.
- WEBS' index investing approach frees investors from
the process of stock selection and the many
complexities associated with direct foreign stock
ownership.
- WEBS trade and settle in U.S. Dollars three business
days after the trade date.
<PAGE>
Q How easily can I buy and sell WEBS?
A Investors can trade WEBS during normal market
hours, just like any other U.S. stock.
Q Can I use WEBS for targeted portfolio exposure?
A Yes. WEBS are well suited for this purpose. You can
choose a specific country and its equity market from
a range of available WEBS Index Series that covers
15 countries in Europe, Australasia and the Far East,
as well as Canada and Mexico. More WEBS Index Series may
be added in the future.
Q How broad is the exposure in a given foreign equity
market?
A MSCI generally seeks to have 60% of the capitalization
of a country's stock market reflected in the MSCI index
for such country. Each WEBS Index Series seeks to provide
investment results that correspond generally to the
price and yield performance of the relevant index.
STRUCTURE
Q Who issues WEBS?
A WEBS Index Fund, Inc., an investment company registered
under the Investment Company Act of 1940, as amended, and
organized as a series fund.
Q Who owns the Fund?
A Investors in WEBS become equity shareholders in the Fund.
Q Who manages the investment portfolios of the WEBS Index
Series?
A Barclays Global Fund Advisors is responsible for the
investment management of each WEBS Index Series. Their
responsibilities include portfolio construction,
monitoring and rebalancing designed to help track
the performance of the relevant MSCI Index for each
WEBS Index Series.
Q Where are these portfolio securities held?
A Morgan Stanley Trust Company is the global custodian
and lending agent for the portfolio securities and
cash of each of the WEBS Index Series. Portfolio
securities will be held in the various foreign
countries, through the Custodian's network of local
sub-custodians.
<PAGE>
PRICING
Q How is Net Asset Value (NAV) determined?
A Net Asset Value (NAV) per WEBS for each WEBS Index
Series is computed by dividing the value of the net
assets of such WEBS Index Series by the total number
of WEBS of such Index Series 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 NAV. The NAV for each WEBS Index Series
is determined as of the close of the regular trading
session on the New York Stock Exchange, Inc. (NYSE),
ordinarily 4 p.m. New York time, on each day such
Exchange is open.
In computing a WEBS Index Series' NAV, the WEBS Index
Series' portfolio securities are valued based on their
last-quoted current price. Price information on listed
securities is taken from the exchange where the security
is primarily traded. Securities regularly traded in the
over-the-counter market are valued at the latest quoted
bid price. Other portfolio securities and assets for
which market quotations are not readily available are
valued based on fair value, as determined in good faith
by the Adviser, in accordance with procedures adopted by
the Fund's board of directors.
The values of portfolio securities are converted into
U.S. Dollars at the same foreign exchange rate used by
MSCI in computing the relevant MSCI Index on any particular
day. This is currently the rate at 4:00 p.m., London time,
except for the Mexico (Free) WEBS Index, where the rate
used is that as of 3:00 p.m. New York time.
Q Will the NAV fluctuate?
A The NAV of each WEBS Index Series will fluctuate with
changes in the market value of its underlying portfolio
securities, with changes in the exchange rates between
the U.S. Dollar and the relevant foreign currency, and
with the WEBS Index Series' income and expenses.
Q Do I maintain the foreign currency exposure of the
benchmark MSCI Index?
A Although WEBS trade in U.S. Dollars, investors still
have foreign currency exposure with respect to the
underlying securities
<PAGE>
of a WEBS Index Series. The Fund will not hedge such
foreign currency exposure.
Q Do I have any other performance exposure?
A Yes. WEBS investors have full exposure to the price
movements of the underlying securities, and to the
movement of the foreign currencies against the U.S.
Dollar.
Q Are there any sales loads?
A No. The Fund does not impose any initial or deferred
sales charge, and is thus a "no-load" fund. Investors
will pay normal brokerage commissions when buying and
selling WEBS on the AMEX, just as they do when
transacting in any other AMEX-listed security.
Q How do the management fees payable by the Fund compare
to those paid by actively managed funds?
A The Fund is an index fund. Management fees for passively
managed index funds are typically lower than for actively
managed funds. The reason for this is that passive
management will require fewer investment, research and
trading decisions, thereby justifying lower fees.
Q Where can I get immediate, up-to-date price information?
A Pricing of WEBS on the AMEX is continuous during normal
trading hours. Investors can obtain this information using
the AMEX's pricing symbols for WEBS, through any
information service that reports AMEX prices. The
closing prices will be published in major newspapers
on the following business day.
CREATION AND REDEMPTION: FOR INSTITUTIONAL INVESTORS
Q How are WEBS created or redeemed?
A WEBS may be created and redeemed only in Creation Units,
which
<PAGE>
range in value depending on the WEBS Index Series. A
detailed description of the creation and redemption
process appears in the Prospectus and Statement of
Additional Information.
Q What is a "Creation Unit?"
A A specified number of WEBS, which varies depending on the
WEBS Index Series. To purchase a Creation Unit, an
investor generally deposits a portfolio of securities
designated by the Adviser, plus an amount of cash
specified by the Administrator.
Q What is the difference between a Creation Unit and a WEBS?
A A Creation Unit is simply a specified number of WEBS
shares.
Q Who can create them?
A Any investor who makes an in-kind deposit through an
Authorized Participant of a designated portfolio of
equity securities specified for a WEBS Index Series,
plus a cash amount, and a fee to cover creation and
other transaction costs.
Q How are they issued?
A The Fund issues and sells Creation Units of WEBS of each
WEBS Index Series on a continuous basis through the
Distributor at their NAV next determined after receipt
of an order in proper form. WEBS may also be sold in
Creation Units for cash, in the sole discretion of the
Fund.
Q Can WEBS be redeemed for their underlying portfolio
securities?
A Yes. WEBS are redeemable, but only when aggregated in
a Creation Unit.
Q How are Creation Units redeemed?
A A Creation Unit will be redeemed by the Fund at its NAV.
On redemption, the Fund will deliver the portfolio
securities, plus cash in an amount equal to the
difference between the NAV of the WEBS shares and the
value of the deposit securities, less a redemption
transaction fee. Redemption requests must be submitted
to the Distributor through an Authorized Participant. A
Creation Unit may also be redeemed for cash, in the sole
discretion of the Fund.
<PAGE>
Q When can Creation Units be redeemed?
A Authorized Participants can instruct the Distributor
(at 1-800-810-WEBS) to redeem Creation Units, between
the hours of 9.30 a.m. and 4 p.m. New York time, when
the AMEX is open for business.
Q Are there costs involved in creating and redeeming
Creation Units?
A Yes. A redeeming investor must pay a fee to the Fund
to offset transfer and other transaction costs that
may be incurred by the relevant WEBS Index Series.
Investors will also bear the costs of transferring the
deposited securities to or from the
Fund to their account.
INDEXED PERFORMANCE
Q What is the performance objective of each WEBS Index
Series?
A Each WEBS Index Series intends to remain as fully
invested as practicable in a pool of equity securities,
the performance of which will, in the Adviser's judgement,
approximate the performance of the relevant MSCI Index
taken in its entirety. A WEBS Index Series will normally
invest at least 95% of its total assets in stocks that are
represented in the relevant MSCI Index and will at all
times invest at least 90% of its total assets in such
stocks.
Q Will each WEBS Index Series fully replicate the relevant
MSCI Index?
A A WEBS Index Series generally will not hold all the stocks
that comprise the relevant MSCI Index, due in part to the
costs involved and, in certain instances, to the potential
illiquidity of certain securities. Instead, each Index
Series will attempt to hold a representative sample of the
securities in the MSCI Index, which will be selected by the
Adviser using quantitative analytical models, in a
technique known as "portfolio sampling." Certain WEBS
Index Series may also hold securities that are not in the
relevant MSCI Index where this is considered necessary or
appropriate in light of applicable invesment restrictions.
Q What is portfolio sampling?
A 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 try to
construct each WEBS Index Series portfolio so that, in the
aggregate, its capitalization, industry and fundamental
investment characteristics are expected to perform like
those of the relevant MSCI Index.
Q How closely will the performance of WEBS track the Index
performance?
A Due to the use of the portfolio sampling technique,
a WEBS Index Series
<PAGE>
is not expected to track its benchmark index with the same
degree of accuracy as it would if it invested in every
stock in the relevant Index. The expected tracking error
of a WEBS Index Series relative to the performance of its
benchmark index is expected to be less than 5%. The
tracking error will generally be greater for WEBS Index
Series that have benchmark indices with fewer rather than
greater numbers of component stocks.
Q What if the performance of the underlying equity portfolio
exceeds or underperforms the relevant Index?
A Over time, the portfolio composition of a WEBS Index Series
may be rebalanced, to reflect changes in the subject MSCI
Index, or with a view to bringing the performance and
characteristics of the WEBS Index Series more in line
with that of the relevant MSCI Index. Any such rebalancing
would require the WEBS Index Series to incur transaction
costs and other expenses.
Q Do the WEBS Index Series track the performance of the MSCI
Indices with or without dividends reinvested?
A The MSCI Indices utilized by the WEBS Index Series reflect
the reinvestment of net dividends (except for the Mexico
(Free) WEBS Index Series, which uses an MSCI Index that
reflects reinvestment of gross dividends).
INCOME VIA DIVIDENDS AND CAPITAL GAINS
Q When are dividends and capital gains paid on WEBS?
A Dividends and capital gain distributions will be payable
at least annually, and will be distributed to investors in
U.S. Dollars. Dividends may be more frequent than annually
for certain WEBS Index Series.
Q Can WEBS dividends be reinvested?
A Dividends may not be automatically reinvested in WEBS
shares of a WEBS Index Series at this time, although
investors may always purchase additional WEBS in the
secondary market with distributions received on their
existing WEBS.
Q What is included in WEBS' accrued income?
A Net investment income from dividends, interest income,
securities lending income and net gains from currency
transactions, less WEBS Index Series operating expenses,
plus net short-term capital gains.
<PAGE>
Q Is income commingled among WEBS Index Series?
A No. However, the WEBS Index Series share certain expenses
incurred at the Fund level.
Q Is there any withholding tax on income?
A Dividends on the portfolio stocks held in each WEBS Index
Series may be subject to foreign income taxes withheld at
source. There should not be any further withholding tax on
distributions to WEBS investors who are U.S. investors and
who complete all required U.S. tax forms. Foreign investors
will be subject to U.S. withholding tax on WEBS' ordinary
income dividends at a 30% rate or lower, pursuant to the
relevant tax treaty. Each WEBS Index Series will flow
through such withholding taxes to its shareholders, who
can choose to either deduct or credit them against their
U.S. income tax liability.
Q How are dividends and capital gains treated for Federal
income tax purposes?
A Tax treatment is comparable to an investment in a mutual
fund that invests in foreign securities. Dividends paid
out of a WEBS Index Series' net investment income and
distributions of net realized short-term capital gains
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 their WEBS. Dividends and
distributions paid by a WEBS Index Series will not qualify
for the deduction for dividends received by corporations.
Distributions in excess of a WEBS Index Series' current
and accumulated earnings and profits will be treated as
a tax-free return of capital to each WEBS Index Series
investor, to the extent of the investor's basis in their
WEBS, and as capital gain thereafter.
Gains or losses realized upon a sale by a holder of WEBS
or redemption by a Creation Unit holder who is not a
securities dealer, will generally be treated as a long-term
capital gain or loss if the WEBS or Creation Unit have
been held for more than one year; and otherwise as a
short-term capital gain or loss.
<PAGE>
Q Do investors receive the gross amount of all their WEBS
Index Series' dividends and capital gains?
A No. Expenses are deducted daily against each WEBS Index
Series' income flows.
Q Where can I find the record date for a WEBS Index Series?
A They will be announced in accordance with applicable
AMEX requirements.
WHO TO CONTACT
If you have further questions or need more WEBS product
information, call 1-800-810-WEBS toll free. Or, write to:
WEBS c/o Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, MA 02109
- To buy WEBS shares on the AMEX, contact your broker.
- To create WEBS Creation Units, contact an Authorized
Participant.
The names of the current Authorized Participants are
available from the Distributor at 1-800-810-WEBS.
- To redeem WEBS Creation Units, contact Funds Distributor,
Inc. at the above toll-free number.
- To get current WEBS prices, consult your broker, or any
service that carries current trading information for
AMEX-listed securities.
- For information concerning requirements for purchasing or
redeeming Creation Unit aggregations of WEBS, call
1-800-810-WEBS.
Funds Distributor, Inc., Distributor
For more information on WEBS, including a prospectus
which details charges and expenses, please call
1-800-810-WEBS. Please read the prospectus carefully
before you invest.
The investment returns and principal value of a WEBS
investment will fluctuate, so that an investor's shares
when sold, or Creation Unit(s) when redeemed, will be
worth more or less than their original cost.
There are special risks of international investing,
including currency and political risks.
12
Design: Studio Morris NYC / LA Writing: Colin Goedecke NYC
FFQ&A
<PAGE>
Contents: Questions investors may have about WEBS
1 Introduction
2 Features
4 Benefits
5 Structure
6 Pricing
8 Creation and Redemption
9 Performance
10 Dividends and Capital Gains
12 Who to Contact
<PAGE>
INTRODUCTION
WEBS enable institutional and individual
investors to gain exposure to selected
international equity markets. They represent
a convenient and relatively economical
means of diversifying a portfolio and gaining
passive index management in certain foreign
countries.
Introduced for trading on the American Stock
Exchange (AMEX) in March, 1996, WEBS are issued
in a number of country-specific Index Series by
WEBS Index Fund, Inc. (the "Fund"), an investment
company registered under the Investment Company
Act of 1940. The companies and institutions involved
include Barclays Global Fund Advisors (the
"Adviser"), Funds Distributor, Inc. (the "Distributor"),
Morgan Stanley Trust Company (the "Custodian"),
Morgan Stanley Capital International ("MSCI"),
PFPC Inc. (the "Administrator") and the American
Stock Exchange, Inc. (the "AMEX").
Here are answers to some of the most frequently asked questions
about WEBS.
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
INVESTMENT
HIGHLIGHTS
[Logo]
Webs-TM-
- --------------------------------------------------------------------------------
WORLD EQUITY BENCHMARK SHARES
What are WEBS?
- - WEBS are 17 country-specific series of securities that are listed and
traded on the American Stock Exchange (AMEX).
- - Each WEBS Index Series represents an investment in an optimized portfolio
of ordinary foreign shares that seeks to provide investment results that
track the price and yield performance of a specific Morgan Stanley
Capital International (MSCI) country index.
Investor profile:
- - WEBS are appropriate for individuals and institutions who want easy access
to one or more international stock markets through indexed investing.
What is the purpose of WEBS?
- - WEBS are designed to give US investors exposure to specific international
equity markets through a diversified portfolio of stocks for each foreign
country selected.
- - These sophisticated investments are purchased through a simple stock trade
and are free from the complexities, but not the risks, of foreign
investing.
WEBS do not:
WEBS are not: - Use leverage to increase their net
- - Closed-end mutual funds. assets.
- - ADRs or UITs. - Attempt to outperform an
- - Derivatives. international market through stock
selection.
WEBS series initially issued for 17 countries:
COUNTRY AMEX SYMBOL IOPV COUNTRY AMEX SYMBOL IOPV
---------------------------------- ----------------------------------
Australia EWA WBJ Malaysia EWM INM
Austria EWO INY Mexico (Free) EWW INW
Belgium EWK INK Netherlands EWN INN
Canada EWC WPB Singapore (Free) EWS INR
France EWQ WBF Spain EWP INP
Germany EWG ING Sweden EWD WBQ
Hong Kong EWH INH Switzerland EWL INL
Italy EWI INE United Kingdom EWU INU
Japan EWJ INJ
"INDICATIVE OPTIMIZED PORTFOLIO VALUES" (IOPV'S) ARE CALCULATED USING REAL-TIME
PRICES AND FX RATES AND ARE UPDATED EVERY 15 SECONDS BY BLOOMBERG-Registered
Trademark-. SEE THE STATEMENT OF ADDITIONAL INFORMATION OF WEBS INDEX FUND, INC.
FOR MORE INFORMATION ON IOPV.
IN MEXICO AND SINGAPORE CERTAIN STOCKS HAVE RESTRICTIONS ON FOREIGN OWNERSHIP.
MSCI CREATED (FREE) INDICES IN THOSE COUNTRIES WHICH ONLY INCLUDE STOCKS IN
WHICH FOREIGNERS MAY INVEST.
Fund adviser:
- - Barclays Global Fund Advisors, one of the world's largest institutional
index money managers, will construct an optimized portfolio of foreign
ordinary shares that seeks to perform like those of a specific MSCI Index.
WEBS benefits:
- - WEBS provide investors immediate access to international markets.
- - At $10-20 per share, it is a relatively low cost, simplified approach to
foreign investing.*
- - WEBS seek to produce investment results that correspond generally to the
price and yield performance of a particular MSCI index.
- - Each WEBS Index Series holds a diversified portfolio of foreign stocks of a
country that is selected and monitored by a globally recognized
institutional money manager.
- - Pricing is anticipated to be near NAV, due to WEBS' unique structure.
- - Daily liquidity on the AMEX in US dollars.
- - Potential to enhance returns and reduce portfolio risk through
international diversification.
*AS OF FISCAL YEAR-END 8/31/96 THE WEBS INDEX SERIES HAD MAINTAINED A PRICE
RANGE OF $10-$20 PER SHARE. THERE IS NO GUARANTEE THAT PRICES WILL REMAIN WITHIN
THIS RANGE.
- --------------------------------------------------------------------------------
<PAGE>
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG-Registered Trademark- WEBS(GO)
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and principal value of a WEBS investment will fluctuate so
that an investor's shares when sold, or Creation Unit(s) when redeemed, may be
worth more or less than their original cost. There are special risks of
international investing, including currency and political risks. Please call
your financial advisor or 1 800 810-WEBS to obtain more compete information
about WEBS, including a prospectus which details charges and expenses. Please
read the prospectus carefully before you invest or send money.
Distributed by:
Funds Distributor, Inc.
- --------------------------------------------------------------------------------
Creation Units:
- - They are large aggregations of a specified number of WEBS shares that are
created and redeemed through an "Authorized Participant" (Broker/Dealer).
