<PAGE> 1
WORLD EQUITY BENCHMARK SHARES(SM)
WEBS INDEX FUND, INC.
[WEBS LOGO]
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 (Free) 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 WEBS Index Series 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 WEBS Index Series 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 October 29, 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 Statement of Additional Information, material incorporated by
reference herein and other information regarding the Fund is available at the
SEC's Web site (http://www.sec.gov). 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 OCTOBER 29, 1997
<PAGE> 2
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.................................................... 17
WEBS Index Fund, Inc and its Investment Objective................................... 17
World Equity Benchmark Shares: "WEBS"............................................... 18
Who Should Invest?.................................................................. 18
Investment Policies................................................................. 18
Implementation of Policies.......................................................... 20
Investment Limitations.............................................................. 23
The Benchmark MSCI Indices Utilized by the WEBS Index Series........................ 23
Management of the Fund.............................................................. 32
Exchange Listing and Trading of WEBS................................................ 35
Investment Considerations and Risks................................................. 36
Determination of Net Asset Value.................................................... 39
Creation Units...................................................................... 39
Purchase and Issuance of WEBS in Creation Units..................................... 40
Redemption of WEBS in Creation Units................................................ 41
Dividends and Capital Gains Distributions........................................... 42
Tax Matters......................................................................... 42
Book-Entry Only System.............................................................. 44
Performance......................................................................... 45
General Information................................................................. 46
Available Information............................................................... 46
</TABLE>
------------------------------
"World Equity Benchmark Shares" and "WEBS" are service marks of Morgan
Stanley, Dean Witter, Discover & Co. 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> 3
PROSPECTUS SUMMARY
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 (Free) 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 WEBS Index Series
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"). 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 Funds Distributor, Inc. 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, Inc. A
"round lot" of WEBS is 100 shares. At October 15,
1997, the closing price per share of the WEBS of
each WEBS Index Series was between $23 5/8
(Netherlands WEBS Index Series) and $8 (Malaysia
(Free) WEBS Index Series) although there can be no
assurance of this price
3
<PAGE> 4
range or that an active trading market will develop
or be maintained for WEBS of a particular WEBS
Index Series.
Who Should Invest?......... WEBS are designed for investors who seek a
relatively low-cost "passive" approach for
investing in a portfolio of equity securities of
companies located in the country of the subject
MSCI Index. Unlike equity mutual funds that seek to
"beat" market averages with unpredictable results,
the 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, Lending Agent and
Sub-Administrator. Morgan Stanley Trust Company
("MSTC") serves as the Custodian for the cash and
portfolio securities of each WEBS Index Series, as
Lending Agent of the portfolio securities of each
WEBS Index Series and as a Sub-Administrator of the
Fund.
4
<PAGE> 5
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.
("LICENSEE"). THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY
CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL
INTERNATIONAL S.A.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED BY
MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY MEMBER OF THE
PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY, OR IN
THE WEBS OF ANY WEBS INDEX SERIES PARTICULARLY, OR THE ABILITY OF THE INDICES
IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS
THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN
STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK
("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO
MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND
CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX SERIES OR THE ISSUER
THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS
OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX SERIES OR THE OWNERS OF THE WEBS OF
ANY WEBS INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR
CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN
STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS
RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN, THE DETERMINATION OF THE TIMING
OF, PRICES OF, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED
OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY WEBS
INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE
CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED UNDER ANY LICENSE AGREEMENT OR FOR ANY OTHER
USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED WARRANTIES,
AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MSCI INDICES OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY
OR CIPSA HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
------------------------------
The information contained herein regarding MSCI, the MSCI Indices, local
securities markets and The Depository Trust Company ("DTC") was obtained from
publicly available sources.
5
<PAGE> 6
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
with respect to each WEBS Index Series of the Fund. The tables show all expenses
and fees the Fund is expected to incur. The information under "Annual Series
Operating Expenses" is based on actual expenses incurred by the Fund in the
fiscal year ended August 31, 1997, adjusted to reflect changes in the rate of
Rule 12b-1 and administration fees that became effective on October 29, 1997.
The examples set forth below are presented for an investment of $1,000 (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 August 31, 1997, the values of the 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 were as follows: the Australia WEBS Index Series, $2,066,318; the Austria
WEBS Index Series, $1,024,278; the Belgium WEBS Index Series, $621,904; the
Canada WEBS Index Series, $1,350,627; the France WEBS Index Series, $2,839,583;
the Germany WEBS Index Series, $4,821,741; the Hong Kong WEBS Index Series,
$1,093,278; the Italy WEBS Index Series, $2,499,375; the Japan WEBS Index
Series, $7,534,841; the Malaysia (Free) WEBS Index Series, $611,394; the Mexico
(Free) WEBS Index Series, $1,518,310; the Netherlands WEBS Index Series,
$1,084,136; the Singapore (Free) WEBS Index Series, $835,742; the Spain WEBS
Index Series, $1,393,573; the Sweden WEBS Index Series, $1,399,230; the
Switzerland WEBS Index Series, $1,739,021; and the United Kingdom WEBS Index
Series, $3,245,520. The foregoing values are based on information available on
August 31, 1997. The actual dollar values on any particular day will fluctuate
and may be greater or less than such values. For additional information, please
refer to "Creation Units" on page 39 of this Prospectus.
6
<PAGE> 7
<TABLE>
<CAPTION>
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY
WEBS WEBS WEBS WEBS WEBS WEBS
INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <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 None
Maximum Transaction Fee (a) for Purchase of
one Creation Unit of WEBS:
In-kind and Cash Purchases (b)............. $2,500 $2,000 $1,600 $4,100 $4,200 $2,700
Additional Variable Charge for Cash
Purchases (NOTE - The Fund will not
ordinarily permit cash
purchases.)(b)......................... .60% .67% .30% .30% .25% .25%
Deferred Sales Load........................ None None None None None None
Maximum Redemption Transaction Fee (a) for
Redemption of one Creation Unit of WEBS:
In-kind and Cash Redemptions (c)........... $2,500 $2,000 $1,600 $4,100 $4,200 $2,700
Additional Variable Charge for Cash
Redemptions (NOTE - The Fund will not
ordinarily permit cash redemptions.)
(c).................................... .60% .67% .30% .30% .25% .25%
B. Annual Series Operating Expenses (as a
percentage of average net assets)
Management Fees............................ .27% .27% .27% .27% .27% .27%
12b-1 Fees (d)............................. .20% .20% .20% .20% .20% .20%
Other Expenses*............................ .86% 1.21% .77% .88% 1.05% .90%
---- ---- ---- ---- ---- ----
Total Operating Expenses*.................. 1.33% 1.68% 1.24% 1.35% 1.52% 1.37%
==== ==== ==== ==== ==== ====
<CAPTION>
HONG KONG ITALY JAPAN
WEBS WEBS WEBS
INDEX SERIES INDEX SERIES INDEX SERIES
------------ ------------ ------------
<S> <C> <C> <C>
A.
None None None
$4,100 $2,200 $8,700
.60% .30% .15%
None None None
$4,100 $2,200 $8,700
.60% .30% .40%
B.
.27% .27% .27%
.20% .20% .20%
.96% .86% .72%
---- ----
1.43% 1.33% 1.19%
==== ====
</TABLE>
* These expense ratio percentages reflect the average daily net assets of the 17
WEBS Index Series for the fiscal year ended August 31, 1997, which totaled
$339,878,558. The net assets of the 17 WEBS Index Series totaled $471,618,074
as of August 31, 1997.
7
<PAGE> 8
<TABLE>
<CAPTION>
SINGAPORE UNITED
MALAYSIA MEXICO NETHERLANDS (FREE) SPAIN SWEDEN SWITZERLAND KINGDOM
(FREE) WEBS (FREE) WEBS WEBS WEBS WEBS WEBS WEBS WEBS
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>
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 None None None
Maximum Transaction Fee(a) for
Purchase of one Creation Unit
of WEBS:
In-kind and Cash
Purchases(b)................ $ 5,300 $ 2,900 $ 2,100 $ 2,800 $2,700 $2,600 $ 2,100 $5,900
Additional Variable Charge for
Cash Purchases (NOTE - The
Fund will not ordinarily
permit cash
purchases.)(b).............. 1.07% .50% .25% 1.30% .25% .30% .40% .25%
Deferred Sales Load............. None None None None None None None None
Maximum Redemption Transaction
Fee (a) for Redemption of one
Creation Unit of WEBS:
In-kind and Cash Redemptions
(c)......................... $ 5,300 $ 2,900 $ 2,100 $ 2,800 $2,700 $2,600 $ 2,100 $5,900
Additional Variable Charge for
Cash Redemptions (NOTE - The
Fund will not ordinarily
permit cash
redemptions.)(c)............ 1.07% .50% .25% 1.30% .45% .30% .40% .75%
B. Annual Series Operating
Expenses (as a percentage of
average net assets)
Management Fees................. .27% .27% .27% .27% .27% .27% .27% .27%
12b-1 Fees(d)................... .20% .20% .20% .20% .20% .20% .20% .20%
Other Expenses*................. .99% 1.16% .99% .96% 1.20% 1.17% 1.05% .91%
------ ------ ------ ------ ------ ------ ------ ------
Total Operating Expenses*....... 1.46% 1.63% 1.46% 1.43% 1.67% 1.64% 1.52% 1.38%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
* These expense ratio percentages reflect the average daily net assets of the 17
WEBS Index Series for the fiscal year ended August 31, 1997, which totaled
$339,878,558. The net assets of the 17 WEBS Index Series totaled $471,618,074
as of August 31, 1997.
8
<PAGE> 9
- ------------------------------
(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 (Free) 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 by the Fund to the Distributor will be made pursuant to the
Fund's Rule 12b-1 Plan at a rate set from time to time by the Board of
Directors, provided that the annual rate may not exceed .25% of the Fund's
average daily net assets. The Board of Directors has determined to limit the
annual fee payable under the Rule 12b-1 Plan with respect to each WEBS Index
Series so as not to exceed .20% of the average daily net assets of each WEBS
Index Series until further notice. See "Management of the
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. In addition, the Distributor has
9
<PAGE> 10
entered into agreements whereby certain broker-dealers and/or their
salespersons may receive a portion of the Rule 12b-1 fee to compensate them
for their distribution of WEBS and/or for services provided to their
shareholders or to the Fund. For additional information on these
compensation arrangements, see "Investment Advisory, Management,
Administrative and Distribution Services -- The Distributor" in the
Statement of Additional Information.
EXPLANATION OF TABLES
A. Shareholder Transaction Expenses are charges that investors pay to buy or
sell Creation Units of the Fund. The figures in the table are estimates and
actual shareholder transaction expenses may vary from such estimates. See
"Purchase and Issuance of WEBS in Creation Units" and "Redemption of WEBS in
Creation Units" in this Prospectus and in the Statement of Additional
Information for an explanation of how these charges apply.
B. Annual Series Operating Expenses are based on actual expenses incurred by the
Fund for the fiscal year ended August 31, 1997, as adjusted to reflect
changes to the rates of Rule 12b-1 and administration fees that became
effective on October 29, 1997. Actual expenses may vary and will be affected
by, among other things, the levels of average net assets of a WEBS Index
Series and the Fund. Management fees are paid to the Adviser to provide each
WEBS Index Series with investment advisory, management and certain
administrative services. "Other Expenses" include fees paid to the
Administrator to provide the Fund with administrative and fund accounting
services. From time to time, the Administrator may waive the administration
fees otherwise payable to it or may reimburse the Fund for its operating
expenses. On July 1, 1997, the Administrator waived all deferred fees. The
waived amount totaled $648,802 as of such date. Distribution fees are paid to
the Distributor, to compensate the Distributor and/or reimburse it for
certain expenses and for payments made to dealers and other persons providing
distribution, marketing and shareholder services to the Fund. See "Management
of the Fund" for additional information.
10
<PAGE> 11
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 following expenses on a $1,000 investment (payment with a deposit of
Deposit Securities), assuming (1) a 5% annual return and (2) redemption
(delivery of Deposit Securities), at the end of each indicated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
($) ($) ($) ($)
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Australia WEBS Index Series...................... 15.94 44.47 75.09 161.83
Austria WEBS Index Series........................ 20.94 56.69 94.79 201.37
Belgium WEBS Index Series........................ 17.74 44.35 72.96 154.28
Canada WEBS Index Series......................... 19.77 48.66 79.66 167.41
France WEBS Index Series......................... 18.39 50.86 85.57 183.24
Germany WEBS Index Series........................ 15.06 44.44 75.94 165.08
Hong Kong WEBS Index Series...................... 22.00 52.53 85.23 177.54
Italy WEBS Index Series.......................... 15.29 43.82 74.45 161.22
Japan WEBS Index Series.......................... 14.42 40.02 67.57 146.02
Malaysia (Free) WEBS Index Series................ 32.06 63.06 96.24 189.81
Mexico (Free) WEBS Index Series.................. 20.36 55.08 92.12 195.93
Netherlands WEBS Index Series.................... 18.70 49.91 83.32 177.52
Singapore (Free) WEBS Index Series............... 21.20 51.74 84.46 176.81
Spain WEBS Index Series.......................... 20.81 56.36 94.25 200.27
Sweden WEBS Index Series......................... 20.35 55.28 92.54 196.91
Switzerland WEBS Index Series.................... 17.86 50.33 85.05 182.75
United Kingdom WEBS Index Series................. 17.66 47.21 78.89 168.49
</TABLE>
(b) Such an investor would pay the following expenses on the same investment,
assuming no redemptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
($) ($) ($) ($)
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Australia WEBS Index Series...................... 14.73 43.26 73.88 160.62
Austria WEBS Index Series........................ 18.99 54.74 92.84 199.42
Belgium WEBS Index Series........................ 15.17 41.78 70.39 151.71
Canada WEBS Index Series......................... 16.74 45.63 76.62 164.37
France WEBS Index Series......................... 16.91 49.38 84.09 181.76
Germany WEBS Index Series........................ 14.50 43.88 75.38 164.52
Hong Kong WEBS Index Series...................... 18.25 48.78 81.48 173.79
Italy WEBS Index Series.......................... 14.41 42.94 73.57 160.34
Japan WEBS Index Series.......................... 13.26 38.86 66.42 144.87
Malaysia (Free) WEBS Index Series................ 23.39 54.39 87.58 181.14
Mexico (Free) WEBS Index Series.................. 18.45 53.17 90.21 194.02
Netherlands WEBS Index Series.................... 16.76 47.97 81.38 175.58
Singapore (Free) WEBS Index Series............... 17.85 48.39 81.11 173.46
Spain WEBS Index Series.......................... 18.88 54.42 92.31 198.33
Sweden WEBS Index Series......................... 18.50 53.43 90.68 195.05
Switzerland WEBS Index Series.................... 16.65 49.12 83.85 181.54
United Kingdom WEBS Index Series................. 15.84 45.39 77.07 166.67
</TABLE>
11
<PAGE> 12
The examples above illustrate the estimated expenses associated with a
$1,000 investment in a Creation Unit of WEBS on an in-kind basis over periods of
1, 3, 5 and 10 years, based on the
expenses in the table and an assumed annual rate of return of 5%. The
presentation of a $1,000 investment in a Creation Unit is for illustration
purposes only, as WEBS may only be purchased from the 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 August 31, 1997 at between
$616,844 and $7,568,662 depending on the WEBS Index Series, assuming for this
purpose that the net asset value of a Creation Unit was the same as the value of
the Deposit Securities as of such date. See the second paragraph under "Summary
of Fund Expenses."