- - Each Creation Unit is backed by an in-kind deposit of a portfolio of
foreign shares selected by the Adviser for each country offered, plus a
specified amount of cash.
- - The process of creating or redeeming shares in Creation Units at their net
asset value should enable WEBS to trade close to their NAV.
- - The Fund will not redeem or create WEBS in amounts less than Creation
Units. However, WEBS may be bought and sold on the AMEX in any amount.
Investment risks:
- - There may be premiums/discounts to NAV from time to time, but large
variances are not expected to be sustained due to the Creation/Redemption
process.
- - WEBS are subject to foreign currency risk since they do not hedge
currencies.
- - Investment returns in international markets may be more volatile than that
of the US Market. WEBS involve normal foreign investment risks, such as
market fluctuations, due to changes in the economic and political
developments in the countries with which they are associated.
WEBS features:
- - Simple, liquid, indexed way to invest in a foreign country with a domestic
trade.
- - All 17 WEBS are traded in US dollars on the AMEX and settle T+3.
- - WEBS are marginable.
- - Can be sold short, even on a downtick.
- - WEBS are fully invested in stocks--generally, at least 95%.
- - Anticipated low portfolio turnover, since WEBS are "passively" managed.
- - WEBS are tax efficient; capital gains should be modest and are due mostly
to corporate actions and rebalancing.
- - Dividends and capital gains, if any, distributed in US dollars, at least
annually.
- - NAV daily at 4:00 pm NY time based on local market closing prices. Exchange
rates at 4:00 pm London time. Except Mexican WEBS, FX rate 3:00 pm NY
time.
- - Real-time IOPV updated every 15 seconds by BLOOMBERG-Registered Trademark-
and available on all quote systems.
WEBS possible applications:
- - Obtain index exposure to a single country or a specific region.
- - Combine WEBS to create a customized portfolio of multiple or regional
international markets.
- - Replicate MSCI EAFE Index through the purchase of a portfolio of WEBS.
- - Alternative or complement to traditional closed-end and open-end funds.
- - Gain access to the foreign countries that do not have country specific
funds available in the United States.
- - Use as the international component in an asset allocation account.
WEBS world class partners:
ISSUER: WEBS Index Fund, Inc.
ADVISER: Barclays Global Fund Advisors
INDICES: Morgan Stanley Capital International
DISTRIBUTOR: Funds Distributor, Inc.
EXCHANGE: American Stock Exchange
CUSTODIAN: Morgan Stanley Trust Company
TRANSFER AGENT &
ADMINISTRATOR: PFPC Inc.
SPECIALISTS: Spear Leeds & Kellog, and AIM Securities
- --------------------------------------------------------------------------------
10/96
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]-TM- AVERAGE ANNUAL PERFORMANCE OF MSCI INDICES -- PERIODS ENDING 9/30/96
IN US DOLLARS -- (REINVESTMENT OF NET DIVIDENDS)*
Equity
Benchmark
Shares
<TABLE>
<CAPTION>
YTD 3 YR 5 YR 10 YR 10 YR CUM
<S> <C> <C> <C> <C> <C>
AUSTRALIA 8.10 13.60 8.85 13.09 242.11
AUSTRIA -0.14 -0.72 -0.39 7.44 105.00
BELGIUM 6.78 17.64 15.22 14.65 292.25
CANADA 15.10 13.82 6.86 8.65 129.20
FRANCE 11.61 8.53 9.39 10.30 166.46
GERMANY 7.93 12.90 11.25 8.57 127.59
HONG KONG 18.65 17.00 26.30 23.21 706.46
ITALY 10.24 6.53 5.50 0.70 7.19
JAPAN -4.52 0.00 2.85 4.58 56.47
MALAYSIA 17.00 11.84 22.51 19.58** 378.07**
MEXICO (FREE) 18.05 -7.37 4.20 33.44** 1147.85**
NETHERLANDS 14.39 20.82 19.77 16.36 355.13
SINGAPORE (FREE) -8.72 9.67 15.65 16.59 364.17
SPAIN 13.72 13.52 6.88 9.57 149.41
SWEDEN 22.20 27.07 17.08 15.56 324.80
SWITZERLAND 3.79 21.18 23.07 14.43 284.93
UNITED KINGDOM 11.24 14.19 9.91 14.73 295.20
- ---------------------------------------------------------------------
EAFE 4.39 8.06 8.17 8.67 129.63
- ---------------------------------------------------------------------
</TABLE>
MSCI: Morgan Stanley Capital International Indexes
EAFE: Europe, Australasia and Far East.
*Net dividends means dividends after reduction for taxes withheld at source,
except that Mexico reflects gross dividends, since Mexican companies do not
withhold tax from U.S. investors. The dividend withholding rate used by MSCI is
that relevant for residents of Luxembourg, and such rate is higher than the rate
applicable to U.S. investors, in several cases.
**Return calculated since 12/31/87 (inception of index).
Past performance is no guarantee of future results, nor do Index results
represent any past or expected performance of WEBS. It is not possible to invest
in an index. Indices are unmanaged and do not bear expenses unlike WEBS.
Foreign investing may be volatile and performance is subject to market
fluctuations, political risks and currency risks.
For more information on WEBS, including a prospectus which details charges and
expenses, please call 1-800-810-WEBS. Please read the prospectus carefully
before you invest or send money. Funds Distributor, Inc., Distributor.
- --------------------------------------------------------------------------------
Source: Morgan Stanley Capital International
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]-TM- ANNUAL MARKET PERFORMANCE AND RANKING FOR 17 MSCI INDICES AND S&P 500
IN US DOLLARS -- (REINVESTMENT OF NET DIVIDENDS, EXCEPT FOR
MEXICO AND U.S.)*
World
Equity
Benchmark
Shares
<TABLE>
<CAPTION>
Ranking 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Switzerland 44.12% Japan 21.44% Hong Kong 116.70% Hong Kong 32.29%
2. US 37.58% Sweden 18.34% Malaysia 110.00% Mexico(Free) 24.98%
3. Sweden 33.36% Netherlands 11.70% Singapore(Free) 67.97% Malaysia 17.77%
4. Spain 29.83% Italy 11.56% Mexico(Free) 49.35% Switzerland 17.23%
5. Netherlands 27.71% Belgium 8.24% Switzerland 45.79% US 7.62%
6. Belgium 25.88% Singapore(Free) 6.68% Sweden 36.99% Singapore(Free) 6.28%
7. Hong Kong 22.57% Australia 5.40% Germany 35.64% France 2.81%
8. United Kingdom 21.27% Germany 4.66% Netherlands 35.28% Netherlands 2.30%
9. Canada 18.31% Switzerland 3.54% Australia 35.17% Belgium (1.47%)
10. Germany 16.41% US 1.32% Spain 29.78% United Kingdom (3.65%)
11. France 14.12% United Kingdom (1.63%) Italy 28.53% Germany (10.27%)
12. Australia 11.19% Canada (3.04%) Austria 28.09% Austria (10.65%)
13. Malaysia 8.34% Spain (4.80%) Japan 25.48% Australia (10.82%)
14. Singapore (Free) 6.45% France (5.18%) United Kingdom 24.44% Canada (12.15%)
15. Italy 1.05% Austria (6.28%) Belgium 23.51% Sweden (14.41%)
16. Japan 0.69% Malaysia (19.94%) France 20.91% Japan (21.45%)
17. Austria (4.72%) Hong Kong (28.90%) Canada 17.58% Spain (21.87%)
18. Mexico (Free) (20.37%) Mexico(Free) (40.55%) US 10.08% Italy (22.22%)
<CAPTION>
1991 1990 1989
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Mexico(Free) 126.05% Mexico(Free) 62.65% Austria 103.91%
2. Hong Kong 49.52% United Kingdom 10.29% Mexico(Free) 89.20%
3. Australia 33.64% Hong Kong 9.17% Malaysia 55.76%
4. US 30.47% Austria 6.33% Germany 46.26%
5. Singapore(Free) 24.96% US (3.10%) Singapore(Free) 42.26%
6. France 17.83% Netherlands (3.19%) France 36.15%
7. Netherlands 17.80% Switzerland (6.23%) Netherlands 35.75%
8. United Kingdom 16.02% Malaysia (7.91%) US 31.69%
9. Switzerland 15.77% Germany (9.36%) Switzerland 26.21%
10. Spain 15.63% Belgium (10.98%) Canada 24.30%
11. Sweden 14.42% Singapore(Free) (11.66%) United Kingdom 21.87%
12. Belgium 13.77% Canada (13.00%) Italy 19.42%
13. Canada 11.08% France (13.83%) Belgium 17.29%
14. Japan 8.92% Spain (13.85%) Spain 9.76%
15. Germany 8.16% Australia (17.54%) Sweden 9.76%
16. Malaysia 4.94% Italy (19.19%) Australia 9.30%
17. Italy (1.82%) Sweden (20.99%) Hong Kong 8.39%
18. Austria (12.23%) Japan (36.10%) Japan 1.71%
</TABLE>
*Assumes reinvestment of dividend and capital gain distributions. Net dividends
means dividends after reduction for taxes withheld at source. Mexico and U.S.
reflect gross dividends since Mexican and U.S. companies do not withhold tax
from U.S. investors. US Market represented by the S&P 500 Index. The dividend
withholding rate used by MSCI is that relevant for residents of Luxembourg, and
such rate is higher than the rate applicable to U.S. residents, in several
cases.
Past performance is no guarantee of future results, nor do index results
represent any past or expected performance of WEBS. It is not possible to invest
in an index. Indices are unmanaged, and do not bear expenses, unlike WEBS.
Foreign investing may be volatile and performance is subject to market
fluctuations, political risks and currency risks.
Annual total return in US $ for each country index is based on the change for
the period of 1/1 through 12/31 in the market and currency value of the
individual stocks comprising each index, assuming reinvestment of any dividends
and capital gains.
For more information on WEBS, including a prospectus which details charges and
expenses, please call 1-800-810-WEBS. Please read the prospectus carefully
before you invest or send money. Funds Distributor, Inc., Distributor.
- --------------------------------------------------------------------------------
Sources: Lipper Analytical Services, Morgan Stanley Capital International and
Standard and Poor's Corporation
<PAGE>
World
Equity
Benchmark
Shares
A simple trade.
A sophisticated
investment.
Investment
Highlights
[Logo]
Webs TM
THE CASE FOR INTERNATIONAL INDEX INVESTING
The emergence of the world marketplace, with growing interdependence between the
economies of the United States and other developed and emerging countries, is a
well-publicized story. But taking advantage of these investment opportunities
can present investors with a wide, often confusing array of choices.
World Equity Benchmark Shares (WEBS) offer U.S. individual and institutional
investors a flexible, relatively low-cost entry into international markets.
WHY INVEST INTERNATIONALLY?
Investors have long recognized that the U.S. economy and markets represent only
a portion of the world's investment opportunities. As the chart at right
shows, non-U.S. equities currently represent 60 percent of the world's market
capitalization.
With this growth in opportunity has come increased interest from American
investors.
- Over $115 billion have been invested in international securities--both
equities and fixed-income--in the three years ended December 31, 1995
by U.S. pension funds and other tax-exempt institutions. (1)
- International markets often move in different directions from the
U.S.--making them attractive as portfolio hedges.
- For portfolio diversification, many financial advisers recommend a 10
to 40 percent international component, depending on the investor's
objectives and risk tolerances.
STAYING AT HOME MEANS PASSING UP
60% OF THE WORLD'S MARKET!
PERCENT OF TOTAL WORLD MARKET CAPITALIZATION AT YEAR END.
[PIE CHART] [PIE CHART] [PIE CHART]
/ / /X/ / / /X/ / / /X/
56% 44% 49% 51% 40% 60%
1975 1985 1995
/ / U.S. equities /X/ Non-U.S. equities
Source: Morgan Stanley Capital International
INDEX INVESTING: INSTITUTIONS ACTIVELY SEEK 'PASSIVE' MANAGEMENT FOR MARKET
RETURNS
Broad based market indices, such as the S&P 500 in U.S., or the Morgan Stanley
Capital International Indices for international markets, are the yardsticks used
by most investors to judge portfolio performance. While the two basic
investment management styles differ in their approach, both measure success
using these and other yardsticks:
- Active management--selecting and trading a portfolio of stocks based on
which industries and companies will likely maximize performance. This
approach may or may not outperform the relevant market index.
- Passive management--the indexed approach--investing in a group of
stocks that are intended to track the performance of a broad index.
Indexing seeks to closely track a market's overall performance, not
outperform it.
Over $600 billion of U.S. tax-exempt institutional assets are now invested in
indexed portfolios,(2) which seek only to track an index, not outperform it.
Investing internationally, however, is nothing if not challenging. Choosing
which country or region offers the best opportunities at a given time can be
perplexing. Since past performance can't guarantee future results, selecting
the right active investment manager can be difficult, and purchasing individual
international equities can be complicated and expensive; using an indexed
approach reduces or eliminates the impact of these factors.
Consider these significant benefits of indexing:
- Returns for actively managed portfolios as compared to their benchmark
indices can fluctuate from year to year. As reported by
Morningstar, 78% of actively managed mutual funds did not outperform
the market over the last 10 years.
- Indexed portfolios follow a consistent strategy--to replicate the
market as nearly as possible--even if management personnel changes.
An index investor does not have to worry that a successful portfolio
manager will suddenly leave, or that a new manager will make major
changes in strategy that can affect an actively managed portfolio's
performance.
- Indexing generally means lower costs for the investor, due to a
relatively lower portfolio turnover rate and lower advisory fees than
is the case for active management.
(1) Source: INSTITUTIONAL INVESTOR, April 1996.
(2) Source: PENSION & INVESTMENTS, February 19, 1996.
SINCE 1990, ALL INDEXED MUTUAL FUND
ASSETS HAVE INCREASED MORE THAN 800%.
[BAR GRAPH]
50-
$40.9
40- -----
Assets
in
billions
30-
$23.3
-----
$19.9
20- -----
$13.6
-----
10- $8.8
-----
$4.5
-----
0----------------------------------------------------------------
1990 1991 1992 1993 1994 1995
Source: Financial Research Corporation
<PAGE>
FOR MORE INFORMATION CALL 1 800 810-WEBS
VISIT OUR INTERNET SITE for information and daily prices and valuations
http://websontheweb.com
Real-time IOPVs available on THE BLOOMBERG-Registered Trademark- WEBS(GO)
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and principal value of a WEBS investment will fluctuate so
that an investor's shares when sold, or Creation Unit(s) when redeemed, may be
worth more or less than their original cost. There are special risks of
international investing, including currency and political risks. For more
information on WEBS, including a prospectus which details charges and expenses,
please call 1-800-810-WEBS. Please read the prospectus carefully before you
invest or send money.
Distributed by: Funds Distributor Inc.
INDEXING IS A SIMPLE WAY TO ENTER THE WORLD MARKETPLACE
Investing overseas involves special risks--such as exposure to currency
fluctuations, foreign economic and political changes and markets that are
generally more volatile, speculative and inefficient than U.S. markets. So,
many institutional investors believe indexing is a common-sense approach to
international investing, where picking a manager or individual securities may
be more difficult.
- U.S. pension funds, some of the country's most conservative investors,
placed $13 billion, almost half, of their 1995 international equity
investments into indexing.(1)
- International indexed assets grew 15 percent in 1995, almost three
times the growth rate of indexed assets overall, even after adjusting
for market performance. Nearly 20 percent of equity indexed products
in the U.S. were international at year end.(2)
- International indexing simplifies an investor's choices. Rather than
picking specific managers or securities, the choice is which
countries--or regions--offer the best opportunities.
WEBS OFFER INTERNATIONAL FLEXIBILITY WITH INDEXED SIMPLICITY
WEBS offer U.S. investors a simple, relatively inexpensive way to invest in
overseas markets or regions through indexed investing and provide investment
strategies previously available only to institutional investors.
- WEBS are 17 country-specific series of securities listed and traded on
the American Stock Exchange. Investing in WEBS provides immediate
access to international markets, with daily liquidity in U.S. dollars.
- Each WEBS Index Series invests in an optimized portfolio of ordinary
foreign shares and seeks to track the performance of a specific Morgan
Stanley Capital International (MSCI) Index.
- Adding WEBS to a domestic equity portfolio may enhance return, lower
volatility and reduce risk.
- With share prices which ranged between $10-$20 as of 8/31/96, and low
operating expenses, WEBS give investors a relatively low-cost entry
into international investing.*
- WEBS are flexible. Available for 17 countries, WEBS allow an investor
to build an international portfolio of equity index investments.
ADDING INTERNATIONAL STOCKS TO A U.S. PORTFOLIO MAY ENHANCE RETURNS
WHILE LOWERING VOLATILITY.
Total Return Risk (Standard Deviation)
------------ -------------------------
100% International Stocks 16.08% 20.0%
60% U.S. Stocks
40% International Stocks 15.90% 15.2%
100% U.S. Stocks 15.80% 17.0%
THE EFFICIENT FRONTIER CHART ABOVE SHOWS THAT OVER THE LAST TWENTY
YEARS, A PORTFOLIO OF 60% U.S. STOCKS (S&P 500 INDEX) AND 40%
INTERNATIONAL STOCKS (EAFE INDEX) ACHIEVED ENHANCED RETURNS AND REDUCED
VOLATILITY.
U.S. stocks are represented by the S&P 500 Index, a market-value-
weighted benchmark of U.S. common stock performance. International
stocks are represented by Morgan Stanley Capital International Europe,
Australasia, Far East (EAFE) Index, a market-weighted benchmark of
international stock performance.
The S&P 500 and EAFE Indices are unmanaged indices that unlike WEBS, do
not incur expenses. This information is presented for illustrative
purposes only and is not indicative of any specific investment. Actual
investments may not be made in an index.
Source: Ibbotson Associates
COUNTRY AMEX SYMBOL IOPV(1)
Australia EWA WBJ
Austria EWO INY
Belgium EWK INK
Canada EWC WPB
France EWD WBF
Germany EWG ING
Hong Kong EWH INH
Italy EWI INE
Japan EWJ INJ
COUNTRY AMEX SYMBOL IOPV(1)
Malaysia EWM INM
Mexico (Free) EWW INW
Netherlands EWN INN
Singapore (Free) EWS INR
Spain EWP INP
Sweden EWD WBD
Switzerland EWL INL
United Kingdom EWU INU
(1) "INDICATIVE OPTIMIZED PORTFOLIO VALUES" (IOPVs) ARE CALCULATED
USING REAL-TIME PRICES AND FX RATES AND ARE UPDATED EVERY 15
SECONDS BY BLOOMBERG-Registered Trademark-. SEE THE STATEMENT OF
ADDITIONAL INFORMATION FOR A FURTHER DESCRIPTION OF IOPV. IN
MEXICO AND SINGAPORE, CERTAIN STOCKS HAVE RESTRICTIONS ON FOREIGN
OWNERSHIP. MSCI CREATED (FREE) INDICES IN THOSE COUNTRIES WHICH
ONLY INCLUDE INVESTABLE STOCKS FOR FOREIGNERS.
(1) Source: INSTITUTIONAL INVESTOR, April, 1996.
(2) Source: PENSION & INVESTMENTS, February 19, 1996.
- --------------------------------------------------------------------------------
* There is no guarantee that WEBS will maintain a $10-$20 price range. 10/96
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
THIS INFORMATION IS PROVIDED
TO HELP YOU EVALUATE AN
INVESTMENT IN AUSTRALIAN
WORLD EQUITY BENCHMARK
SHARES ("WEBS"). WEBS ARE
17 COUNTRY-SPECIFIC SECURITIES
THAT ARE LISTED AND TRADED
ON THE AMERICAN STOCK
EXCHANGE ("AMEX"). EACH
WEBS INDEX SERIES REPRESENTS
AN INVESTMENT IN AN OPTIMIZED
PORTFOLIO OF ORDINARY FOREIGN
SHARES THAT SEEKS TO TRACK
THE PERFORMANCE OF A SPECIFIC
MORGAN STANLEY CAPITAL
INTERNATIONAL ("MSCI")
COUNTRY INDEX.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG -Registered Trademark-
WEBS < GO >
SOURCES:
Morgan Stanley & Co. 9/96,
The Economist Intelligence
Unit LTD., MSCI Data, WEBS
prospectus and Statement of
Additional Information.
WEBS-TM-
AUSTRALIA
ECONOMIC AND MARKET FACT SHEET
AMEX PRICE TICKER-AUSTRALIA WEBS
EWA
- -------------------------------------------------------------
ECONOMIC FACTS
- -------------------------------------------------------------
GDP: (12/95) $348 BN
Population: (12/95) 18.1 MM
% Change in inflation rate: (5/31/95-5/31/96) 3.7
Exchange rate AUSD to USD (10/2/96): 1.26
10-year Interest rates (5/31/96): 8.92
Unemployment as of 8/96: 8.8%
Real GDP growth 1994: 5.2%
Real GDP growth 1995: 3.1%
GDP measures the value of all goods & services produced within
a nation's borders regardless of the nationality of the producer.
- -------------------------------------------------------------
TOP 10 HOLDINGS-AUSTRALIA WEBS INDEX SERIES
- -------------------------------------------------------------
- -------------------------------------------------------------
% OF MARKET VALUE
STOCK NAME INDEX SERIES (US$)
- -------------------------------------------------------------
1. Broken Hill Properties 16.564% 1,679,194.82
2. National Bank Australia 10.485% 1,066,085.36
3. WestPac Banking 7.198% 729,645.04
4. News Corp 6.753% 684,603.03
5. Western Mining Corp 4.442% 450,301.47
6. Coca-Cola Amatil 4.405% 446,582.58
7. CRA LTD- 3.118% 323,226.41
8. Coles Meyer 2.723% 276,020.32
9. Fosters Brewing 2.667% 270,319.35
10. Lend Lease Corp 2.640% 267,640.96
Source: Barclays Global Fund Advisors As of 9/30/96
- -------------------------------------------------------------
MARKET FACTS
- -------------------------------------------------------------
Total Market Cap: (3/96) $271 BN
# of listed companies: (12/94) 1,186
U.S. flow of funds: 1994 $1,442 MM
1995 $957 MM
-----------------------------
AVERAGE DAILY VALUE OF TRADES
-----------------------------
DATE US$ MILLIONS
------ ------------
11/30/95.................... 651.939
12/31/95.................... 665.232
1/31/96.................... 685.214
2/29/96.................... 706.910
3/31/96.................... 703.745
4/30/96.................... 738.305
5/31/96.................... 732.604
6/30/96.................... 708.417
7/31/96.................... 675.200
8/31/96.................... 718.440
9/30/96.................... 719.102
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
AUSTRALIA-TOP 5 INDUSTRIES RANKED BY MARKET CAPITALIZATION
- -------------------------------------------------------------
INDUSTRY % OF MARKET
-------- -----------
1. Energy Sources 21.90
2. Banking 14.70
3. Broadcasting & Publishing 11.10
4. Metals - Non-Ferrous 9.30
5. Metals - Steel 6.90
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
HISTORIC MSCI AUSTRALIA INDEX PERFORMANCE-For 5 Year Period
Ending 9/30/96
- -------------------------------------------------------------
<TABLE>
<CAPTION>
RETURNS
DATE US $
-------- --------
<S> <C>
12/31/91 470.835
1/31/92 457.863
2/29/92 460.976
3/31/92 464.085
4/30/92 480.358
5/31/92 488.013
6/30/92 471.440
7/31/92 460.587
8/31/92 424.258
9/30/92 406.197
10/31/92 381.378
11/30/92 384.138
12/31/92 419.910
1/31/93 406.512
2/28/93 437.732
3/31/93 454.956
4/30/93 457.868
5/31/93 449.771
6/30/93 439.551
7/31/93 482.732
8/31/93 503.142
9/30/93 490.494
10/31/93 545.973
11/30/93 511.780
12/31/93 567.610
1/31/94 628.308
2/28/94 596.288
3/31/94 552.560
4/30/94 572.560
5/31/94 599.901
6/30/94 569.034
7/31/94 597.947
8/31/94 626.260
9/30/94 592.572
10/31/94 608.830
11/30/94 585.743
12/31/94 598.286
1/31/95 562.167
2/28/95 580.075
3/31/95 574.124
4/30/95 612.828
5/31/95 598.865
6/30/95 592.143
7/31/95 647.279
8/31/95 659.263
9/30/95 655.088
10/31/95 638.771
</TABLE>
The above chart is intended to represent the historical performance of the
Australia MSCI Index.
It does not represent any past or future performance of WEBS. It is not
possible to invest in an index.
The MSCI Australia Index consists of 49 stocks with an aggregate market
capitalization of $138.8 billion; it represents approximately 55.1% of
Australia's total market capitalization. The Australia Index reflects the
reinvestment of net dividends. The MSCI Australia Index is unmanaged and
therefore does not bear management, administration, distribution, transaction
or other expenses as do the WEBS.
<PAGE>
- ----------------------------------------------------------------
12 am
NEW YORK
3 pm
CANBERRA
CAPITAL:
Canberra
PRINCIPAL SOURCE OF IMPORTS
(1994): US 22%;
Japan 16%, Germany 7%, UK 6%
PRINCIPAL IMPORTS:
Machinery and transportation equipment; computers, oil
PRINCIPAL EXPORT CUSTOMERS
(1994): Japan 23%,
S. Korea 8%, New Zealand 7%, US 6%
PRINCIPAL EXPORTS:
Coal, gold, wool, meat, iron ore, wheat, aluminum
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks. For
more information on WEBS,
including a prospectus which
details charges and expenses,
please call 1-800-810-WEBS.
Please read the prospectus
carefully before you invest.
DISTRIBUTED BY:
Funds Distributor Inc.
- -------------------------------------------------------------
The economy of the Commonwealth of Australia historically has consisted of
export-oriented agricultural and mining sectors, coupled with a diversified
manufacturing and service sector dedicated to domestic requirements. The
government encourages foreign investment, particularly in transportation,
ranching, and manufacturing. In 1995, cumulative US investment in Australia
totaled more that $65 billion, 21% of all foreign investment.
A net exporter of energy products, Australia is rich in natural resources. It
is one of the world's leading producers and exporters of aluminum, bauxite,
cobalt, copper, industrial diamonds, gold, iron ore, silver, and uranium. It
has abundant supplies of coal, natural gas, and liquid petroleum.
Manufacturing as been limited both by historically small domestic markets and
a relatively small labor force. Tariffs that had been imposed to discourage
imports and encourage domestic production resulted in the development of a
broad-based manufacturing sector. Beginning in 1984, the government began to
reduce trade barriers; this, combined with more recent reforms, has boosted
economic diversification and increased industry's export orientation.
Australia suffered a significant recession in 1990-91, followed by a period
of growth in 1992-93. Real GDP growth slowed to 3.1% in 1995. Inflation,
which reached 5.1% during the recovery, had fallen below 4% by late 1995.
The fear of a Reserve Bank interest rate cut came to an end following the
report showing a GDP growth rate of 4.8% through March. The consumer,
business and government sectors all contributed to this growth, although the
services, agriculture and mining (particularly gold mining), sectors were the
leaders. The manufacturing and construction sectors performed poorly overall.
In May, the Australian dollar appreciated 1.4% against the United States
dollar, which resulted in increased imports. However, in June 1996 a slump in
gold and copper prices contributed to a slight depreciation of the Australian
dollar. Overall, Australia has experienced stable inflation rates, asset
prices and healthy corporate profits, all of which have resulted in slow,
steady growth of the economy.
Sources: U.S. Department of State Bureau of Public Affairs; Barclays Global
Fund Advisors.
- ----------------------------------------------------------------
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
THIS INFORMATION IS PROVIDED
TO HELP YOU EVALUATE AN
INVESTMENT IN FRENCH
WORLD EQUITY BENCHMARK
SHARES ("WEBS"). WEBS ARE
17 COUNTRY-SPECIFIC SECURITIES
THAT ARE LISTED AND TRADED
ON THE AMERICAN STOCK
EXCHANGE ("AMEX"). EACH
WEBS INDEX SERIES REPRESENTS
AN INVESTMENT IN AN OPTIMIZED
PORTFOLIO OF ORDINARY FOREIGN
SHARES THAT SEEKS TO TRACK
THE PERFORMANCE OF A SPECIFIC
MORGAN STANLEY CAPITAL
INTERNATIONAL ("MSCI")
COUNTRY INDEX.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG-Registered Trademark-
WEBS < GO >
Sources:
Morgan Stanley & Co. 9/96,
The Economist Intelligence
Unit LTD., MSCI Data, WEBS
prospectus and Statement of
Additional Information.
WEBS -TM-
FRANCE
ECONOMIC AND MARKET FACT SHEET
AMEX PRICE TICKER-FRANCE WEBS
EWQ
- ------------------------------------------------------------------
ECONOMIC FACTS
- ------------------------------------------------------------------
GDP: (12/95) $1.5 TRILLION
Population: (12/95) 58.1 MM
% Change in inflation rate: (5/31/95-5/31/96) 2.4
Exchange rate FRANC to USD (10/2/96): 5.18
10-year Interest rates (5/31/96): 6.51
Unemployment as of 8/96: 12.6%
Real GDP growth 1994: 2.9%
Real GDP growth 1995: 2.2%
GDP measures the value of all goods & services produced within
a nation's borders regardless of the nationality of the producer.
- ------------------------------------------------------------------
TOP 10 HOLDINGS-FRANCE WEBS INDEX SERIES
- ------------------------------------------------------------------
- ------------------------------------------------------------------
% OF MARKET VALUE
STOCK NAME INDEX SERIES (US$)
- ------------------------------------------------------------------
1. L'Oreal 6.374% 514,700.90
2. Carrefour 5.959% 480,241.22
3. Elf Aquitaine 5.822% 469,537.42
4. Lvmh (Moet Henne) 5.329% 430,046.98
5. Total SA-B 5.126% 413,489.95
6. Gen Des Eaux 3.602% 290,214.58
7. Alcatel Alsthom 3.513% 283,512.71
8. Air Liquide 3.330% 268,462.10
9. ST Gobain 3.159% 256,333.25
10. AXA SA 3.126% 251,956.06
Source: Barclays Global Fund Advisors As of 9/30/96
- -------------------------------------------------------------
MARKET FACTS
- -------------------------------------------------------------
Total Market Cap: (3/96) $565 BN
# of listed companies: (12/94) 922
U.S. flow of funds: 1994 $2,094 MM
1995 $1,457 MM
------------------------------
AVERAGE DAILY VALUE OF TRADES
------------------------------
DATE US$ MILLIONS
------ ------------
1990.................. 4842.54800
1991.................. 4490.16000
1992.................. 4995.16400
1993.................. 6871.20400
1994.................. 8082.78400
1995.................. 8526.44000
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
FRANCE-TOP 5 INDUSTRIES RANKED BY MARKET CAPITALIZATION
- -------------------------------------------------------------
INDUSTRY % OF MARKET
-------- -----------
1. Energy Sources 10.60
2. Banking 10.60
3. Merchandising 8.80
4. Health And Personal Care 7.20
5. Beverages And Tobacco 6.80
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------------------
HISTORIC MSCI FRANCE INDEX PERFORMANCE-FOR 5 YEAR PERIOD
ENDING 9/30/96
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
DATE US $
-------- --------
<S> <C>
12/31/91 1059.771
1/31/92 1062.993
2/29/92 1105.795
3/31/92 1092.798
4/30/92 1149.346
5/31/92 1197.999
6/30/92 1180.948
7/31/92 1131.542
8/31/92 1142.002
9/30/92 1178.097
10/31/92 1080.413
11/30/92 1062.233
12/31/92 1089.535
1/31/93 1061.497
2/28/93 1153.679
3/31/93 1206.607
4/30/93 1189.298
5/31/93 1158.514
6/30/93 1141.261
7/31/93 1155.302
8/31/93 1255.755
9/30/93 1244.599
10/31/93 1255.410
11/30/93 1216.283
12/31/93 1317.406
1/31/94 1368.796
2/28/94 1342.838
3/31/94 1281.673
4/30/94 1338.385
5/31/94 1275.414
6/30/94 1226.094
7/31/94 1347.192
8/31/94 1354.215
9/30/94 1262.532
10/31/94 1307.509
11/30/94 1293.480
12/31/94 1249.100
1/31/95 1219.842
2/28/95 1240.216
3/31/95 1403.556
4/30/95 1417.692
5/31/95 1433.488
6/30/95 1409.365
7/31/95 1473.642
8/31/95 1379.802
9/30/95 1353.736
10/31/95 1374.479
11/30/95 1367.688
12/31/95 1425.423
1/31/96 1483.309
2/29/96 1500.650
3/31/96 1545.378
4/30/96 1573.314
5/31/96 1555.844
6/30/96 1583.799
7/31/96 1539.640
8/31/96 1507.843
9/30/96 1590.954
</TABLE>
The above chart is intended to represent the historical performance of the
France MSCI Index.
It does not represent any past or future performance of
WEBS. It is not possible to invest in an index.
The MSCI France Index consists of 74 stocks with an aggregate market
capitalization of $341.5 billion; it represents approximately 65.1% of France's
total market capitalization. The France Index reflects the reinvestment of net
dividends. The MSCI France Index is unmanaged and therefore does not bear
management, administration, distribution, transaction or other expenses as do
the WEBS.
<PAGE>
- ------------------------------------------------
12am
NEW YORK
6am
PARIS
CAPITAL:
Paris
PRINCIPAL SOURCE OF IMPORTS
(1995): Germany 18.5%,
UK 8.0%, US 7.8%,
Italy 10%, Belg/Lux 9.0%
PRINCIPAL IMPORTS:
Crude petroleum, electronics, machinery, chemicals, autos and parts,
agricultural produce, foodstuffs
PRINCIPAL EXPORT CUSTOMERS
(1995): Germany 17.7%, UK 9.3%, Italy 9.6%,
Belg/Lux 8.5%, Spain 7.3%
PRINCIPAL EXPORTS:
Chemicals, autos, aircraft, foodstuffs, machinery
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks. For
more information on WEBS,
including a prospectus which
details charges and expenses,
please call 1-800-810-WEBS.
Please read the prospectus
carefully before you invest.
Distributed by:
Funds Distributor Inc.
- --------------------------------------------------------------------------------
France is the fourth-largest Western industrialized economy. It has substantial
agricultural resources, a diversified modern industrial system, and a highly
skilled work force. Government policy stresses investment and maintenance of
fiscal and monetary stability. Its policies generally keep France's inflation
rate low relative to other European economies.
Industrial production generates about one third of GDP and employs about one
third of the workforce, a relationship similar to those of other highly
industrialized nations. Primary industries include steel and related products,
aluminum, chemicals, and mechanical and electrical goods. The nation has
well-developed telecommunications, aerospace, and weapons sectors. With
virtually no domestic oil production, France generates about 75% of its
electrical energy utilizing nuclear power.
As the second largest trading nation in Western Europe (after Germany), France
experienced two successive record years for trade surplus during 1993 and 1994.
France is also the leading agricultural producer in Western Europe, and is one
of the world's major exporters of dairy products, wheat, and wine.
France's biggest problem is reducing its deficit to 4% of GDP by the end of
1996. The deficit reduction plan has resulted in wage freezes, tax increases,
and postponement of payments to the unemployment insurance fund.
A major change in the government following the general election (a move from a
Socialist president to a Center-Right president) has upset the economy. Consumer
spending has fallen, as have the volume of both imports and exports. The rate of
inflation has remained stable at 2% and is expected to continue at this level.
The Bank of France was able to resume its policy of gradual interest rate cuts
with a 10 basis point reduction to 3.25% in September, 1996. The government has
also announced plans for tax cuts. The low level of interest rates is important
to the goal of increasing consumption. Savings deposits are yielding 2.5%, the
lowest in 30 years.
Sources: U.S. Department of State Bureau of Public Affairs; Barclays Global
Fund Advisors.
- -----------------------------
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
THIS INFORMATION IS PROVIDED
TO HELP YOU EVALUATE AN
INVESTMENT IN GERMAN
WORLD EQUITY BENCHMARK
SHARES ("WEBS"). WEBS ARE
17 COUNTRY-SPECIFIC SECURITIES
THAT ARE LISTED AND TRADED
ON THE AMERICAN STOCK
EXCHANGE ("AMEX"). EACH
WEBS INDEX SERIES REPRESENTS
AN INVESTMENT IN AN OPTIMIZED
PORTFOLIO OF ORDINARY FOREIGN
SHARES THAT SEEKS TO TRACK
THE PERFORMANCE OF A SPECIFIC
MORGAN STANLEY CAPITAL
INTERNATIONAL ("MSCI")
COUNTRY INDEX.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG -Registered Trademark-
WEBS < GO >
SOURCES:
Morgan Stanley & Co. 9/96,
The Economist Intelligence
Unit LTD., MSCI Data, WEBS
prospectus and Statement of
Additional Information.