12
<PAGE> 13
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following tables set forth certain information concerning the investment
results of each WEBS Index Series. The financial highlights for the periods
indicated have been audited by Ernst & Young LLP, independent auditors, whose
current 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. The
financial data for each WEBS Index Series for the period ending August 31, 1996
is a part of previous financial statements audited by Ernst & Young LLP. Further
information about the performance of the Fund is available in the annual report
to shareholders, which may be obtained free of charge by calling the Distributor
at 1-800-810-WEBS (9327).
<TABLE>
<CAPTION>
AUSTRALIA WEBS AUSTRIA WEBS BELGIUM WEBS
INDEX SERIES INDEX SERIES INDEX SERIES
------------------------ ---------------------- -----------------------
FOR THE FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
YEAR ENDED 03/12/96* YEAR ENDED 03/12/96* YEAR ENDED 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96 08/31/97 -08/31/96
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.............. $ 10.15 $ 9.95(1) $ 10.40 $ 10.91(1) $ 14.99 $ 14.92(1)
------- ------- ------- ------- ------- -------
Net investment income/(loss)(+)................... 0.17 0.10 (0.02) 0.04 0.77 0.40
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets and
liabilities denominated in foreign currencies.... 0.47 0.29 0.13 (0.41) 0.62 0.36
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations................................ 0.64 0.39 0.11 (0.37) 1.39 0.76
------- ------- ------- ------- ------- -------
Less distributions
Dividends from net investment income.............. (0.16) (0.08) -- (0.02) (0.33) (0.54)
Dividends in excess of net investment income...... (0.04) (0.05) -- (0.01) (0.28) (0.09)
Distributions from net realized capital gains..... (0.04) (0.02) -- (0.03) (0.12) (0.06)
Distributions in excess of net realized gains..... -- -- -- -- -- --
Return of capital................................. (0.20) (0.04) -- (0.08) (0.01) --
------- ------- ------- ------- ------- -------
Total dividends and distributions................ (0.44) (0.19) -- (0.14) (0.74) (0.69)
------- ------- ------- ------- ------- -------
Net asset value, end of period.................... $ 10.35 $ 10.15 $ 10.51 $ 10.40 $ 15.64 $ 14.99
======= ======= ======= ======= ======= =======
Total Investment Return(2)......................... 6.23% 3.88%(4) 1.06% (3.39)%(4) 9.26% 5.01%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's).............. $ 41,406 $ 12,177 $ 4,205 $ 13,520 $ 32,528 $ 1,800
Ratios of expenses to average net assets(5)....... 1.33% 1.59%(3) 1.68% 1.56%(3) 1.24% 2.29%(3)
Ratios of net investment income/(loss) to average
net assets(5).................................... 1.57% 2.18%(3) (0.22%) 0.87%(3) 4.63% 5.67%(3)
Portfolio turnover(6)............................. 5.30% 8.84%(4) 28.47% 9.60%(4) 16.83% 6.25%(4)
Average commission rate paid...................... $ 0.0182 $ 0.0085 $ 0.1719 $ 0.2986 $ 0.3379 $ 0.4327
<CAPTION>
CANADA WEBS FRANCE WEBS
INDEX SERIES INDEX SERIES
------------------------ ------------------------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED 03/12/96* YEAR ENDED 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.............. $ 10.60 $ 10.17(1) $ 12.73 $ 12.42(1)
------- ------- ------- -------
Net investment income/(loss)(+)................... 0.05 0.04 0.17 0.17
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets and
liabilities denominated in foreign currencies.... 2.97 0.43 1.95 0.45
------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations................................ 3.02 0.47 2.12 0.62
------- ------- ------- -------
Less distributions
Dividends from net investment income.............. (0.05) (0.03) (0.15) (0.09)
Dividends in excess of net investment income...... (0.00)** (0.01) -- (0.01)
Distributions from net realized capital gains..... (0.14) -- (0.20) 0.00**
Distributions in excess of net realized gains..... -- 0.00** -- --
Return of capital................................. -- 0.00** -- (0.21)
------- ------- ------- -------
Total dividends and distributions................ (0.19) (0.04) (0.35) (0.31)
------- ------- ------- -------
Net asset value, end of period.................... $ 13.43 $ 10.60 $ 14.50 $ 12.73
======= ======= ======= =======
Total Investment Return(2)......................... 28.50% 4.63%(4) 16.60% 4.95%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's).............. $ 24,168 $ 13,776 $ 14,519 $ 22,930
Ratios of expenses to average net assets(5)....... 1.35% 1.44%(3) 1.52% 1.84%(3)
Ratios of net investment income/(loss) to average
net assets(5).................................... 0.39% 0.79%(3) 1.17% 2.72%(3)
Portfolio turnover(6)............................. 11.02% 0.00%(4) 7.13% 0.00%(4)
Average commission rate paid...................... $ 0.0217 -- $ 0.0137 $ 0.3956
</TABLE>
- ---------------
* 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 AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratios of expenses to average net assets before
waivers........................................... 1.33% 1.60%(3) 1.69% 1.57%(3) 1.24%
Ratios of net investment income/(loss) to average
net assets before waivers......................... 1.57% 2.17%(3) (0.22)% 0.86%(3) 4.63%
<CAPTION>
<S> <C> <C> <C> <C> <C>
Ratios of expenses to average net assets before
waivers........................................... 2.30%(3) 1.36% 1.45%(3) 1.52% 1.85%(3)
Ratios of net investment income/(loss) to average
net assets before waivers......................... 5.66%(3) 0.39% 0.78%(3) 1.17% 2.71%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
13
<PAGE> 14
<TABLE>
<CAPTION>
GERMANY WEBS HONG KONG WEBS
INDEX SERIES INDEX SERIES
------------------------ -------------------------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED 03/12/96* YEAR ENDED 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period............................ $ 13.64 $ 13.23(1) $ 13.05 $ 12.83(1)
------- ------- ------- -------
Net investment income/(loss)(+)................................. 0.03 0.06 0.26 0.15
Net realized and unrealized gain/(loss) on investments and
foreign currency related transactions and translation of other
assets and liabilities denominated in foreign currencies...... 2.77 0.47 2.12 0.27
------- ------- ------- -------
Net increase/(decrease) in net assets resulting from
operations................................................... 2.80 0.53 2.38 0.42
------- ------- ------- -------
Less Distributions
Dividends from net investment income............................ (0.03) (0.03) (0.21) (0.13)
Dividends in excess of net investment income.................... (0.01) (0.01) (0.01) (0.02)
Distributions from net realized capital gains................... (0.07) -- (0.34) (0.01)
Distributions in excess of net realized gains................... -- (0.01) 0.00** --
Return of capital............................................... (0.02) (0.07) (0.14) (0.04)
------- ------- ------- -------
Total dividends and distributions............................. (0.13) (0.12) (0.70) (0.20)
------- ------- ------- -------
Net asset value, end of period.................................. $ 16.31 $ 13.64 $ 14.73 $ 13.05
======= ======= ======= =======
Total Investment Return (2)...................................... 20.51% 4.00%(4) 17.80% 3.22%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's)............................ $ 24,486 $28,664 $ 25,417 $ 7,845
Ratios of expenses to average net assets(5)..................... 1.37% 1.68%(3) 1.43% 1.52%(3)
Ratios of net investment income/(loss) to average net
assets(5)..................................................... 0.23% 1.00%(3) 1.71% 2.37%(3)
Portfolio turnover(6)........................................... 9.04% 0.00%(4) 22.90% 0.00%(4)
Average commission rate paid.................................... $ 0.0236 -- $ 0.0058 $ 0.0007
<CAPTION>
ITALY WEBS JAPAN WEBS
INDEX SERIES INDEX SERIES
------------------------- -------------------------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED 03/12/96* YEAR ENDED 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period............................ $ 13.79 $ 13.62(1) $ 14.33 $ 14.79(1)
------- ------- ------- -------
Net investment income/(loss)(+)................................. 0.12 0.25 (0.06) (0.07)
Net realized and unrealized gain/(loss) on investments and
foreign currency related transactions and translation of other
assets and liabilities denominated in foreign currencies...... 3.10 0.31 (1.65) (0.39)
------- ------- ------- -------
Net increase/(decrease) in net assets resulting from
operations................................................... 3.22 0.56 (1.71) (0.46)
------- ------- ------- -------
Less Distributions
Dividends from net investment income............................ (0.11) (0.14) -- --
Dividends in excess of net investment income.................... (0.24) (0.03) -- --
Distributions from net realized capital gains................... -- (0.14) -- --
Distributions in excess of net realized gains................... -- -- (0.01) --
Return of capital............................................... -- (0.08) -- --
------- ------- ------- -------
Total dividends and distributions............................. (0.35) (0.39) (0.01) --
------- ------- ------- -------
Net asset value, end of period.................................. $ 16.66 $ 13.79 $ 12.61 $ 14.33
======= ======= ======= =======
Total Investment Return (2)...................................... 23.37% 4.11%(4) (11.97)% (3.11)%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's)............................ $ 32,495 $ 35,170 $158,957 $103,164
Ratios of expenses to average net assets(5)..................... 1.33% 1.43%(3) 1.19% 1.37%(3)
Ratios of net investment income/(loss) to average net
assets(5)..................................................... 0.76% 3.69%(3) (0.48)% (1.01)%(3)
Portfolio turnover(6)........................................... 13.70% 19.80%(4) 12.90% 21.54%(4)
Average commission rate paid.................................... $ 0.0045 $ 0.0046 $ 0.0162 $ 0.0152
</TABLE>
- ---------------
* 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 AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Ratios of expenses to average net assets before waivers.......... 1.37% 1.69%(3) 1.43% 1.53%(3)
Ratios of net investment income/(loss) to average net assets
before waivers.................................................. 0.22% 0.99%(3) 1.71% 2.36%(3)
<CAPTION>
Ratios of expenses to average net assets before waivers.......... 1.33% 1.44%(3) 1.19% 1.38%(3)
<S> <C<C> <C> <C> <C>
Ratios of net investment income/(loss) to average net assets
before waivers.................................................. 0.76% 3.68%(3) (0.48)% (1.02)%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
14
<PAGE> 15
<TABLE>
<CAPTION>
NETHERLANDS
WEBS
MALAYSIA (FREE) WEBS MEXICO (FREE) WEBS INDEX
INDEX SERIES INDEX SERIES SERIES
------------------------ ------------------------- ----------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD FOR THE
YEAR ENDED 03/12/96* YEAR ENDED 03/12/96* YEAR ENDED
08/31/97 -08/31/96 08/31/97 -08/31/96 08/31/97
---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period............. $ 13.80 $ 13.24(1) $ 11.52 $ 9.95(1) $ 17.36
------- ------- ------- ------- -------
Net investment income/(loss)(+).................. 0.01 (0.02) 0.02 0.00** 0.11
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets
and liabilities denominated in foreign
currencies..................................... (5.55) 0.59 4.07 1.59 4.79
------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations............................... (5.54) 0.57 4.09 1.59 4.90
------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income............. 0.00** -- (0.01) -- (0.10)
Dividends from excess of net investment income... (0.01) -- (0.01) (0.01) (0.01)
Distributions from net realized capital gains.... -- -- (0.44) -- (0.71)
Distributions in excess of net realized gains.... -- -- -- -- --
Return of capital................................ (0.02) (0.01) (0.04) (0.01) (0.02)
------- ------- ------- ------- -------
Total dividends and distributions.............. (0.03) (0.01) (0.50) (0.02) (0.84)
------- ------- ------- ------- -------
Net asset value, end of period................... $ 8.23 $ 13.80 $ 15.11 $ 11.52 $ 21.42
======= ======= ======= ======= =======
Total Investment Return(2)........................ (40.20)% 4.28%(4) 35.21% 15.93%(4) 28.04%
Ratios/Supplemental Data
Net assets, end of period (in 000's)............. 12,339 $ 9,318 $ 16,627 $ 5,759 $ 9,661
Ratios of expenses to average net assets(5)...... 1.46% 1.58%(3) 1.63% 1.75%(3) 1.46%
Ratios of net investment income/(loss) to average
net assets(5).................................. 0.04% (0.35)%(3) 0.14% 0.01%(3) 0.54%
Portfolio turnover(6)............................ 0.00% 0.00%(4) 22.80% 0.00%(4) 12.68%
Average commission rate paid..................... -- -- $ 0.0066 -- $ 0.0354
<CAPTION>
NETHERLANDS
WEBS
INDEX SINGAPORE (FREE) WEBS
SERIES INDEX SERIES
---------- -------------------------
FOR THE FOR THE
PERIOD FOR THE PERIOD
03/12/96* YEAR ENDED 03/12/96*
-08/31/96 08/31/97 -08/31/96
---------- ---------- ----------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period............. $ 15.91(1) $ 11.38 $ 12.24(1)
------- ------- -------
Net investment income/(loss)(+).................. 0.24 0.00** 0.04
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets
and liabilities denominated in foreign
currencies..................................... 1.54 (2.67) (0.86)
------- ------- -------
Net increase/(decrease) in net assets resulting
from operations............................... 1.78 (2.67) (0.82)
------- ------- -------
Less Distributions
Dividends from net investment income............. (0.14) 0.00** (0.03)
Dividends from excess of net investment income... (0.01) (0.01) (0.01)
Distributions from net realized capital gains.... (0.08) (0.02) --
Distributions in excess of net realized gains.... (0.01) -- --
Return of capital................................ (0.09) (0.02) --
------- ------- -------
Total dividends and distributions.............. (0.33) (0.05) (0.04)
------- ------- -------
Net asset value, end of period................... $ 17.36 $ 8.66 $ 11.38
======= ======= =======
Total Investment Return(2)........................ 11.19%(4) (23.48)% (6.73)%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's)............. $ 6,962 $ 14,722 $ 9,107
Ratios of expenses to average net assets(5)...... 1.63%(3) 1.43% 1.56%(3)
Ratios of net investment income/(loss) to average
net assets(5).................................. 2.93%(3) 0.03% 0.69%(3)
Portfolio turnover(6)............................ 4.32%(4) 13.40% 26.29%(4)
Average commission rate paid..................... $ 0.0651 $ 0.0076 $ 0.0118
</TABLE>
- ---------------
* 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 AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratios of expenses to average net assets before