WEBS-TM-
GERMANY
ECONOMIC AND MARKET FACT SHEET
AMEX PRICE TICKER-GERMANY WEBS
EWG
- -------------------------------------------------------------
ECONOMIC FACTS
- -------------------------------------------------------------
GDP: (12/95) $2.4 TRILLION
Population: (12/95) 81.5 MM
% Change in inflation rate: (5/31/95-5/31/96) 1.5
Exchange rate for DM to USD (10/2/96): 1.53
10-year Interest rates (5/31/96): 6.52
Unemployment as of 8/96: 10.2%
Real GDP growth 1994: 3.0%
Real GDP growth 1995: 1.9%
GDP measures the value of all goods & services produced within
a nation's borders regardless of the nationality of the producer.
- -------------------------------------------------------------
TOP 10 HOLDINGS-GERMANY WEBS INDEX SERIES
- -------------------------------------------------------------
- -------------------------------------------------------------
% OF MARKET VALUE
STOCK NAME INDEX SERIES (US$)
- -------------------------------------------------------------
1. Allianz Holding 10.720% 1,766,267.82
2. Siemens 7.044% 1,160,544.17
3. Daimler-Benz 6.677% 1,100,147.52
4. Veba 6.231% 1,026,743.16
5. Muenchener Rueck 5.507% 907,392.23
6. Deutsche Bank 5.322% 876,800.52
7. Basf Ag 4.966% 818,226.52
8. Bayer Ag 4.903% 807,736.44
9. Dresdner Bank 4.162% 685,776.10
10. MannesMann Ag 3.642% 600,032.78
Source: Barclays Global Fund Advisors As of 9/30/96
- -------------------------------------------------------------
MARKET FACTS
- -------------------------------------------------------------
Total Market Cap: (3/96) $577 BN
# of listed companies: (12/94) 1,467
U.S. flow of funds: 1994 $1,438 MM
1995 $510 MM
-----------------------------
AVERAGE DAILY VALUE OF TRADES
-----------------------------
DATE US$ MILLIONS
------ ------------
1990..................... 2034.826800
1991..................... 1451.932800
1992..................... 1816.822000
1993..................... 2379.772400
1994..................... 2368.415600
1995..................... 2375.744800
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
GERMANY-TOP 5 INDUSTRIES RANKED BY MARKET CAPITALIZATION
- -------------------------------------------------------------
INDUSTRY % OF MARKET
-------- -----------
1. Insurance 18.20
2. Banking 13.80
3. Utilities - Electrical and Gas 10.90
4. Automobiles 10.20
5. Chemicals 9.00
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
HISTORIC MSCI GERMANY INDEX PERFORMANCE-For 5 Year Period
Ending 9/30/96
- -------------------------------------------------------------
<TABLE>
<CAPTION>
RETURNS
DATE US $
-------- --------
<S> <C>
12/31/91 988.634
1/31/92 995.286
2/29/92 1020.006
3/31/92 997.615
4/30/92 993.006
5/31/92 1055.884
6/30/92 1074.267
7/31/92 1015.419
8/31/92 1014.667
9/30/92 975.183
10/31/92 907.344
11/30/92 901.590
12/31/92 887.096
1/31/93 916.062
2/28/93 963.230
3/31/93 990.420
4/30/93 976.723
5/31/93 974.039
6/30/93 941.801
7/31/93 972.932
8/31/93 1081.322
9/30/93 1099.445
10/31/93 1164.825
11/30/93 1137.197
12/31/93 1203.221
1/31/94 1168.045
2/28/94 1146.115
3/31/94 1185.801
4/30/94 1256.865
5/31/94 1184.245
6/30/94 1187.716
7/31/94 1246.162
8/31/94 1291.912
9/30/94 1215.238
10/31/94 1283.022
11/30/94 1215.598
12/31/94 1259.350
1/31/95 1235.444
2/28/95 1340.140
3/31/95 1309.380
4/30/95 1364.825
5/31/95 1376.162
6/30/95 1415.046
7/31/95 1498.805
8/31/95 1417.770
9/30/95 1437.285
10/31/95 1419.740
11/30/95 1422.515
12/31/95 1466.015
1/31/96 1529.263
2/29/96 1542.809
3/31/96 1536.866
4/30/96 1480.766
5/31/96 1501.909
6/30/96 1532.459
7/31/96 1536.742
8/31/96 1572.090
9/30/96 1582.271
</TABLE>
The above chart is intended to represent the historical performance of the
Germany MSCI Index.
It does not represent any past or future performance of WEBS. It is not
possible to invest in an index.
The MSCI Germany Index consists of 69 stocks with an aggregate market
capitalization of $377.1 billion; it represents approximately 62.7% of
Germany's total market capitalization. The Germany Index reflects the
reinvestment of net dividends. The MSCI Germany Index is unmanaged and
therefore does not bear management, administration, distribution, transaction
or other expenses as do the WEBS.
<PAGE>
- ----------------------------------------------------------------
12 am
NEW YORK
6 am
BERLIN
CAPITAL:
Berlin
PRINCIPAL SOURCE OF IMPORTS
(1994): France 11.0%
Italy 8.4%, Netherlands 8.2%
(EU 55.4%)
PRINCIPAL IMPORTS:
Food, energy products, electrical products, autos, apparel
PRINCIPAL EXPORT CUSTOMERS
(1994): US 7.9%, UK 8.0%, France 12% (EU 55.7%)
PRINCIPAL EXPORTS:
Chemicals, autos, iron and steel, electrical products
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks. For
more information on WEBS,
including a prospectus which
details charges and expenses,
please call 1-800-810-WEBS.
Please read the prospectus
carefully before you invest.
DISTRIBUTED BY:
Funds Distributor Inc.
- -------------------------------------------------------------
Germany ranks among the world's most important economic powers. With a
strong, competitive economy, Germany possesses abundant human capital, low
corporate debt burdens, and cooperative government-industry relations.
In 1994, the German economy turned the corner on recovery, with GDP
increasing by 3%. This recovery was led by the eastern states, areas formerly
part of the GDR (East Germany), which had a 10% growth in GDP. More recently,
to stimulate additional economic sluggishness in late 1995 and early 1996,
the German central bank lowered interest rates to post-WWII lows.
Major components of German industry include motor vehicles, machinery,
chemicals, and heavy electrical equipment. The economy is heavily export
oriented, with one-third of its national output going to the external sector.
Japan and the US are its two major trading partners. Foreign investment is
encouraged; the US is Germany's largest source of foreign investment.
In the last year, Germany has seen a surge in the value of the currency,
excessive wage settlements, a slowdown in overseas activity and a tax related
drop in construction activity. The slowdown of the economy and the strength
of the Deutschmark in late 1995 had a beneficial impact on inflation and it
fell, below estimates, to 1.6%. In April 1996, the Bundesbank eased monetary
policy and reduced the key discount rate to 2.5%. Unemployment had increased
sharply in the last few years, but is expected to decrease slightly from
10.3% in 1996 to 10% in 1997. Labor market reforms are being implemented to
make the market more flexible and to address the very serious unemployment
crisis. Consumer expenditure should get a boost from a recent reduction in
personal taxes.
Sources: US Department of State Bureau of Public Affairs; Barclay's Global
Fund Advisors.
- ----------------------------------------------------------------
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
THIS INFORMATION IS PROVIDED
TO HELP YOU EVALUATE AN
INVESTMENT IN HONG KONG
WORLD EQUITY BENCHMARK
SHARES ("WEBS"). WEBS ARE
17 COUNTRY-SPECIFIC SECURITIES
THAT ARE LISTED AND TRADED
ON THE AMERICAN STOCK
EXCHANGE ("AMEX"). EACH
WEBS INDEX SERIES REPRESENTS
AN INVESTMENT IN AN OPTIMIZED
PORTFOLIO OF ORDINARY FOREIGN
SHARES THAT SEEKS TO TRACK
THE PERFORMANCE OF A SPECIFIC
MORGAN STANLEY CAPITAL
INTERNATIONAL ("MSCI")
COUNTRY INDEX.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG-Registered Trademark-
WEBS < GO >
SOURCES:
Morgan Stanley & Co. 9/96,
The Economist Intelligence
Unit LTD., MSCI Data, WEBS
prospectus and Statement of
Additional Information.
WEBS-TM-
HONG KONG
ECONOMIC AND MARKET FACT SHEET
AMEX PRICE TICKER-HONG KONG WEBS
EWH
- ----------------------------------------------------------------
ECONOMIC FACTS
- ----------------------------------------------------------------
GDP: (12/95) $143.7 BN
Population: (12/95) 6.19 MM
% Change in inflation rate: (5/31/95-5/31/96) 8.7%
Exchange rate HKD to USD (10/2/96): 7.73
10-year Interest rates (5/31/96): 7.738
Unemployment as of 8/96: 2.3%
Real GDP growth 1994: 5.5%
Real GDP growth 1995: 4.6%
GDP measures the value of all goods & services produced within a
nation's borders regardless of the nationality of the producer.
- ----------------------------------------------------------------
TOP 10 HOLDINGS-HONG KONG WEBS INDEX SERIES
- ----------------------------------------------------------------
- ----------------------------------------------------------------
% OF MARKET VALUE
STOCK NAME INDEX SERIES (US$)
- ----------------------------------------------------------------
1. Sun Hung Kai Properties 14.304% 1,191,258.24
2. Hutchison Whampo 12.919% 1,075,908.44
3. Hong Kong Telecom 10.435% 869,002.97
4. Hang Seng Bank 9.168% 763,481.18
5. Cheung Kong 4.435% 369,326.26
6. Bank of East Asia 4.382% 364,960.56
7. Swire Pacific 4.301% 358,205.10
8. Hong Kong China GS 4.084% 341,121.17
9. New World Development 4.045% 336,014.48
10. China Light+Power 4.025% 335,186.86
Source: Barclays Global Fund Advisors As of 9/30/96
- ----------------------------------------------------------------
MARKET FACTS
- ----------------------------------------------------------------
Total Market Cap: (3/96) $310 BN
# of listed companies: (12/94) 529
U.S. flow of funds: 1994 $2,405 MM
1995 $2,182 MM
-----------------------------
AVERAGE DAILY VALUE OF TRADES
-----------------------------
DATE US$ MILLIONS
------ ------------
1990.................... 138.304400
1991.................... 154.386800
1992.................... 314.578000
1993.................... 529.146400
1994.................... 504.228400
1995.................... 383.328000
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
HONG KONG-TOP 5 INDUSTRIES RANKED BY MARKET CAPITALIZATION
- -------------------------------------------------------------
INDUSTRY % OF MARKET
-------- -----------
1. Real Estate 35.10
2. Multi-Industry 20.70
3. Banking 13.30
4. Telecommunications 12.00
5. Utilities - Electrical And Gas 8.50
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
HISTORIC MSCI HONG KONG INDEX PERFORMANCE-For 5 Year Period
Ending 9/30/96
- -------------------------------------------------------------
<TABLE>
<CAPTION>
RETURNS
DATE US $
-------- --------
<S> <C>
12/31/91 5164.178
1/31/92 5644.313
2/29/92 6109.986
3/31/92 6112.923
4/30/92 6597.105
5/31/92 7556.184
6/30/92 7662.887
7/31/92 7318.603
8/31/92 6991.373
9/30/92 6942.835
10/31/92 7824.082
11/30/92 7237.927
12/31/92 6831.439
1/31/93 7123.269
2/28/93 7856.734
3/31/93 7883.543
4/30/93 8486.436
5/31/93 9217.533
6/30/93 8889.830
7/31/93 8725.309
8/31/93 9361.348
9/30/93 9556.777
10/31/93 11777.211
11/30/93 11611.260
12/31/93 14803.508
1/31/94 14248.961
2/28/94 12757.049
3/31/94 11383.062
4/30/94 11431.097
5/31/94 12221.517
6/30/94 11231.049
7/31/94 12127.589
8/31/94 12815.379
9/30/94 12269.838
10/31/94 12362.355
11/30/94 10860.844
12/31/94 10525.347
1/31/95 9288.477
2/28/95 10713.015
3/31/95 10986.928
4/30/95 10676.925
5/31/95 12083.073
6/30/95 11888.439
7/31/95 12129.591
8/31/95 11728.629
9/30/95 12430.729
10/31/95 12457.586
11/30/95 12491.768
12/31/95 12900.569
1/31/96 14563.338
2/29/96 14400.972
3/31/96 14414.343
4/30/96 14447.636
5/31/96 14881.295
6/30/96 14536.344
7/31/96 13874.534
8/31/96 14328.768
9/30/96 15306.613
</TABLE>
The above chart is intended to represent the historical
performance of the Hong Kong MSCI Index.
It does not represent any past or future performance of WEBS. It
is not possible to invest in an index.
The MSCI Hong Kong Index consists of 38 stocks with an aggregate
market capitalization of $183.8 billion; it represents
approximately 59.2% of Hong Kong's total market capitalization.
The Hong Kong Index reflects the reinvestment of net dividends.
The MSCI Hong Kong Index is unmanaged and therefore does not
bear management, administration, distribution, transaction or
other expenses as do the WEBS.
<PAGE>
- ----------------------------------------------------------------
12 am
NEW YORK
1 pm
HONG KONG
PRINCIPAL SOURCE OF IMPORTS
(1995): China-7.0%; Taiwan-9%;
US-11%, Japan 21%
PRINCIPAL IMPORTS:
Foodstuffs, transportation
equipment, raw materials, petroleum
PRINCIPAL EXPORT CUSTOMERS:
(1995): US-26.4%;
China-27.4%; Germany-5.3%;
Singapore-5.3% (1995)
PRINCIPAL EXPORTS:
Clothing and textiles, watches
and clocks, electronics
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks. For
more information on WEBS,
including a prospectus which
details charges and expenses,
please call 1-800-810-WEBS.
Please read the prospectus
carefully before you invest.
DISTRIBUTED BY:
Funds Distributor Inc.
- ----------------------------------------------------------------
China will have a greater influence on Hong Kong after July 1, 1997, when
Britain will transfer control of the territory to China. While the transition
to Chinese control in 1997 is cause for concern, Hong Kong is one of the
world's leading business centers because of its open economic policies, a
stable government, ready availability of professional financial and insurance
services, efficient communications and transportation networks, and
well-established legal and accounting systems. It is an important regional
financial and banking center, with 85 of the world's top 100 banks doing
business there, a major stock market, the world's fifth largest foreign
exchange market, and a flourishing insurance industry.
The economy is fundamentally service based, and Hong Kong is the 10th largest
exporter of services in the world. The service sector contributes 83% of GDP
and employs 80% of workers.
As of June, 1996, the government forecast for GDP growth in 1996 was 4.7%,
compared to 4.6% for 1995. The most recent inflation and unemployment
statistics show improvements over 1995, with inflation running at 6.3% from
January 1996 through March 1996, compared to 8.7% for 1995. Retail sales
reversed a declining trend during the first half of 1996, led by automobiles
and consumer durable goods.
The GDP growth rate touched a low of 3.1% in the first quarter. Unemployment
fell below the 3% mark in July for the first time in 14 months. Inflation is
at 6.8% in the first half of 1996. There has been a surge in tourism and,
together with a shift in trade towards offshore trading and a continued
increase in exports of financial and other business products, should
contribute to robust growth in exports of services in late 1996.
Sources: Hong Kong Trade Development Council; US Department of State Bureau
of Public Affairs; Barclay's Global Fund Advisors.
- ----------------------------------------------------------
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
THIS INFORMATION IS PROVIDED
TO HELP YOU EVALUATE AN
INVESTMENT IN JAPANESE
WORLD EQUITY BENCHMARK
SHARES ("WEBS"). WEBS ARE
17 COUNTRY-SPECIFIC SECURITIES
THAT ARE LISTED AND TRADED
ON THE AMERICAN STOCK
EXCHANGE ("AMEX"). EACH
WEBS INDEX SERIES REPRESENTS
AN INVESTMENT IN AN OPTIMIZED
PORTFOLIO OF ORDINARY FOREIGN
SHARES THAT SEEKS TO TRACK
THE PERFORMANCE OF A SPECIFIC
MORGAN STANLEY CAPITAL
INTERNATIONAL ("MSCI")
COUNTRY INDEX.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG-Registered Trademark-
WEBS < GO >
SOURCES:
Morgan Stanley & Co. 9/96,
The Economist Intelligence
Unit LTD., MSCI Data, WEBS
prospectus and Statement
of Additional Information.
WEBS-TM-
JAPAN
ECONOMIC AND MARKET FACT SHEET
AMEX PRICE TICKER-JAPAN WEBS
EWJ
- ----------------------------------------------------------------
ECONOMIC FACTS
- ----------------------------------------------------------------
GDP: (12/95) $4.8 TRILLION
Population: (12/95) 125 MM
% Change in inflation rate: (5/31/95-5/31/96) 0.4
Exchange rate for YEN to USD (10/2/96): 112
10-year Interest rates (5/31/96): 3.14
Unemployment as of 8/96: 3.3%
Real GDP growth 1994: 0.5%
Real GDP growth 1995: 0.9%
GDP measures the value of all goods & services produced within
a nation's borders regardless of the nationality of the producer.
- ----------------------------------------------------------------
- ---------------------------------------------------------------
TOP 10 HOLDINGS-JAPAN WEBS INDEX SERIES
- ----------------------------------------------------------------
% OF MARKET VALUE
STOCK NAME INDEX SERIES (US$)
- ----------------------------------------------------------------
1. Bank of Tokyo-Mitsubishi 4.903% 5,236,363.64
2. Toyota Motor Corp. 4.603% 4,913,131.31
3. Sumitomo Bank 2.703% 2,885,387.21
4. Fuji Bank LTD 2.639% 2,818,585.86
5. Industrial Bank of Japan 2.513% 2,682,828.28
6. Nomura Securities Co. 1.862% 1,987,878.79
7. Matsushita Electric 1.698% 1,813,333.33
8. Sakura Bank LTD 1.681% 1,793,939.39
9. Hitachi LTD 1.525% 1,629,090.91
10. Sony Corp 1.419% 1,514,882.15
Source: Barclays Global Fund Advisors As of 9/30/96
- ----------------------------------------------------------------
MARKET FACTS
- ----------------------------------------------------------------
Total Market Cap: (3/96) $3,825 BN
# of listed companies: (12/94) 1,689
U.S. flow of funds 1994 $14,724 MM
into Japan: 1995 $19,817 MM
-----------------------------
AVERAGE DAILY VALUE OF TRADES
-----------------------------
DATE US$ MILLIONS
------ ------------
1990........................ 5150.376800
1991........................ 3291.729200
1992........................ 1907.906800
1993........................ 3171.906800
1994........................ 3439.585600
1995........................ 3536.001600
Source: Morgan Stanley & Co. as of 9/96
- ----------------------------------------------------------------
JAPAN-TOP 5 INDUSTRIES RANKED BY MARKET CAPITALIZATION
- ----------------------------------------------------------------
INDUSTRY % OF MARKET
-------- -------------
1. Banking 22.50
2. Automobiles 5.40
3. Merchandising 4.80
4. Utilities - Electrical and Gas 4.40
5. Appliances and Household Durables 4.10
Chemicals 4.10
Source: Morgan Stanley & Co. as of 9/96
- ------------------------------------------------------------------------
HISTORIC MSCI JAPAN INDEX PERFORMANCE-For 5 Year Period
Ending 9/30/96
- ------------------------------------------------------------------------
JAPAN
<TABLE>
<CAPTION>
RETURNS
DATE US $
------ --------
<S> <C>
12/31/91 3966.562
1/31/92 3782.777
2/29/92 3466.918
3/31/92 3091.078
4/30/92 2900.782
5/31/92 3132.831
6/30/92 2846.388
7/31/92 2813.809
8/31/92 3312.305
9/30/92 3232.899
10/31/92 3082.766
11/30/92 3162.409
12/31/92 3115.662
1/31/93 3105.501
2/28/93 3239.948
3/31/93 3695.734
4/30/93 4352.617
5/31/93 4472.500
6/30/93 4410.467
7/31/93 4689.795
8/31/93 4792.080
9/30/93 4564.283
10/31/93 4543.501
11/30/93 3789.422
12/31/93 3909.592
1/31/94 4540.798
2/28/94 4748.406
3/31/94 4545.271
4/30/94 4739.007
5/31/94 4842.752
6/30/94 5081.589
7/31/94 4899.088
8/31/94 4932.447
9/30/94 4810.686
10/31/94 4942.594
11/30/94 4693.874
12/31/94 4747.746
1/31/95 4470.851
2/28/95 4254.928
3/31/95 4646.453
4/30/95 4873.202
5/31/95 4570.961
6/30/95 4352.535
7/31/95 4698.954
8/31/95 4510.052
9/30/95 4548.309
10/31/95 4293.919
11/30/95 4548.072
12/31/95 4780.592
1/31/96 4717.769
2/29/96 4633.774
3/31/96 4797.306
4/30/96 5070.059
5/31/96 4809.133
6/30/96 4834.575
7/31/96 4618.082
8/31/96 4411.681
9/30/96 4564.533
</TABLE>
The above chart is intended to represent the historical performance of the Japan
MSCI Index.
It does not represent any past or future performance of WEBS. It is
not possible to invest in an index.
The MSCI Japan Index currently consists of 317 stocks with an aggregate market
capitalization of $2,124.1 billion; it represents approximately 60.1% of Japan's
total market capitalization. The Japan Index reflects the reinvestment of net
dividends. The MSCI Japan Index is unmanaged and therefore does not bear
management, administration, distribution, transaction or other expenses as do
the WEBS.
<PAGE>
12 am
NEW YORK
2 pm
TOKYO
CAPITAL:
Tokyo
PRINCIPAL SOURCE OF IMPORTS
(est. 1995): US 22.4%;
China 10.7%;
South Korea 5.2%.
PRINCIPAL IMPORTS:
Mineral fuels, foodstuffs, metal ores, machinery and transport equipment.
PRINCIPAL EXPORT CUSTOMERS
(est. 1995): US 28.1%; South Korea 7.0%; Taiwan 6.5%.
PRINCIPAL EXPORTS:
Machinery and transportation equipment, metal products,
textiles, chemicals.
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks. For
more information on WEBS, including
a prospectus which details charges and
expenses, please call 1-800-810-WEBS.
Please read the prospectus carefully
before you invest.
Distributed by:
Funds Distributor Inc.
- ------------------------------------------------------------------------------
Japan's economy is the second largest in the world after that of the U.S.
Partial deregulation of its financial markets was introduced to alleviate the
ever worsening imbalance of bilateral trade. It is hoped that this measure will
alleviate the problem and stimulate imports. Japan imports much of its energy
resources (oil and gas) and is beginning to rely more on nuclear power.
Education is universal for children ages 6 and up, although the majority of the
population sends children from 3 to 5 to preschool. Nearly everyone in Japan is
insured under plans covering health, welfare, annuities, unemployment and/or
industrial accidents.
Business sentiment has been weak in recent times. Inflation is developing
moderately (-.1% in 1995 and .2% in 1996), but is not considered to be a
problem. The depreciation of the Yen (September 1995) has caused inflation to
stabilize. Competition in the retail sector has become more fierce as a result
of deregulation of the entry requirements for large supermarkets (discount
stores). Appreciation of the Japanese Yen in the mid-1990s had caused the price
of imported goods to fall for several years. Thus, foreign inputs (raw
materials) became cheaper for Japanese producers, as did imported finished
goods. This triggered productivity improvements and had considerable impact on
price trends. Japan increased the Value Added Tax (VAT) from 3% to 5% on April
1, 1996. There is a question as to whether the retailers will pass the price
increase to their clients (given the growing competition) or absorb all or some
of the increase themselves. GDP is on the rise moving from .8% in 1995 to a
forecasted 3.4% for 1996.
Sources: U.S. Department of State Bureau of Public Affairs; Barclays Global Fund
Advisors.
- --------------------------------------------------------------------------------
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
THIS INFORMATION IS PROVIDED
TO HELP YOU EVALUATE AN
INVESTMENT IN MEXICAN
WORLD EQUITY BENCHMARK
SHARES ("WEBS"). WEBS ARE
17 COUNTRY-SPECIFIC SECURITIES
THAT ARE LISTED AND TRADED
ON THE AMERICAN STOCK
EXCHANGE ("AMEX"). EACH
WEBS INDEX SERIES REPRESENTS
AN INVESTMENT IN AN OPTIMIZED
PORTFOLIO OF ORDINARY FOREIGN
SHARES THAT SEEKS TO TRACK
THE PERFORMANCE OF A SPECIFIC
MORGAN STANLEY CAPITAL
INTERNATIONAL ("MSCI")
COUNTRY INDEX.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG -Registered Trademark-
WEBS < GO >
Sources:
Morgan Stanley & Co. 9/96,
The Economist Intelligence
Unit LTD., MSCI Data, WEBS
prospectus and Statement of
Additional Information.
WEBS-TM-
MEXICO
ECONOMIC AND MARKET FACT SHEET
AMEX PRICE TICKER-MEXICO WEBS
EWW
- -------------------------------------------------------------
ECONOMIC FACTS
- -------------------------------------------------------------
GDP: (12/95) $244.3 BN
Population: (12/95) 93.7 MM
% Change in inflation rate: (5/31/95-5/31/96 36.90
Exchange rate PESO to USD (10/2/96): 7.52
Unemployment as of 8/96: 5.2%
Real GDP growth 1994: 3.7%
Real GDP growth 1995: -6.9%
GDP measures the value of all goods & services produced within
a nation's borders regardless of the nationality of the producer.
- --------------------------------------------------------------
TOP 10 HOLDINGS-MEXICO WEBS INDEX SERIES
- --------------------------------------------------------------
- --------------------------------------------------------------
% OF MARKET VALUE
STOCK NAME INDEX SERIES (US$)
- --------------------------------------------------------------
1. Telef de Mexico 20.675% 1,440,000.00
2. Grupo Telev-CPO 7.212% 514,966.89
3. Grupo Modelo 6.748% 462,516.56
4. Apasco SA 4.223% 288,158.94
5. EMP Moderna 4.127% 287,284.77
6. Alfa SA 3.801% 272,823.11
7. Cifra 4.223% 258,913.91
8. Fomento Econ 3.726% 255,894.04
9. Grupo Mexico 3.564% 242,781.46
10 Indus Penoles 3.312% 228,516.56
Source: Barclays Global Fund Advisors As of 9/30/96
- -------------------------------------------------------------
MARKET FACTS
- -------------------------------------------------------------
Total Market Cap: (3/96) $111 BN
# of listed companies: (12/94) 206
U.S. flow of funds: 1994 $1,437 MM
1995 $153 MM
-----------------------------
AVERAGE DAILY VALUE OF TRADES
-----------------------------
RETURNS
DATE US$ MILLIONS
------ ------------
11/30/95.................... 1029.610
12/31/95.................... 1057.033
1/31/96..................... 1184.103
2/29/96..................... 1075.752
3/31/96..................... 1162.024
4/30/96..................... 1228.793
5/31/96..................... 1237.073
6/30/96..................... 1223.060
7/31/96..................... 1143.960
8/31/96..................... 1249.648
9/30/96..................... 1247.850
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
MEXICO-TOP 5 INDUSTRIES RANKED BY MARKET CAPITALIZATION
- -------------------------------------------------------------
INDUSTRY % OF MARKET
-------- -----------
1. Telecommunications 31.70
2. Beverages And Tobacco 11.90
3. Merchandising 8.80
4. Metals - Non-Ferrous 8.80
5. Building Materials And Components 8.00
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
HISTORIC MSCI MEXICO INDEX PERFORMANCE-For 5 Year Period
Ending 9/30/96
- -------------------------------------------------------------
<TABLE>
<CAPTION>
RETURN
DATE US $
-------- --------
<S> <C>
12/31/91 1196.299
1/31/92 1330.002
2/29/92 1535.223
3/31/92 1546.530
4/30/92 1483.815
5/31/92 1505.215
6/30/92 1260.092
7/31/92 1274.553
8/31/92 1190.479
9/30/92 1134.911
10/31/92 1344.763
11/30/92 1452.775
12/31/92 1495.130
1/31/93 1411.226
2/28/93 1328.130
3/31/93 1508.279
4/30/93 1403.794
5/31/93 1387.304
6/30/93 1406.577
7/31/93 1485.291
8/31/93 1627.273
9/30/93 1570.067
10/31/93 1732.024
11/30/93 1912.278
12/31/93 2232.988
1/31/94 2409.704
2/28/94 2193.955
3/31/94 1943.393
4/30/94 1890.127
5/31/94 2036.944
6/30/94 1822.125
7/31/94 1979.101
8/31/94 2124.316
9/30/94 2159.891
10/31/94 1983.764
11/30/94 2003.765
12/31/94 1327.464
1/31/95 1037.234
2/28/95 789.934
3/31/95 804.288
4/30/95 957.164
5/31/95 929.584
6/30/95 1028.807
7/31/95 1123.157
8/31/95 1161.574
9/30/95 1091.488
10/31/95 947.652
</TABLE>
The above chart is intended to represent the historical performance of the
Mexico MSCI Index.
It does not represent any past or future performance of WEBS. It is not
possible to invest in an index.
The MSCI Mexico Index consists of 41 stocks with an aggregate market
capitalization of $63.8 billion; it represents approximately 59.4% of
Mexico's total market capitalization. The Mexico Index reflects the
reinvestment of net dividends. The MSCI Mexico Index is unmanaged and
therefore does not bear management, administration, distribution, transaction
or other expenses as do the WEBS.
<PAGE>
- ----------------------------------------------------------------
12 am
NEW YORK
11 pm
MEXICO CITY
Capital:
Mexico City
PRINCIPAL SOURCE OF IMPORTS
(1994): US 69%
PRINCIPAL IMPORTS:
Motor vehicle parts, office equipment and agricultural products
PRINCIPAL EXPORT CUSTOMERS
(1994): US 8.4%
PRINCIPAL EXPORTS:
Petroleum, cars and agricultural products
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks. For
more information on WEBS,
including a prospectus which
details charges and expenses,
please call 1-800-810-WEBS.
Please read the prospectus
carefully before you invest.
Distributed by:
Funds Distributor Inc.
- -------------------------------------------------------------
The economy of Mexico has been expanding the first half of 1996. Interest
rates have held relatively stable at 31.6% in 1996. Mexico's economic results
have boosted the stock market to record highs in local currency. However,
measured in US dollars, there is still much ground to cover to regain
pre-devaluation levels. On August 19, 1996, Mexico's Finance Ministry
announced that real GDP grew 7.2% in this year's second quarter compared to
the second quarter of 1995. This was the first quarter since the 1994 Peso
devaluation in which the GDP showed positive real growth versus the prior
year. However, prior economic difficulties in 1995 were significant. GDP
declined by 6.9% and inflation hit 52%. Unemployment more than doubled in the
first seven months of 1995.
To further stabilize the financial and foreign exchange markets, the
government instituted a number of new policies. These included the adoption
of a floating exchange rate system to enable the central bank to better
control the monetary base, and the introduction of new bills allowing the
privatization of ports, airports, railroads, and to open telecommunications
services to competition.
Mexico's recovery has begun to diversify beyond the export sector and into
more domestic-oriented industries. The construction industry, which was the
most negatively impacted in 1995, increased 7.8% in the second quarter of
1996. The services sector grew 5.4%. The commerce, restaurants and hotels
sector, which includes retailers, increased 7.9% for the quarter.
Since 1995, trade balances have improved, and grew at an 18.4% annual rate
during the first quarter of 1996. The banking system is solidifying, with an
ongoing emphasis on improving asset quality, strengthening reserves, and
increasing its capacity to support economic growth.
Sources: Barclay's Global Fund Advisors; LATIN FINANCE, October 1996
- -------------------------------------------------------------
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
THIS INFORMATION IS PROVIDED
TO HELP YOU EVALUATE AN
INVESTMENT IN SWEDISH
WORLD EQUITY BENCHMARK
SHARES ("WEBS"). WEBS ARE
17 COUNTRY-SPECIFIC SECURITIES
THAT ARE LISTED AND TRADED
ON THE AMERICAN STOCK
EXCHANGE ("AMEX"). EACH
WEBS INDEX SERIES REPRESENTS
AN INVESTMENT IN AN OPTIMIZED
PORTFOLIO OF ORDINARY FOREIGN
SHARES THAT SEEKS TO TRACK
THE PERFORMANCE OF A SPECIFIC
MORGAN STANLEY CAPITAL
INTERNATIONAL ("MSCI")
COUNTRY INDEX.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Real-time IOPVs available on
The BLOOMBERG-Registered Trademark-
WEBS < GO >
SOURCES:
Morgan Stanley & Co. 9/96,
The Economist Intelligence
Unit LTD., MSCI Data, WEBS
prospectus and Statement of
Additional Information.
WEBS-TM-
SWEDEN ECONOMIC AND MARKET FACT SHEET
AMEX PRICE TICKER-SWEDEN WEBS
EWD
- -------------------------------------------------------------
ECONOMIC FACTS
- -------------------------------------------------------------
GDP: (12/95) $208 BN
Population: (12/95) 9 MM
% Change in inflation rate: (5/31/95-5/31/96) 1
Exchange rate KRONA to USD (10/2/96): 6.60
10-year Interest rates (5/31/96): 8.43
Unemployment as of 8/96: 7.8%
Real GDP growth 1994: 2.6%
Real GDP growth 1995: 3.0%
GDP measures the value of all goods & services produced within
a nation's borders regardless of the nationality of the producer.
- -------------------------------------------------------------
TOP 10 HOLDINGS-SWEDEN WEBS INDEX SERIES
- -------------------------------------------------------------
- -------------------------------------------------------------
% OF MARKET VALUE
STOCK NAME INDEX SERIES (US$)
- -------------------------------------------------------------
1. Ericsson LM-B 17.866% 816,847.83
2. Astra AB-A 15.163% 693,236.71
3. ABB AB-A 4.821% 220,434.78
4. Svenska Hana 4.521% 206,702.90
5. Hennes+Mauri-B 4.113% 188,030.80
6. Skanska AB-B 3.994% 182,608.70
7. Skandi enskil-A 3.754% 171,618.36
8. Electrolux AB-B 3.444% 157,457.73
9. Astra AB-B 3.153% 144,148.55
10. Stadshy Potek AB 3.027% 138,381.64
Source: Barclays Global Fund Advisors As of 9/30/96
- -------------------------------------------------------------
MARKET FACTS
- -------------------------------------------------------------
Total Market Cap: (3/96) $184 BN
# of listed companies: (12/94) 229
U.S. flow of funds: 1994 N/A
1995 $2,843 MM
-----------------------------
AVERAGE DAILY VALUE OF TRADES
-----------------------------
DATE US$ MILLIONS
------ ------------
1990..................... 82.272800
1991..................... 62.952000
1992..................... 114.601600
1993..................... 171.013600
1994..................... 344.348000
1995..................... 376.839600
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
SWEDEN-TOP 5 INDUSTRIES RANKED BY MARKET CAPITALIZATION
- -------------------------------------------------------------
INDUSTRY % OF MARKET
-------- -----------
1. Electrical And Electronics 29.40
2. Health And Personal Care 21.40
3. Automobiles 9.00
4. Banking 8.10
5. Forest Products And Paper 6.90
Source: Morgan Stanley & Co. as of 9/96
- -------------------------------------------------------------
HISTORIC MSCI SWEDEN INDEX PERFORMANCE-For 5 Year Period
Ending 9/30/96
- -------------------------------------------------------------
<TABLE>
<CAPTION>
RETURNS
DATE US $
-------- --------
<S> <C>
12/31/91 1842.522
1/31/92 1841.873
2/29/92 1794.889
3/31/92 1876.646
4/30/92 1859.643
5/31/92 1975.364
6/30/92 1908.076
7/31/92 1857.158
8/31/92 1745.482
9/30/92 1551.610
10/31/92 1412.437
11/30/92 1611.094
12/31/92 1577.020
1/31/93 1505.217
2/28/93 1560.835
3/31/93 1576.589
4/30/93 1731.933
5/31/93 1913.685
6/30/93 1780.866
7/31/93 1829.290
8/31/93 1999.724
9/30/93 2030.655
10/31/93 2221.101
11/30/93 1955.960
12/31/93 2160.322
1/31/94 2532.254
2/28/94 2412.737
3/31/94 2263.348
4/30/94 2448.670
5/31/94 2414.968
6/30/94 2289.020
7/31/94 2441.300
8/31/94 2429.636
9/30/94 2437.321
10/31/94 2670.203
11/30/94 2597.071
12/31/94 2556.452
1/31/95 2570.906
2/28/95 2614.761
3/31/95 2572.869
4/30/95 2806.667
5/31/95 2847.645
6/30/95 2974.072
7/31/95 3180.676
8/31/95 3095.626
9/30/95 3522.957
10/31/95 3372.461
11/30/95 3487.705
12/31/95 3409.290
1/31/96 3326.413
2/29/96 3651.413
3/31/96 3736.031
4/30/96 3695.255
5/31/96 3859.418
6/30/96 3910.916
7/31/96 3750.146
8/31/96 4000.523
9/30/96 4166.295
</TABLE>
The above chart is intended to represent the historical performance of the
Sweden MSCI Index.