waivers........................................... 1.47% 1.59%(3) 1.63% 1.76%(3) 1.46%
Ratios of net investment income/(loss) to average
net assets before waivers......................... 0.04% (0.36)%(3) 0.13% 0.00%(3) 0.53%
<CAPTION>
Ratios of expenses to average net assets before
Ratios of net investment income/(loss) to average
net assets before waivers......................... 2.92%(3) 0.03% 0.68%(3)
<CAPTION>
waivers........................................... 1.64%(3) 1.43% 1.57%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
15
<PAGE> 16
<TABLE>
<CAPTION>
SPAIN WEBS SWEDEN WEBS
INDEX SERIES INDEX SERIES
------------------------ -------------------------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED 03/12/96* YEAR ENDED 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.............................. $ 14.09 $ 13.28(1) $ 14.67 $ 13.22(1)
------- ------- ------- -------
Net investment income/(loss)(+)................................... 0.19 0.14 (0.03) 0.20
Net realized and unrealized gain/(loss) on investments and foreign
currency related transactions and translation of other assets
and liabilities denominated in foreign currencies............... 5.33 0.98 4.45 1.67
------- ------- ------- -------
Net increase/(decrease) in net assets resulting from operations
............................................................... 5.52 1.12 4.42 1.87
------- ------- ------- -------
Less Distributions
Dividends from net investment income.............................. (0.12) (0.18) -- (0.23)
Dividends from excess of net investment income.................... (0.05) -- -- (0.07)
Distributions from net realized capital gains..................... (0.86) (0.13) (0.77) (0.12)
Distributions in excess of net realized gains..................... -- -- -- --
Return of capital................................................. (0.09) -- -- --
------- ------- ------- -------
Total dividends and distributions............................... (1.12) (0.31) (0.77) (0.42)
------- ------- ------- -------
Net asset value, end of period.................................... $ 18.49 $ 14.09 $ 18.32 $ 14.67
======= ======= ======= =======
Total Investment Return(2)......................................... 39.15% 8.45%(4) 30.10% 14.13%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's).............................. $ 8,321 $ 4,227 $ 8,243 $ 4,400
Ratios of expenses to average net assets(5)....................... 1.67% 1.76%(3) 1.64% 1.75%(3)
Ratios of net investment income/(loss) to average net assets(5)... 1.04% 2.04%(3) (0.19)% 3.05%(3)
Portfolio turnover (6)............................................ 19.21% 4.73%(4) 13.71% 5.87%(4)
Average commission rate paid...................................... $ 0.0344 $0.0723 $ 0.0229 $ 0.0561
<CAPTION>
SWITZERLAND WEBS UNITED KINGDOM WEBS
INDEX SERIES INDEX SERIES
------------------------- -------------------------
FOR THE FOR THE
FOR THE PERIOD FOR THE PERIOD
YEAR ENDED 03/12/96* YEAR ENDED 03/12/96*
08/31/97 -08/31/96 08/31/97 -08/31/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.............................. $ 12.29 $ 12.07(1) $ 13.15 $ 12.14(1)
------- ------- ------- -------
Net investment income/(loss)(+)................................... (0.04) 0.08 0.38 0.21
Net realized and unrealized gain/(loss) on investments and foreign
currency related transactions and translation of other assets
and liabilities denominated in foreign currencies............... 2.11 0.24 3.62 1.06
------- ------- ------- -------
Net increase/(decrease) in net assets resulting from operations
............................................................... 2.07 0.32 4.00 1.27
------- ------- ------- -------
Less Distributions
Dividends from net investment income.............................. -- (0.10) (0.32) (0.20)
Dividends from excess of net investment income.................... -- -- (0.06) (0.03)
Distributions from net realized capital gains..................... (0.57) -- (0.17) 0.00**
Distributions in excess of net realized gains..................... -- -- -- --
Return of capital................................................. (0.00)** -- (0.10) (0.03)
------- ------- ------- -------
Total dividends and distributions............................... (0.57) (0.10) (0.65) (0.26)
------- ------- ------- -------
Net asset value, end of period.................................... $ 13.79 $ 12.29 $ 16.50 $ 13.15
======= ======= ======= =======
Total Investment Return(2)......................................... 16.69% 2.60%(4) 30.48% 10.41%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's).............................. $ 13,805 $ 6,158 $ 29,721 $ 15,790
Ratios of expenses to average net assets(5)....................... 1.52% 1.82%(3) 1.38% 1.61%(3)
Ratios of net investment income/(loss) to average net assets(5)... (0.29)% 1.39%(3) 2.47% 3.62%(3)
Portfolio turnover (6)............................................ 48.05% 17.06%(4) 1.84% 0.00%(4)
Average commission rate paid...................................... $ 0.8788 $ 0.7852 $ 0.0314 --
</TABLE>
- ---------------
* 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 AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Ratios of expenses to average net assets before waivers............ 1.67% 1.77%(3) 1.64% 1.76%(3)
Ratios of net investment income/(loss) to average net assets before
waivers........................................................... 1.04% 2.03%(3) (0.19)% 3.04%(3)
<CAPTION>
Ratios of expenses to average net assets before waivers............ 1.53% 1.83%(3) 1.38% 1.62%(3)
<S> <C<C> <C> <C> <C>
Ratios of net investment income/(loss) to average net assets before
waivers........................................................... (0.29)% 1.38%(3) 2.47% 3.61%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
16
<PAGE> 17
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, as amended, (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 (Free) 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 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 WEBS 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 WEBS 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 its investment
flexibility. The WEBS Index Series utilize a portfolio sampling technique and do
not invest in all of the securities in their respective MSCI Indices. As a
result, a WEBS Index Series' performance will differ from that of the benchmark
MSCI Index to a greater extent than if it invested in all of the securities in
the benchmark. In addition, the MSCI Indices assume that dividends are received
throughout a year ("dividend smoothing") while the WEBS Index Series record them
on the ex date and this can cause the performance of a WEBS Index Series to
diverge from that of its 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
17
<PAGE> 18
Index Series involves special risks of investing in securities of the relevant
foreign country. For a discussion of certain special considerations and risk
factors relevant to an investment in WEBS, see "Investment Considerations and
Risks."
WORLD EQUITY BENCHMARK SHARES: "WEBS"
The shares of common stock, par value $.001 per share, of each WEBS Index
Series are referred to herein as "World Equity Benchmark Shares" or "WEBS."
EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF
THE 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 of WEBS," "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
18
<PAGE> 19
benchmark indices but will typically hold a representative subset of such stocks
selected through the Adviser's application of portfolio sampling techniques.