It does not represent any past or future performance of WEBS. It is not
possible to invest in an index.
The MSCI Sweden Index consists of 30 stocks with an aggregate market
capitalization of $104.0 billion; it represents approximately 60.6% of
Sweden's total market capitalization. The Sweden Index reflects the
reinvestment of net dividends. The MSCI Sweden Index is unmanaged and
therefore does not bear management, administration, distribution, transaction
or other expenses as do the WEBS.
<PAGE>
- ----------------------------------------------------------------
12 am
NEW YORK
6 am
STOCKHOLM
CAPITAL:
Stockholm
PRINCIPAL SOURCE OF IMPORTS
(1995): Germany, UK, US,
Denmark, Finland
PRINCIPAL IMPORTS:
Automobile parts, petroleum, food,
data processing equipment, iron
and steel
PRINCIPAL EXPORT CUSTOMERS
(1995): Germany, UK, Norway, US,
Denmark
PRINCIPAL EXPORTS:
Road vehicles/automolies,
chemicals, misc. manufactured
articles, crude materials
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks. For
more information on WEBS,
including a prospectus which
details charges and expenses,
please call 1-800-810-WEBS.
Please read the prospectus
carefully before you invest.
DISTRIBUTED BY:
Funds Distributor Inc.
- -------------------------------------------------------------
With a modern distribution system, well-developed internal and external
communications, and a skilled labor force, Sweden has achieved a relatively
high standard of living under a mixed system of high-tech capitalism and
relatively high social welfare benefits. Timber, hydropower, and iron ore
constitute the resource base of an economy that is heavily oriented toward
foreign trade. Privately owned firms account for about 90% of industrial
output, about half of which comes from the engineering sector.
Major industries include iron and steel, precision equipment (bearings, radio
and telephone components, armaments), wood pulp and paper products, processed
foods, and automobiles.
The government is determined to restrict public finances and reduce the
budget deficit to 8% of GDP this year (down from an estimated 9.5% in 1995),
with further reductions into 1997. A preliminary budget has been drafted and
savings are planned for 1997 and 1998, 65% of which are to be made via
spending cuts. The remaining 35% is expected to come from increased energy
taxes, base tax rates and payroll taxes. Spending cuts are widespread except
on higher and adult education. This budget revision is in response to the
criteria set forth in the Maastricht Treaty requiring Europe to reduce budget
deficits. Inflation has been falling to 2.6% in 1995 and an expected 2.5% in
1996. Lower interest rates, and lower prices on clothing and petrol were the
main sources of the decline. Both the appreciation of the Swedish Krona and
the sluggishness in consumer demand eased price pressures. The Riksbank has
cut the repo rate eight times this year from 8.91% to 7.15%. The deposit rate
has been cut from 7.5% to 6.75% and the lending rate from 9% to 8.25%. This
easing of monetary policy reflects a benign inflationary environment and the
improvement of the currency over the last few months. The Swedish economy
has expanded this year, driven mainly by fixed investment and exports with
consumer demand remaining weak.
Sources: Barclay's Global Fund Advisors.
- ----------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Parts A and/or B of the Registration Statement are
the following audited financial statements:
Report of Independent Accountants - October 14, 1996
Statements of Assets and Liabilities - August 31, 1996
Statements of Operations - for the period from March 12, 1996
(commencement of operations) through August 31, 1996
Statements of Changes in Net Assets - for the period from March
12, 1996 (commencement of operations) through August 31,
1996
Financial Highlights for each WEBS Index Series for the period
from March 12, 1996 (commencement of operations) through
August 31, 1996
Notes to Financial Statements
(2) All required financial statements are included in Parts A and B
hereof. All other financial statements and schedules are
inapplicable.
(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
(B)(1) Authorized Participation Agreement for Merrill Lynch
* (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) -- 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) -- Statement of Assets and Liabilities for the one-month period ended September 30, 1996
(unaudited)
(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) -- Financial Data Schedules
</TABLE>
- ------------------------
* Previously filed.
1
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of December, 1996, the stockholders of Common Stock, par value $.001
per share, of each of the initial seventeen Index Series of the Fund were:
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:
The JPM Advisor Fund
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
The Skyline Funds
Waterhouse Investors Cash Management Fund, Inc.
Harris Insight Funds Trust
The JPM Institutional Funds
The Pierpont Funds
LKCM Fund
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
St. Clair Money Market Fund
(b) The information required by this Item 29(b) with respect to each
director, officer or partner of Funds Distributor is incorporated by
reference to Schedule A of Form BD Filed by Funds Distributor with the
Securities and Exchange Commission pursuant to the Securities Act of 1934
(File No. 8-20518).
6
<PAGE>
(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 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 Post-
Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in New York, New York, on
the 18th day of October, 1996.
FOREIGN FUND, INC.
By: /S/ Nathan Most
-----------------------------
Nathan Most
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 to the Registration Statement has been signed below by
the following persons, in the capacities indicated, on the 18th day of
October, 1996.
SIGNATURE TITLE
/S/ Nathan Most President and Director
- --------------------------
(Nathan Most)
/S/ John B. Carroll Director
- --------------------------
(John B. Carroll)
/S/ Timothy A. Hultquist Director
- --------------------------
(Timothy A. Hultquist)
/S/ Lloyd N. Morrisett Director
- --------------------------
(Lloyd N. Morrisett)
/S/ W. Allen Reed Director
- --------------------------
(W. Allen Reed)
/S/ Stephen M. Wynne Treasurer (principal financial and
- -------------------------- accounting officer)
(Stephen M. Wynne)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
--------------- ----------------------------------------------------------------------------------- ---------------
<C> <S> <C> <C> <C>
(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 Participation Agreement.
(6) (B)(1) -- Authorized Participation Agreement for Merrill Lynch
(8) (A) -- Custodian Agreement between the Fund and Morgan Stanley Trust Company
(8) (B) -- Lending Agreement Dated as of March 5, 1996 between Morgan Stanley Trust
Company and the Fund
(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.
(11) -- Opinion and consent of Ernst & Young, LLP
(12) -- Statement of Assets and Liabilities for the one-month period ended
September 30, 1996 (unaudited)
(16) -- Not applicable
(17) -- Financial Data Schedules
</TABLE>
<PAGE>
ADVISORY AGREEMENT
AGREEMENT made as of the 15 day of March, 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
<PAGE>
(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.
4
<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.
5
<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.
6
<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: /s/ Nathan Most
--------------------------------
Name: Nathan Most
Title: President
BZW BARCLAYS GLOBAL FUND ADVISORS
By: /s/ Vincent J. Bencivenga
--------------------------------
Name: Vincent J. Bencivenga
Title: Chief Fiduciary,
Compliance Officer
By: /s/ Andrew Zulberti
--------------------------------
Name: Andrew Zulberti
Title: Chief Financial Officer
7
<PAGE>
SCHEDULE A
ADVISORY FEE FOR THE INITIAL FUNDS:
.27% per annum of the aggregate net assets of the Initial Funds less than or
equal to $1.7 billion, plus .15% per annum of the aggregate net assets of the
Initial Funds between $1.7 billion and $7 billion, plus .12% per annum of the
aggregate net assets of the Initial Funds between $7 billion and $10 billion
plus .08% per annum of the aggregate net assets of the Initial Funds in excess
of $10 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>
DISTRIBUTION AGREEMENT
FOREIGN FUND, INC.
c/o PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
March 9, 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: /s/ Nathan Most
----------------------------
President
Accepted:
FUNDS DISTRIBUTOR, INC.
By: /s/ Richard W. Healey
--------------------------------
Richard W. Healey
Senior Vice President
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>
EXH. 6B-1
FOREIGN FUND, INC.
- AUTHORIZED PARTICIPANT AGREEMENT
This Authorized Participant Agreement (the "Agreement") is entered into by
and between FUNDS DISTRIBUTOR, INC. (the "Distributor"), and Merrill, Lynch,
Pierce, Fenner & Smith, Incorporated (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-TM-" or
"WEBS-TM-"), 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 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
<PAGE>
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 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
I-2
<PAGE>
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 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
I-3
<PAGE>
promotional materials or sales literature furnished to the Participant by the
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. Not withstanding the foregoing, the Participant may without
the written approval of the Distributor prepare and circulate in the regular
course of its business research reports that include information, opinions or
recommendations relating to WEBS (i) for public dissemination, provided that
such research are not used for purposes of marketing WEBS and (ii) for internal
use by the Participant.
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 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.
I-4
<PAGE>
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 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.
I-5
<PAGE>
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, 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
I-6
<PAGE>
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) 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.
(c) 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. In the Redemption Order the Participant will be
required to confirm that an in-kind redemption request has not been submitted on
behalf of a beneficial owner who is an Australian resident.
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 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
I-7
<PAGE>
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.
11. (a) INDEMNIFICATION OF INDEMNIFIED PARTIES - 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 any actions
of such Indemnified Party in reliance upon any instructions issued in accordance
with Annexes II, III, IV, V and VI (as each may be amended from time to time)
reasonably 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.
The Participant agrees to indemnify and hold harmless each Indemnified Party
against any loss, liability, claim, damage and expense whatsoever, as incurred,
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment thereto), or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or arising
out of any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but only with respect
to such untrue statements or omissions or alleged untrue
I-8
<PAGE>
statements or omissions in reliance upon and in conformity with written
information furnished to the Indemnified Parties expressly for use in the
Registration Statement (or any amendment or supplement thereto). 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. This subparagraph 11(a) shall survive the
termination of this Agreement.
(b) INDEMNIFICATION OF PARTICIPANT - The Distributor hereby agrees to
indemnify and hold harmless the Participant to the extent and in the manner set
forth in clauses (i), (ii) and (iii) below:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto) or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any or all loss, liability, claim damage and expense
whatsoever, as incurred, to the extent of the aggregated amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission;
(iii) against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by Participant), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any government agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission to the extent that
any such expense is not paid under (i) or (ii) above. This subparagraph 11(b)
shall survive the termination of this Agreement.
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.
I-9
<PAGE>
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, facsimile 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: [signed Marie E. Connolly]
-----------------------------------------
TITLE: [President and CEO]
ADDRESS: [60 State Street, Suite 1300]
[Boston, MA 02109]
Date: [5/24] , 199[6]
TELEPHONE: [617-557-3331]
FACSIMILE:
PARTICIPANT
BY: [signed, Thomas Joyce]
-----------------------------------------
TITLE: [Managing Director]
ADDRESS: [Merrill Lynch]
[250 Vesey Street, New York 10281-1305]
Date: [5/24] , 199[6]
TELEPHONE: [212-449-4082]
FACSIMILE: [212-449-2638]
I-11
<PAGE>
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
I-1
<PAGE>
The 75,000
Malaysia
Index
The 100,000
Mexico (Free)
Index
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.
II-1
<PAGE>
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 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.
II-2
<PAGE>
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
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.
II-3
<PAGE>
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.
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
II-4
<PAGE>
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 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
or 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 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-5
<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-6
<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.
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
II-7
<PAGE>
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 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.
II-8
<PAGE>
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-9
<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:
Wire Transfer: Other:
III-1
<PAGE>
__________________
__________________
(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>
(DTC PART #)
SUBSCRIPTION (NAME OF B/D) REDEMPTION
DAILY TRADE SUMMARY
FOREIGN FUND, INCORPORATED
FUNDS DISTRIBUTOR, INC.
TRADING PHONE (800) 810-WEBS OPTION #2
FAX (617) 248-6439
<TABLE>
<CAPTION>
- ------------------------ -------------------
TRADE DATE: 12/28/95 TRADE DATE:
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
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>
II. TO BE COMPLETED BY DISTRIBUTOR
( ) Properly completed irrevocable purchase order, including
Index Series Order Sheet submitted before AMEX closing time.
III-3
<PAGE>
( ) 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.
IV-1
<PAGE>
The undersigned Participant represents and warrants to the Distributor and the
Fund that it has the right and authority for itself or on behalf of its customer
to redeem the WEBS contemplated by this redemption. In addition, the
undersigned Participant confirms to the Distributor and the Fund that the WEBS
to which this redemption request relates are not beneficially owned by a
resident of Australia.
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>
(DTC PART #)
SUBSCRIPTION (NAME OF B/D) REDEMPTION
DAILY TRADE SUMMARY
FOREIGN FUND, INCORPORATED
FUNDS DISTRIBUTOR, INC.
TRADING PHONE (800) 810-WEBS OPTION #2
FAX (617) 248-6439
<TABLE>
<CAPTION>
- ------------------------ -------------------
TRADE DATE: 12/28/95 TRADE DATE:
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
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 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].
IV-4
<PAGE>
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].
V-1
<PAGE>
Date: _________________ ___________________
[name, title]
V-2
<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: ________________
VI-1
<PAGE>
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: ________________
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: __________________
VII-1
<PAGE>
Germany Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
Hong Kong Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
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: __________________
VII-2
<PAGE>
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: __________________
United Kingdom Index Series
Account Name: __________________
Account Number: __________________
Other Reference Number: __________________
VII-3
<PAGE>
CUSTODY AGREEMENT
This Custody Agreement is dated March 5, 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 /s/ Lisa M. King
-------------------------
Name: Lisa M. King
Title: Assistant Secretary
Address for record: c/o PFPC Inc.
---------------------------
400 Bellevue Parkway
---------------------------
Wilmington, DE 19809
---------------------------
Accepted:
MORGAN STANLEY TRUST COMPANY
By /s/ G.Federico
----------------------------
Authorized Signature
<PAGE>
APPENDIX 1
ACCOUNT DOCUMENTATION
REQUIRED DOCUMENTATION FOR CORE CUSTODIAL SERVICES:
Custody Agreement
Secretary's Certificate
Client Service Guide (including appendices)
Fee Schedule/Billing Guide
Certificate of Beneficial Ownership
Form W-9 (U.S. Residents)
Form 8821 or 6166 (U.S. Residents)
Form W-8 (Non-U.S. Residents)
Form 1001 (Non-U.S. Residents)
Local Tax Office Letter (Non-U.S. Residents)
Client Service Requirement Letter
Voting Power of Attorney
Sophisticated Investor Letter
General Account Information
JGB Indemnification Letter (optional)
Thai Authorization Letter (optional)
New Zealand 'Approved Issuer Levy' Letter (optional)
ADDITIONAL DOCUMENTATION REQUIRED FOR TAX RECLAIM SERVICES:
Tax Reclaim Power of Attorney
U.K. Tax Authority Letter (Non U.K. individuals only)
(ONLY FOR TAX EXEMPT CLIENTS)
IRS Determination Letter (U.S. residents only)
U.K. Form 309A (U.S. residents only)
U.K. Form 4338 (Non U.K. funds)
U.K. Form 4338A (Non U.K. charities/
foundations)
Previous Exemption Letters (Non U.S. residents)
<PAGE>
APPENDIX 2
ACCOUNT NAME MNEMONIC ACCOUNT NUMBER
Foreign Fund Inc/Austria Index Series XATS 000428003
Foreign Fund Inc/Australia Index Series XAUD 000428011
Foreign Fund Inc/Belgium Index Series XBEF 000428029
Foreign Fund Inc/Canada Index Series XCAD 000428037
Foreign Fund Inc/France Index Series XFRF 000428045
Foreign Fund Inc/Germany Index Series XDEM 000428052
Foreign Fund Inc/Hong Kong Index Series XHKD 000428060
Foreign Fund Inc/Italy Index Series XITL 000428078
Foreign Fund Inc/Japan Index Series XJPY 000428086
Foreign Fund Inc/Malaysia Index Series XMYR 000428094
Foreign Fund Inc/Mexico Index Series XMXN 000428102
Foreign Fund Inc/Netherland Index Series s XNLG 000428110
Foreign Fund Inc/Singapore Index Series XSGD 000428128
Foreign Fund Inc/Spain Index Series XESP 000428136
Foreign Fund Inc/Sweden Index Series XSEK 000428144
Foreign Fund Inc/Switzerland Index Series XCHF 000428151
Foreign Fund Inc/UK Index Series XGBP 000428169
<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
- ---- ------------ ----- ---------- ----------
Robert Flitter PFPC Inc. Accounting 302-791-1589 /s/ Robert Flitter
Manager II 302-791-4875
Beverly Zehr PFPC Inc. Accounting 302-791-2360 /s/ Beverly Zehr
Manager II 302-791-4875
Neal Andrews PFPC Inc. Accounting 302-791-1462 /s/ Neal J. Andrews
Director 302-791-2639
Joel Weiss PFPC Inc. Accounting 302-791-1851 /s/ Joel Weiss
Director 302-791-1939
For the issuance of checks and other drafts in payment of the Fund's
operating expense.
Authorized by: /s/ Lisa M. King
-----------------------
Assistant Secretary
Foreign Fund, Inc.