However, each WEBS Index Series reserves the right to invest in all of the
stocks in its benchmark index and where a WEBS Index Series benchmark index is
comprised of relatively few securities it may do so on a regular basis. In
addition, a WEBS Index Series may hold stocks that are not in the relevant MSCI
Index if the Adviser determines this to be appropriate in light of the WEBS
Index Series' investment objective and relevant investment constraints.
Each WEBS Index Series has the policy to remain as fully invested as
practicable in a pool of equity securities the performance of which will
approximate the performance of the subject MSCI Index taken in its entirety. A
WEBS Index Series will normally invest at least 95% of its total assets in
stocks that are represented in the relevant MSCI Index, and will at all times
invest at least 90% of its total assets in such stocks, except that in order to
permit the Adviser additional flexibility to comply with the requirements of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and
other regulatory requirements and to manage future corporate actions and index
changes in the smaller markets, each of the Austria, Belgium, Hong Kong, Mexico
(Free), Netherlands, Spain, Sweden and Switzerland WEBS Index Series will at all
times invest at least 80% of its total assets in such stocks and at least 10% of
the remaining 20% of its total assets in such stocks or in stocks included in
the relevant market, but not in the relevant MSCI Index. A WEBS Index Series may
invest its remaining assets in Short-Term Investments (defined below), in stocks
that are in the relevant market but not the relevant MSCI Index, and/or in
combinations of certain stock index futures contracts, options on such futures
contracts, stock index options, stock index swaps, cash, local currency and
forward currency exchange contracts that are intended to provide the WEBS Index
Series with exposure to such stocks (the WEBS Index Series will not use such
instruments to leverage their investment portfolios). "Short-Term Investments"
are short-term high quality debt securities that include: obligations of the
United States Government and its agencies or instrumentalities; commercial paper
(rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's
Ratings Group), bank certificates of deposit and bankers' acceptances;
repurchase agreements collateralized by the foregoing securities; participation
interests in such securities; and shares of money market funds (subject to
applicable limits under the 1940 Act).
A WEBS Index Series will not invest in cash reserves or Short-Term
Investments or utilize futures contracts, options or swap agreements as part of
a temporary defensive strategy to protect against potential stock market
declines. A WEBS Index Series may enter into forward currency exchange contracts
in order to facilitate settlements in local markets, in connection with
positions in stock index futures and to protect against currency exposure in
connection with its distributions to shareholders, but not as part of a
defensive strategy to protect against fluctuations in exchange rates. See
"Implementation of Policies" for a description of these and other investment
practices of the 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
19
<PAGE> 20
stock). No WEBS Index Series will concentrate its investments otherwise. If the
benchmark index for a WEBS Index Series has a concentration of more than 25%
because of a single stock (i.e., if one stock in the benchmark index accounts
for more than 25% of the index and it is the only stock in the index in its
industry), the WEBS Index Series will invest less than 25% of its assets in such
stock and will reallocate the excess to stocks in other industries. Changes in a
WEBS Index Series' concentration (if any) and non-concentration would be made
"passively" -- that is, any such changes would be made solely as a result of
changes in the concentrations of the benchmark index's constituents. As of
August 31, 1997, as a result of this policy, the Hong Kong WEBS Index Series
concentrates in the Real Estate industry, the Singapore (Free) WEBS Index Series
concentrates in the Banking industry, the Spain WEBS Index Series concentrates
in the Banking and Utilities (Electrical & Gas) industries, the Sweden WEBS
Index Series concentrates in the Electrical & Electronics industry and the
Switzerland WEBS Index Series concentrates in the Health and Personal Care
industry. Since the concentration of each WEBS Index Series is based on that of
its benchmark index, changes in the market values of the WEBS Index Series'
portfolio securities will not necessarily trigger changes in the portfolio of
such WEBS Index Series.
The concentration policy of each WEBS Index Series is a fundamental policy
that may be changed only with shareholder approval. Each of the other investment
policies of each WEBS Index Series is a nonfundamental policy that may be
changed by the Board of Directors without shareholder approval. However,
shareholders would be notified prior to any material change in these policies.
See "Investment Limitations" herein and "Investment Policies and Restrictions"
in the Statement of Additional Information for 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 INVEST-
20
<PAGE> 21
MENT VEHICLE THAT INVESTED IN EVERY COMPONENT SECURITY OF THE SUBJECT INDEX. The
Adviser expects that, over time, the "expected tracking error" of a WEBS Index
Series relative to the performance of its benchmark index will be less than 5%
and that the tracking error will generally be greater for WEBS Index Series that
have benchmark indices with fewer rather than greater numbers of component
stocks. An expected tracking error of 5% means that there is a 68% probability
that the net asset value of the WEBS Index Series will be within plus or minus
5% of the subject MSCI Index level after one year, without rebalancing the
portfolio composition. A tracking error of 0% would indicate perfect tracking,
which would be achieved when the net asset value of the WEBS Index Series
increases or decreases in exact proportion to changes in its benchmark index.
Factors such as expenses of the Fund, taxes, the need to comply with the
diversification and other requirements of the Internal Revenue Code, the
existence of uninvested assets in the portfolios (including cash and deferred
organizational expenses), 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 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 disclose tracking error over the previous six month
periods, and in the event that tracking error exceeds 5%, the Board 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 cash, local currency, forward
currency exchange contacts and certain Short-Term Investments that are not
associated with related positions in stock index futures contracts, options on
such futures contracts, stock index options or stock index swaps. Such
investments may be made to invest uncommitted cash balances or, in limited
circumstances, to assist in meeting shareholder redemptions of Creation Units of
WEBS.
A WEBS Index Series may purchase stock index futures contracts, options on
such futures contracts and stock index options and may enter into stock index
swaps to 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
21
<PAGE> 22
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 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. 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 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
22
<PAGE> 23
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;
(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 referred to in this Prospectus
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.). MSCI publishes several
23
<PAGE> 24
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 MSCI believes the stock to be an
attractive investment.
In General
The Indices were founded in 1969 by Capital International S.A. as the first
international performance benchmarks constructed to facilitate accurate
comparison of world markets. Morgan Stanley acquired rights to the Indices in
1986. The MSCI Indices have covered the world's developed markets since 1969,
and in 1988, MSCI commenced coverage of the emerging markets.
Although local stock exchanges have traditionally calculated their own
indices, these are generally not comparable with one another, due to differences
in the representation of the local market, mathematical formulas, base dates and
methods of adjusting for capital changes. MSCI applies the same criteria and
calculation methodology across all markets for all indices, developed and
emerging.
MSCI Indices are notable for the depth and breadth of their coverage. MSCI
generally seeks to have 60% of the capitalization of a country's stock market
reflected in the MSCI Index for such country. Thus, the MSCI Indices balance the
inclusiveness of an "all share" index against the replicability of a "blue chip"
index.
Weighting
All single-country MSCI Indices are market capitalization weighted, i.e.,
companies are included in the indices at their full market value (total number
of shares issued and paid up, multiplied by price). MSCI believes full market
capitalization weighting is preferable to other weighting schemes for both
theoretical and practical reasons.
24
<PAGE> 25
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 China,
Indonesia, Malaysia, Mexico, the Philippines, Singapore and Thailand, and for
those regional and international indices which include such markets.
Indonesia, Malaysia, Singapore and Thailand currently impose foreign
ownership limits on domestic stock, and when the foreign ownership limit is
reached, foreigners may only trade with other foreigners, frequently at a price
that is higher than the price available to domestic investors. The Free Indices
for such countries are designed to reflect the actual investment conditions for
international investors by using the foreign prices for stocks where relevant.
The Free Indices for Indonesia, Malaysia, Singapore and Thailand will use
foreign prices only when a foreign ownership limit is reached on a constituent
stock and a determination is made that there is sufficient long-term liquidity
at the foreign price. To compensate for the distorting inflation of a company's
weight that may occur as a result of using the higher foreign prices for its
shares, a compensating factor called a Free Market Capitalization Factor
("FMCF") may be applied to the total number of shares of a "foreign priced"
constituent stock in the respective Index. A FMCF is the approximate ratio of
domestic price to foreign price and is applied in an effort to align the free
market capitalization weight with the domestic market capitalization weight.
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
31, 1997, the MSCI Australia consisted of 55 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.
(14.83%), National Australia Bank (12.13%) and Westpac Banking (6.10%) for a
total of approximately 33.06% of the MSCI Australia. As of August 31, 1997, the
ten largest constituents comprised approximately 59.46% of the market
capitalization of the MSCI Australia. As of August 31, 1997, the three most
highly represented industry sectors in the MSCI Australia, and the approximate
percentages of the MSCI Australia represented thereby, were Banking (18.23%),
Energy Sources (16.98%) and Metals- Non-Ferrous (9.33%), for a total of
approximately 44.54% of the MSCI Australia. The MSCI Australia represented
approximately 54.9% of the aggregate capitalization of the Australian equity
markets at August 31, 1997.
The MSCI Austria Index ("MSCI Austria"). The MSCI Austria consists
primarily of stocks that are traded on the Vienna Stock Exchange. On August 31,
1997, the MSCI Austria consisted of 24 stocks. The three largest constituents of
the MSCI Austria and the respective approximate percentages of the MSCI Austria
represented thereby were OMV AG (15.17%), Bank Austria Stamm (12.17%) and Va
Technologic (11.70%) for a total of approximately 39.04% of the MSCI Austria. As
of August 31, 1997, the ten largest constituents comprised approximately 80.01%
of the market capitalization of the MSCI Austria. As of August 31, 1997, the
three most highly represented industry sectors in the MSCI Austria, and the
approximate percentages of the
25
<PAGE> 26
MSCI Austria represented thereby, were Banking (28.26%), Energy Sources (15.17%)
and Machinery & Engineering (14.15%), for a total of approximately 55.58% of the
MSCI Austria. The MSCI Austria represented approximately 66.0% of the aggregate
capitalization of the Austrian equity markets at August 31, 1997.
The MSCI Belgium Index ("MSCI Belgium"). The MSCI Belgium consists
primarily of stocks that are traded on the Brussels Stock Exchange. On August
31, 1997, the MSCI Belgium consisted of 17 stocks. As of August 31, 1997, the
three largest constituents of the MSCI Belgium and the respective approximate
percentages of the MSCI Belgium represented thereby were Electrabel (15.14%),
Petrofina (11.79%) and Fortis Ag (11.56%), for a total of approximately 38.49%
of the MSCI Belgium. As of August 31, 1997, the ten largest constituents
comprised approximately 83.33% of the market capitalization of the MSCI Belgium.
As of August 31, 1997, the three most highly represented industry sectors in the
MSCI Belgium, and the approximate percentages of the MSCI Belgium represented
thereby, were Utilities -- Electrical & Gas (22.97%), Insurance (17.78%) and
Banking (16.79%), for a total of approximately 57.54% of the MSCI Belgium. The
MSCI Belgium represented approximately 56.0% of the aggregate capitalization of
the Belgian equity markets at August 31, 1997.
The MSCI Canada Index ("MSCI Canada"). The MSCI Canada consists primarily
of stocks that are traded on the Toronto Stock Exchange. On August 31, 1997, 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 (8.50%), BCE Inc. (5.89%) and Royal Bank of Canada
(4.73%), for a total of approximately 19.12% of the MSCI Canada. As of August
31, 1997, the ten largest constituents comprised approximately 44.09% of the
market capitalization of the MSCI Canada. As of August 31, 1997, the three most
highly represented industry sectors in the MSCI Canada, and the approximate
percentages of the MSCI Canada represented thereby, were Banking (15.63%),
Energy Sources (13.96%) and Electrical & Electronics (11.04%), for a total of
approximately 40.63% of the MSCI Canada. The MSCI Canada represented
approximately 64.0% of the aggregate capitalization of the Canadian equity
markets at August 31, 1997.
The MSCI France Index ("MSCI France"). The MSCI France consists primarily
of stocks that are traded on the Paris Stock Exchange. On August 31, 1997, the
MSCI France consisted of 68 stocks. The three largest constituents of the MSCI
France and the respective approximate percentages of the MSCI France represented
thereby were EIF Aquitaine (7.46%), L'Oreal (5.94%) and Carrefour (5.70%), for a
total of approximately 19.10% of the MSCI France. As of August 31, 1997, the ten
largest constituents comprised approximately 49.07% of the market capitalization
of the MSCI France. As of August 31, 1997, the three most highly represented
industry sectors in the MSCI France, and the approximate percentages of the MSCI
France represented thereby, were Energy Sources (13.08%), Health & Personal Care
(12.03%) and Merchandising (11.28%), for a total of approximately 36.39% of the
MSCI France. The MSCI France represented approximately 70.4% of the aggregate
capitalization of the French equity markets at August 31, 1997.
The MSCI Germany Index ("MSCI Germany"). The MSCI Germany consists
primarily of stocks that are traded on the Frankfurt Stock Exchange. On August
31, 1997, the MSCI Germany consisted of 67 stocks. The three largest
constituents of the MSCI Germany and the respective approximate percentages of
the MSCI Germany represented thereby were Allianz (9.39%),
26
<PAGE> 27
Deutsche Telekom (8.10%) and Daimler Benz (7.14%), for a total of approximately
24.63% of the MSCI Germany. As of August 31, 1997, the ten largest constituents
comprised approximately 58.64% of the market capitalization of the MSCI Germany.
As of August 31, 1997, the three most highly represented industry sectors in the
MSCI Germany, and the approximate percentages of the MSCI Germany represented
thereby, were Insurance (15.16%), Banking (13.64%) and Automobiles (11.69%), for
a total of approximately 40.49% of the MSCI Germany. The MSCI Germany
represented approximately 77.3% of the aggregate capitalization of the German
equity markets at August 31, 1997.
The MSCI 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 31, 1997, the MSCI Hong Kong consisted of 35 stocks. The three
largest constituents of the MSCI Hong Kong and the respective approximate
percentages of the MSCI Hong Kong represented thereby were Hutchinson Whampoa
(14.50%), Sun Hung Kai Properties (12.20%) and HongKong Telecom (11.06%), for a
total of approximately 37.76% of the MSCI Hong Kong. As of August 31, 1997, the
ten largest constituents comprised approximately 81.9% of the market
capitalization of the MSCI Hong Kong. As of August 31, 1997, 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
(37.49%), Multi-Industry (21.09%) and Banking (13.26%), for a total of
approximately 71.84% of the MSCI Hong Kong. The MSCI Hong Kong represented
approximately 52.6% of the aggregate capitalization of the Hong Kong equity
markets at August 31, 1997.