<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's for the following activities:
USER ID'S
- ---------
EXCC2 EXCC692 EXCC55
EXCC586 EXCC958 EXCC972
EXCC688 EXCC973
ACCOUNT WORKSTATION SESSIONS
MNEMONIC NUMBER TE TCC SL FE CM MA TD
- -------------------------------------------------------------------------------
XATS 00042800 NO NO NO NO NO YES NO
XAUD 00042801 NO NO NO NO NO YES NO
XBEF 00042802 NO NO NO NO NO YES NO
XCAD 00042803 NO NO NO NO NO YES NO
XFRF 00042804 NO NO NO NO NO YES NO
XDEM 00042805 NO NO NO NO NO YES NO
XHKD 00042806 NO NO NO NO NO YES NO
XITL 00042807 NO NO NO NO NO YES NO
XJPY 00042808 NO NO NO NO NO YES NO
XMYR 00042809 NO NO NO NO NO YES NO
XMXN 00042810 NO NO NO NO NO YES NO
XNLG 00042811 NO NO NO NO NO YES NO
XSGD 00042812 NO NO NO NO NO YES NO
XESP 00042813 NO NO NO NO NO YES NO
XSEK 00042814 NO NO NO NO NO YES NO
XCHF 00042815 NO NO NO NO NO YES NO
XGBP 00042816 NO NO NO NO NO YES NO
- -------------------------------------------------------------------------------
<PAGE>
The Custodian is directed to accept and act upon Authorized Instructions
transmitted electronically and identified with the following mnemonics and
system user ID's for the following activities:
USER ID'S
- ---------
EXCC26 EXCC660 EBG1409
EXCC28 EXCC689 EBG1424
EXCC95 EXCC690 EXCC540
EXCC121 EXCC918 EXCC751
EXCC201 EXCC920 EXCC919
EXCC597 EWE1016
EXCC645 EWE1233
ACCOUNT WORKSTATION SESSIONS
MNEMONIC NUMBER TE TCC SL FE CM MA TD
- -------------------------------------------------------------------------------
XATS 00042800 YES NO NO NO YES NO NO
XAUD 00042801 YES NO NO NO YES NO NO
XBEF 00042802 YES NO NO NO YES NO NO
XCAD 00042803 YES NO NO NO YES NO NO
XFRF 00042804 YES NO NO NO YES NO NO
XDEM 00042805 YES NO NO NO YES NO NO
XHKD 00042806 YES NO NO NO YES NO NO
XITL 00042807 YES NO NO NO YES NO NO
XJPY 00042808 YES NO NO NO YES NO NO
XMYR 00042809 YES NO NO NO YES NO NO
XMXN 00042810 YES NO NO NO YES NO NO
XNLG 00042811 YES NO NO NO YES NO NO
XSGD 00042812 YES NO NO NO YES NO NO
XESP 00042813 YES NO NO NO YES NO NO
XSEK 00042814 YES NO NO NO YES NO NO
XCHF 00042815 YES NO NO NO YES NO NO
XGBP 00042816 YES NO NO NO YES NO NO
- -------------------------------------------------------------------------------
<PAGE>
The Custodian is directed to accept and act upon Authorized Instructions
transmitted electronically and identified with the following mnemonics and
system user ID's for the following activities:
USER ID'S
- ---------
EPF1391
EPF1392
EPF1393
ACCOUNT WORKSTATION SESSIONS
MNEMONIC NUMBER TE TCC SL FE CM MA TD
- -------------------------------------------------------------------------------
XATS 00042800 NO NO NO NO YES NO NO
XAUD 00042801 NO NO NO NO YES NO NO
XBEF 00042802 NO NO NO NO YES NO NO
XCAD 00042803 NO NO NO NO YES NO NO
XFRF 00042804 NO NO NO NO YES NO NO
XDEM 00042805 NO NO NO NO YES NO NO
XHKD 00042806 NO NO NO NO YES NO NO
XITL 00042807 NO NO NO NO YES NO NO
XJPY 00042808 NO NO NO NO YES NO NO
XMYR 00042809 NO NO NO NO YES NO NO
XMXN 00042810 NO NO NO NO YES NO NO
XNLG 00042811 NO NO NO NO YES NO NO
XSGD 00042812 NO NO NO NO YES NO NO
XESP 00042813 NO NO NO NO YES NO NO
XSEK 00042814 NO NO NO NO YES NO NO
XCHF 00042815 NO NO NO NO YES NO NO
XGBP 00042816 NO NO NO NO YES NO NO
- -------------------------------------------------------------------------------
<PAGE>
The Custodian is directed to accept and act upon Authorized Instructions
transmitted electronically and identified with the following mnemonics and
system user ID's for the following activities:
USER ID'S
- ---------
EPF1354 EPF1389
EPF1387 EPF1423
EPF1388
ACCOUNT WORKSTATION SESSIONS
MNEMONIC NUMBER TE TCC SL FE CM MA TD
- -------------------------------------------------------------------------------
XATS 00042800 NO NO NO NO NO NO NO
XAUD 00042801 NO NO NO NO NO NO NO
XBEF 00042802 NO NO NO NO NO NO NO
XCAD 00042803 NO NO NO NO NO NO NO
XFRF 00042804 NO NO NO NO NO NO NO
XDEM 00042805 NO NO NO NO NO NO NO
XHKD 00042806 NO NO NO NO NO NO NO
XITL 00042807 NO NO NO NO NO NO NO
XJPY 00042808 NO NO NO NO NO NO NO
XMYR 00042809 NO NO NO NO NO NO NO
XMXN 00042810 NO NO NO NO NO NO NO
XNLG 00042811 NO NO NO NO NO NO NO
XSGD 00042812 NO NO NO NO NO NO NO
XESP 00042813 NO NO NO NO NO NO NO
XSEK 00042814 NO NO NO NO NO NO NO
XCHF 00042815 NO NO NO NO NO NO NO
XGBP 00042816 NO NO NO NO NO NO NO
- -------------------------------------------------------------------------------
<PAGE>
The Custodian is directed to accept and act upon Authorized Instructions
transmitted electronically and identified with the following mnemonics and
system user ID's for the following activities:
USER ID'S
- ---------
EFD1355 EFD1378
EFD1376 EFD1379
EFD1377
ACCOUNT WORKSTATION SESSIONS
MNEMONIC NUMBER TE TCC SL FE CM MA TD
- -------------------------------------------------------------------------------
XATS 00042800 NO NO NO NO NO NO NO
XAUD 00042801 NO NO NO NO NO NO NO
XBEF 00042802 NO NO NO NO NO NO NO
XCAD 00042803 NO NO NO NO NO NO NO
XFRF 00042804 NO NO NO NO NO NO NO
XDEM 00042805 NO NO NO NO NO NO NO
XHKD 00042806 NO NO NO NO NO NO NO
XITL 00042807 NO NO NO NO NO NO NO
XJPY 00042808 NO NO NO NO NO NO NO
XMYR 00042809 NO NO NO NO NO NO NO
XMXN 00042810 NO NO NO NO NO NO NO
XNLG 00042811 NO NO NO NO NO NO NO
XSGD 00042812 NO NO NO NO NO NO NO
XESP 00042813 NO NO NO NO NO NO NO
XSEK 00042814 NO NO NO NO NO NO NO
XCHF 00042815 NO NO NO NO NO NO NO
XGBP 00042816 NO NO NO NO NO NO NO
- -------------------------------------------------------------------------------
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
<TABLE>
<CAPTION>
COUNTRY MSTC & MSBL MS&CO & MSIL CENTRAL DEPOSITORY
<S> <C> <C> <C>
Argentina Citibank N.A. . Citibank N.A Caja de Valores
Australia Australia & New Zealand Bank Australia & New Zealand Bank CHESS
Austria Creditanstalt-Bankverein Creditanstalt-Bankverein OKB
Bangladesh Standard Chartered Bank N/A N/A
Belgium Banque Bruxelles Lambert S.A. (BBL) CEDEL CIK
Botswana Barclay's Bank of Botswana Ltd. N/A N/A
Brazil Banco de Boston Banco de Boston BOVESPA
Rio de Janeiro Stock Exchange
CETIP - fixed income
SELIC - fixed income
Canada Toronto Dominion Bank Toronto Dominion Bank CDS
Chile Citibank N.A. Citibank N.A. Depositorio Central de Valores
Banco de Chile
China Hongkong and Shanghai Banking Hongkong and Shanghai Banking Shenzen Exchange:
Corp., Ltd. Corp., Ltd. -----------------
Shenzhen Securities Clearing Corp.
Shanghai Exchange:
------------------
Shanghai Exchange:
Colombia Cititrust Colombia Cititrust Colombia DCV - central bank securities
DECEVAL - fixed income securities
Cyprus Barclays Bank PLC N/A N/A
Czech Republic ING Bank ING Bank SCP
Denmark Den Danske Bank A.S. Den Danske Bank A.S. VP
Ecuador Citibank N.A. Citibank N.A. N/A
Egypt Citibank N.A. N/A N/A
Finland Merita Bank Merita Bank N/A
France Banque Indosuez Banque Paribas SICOVAM
Germany Berliner Hanels-und Frankfurter Self-clear DKV
Bank
Ghana Barclay's Bank of Ghana Ltd. N/A N/A
Greece Citibank N.A. Citibank N.A. Apothetirio Titlon A.E.
Hong Kong Hongkong and Shanghai Banking Self-clear CCASS
Corp., Ltd. Standard Chartered Bank
- physical shares
Hungary Citibank Budapest Citibank Budapest KELER
India Morgan Stanley Trust Company N/A N/A
SBI
Standard Chartered Bank
Hongkong and Shanghai Banking
Corp., Ltd.
Indonesia Hongkong and Shanghai Banking Hongkong and Shanghai Banking KDEI
Corp., Ltd. Corp., Ltd.
Ireland Allied Irish Bank Allied Irish Bank CGO - gilts only
Israel Bank Leumi Bank Leumi TSE Clearing House
Italy Barclays Bank PLC Barclays Bank PLC (equity) Monte Titoli S.P.A.
Citibank (FID) Banco d'Italia
Paribas (IPB)
Japan Morgan Stanley International Self-clear JASDEC
Mitsubishi Bank Ltd. Sanwa Bank - cash only
Sanwa Bank - cash only
Jordan Arab Bank PLC N/A N/A
Kenya Barclays Bank of Kenya Ltd. N/A N/A
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRY MSTC & MSBL MS&CO & MSIL CENTRAL DEPOSITORY
<S> <C> <C> <C>
Korea Standard Chartered Bank Standard Chartered Bank KCD
Luxembourg Banque Bruxelles Lambert S.A. (BBL) CEDEL N/A
Euroclear
Malaysia OCBC Bank (Malaysia) Bhd OCBC Bank (Malaysia) Bhd MCD
Mauritius Hongkong and Shanghai Banking N/A N/A
Corp., Ltd.
Mexico Citibank N.A. Citibank N.A. Indeval
Morocco Banque Commerciale du Maroc N/A N/A
Netherlands ABN Amro Bank KAS Associates NECIGEF
New Zealand Australia and New Zealand Bank Australia and New Zealand FASTER
Bank Austraclear
Norway Den Norske Bank Den Norske Bank VPS
Pakistan Standard Chartered Bank Standard Chartered Bank SCD
Papua New Guinea Australia and New Zealand Bank Australia and New Zealand CHESS
Bank
Peru Citibank N.A. Citibank N.A. Caja de Valores
Philippines Hongkong and Shanghai Banking Hongkong and Shanghai Banking N/A
Corp., Ltd. Corp., Ltd.
Poland Citibank S.A. Bank Polska Kasa Opieki S.A. NDS
Portugal Banco Comercial Portugues Banco Comercial Portugues CENTRAL
Citibank (Fid)
Russia Credit Suisse (Moscow) Ltd. Credit Suisse (Moscow) Ltd. N/A
Vnesrtorgbank (Fid)
Singapore Overseas Chinese Banking Corp. Overseas Chinese Banking Corp. CDP
Citibank (Equity)
Slovak Republic ING Bank N/A SCP
South Africa First National Bank of First National Bank of Central Depository
Southern Africa Southern Africa Ltd.
Spain Banco Santander Banco Santander SCLV
Citibank (Fid)
JP Morgan (IPB)
Sri Lanka Hongkong and Shanghai Banking Hongkong and Shanghai Banking CDS
Corp., Ltd. Corp., Ltd.
Swaziland Barclays Bank of Swaziland Ltd. N/A N/A
Sweden Svenska Handelsbanken Skandaninviska Enskilda Banken VPS
Switzerland Bank Leu Self-clear SEGA
Bank Leu (Cash)
Taiwan Hongkong and Shanghai Banking Hongkong and Shanghai Banking TSCD
Corp., Ltd. Corp., Ltd.
Standard Chartered Bank
- AFLAC only
Thailand Standard Chartered Bank Hongkong and Shanghai SDC
Banking Corp., Ltd.
Turkey Citibank N.A. Citibank N.A. N/A
United Kingdom Barclays Bank PLC Self-clear CGO - gilts only
Midland Bank (cash)
United States Depository Trust Co. Depository Trust Co. DTC
- DTC eligible securities - DTC eligible securities Chemical Bank
Chemical Bank - non-DTC Chemical Bank
eligible securities - non-DTC eligible securities
Uruguay Citibank N.A. Citibank N.A. N/A
Venezuela Citibank N.A. Citibank N.A. N/A
Zambia Barclays Bank of Zambia N/A Lusaka Stock Exchange
Depository
Zimbabwe Barclays Bank of Zimbabwe Ltd. N/A N/A
</TABLE>
<PAGE>
LENDING ADDENDUM TO
CUSTODY AGREEMENT
ADDENDUM DATED AS OF MARCH 5, 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 March 5, 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: /s/ G. Federico
---------------------------
Name: Jack Federico
Title: Principal
FOREIGN FUND, INC.
By: /s/ Lisa M. King
---------------------------
Name: Lisa M. King
Title: Asst. Secretary
<PAGE>
FORM OF
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of March 11, 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"); and
WHEREAS, the Fund issues its shares in Index Series; 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 PERSON" 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 to each Index Series
of the Fund and approving this Agreement;
(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 one or more Index Series 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
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 to any 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 10, 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: /s/ Stephen M. Wynne
--------------------------------
Title: Executive Vice President
--------------------------------
FOREIGN FUND, INC.
By: /s/ Nathan Most
--------------------------------
Title: President
--------------------------------
18
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of March 11, 1996, is Exhibit A to that certain
Administration and Accounting Services Agreement dated as of March 11, 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 (Free) 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
Nathan Most /s/ Nathan Most
- ------------------------ ---------------------------
President
Stephen M. Wynne /s/ Stephen M. Wynne
- ------------------------ ---------------------------
Treasurer
JoAnne M. Bennick /s/ JoAnne M. Bennick
- ------------------------ ---------------------------
Asst. Treasurer
Stephen C. Beach /s/ Stephen C. Beach
- ------------------------ ---------------------------
Asst. Treasurer
Gary M. Gardner /s/ Gary M. Gardner
- ------------------------ ---------------------------
Asst. Secretary
Lisa M. King /s/ Lisa M. King
- ------------------------ ---------------------------
Asst. Secretary
Nick Doms /s/ Nick Doms
- ------------------------ ---------------------------
Betsy Connolly /s/ Betsy Connolly
- ------------------------ ---------------------------
Mike Crinieri /s/ Mike Crinieri
- ------------------------ ---------------------------
Dale Lampe /s/ Dale Lampe
- ------------------------ ---------------------------
John Pelletier /s/ John Pelletier
- ------------------------ ---------------------------
Kimberley Sankey /s/ Kimberley Sankey
- ------------------------ ---------------------------
Amy Schioldager /s/ Amy Schioldager
- ------------------------ ---------------------------
Matt Shelton /s/ Matt Shelton
- ------------------------ ---------------------------
20
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
Ross Johnston /s/ Ross Johnston
- ------------------------ ---------------------------
Kevin Maeda /s/ Kevin Maeda
- ------------------------ ---------------------------
21
<PAGE>
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of March 11, 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"); and
WHEREAS, the Fund issues its shares in Index Series; 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 PERSON" 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
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
-9-
<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
-10-
<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;
-11-
<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
-12-
<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
-14-
<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: /s/ Robert J. Pulsing
-------------------------------
Title: Vice President
-------------------------------
FOREIGN FUND, INC.
By: /s/ Nathan Most
-------------------------------
Title: President
-------------------------------
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<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of March 11, 1996, is Exhibit A to that certain
Transfer Agency Services Agreement dated as of March 11, 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 (Free) 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
Nathan Most /s/ Nathan Most
- ------------------------------ --------------------------------
President
Stephen M. Wynne /s/ Stephen M. Wynne
- ------------------------------ --------------------------------
Treasurer
JoAnne M. Bennick /s/ JoAnne M. Bennick
- ------------------------------ --------------------------------
Asst. Treasurer
Stephen C. Beach /s/ Stephen C. Beach
- ------------------------------ --------------------------------
Asst. Treasurer
Gary M. Gardner /s/ Gary M. Gardner
- ------------------------------ --------------------------------
Asst. Secretary
Lisa M. King /s/ Lisa M. King
- ------------------------------ --------------------------------
Asst. Secretary
Nick Doms /s/ Nick Doms
- ------------------------------ --------------------------------
Betsy Connolly /s/ Betsy Connolly
- ------------------------------ --------------------------------
Mike Crinieri /s/ Mike Crinieri
- ------------------------------ --------------------------------
Dale Lampe /s/ Dale Lampe
- ------------------------------ --------------------------------
John Pelletier /s/ John Pelletier
- ------------------------------ --------------------------------
Kimberley Sankey /s/ Kimberley Sankey
- ------------------------------ --------------------------------
Amy Schioldager /s/ Amy Schioldager
- ------------------------------ --------------------------------
Matt Shelton /s/ Matt Shelton
- ------------------------------ --------------------------------
Ross Johnston /s/ Ross Johnston
- ------------------------------ --------------------------------
Kevin Maeda /s/ Kevin Maeda
- ------------------------------ --------------------------------
-21-
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights," "Independent Auditors," "Financial Statements" and "General
Information" and to the use of our report dated October 14, 1996, in this
Post-Effective Amendment No. 1 (Form N-1A No. 33-97598/811-9102) of WEBS
Index Fund, Inc., formerly Foreign Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
October 28, 1996
<PAGE>
FOREIGN FUND INC.
AUSTRALIA INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $9,846,879) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,024,125
Cash (including foreign currency of $57,435 with a cost of $57,455) . . . . . . . . . . . . . . . . . . 63,410
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,818
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,686
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,011
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,241,920
-----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,635
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,404
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,597
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,882
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,472
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,924
-----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,914
-----------
NET ASSETS
Capital stock, $0.001 par value (127.8 million shares of common stock authorized) . . . . . . . . . . . 1,000
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,964,137
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,951
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (11,183)
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,101
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,136,006
-----------
-----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,030
-----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.14
-----------
-----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
AUSTRIA INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $3,243,398) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,993,733
Cash (including foreign currency of $1,350 with a cost of $1,361) . . . . . . . . . . . . . . . . . . . 33,999
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,767
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,336
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,167
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,118,627
----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 978
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,056
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,433
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,298
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,547
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,977
----------
NET ASSETS
Capital stock, $0.001 par value (19.8 million shares of common stock authorized). . . . . . . . . . . . 300
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,385,452
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,278
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (1,097,674)
Net unrealized depreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (249,706)
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,043,650
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,030
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.14
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
BELGIUM INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Cost - $1,745,052) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,789,783
Cash (including foreign currency of $989 with a cost of $996) . . . . . . . . . . . . . . . . . . . . . 7,863
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,897
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,401
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 853
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,835,818
----------
LIABILITIES
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,383
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,341
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,683
----------
NET ASSETS
Capital stock, $0.001 par value (136.2 million shares of common stock authorized) . . . . . . . . . . . 120
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,775,527
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,888)
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (5,340)
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,716
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,806,135
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,030
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.05
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
CANADA INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $13,650,334). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,208,739
Cash (including foreign currency of $7,248 with a cost of $7,210) . . . . . . . . . . . . . . . . . . . 89,282
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,674
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,573
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,029
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,413,533
-----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,963
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,887
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,118
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,247
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,505
-----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,320
-----------
NET ASSETS
Capital stock, $0.001 par value (340.2 million shares of common stock authorized) . . . . . . . . . . . 1,300
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,743,951
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,306
Accumulated net realized gain on investments and foreign currency related transactions. . . . . . . . . 64
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558,592
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,327,213
-----------
-----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,030
-----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.02
-----------
-----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
FRANCE INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $7,566,327) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,936,398
Cash (including foreign currency of $1,498 with a cost of $1,522) . . . . . . . . . . . . . . . . . . . 30,369
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,518
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952
Receivable for securities sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,646,684
Receivable for Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,547,524
Purchase fee receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,200
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,803
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,375
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,442,823
----------
LIABILITIES
Payable for fund share redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,675,094
Payable for securities purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,499,217
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,190
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,478
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,220
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,888
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,395
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,151
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,372,633
----------
NET ASSETS
Capital stock, $0.001 par value (340.2 million shares of common stock authorized) . . . . . . . . . . . 601
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,314,095
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,741)
Accumulated net realized gain on investments and foreign currency related transactions. . . . . . . . . 390,438
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369,797
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,070,190
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601,000
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.43
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
GERMANY INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $16,354,790). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,436,514
Cash (including foreign currency of $3,150 with a cost of $3,234) . . . . . . . . . . . . . . . . . . . 41,801
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,241
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,432
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,859
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,997
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,683,844
-----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,197
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,701
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,077
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,582
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,908
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,648
-----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,113
-----------
NET ASSETS
Capital stock, $0.001 par value (382.2 million shares of common stock authorized) . . . . . . . . . . . 1,201
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,117,814
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,666)
Accumulated net realized gain on investments and foreign currency related transactions. . . . . . . . . 287,849
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,533
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,485,731
-----------
-----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,201,000
-----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.73
-----------
-----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
HONG KONG INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $7,867,474) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,310,903
Cash (including foreign currency of $21,756 with a cost of $21,757) . . . . . . . . . . . . . . . . . . 22,422
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,999
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,767
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,504
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,398,944
----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,117
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,643
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,775
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,179
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,705
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,237
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,656
----------
NET ASSETS
Capital stock, $0.001 par value (191.4 million shares of common stock authorized) . . . . . . . . . . . 601
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,897,650
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,389)
Accumulated net realized ain on investments and foreign currency related transactions . . . . . . . . . 0
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443,426
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,340,288
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601,000
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.88
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
ITALY INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $25,952,115). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,188,586
Cash (including foreign currency of $1,147 with a cost of $1,157) . . . . . . . . . . . . . . . . . . . 207,663
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,342
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,188
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,907
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,502,686
-----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,986
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,861
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,330
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,952
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,081
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,941
-----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,151
-----------
NET ASSETS
Capital stock, $0.001 par value (63.6 million shares of common stock authorized). . . . . . . . . . . . 1,800
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,654,863
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,811)
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (396,778)
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,461
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,430,535
-----------
-----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800,030
-----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.68
-----------
-----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
JAPAN INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $111,377,119) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106,140,645
Cash (including foreign currency of $41,221 with a cost of $41,936) . . . . . . . . . . . . . . . . . . 220,716
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,096
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,569
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416,687
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,707
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,038,420
------------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,556
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,406
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,119
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,138
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,874
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,930
------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234,023
------------
NET ASSETS
Capital stock, $0.001 par value (2,124.6 million shares of common stock authorized) . . . . . . . . . . 7,201
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,901,662
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,072
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (2,715)
Net unrealized depreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,239,823)
------------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106,804,397
------------
------------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,201,000
------------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.83
------------
------------
</TABLE>
<PAGE>
FOREIGN FUND INC.
MALAYSIA INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $10,225,907). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,412,807
Cash (including foreign currency of $9,904 with a cost of $9,935) . . . . . . . . . . . . . . . . . . . 52,018
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,785
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Receivable for Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,051,427
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,948
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,531
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,585,687
-----------
LIABILITIES
Payable for securities purchased. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,035,732
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,319
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,939
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,095
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,783
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,248
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,153
-----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,122,269
-----------
NET ASSETS
Capital stock, $0.001 par value (127.8 million shares of common stock authorized) . . . . . . . . . . . 750
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,272,345
Accumulated net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,521
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (31)
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,833
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,463,418
-----------
-----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,030
-----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.95
-----------
-----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
MEXICO INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $6,191,512) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,797,349
Cash (including foreign currency of $79 with a cost of $78) . . . . . . . . . . . . . . . . . . . . . . 135,213
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,520
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,581
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,991,153
----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,356
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,465
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,889
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,988
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,392
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,012
----------
NET ASSETS
Capital stock, $0.001 par value (255 million shares of common stock authorized) . . . . . . . . . . . . 600
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,364,988
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,284)
Accumulated net realized gain on investments and foreign currency related transactions. . . . . . . . . 0
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605,837
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,967,141
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,030
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.61
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
NETHERLANDS INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $6,369,828) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,885,901
Cash (including foreign currency of $58,969 with a cost of $59,506) . . . . . . . . . . . . . . . . . . 204,865
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,084
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,240
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,365
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,219
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,151,674
----------
LIABILITIES
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,443
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,558
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 981
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,669
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,784
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,682
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,117
----------
NET ASSETS
Capital stock, $0.001 par value (255 million shares of common stock authorized) . . . . . . . . . . . . 401
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,594,813
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,822
Accumulated net realized loss on investments and foreign currency related transaction . . . . . . . . . (2,807)
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,328
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,133,557
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401,000
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17.79
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
SINGAPORE INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $9,448,905) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,951,779
Cash (including foreign currency of $133,822 with a cost of $133,306) . . . . . . . . . . . . . . . . . 151,821
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,468
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Receivable from Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,532
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,420
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,177,032
----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,263
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,858
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,007
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,724
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,712
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,003
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,567
----------
NET ASSETS
Capital stock, $0.001 par value (191.4 million shares of common stock authorized) . . . . . . . . . . . 800
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,703,783
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,552)
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (77,963)
Net unrealized depreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (496,603)
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,127,465
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,030
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.41
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
SPAIN INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $3,977,139) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,237,927
Cash (including foreign currency of $56,288 with a cost of $57,310) . . . . . . . . . . . . . . . . . . 95,515
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,514
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,843
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,521
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,422,733
----------
LIABILITIES
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,963
Stamp tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,695
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,874
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,573
----------
NET ASSETS
Capital stock, $0.001 par value (127.8 million shares of common stock authorized) . . . . . . . . . . . 300
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,076,622
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,355
Accumulated net realized gain on investments and foreign currency related transactions. . . . . . . . . 156
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,727
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,339,160
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,030
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.46
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
SWEDEN INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $4,052,983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,522,119
Cash (including foreign currency of $2,417 with a cost of $2,383) . . . . . . . . . . . . . . . . . . . 45,007
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,977
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,066
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,623,509
----------
LIABILITIES
Administration fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,310
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,791
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,017
----------
NET ASSETS
Capital stock, $0.001 par value (63.6 million shares of common stock authorized). . . . . . . . . . . . 300
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,125,250
Accumulated net investment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,840)
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . 32,380
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469,170
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,573,492
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,030
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.24
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
SWITZERLAND INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $5,985,680) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,897,497
Cash (including foreign currency of $18,212 with a cost of $19,037) . . . . . . . . . . . . . . . . . . 48,157
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,991
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,071
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,830
----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,087,749
----------
LIABILITIES
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,238
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,546
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,337
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,696
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,042
----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,859
----------
NET ASSETS
Capital stock, $0.001 par value (318.625 million shares of common stock authorized) . . . . . . . . . . 501
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,099,525
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Accumulated net realized loss on investments and foreign currency related transactions. . . . . . . . . (36,109)
Net unrealized depreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (89,124)
----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,974,890
----------
----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501,000
----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.93
----------
----------
</TABLE>
<PAGE>
FOREIGN FUND INC.
UNITED KINGDOM INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30,1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost - $14,787,796). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,975,951
Cash (including foreign currency of $33,136 with a cost of $33,057) . . . . . . . . . . . . . . . . . . 154,668
Dividends receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,125
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Unamortized organization cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,635
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,817
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,384,434
-----------
LIABILITIES
Administation fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,972
Distribution fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,285
Advisory fee payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,548
Custody fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,327
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,539
Loan payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000
Interest payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663
Deferred organization cost payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,494
-----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,828
-----------
NET ASSETS
Capital stock, $0.001 par value (934.2 million shares of common stock authorized) . . . . . . . . . . . 1,201
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,941,861
Accumulated net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,703
Accumulated net realized gain on investments and foreign currency related transactions. . . . . . . . . 8,500
Net unrealized appreciation in value of investments and translation of other assets and liabilities
denominated in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,189,341
-----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,145,606
-----------
-----------
Shares of common stock issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,201,000
-----------
Net Asset Value Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.44
-----------
-----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000930667
<NAME> FOREIGN FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> AUSTRALIA INDEX SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 11770743
<INVESTMENTS-AT-VALUE> 12049239
<RECEIVABLES> 2029976
<ASSETS-OTHER> 189891
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14269106
<PAYABLE-FOR-SECURITIES> 1960439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 131887
<TOTAL-LIABILITIES> 2092326
<SENIOR-EQUITY> 1200
<PAID-IN-CAPITAL-COMMON> 11931054
<SHARES-COMMON-STOCK> 1200030
<SHARES-COMMON-PRIOR> 30
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 34085
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 278611
<NET-ASSETS> 12176780
<DIVIDEND-INCOME> 138877
<INTEREST-INCOME> 5866
<OTHER-INCOME> 0
<EXPENSES-NET> 61096
<NET-INVESTMENT-INCOME> 83647
<REALIZED-GAINS-CURRENT> 23767
<APPREC-INCREASE-CURRENT> 278611
<NET-CHANGE-FROM-OPS> 386025
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 127158
<DISTRIBUTIONS-OF-GAINS> 25001
<DISTRIBUTIONS-OTHER> 34847
<NUMBER-OF-SHARES-SOLD> 1200000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12176475
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10350
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 61436
<AVERAGE-NET-ASSETS> 8134513
<PER-SHARE-NAV-BEGIN> 9.95
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> .29
<PER-SHARE-DIVIDEND> .13
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> .03
<PER-SHARE-NAV-END> 10.15
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 872
<AVG-DEBT-PER-SHARE> .001
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000930667
<NAME> FOREIGN FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> AUSTRIA INDEX SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 14484721
<INVESTMENTS-AT-VALUE> 13307320
<RECEIVABLES> 1049453
<ASSETS-OTHER> 266311
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14623084
<PAYABLE-FOR-SECURITIES> 1019365
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83660
<TOTAL-LIABILITIES> 1103025
<SENIOR-EQUITY> 1300
<PAID-IN-CAPITAL-COMMON> 14696778
<SHARES-COMMON-STOCK> 1300030
<SHARES-COMMON-PRIOR> 30
<ACCUMULATED-NII-CURRENT> 5240
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6187)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1177072)
<NET-ASSETS> 13520059
<DIVIDEND-INCOME> 84425
<INTEREST-INCOME> 3483
<OTHER-INCOME> 0
<EXPENSES-NET> 56420
<NET-INVESTMENT-INCOME> 31488
<REALIZED-GAINS-CURRENT> 85287
<APPREC-INCREASE-CURRENT> (1177072)
<NET-CHANGE-FROM-OPS> (1060297)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 34356
<DISTRIBUTIONS-OF-GAINS> 33601
<DISTRIBUTIONS-OTHER> 100047
<NUMBER-OF-SHARES-SOLD> 1700000
<NUMBER-OF-SHARES-REDEEMED> 400000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13519724
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9748
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 56726
<AVERAGE-NET-ASSETS> 7661632
<PER-SHARE-NAV-BEGIN> 10.91
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> (.41)
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> (.03)
<RETURNS-OF-CAPITAL> (.08)
<PER-SHARE-NAV-END> 10.40
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK>0000930667
<NAME>FOREIGN FUND, INC.
<SERIES>
<NUMBER> 03
<NAME> BELGIUM INDEX SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 1801814
<INVESTMENTS-AT-VALUE> 1832666
<RECEIVABLES> 609681
<ASSETS-OTHER> 36515
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2478862
<PAYABLE-FOR-SECURITIES> 615165
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63910
<TOTAL-LIABILITIES> 679075
<SENIOR-EQUITY> 120
<PAID-IN-CAPITAL-COMMON> 1775527
<SHARES-COMMON-STOCK> 120030
<SHARES-COMMON-PRIOR> 30
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 5884
<ACCUMULATED-NET-GAINS> (943)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30967
<NET-ASSETS> 1799787
<DIVIDEND-INCOME> 59588
<INTEREST-INCOME> 698
<OTHER-INCOME> 0
<EXPENSES-NET> 17342
<NET-INVESTMENT-INCOME> 42944
<REALIZED-GAINS-CURRENT> 18047
<APPREC-INCREASE-CURRENT> 30967
<NET-CHANGE-FROM-OPS> 91958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 49219
<DISTRIBUTIONS-OF-GAINS> 6082
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 200000
<NUMBER-OF-SHARES-REDEEMED> 80000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1799332
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2045
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17414
<AVERAGE-NET-ASSETS> 1607431
<PER-SHARE-NAV-BEGIN> 14.92
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> .36
<PER-SHARE-DIVIDEND> .61
<PER-SHARE-DISTRIBUTIONS> .08
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.99
<EXPENSE-RATIO> 2.29
<AVG-DEBT-OUTSTANDING> 1017
<AVG-DEBT-PER-SHARE> .01
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000930667
<NAME> FOREIGN FUND, INC.
<SERIES>
<NUMBER> 04
<NAME> CANADA INDEX SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 13651478
<INVESTMENTS-AT-VALUE> 13677248
<RECEIVABLES> 1077640
<ASSETS-OTHER> 161474
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14916362
<PAYABLE-FOR-SECURITIES> 1055723
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 84240
<TOTAL-LIABILITIES> 1139963
<SENIOR-EQUITY> 1300
<PAID-IN-CAPITAL-COMMON> 13743951
<SHARES-COMMON-STOCK> 1300030
<SHARES-COMMON-PRIOR> 30
<ACCUMULATED-NII-CURRENT> 5167
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25981
<NET-ASSETS> 13776399
<DIVIDEND-INCOME> 112885
<INTEREST-INCOME> 948
<OTHER-INCOME> 0
<EXPENSES-NET> 73529
<NET-INVESTMENT-INCOME> 40304
<REALIZED-GAINS-CURRENT> 71510
<APPREC-INCREASE-CURRENT> 25981
<NET-CHANGE-FROM-OPS> 137795
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 35269
<DISTRIBUTIONS-OF-GAINS> 10800
<DISTRIBUTIONS-OTHER> 3132
<NUMBER-OF-SHARES-SOLD> 1500000
<NUMBER-OF-SHARES-REDEEMED> 200000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13776096
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73951
<AVERAGE-NET-ASSETS> 10848143
<PER-SHARE-NAV-BEGIN> 10.17
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .43
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.60
<EXPENSE-RATIO> 1.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK>0000930667
<NAME>FOREIGN FUND, INC.
<SERIES>
<NUMBER> 05
<NAME> FRANCE INDEX SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 22697914
<INVESTMENTS-AT-VALUE> 22580142
<RECEIVABLES> 2643476
<ASSETS-OTHER> 506901
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25730519
<PAYABLE-FOR-SECURITIES> 2499217
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 301368
<TOTAL-LIABILITIES> 2800585
<SENIOR-EQUITY> 1801
<PAID-IN-CAPITAL-COMMON> 23036770
<SHARES-COMMON-STOCK> 1801000
<SHARES-COMMON-PRIOR> 1000
<ACCUMULATED-NII-CURRENT> 7522
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (116159)
<NET-ASSETS> 22929934
<DIVIDEND-INCOME> 243047
<INTEREST-INCOME> 1930
<OTHER-INCOME> 0
<EXPENSES-NET> 98757
<NET-INVESTMENT-INCOME> 146220
<REALIZED-GAINS-CURRENT> 583565
<APPREC-INCREASE-CURRENT> (116159)
<NET-CHANGE-FROM-OPS> 613626
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 168305
<DISTRIBUTIONS-OF-GAINS> 1601
<DISTRIBUTIONS-OTHER> 329606
<NUMBER-OF-SHARES-SOLD> 2400000
<NUMBER-OF-SHARES-REDEEMED> 600000
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22917114
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14503
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 99271
<AVERAGE-NET-ASSETS> 11399102
<PER-SHARE-NAV-BEGIN> 12.42
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> .45
<PER-SHARE-DIVIDEND> .10
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> .21
<PER-SHARE-NAV-END> 12.73
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 3052
<AVG-DEBT-PER-SHARE> .002
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK>0000930667
<NAME>FOREIGN FUND, INC.
<SERIES>
<NUMBER> 06
<NAME> GERMANY INDEX SERIES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
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