The MSCI Italy Index ("MSCI Italy"). The MSCI Italy consists primarily of
stocks that are traded on the Milan Stock Exchange. On August 31, 1997, the MSCI
Italy consisted of 55 stocks. The three largest constituents of the MSCI Italy
and the respective approximate percentages of the MSCI Italy represented thereby
were ENI (22.10%), Tim Ord (11.19%) and Telecom Italia Ordinary (10.76%), for a
total of approximately 44.05% of the MSCI Italy. As of August 31, 1997, the ten
largest constituents comprised approximately 72.33% of the market capitalization
of the MSCI Italy. As of August 31, 1997, the three most highly represented
industry sectors in the MSCI Italy, and the approximate percentages of the MSCI
Italy represented thereby, were Telecommunications (24.86%), Energy Sources
(22.10%) and Insurance (14.70%), for a total of approximately 61.66% of the MSCI
Italy. The MSCI Italy represented approximately 70.6% of the aggregate
capitalization of the Italian equity markets at August 31, 1997.
The MSCI Japan Index ("MSCI Japan"). The MSCI Japan consists primarily of
stocks that are traded on the Tokyo Stock Exchange. On August 31, 1997, 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 NTT Corp. (6.31%), Toyoto Motor Corp. (5.25%) and Bank Tokyo-Mitsubishi
(4.48%), for a total of approximately 16.04% of the MSCI Japan. As of August 31,
1997, the ten largest constituents comprised approximately 29.28% of the market
capitalization of the MSCI Japan. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Japan, and the approximate percentages
of the MSCI Japan represented thereby, were Banking (17.17%), Automobiles
(7.69%) and Telecommunications (6.31%), for a total of approximately 31.17% of
the MSCI Japan. The MSCI Japan represented approximately 65.2% of the aggregate
capitalization of the Japanese equity markets at August 31, 1997.
27
<PAGE> 28
The MSCI Malaysia (Free) Index ("MSCI Malaysia (Free)"). The MSCI Malaysia
(Free) consists primarily of stocks that are traded on the Kuala Lumpur Stock
Exchange. On August 31, 1997, the MSCI Malaysia (Free) consisted of 76 stocks.
As of August 31, 1997, the three largest constituents of the MSCI Malaysia
(Free) and the respective approximate percentages of the MSCI Malaysia (Free)
represented thereby were Tenaga Nasional (10.76%), Telecom Malaysia (10.65%) and
Malayan Banking (8.85%), for a total of approximately 30.26% of the MSCI
Malaysia (Free). As of August 31, 1997, the ten largest constituents comprised
approximately 53.1% of the market capitalization of the MSCI Malaysia (Free). As
of August 31, 1997, the three most highly represented industry sectors in the
MSCI Malaysia (Free), and the approximate percentages of the MSCI Malaysia
(Free) represented thereby, were Banking (15.12%), Multi-Industry (13.88%) and
Telecommunications (11.39%), for a total of approximately 40.39% of the MSCI
Malaysia (Free). The MSCI Malaysia (Free) represented approximately 52.9% of the
aggregate capitalization of the Malaysian equity markets at August 31, 1997.
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 31, 1997, the MSCI Mexico (Free) consisted of 40 stocks. As
of August 31, 1997, 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 (14.50%), Grupo Modelo (7.24%) and Grupo Carso
(6.69%), for a total of approximately 28.43% of the MSCI Mexico (Free). As of
August 31, 1997, the ten largest constituents comprised approximately 62.57% of
the market capitalization of the MSCI Mexico (Free). As of August 31, 1997, 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 (20.33%), Beverages & Tobacco (14.74%) and Multi-Industry
(14.15%), for a total of approximately 49.22% of the MSCI Mexico (Free). The
MSCI Mexico (Free) represented approximately 66.1% of the aggregate
capitalization of the Mexican equity markets at August 31, 1997.
The MSCI Netherlands Index ("MSCI Netherlands"). The MSCI Netherlands
consists primarily of stocks that are traded on the Amsterdam Stock Exchange. On
August 31, 1997, the MSCI Netherlands consisted of 22 stocks. The three largest
constituents of the MSCI Netherlands and the respective approximate percentages
of the MSCI Netherlands represented thereby were Petroleum (34.64%), ING Groep
N.V. (11.39%) and Unilever NV Cert (10.30%), for a total of approximately 56.33%
of the MSCI Netherlands. As of August 31, 1997, the ten largest constituents
comprised approximately 91.68% of the market capitalization of the MSCI
Netherlands. As of August 31, 1997, the three most highly represented industry
sectors in the MSCI Netherlands, and the approximate percentages of the MSCI
Netherlands represented thereby, were Energy Sources (34.64%), Financial
Services (11.39%) and Food & Household Products (10.30%), for a total of
approximately 56.33% of the MSCI Netherlands. The MSCI Netherlands represented
approximately 70.1% of the aggregate capitalization of the Dutch equity markets
at August 31, 1997.
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 31, 1997, the MSCI Singapore (Free) consisted of 37
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 (14.05%), Oversea-Chinese
28
<PAGE> 29
Banking Corp. (10.43%) and United Overseas Bank Fgn (10.31%), for a total of
approximately 34.79% of the MSCI Singapore (Free). As of August 31, 1997, the
ten largest constituents comprised approximately 76.29% of the market
capitalization of the MSCI Singapore (Free). As of August 31, 1997, 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 (28.81%), Real Estate (17.43%) and Telecommunications (14.05%), for a
total of approximately 60.29% of the MSCI Singapore (Free). The MSCI Singapore
(Free) represented approximately 52.9% of the aggregate capitalization of the
Singaporean equity markets at August 31, 1997.
The MSCI Spain Index ("MSCI Spain"). The MSCI Spain consists primarily of
stocks that are traded on the Madrid Stock Exchange. On August 31, 1997, the
MSCI Spain consisted of 31 stocks. The three largest constituents of the MSCI
Spain and the respective approximate percentages of the MSCI Spain represented
thereby were Telefonica de Espana (17.22%), Endesa Empresa Nal Elec. (14.81%)
and Banco Bilbao Vizcaya (12.57%), for a total of approximately 44.6% of the
MSCI Spain. As of August 31, 1997, the ten largest constituents comprised
approximately 84.89% of the market capitalization of the MSCI Spain. As of
August 31, 1997, the three most highly represented industry sectors in the MSCI
Spain, and the approximate percentages of the MSCI Spain represented thereby,
were Banking (30.57%), Utilities -- Electrical & Gas (28.38%) and
Telecommunications (17.22%), for a total of approximately 76.17% of the MSCI
Spain. The MSCI Spain represented approximately 70.1% of the aggregate
capitalization of the Spanish equity markets at August 31, 1997.
The MSCI Sweden Index ("MSCI Sweden"). The MSCI Sweden consists primarily
of stocks that are traded on the Stockholm Stock Exchange. On August 31, 1997,
the MSCI Sweden consisted of 29 stocks. As of August 31, 1997, the three largest
constituents of the MSCI Sweden and the respective approximate percentages of
the MSCI Sweden represented thereby were Ericsson (LM) (25.93%), Astra (13.80%)
and ABB AB (6.29%), for a total of approximately 46.02% of the MSCI Sweden. As
of August 31, 1997, the ten largest constituents comprised approximately 73.35%
of the market capitalization of the MSCI Sweden. As of August 31, 1997, the
three most highly represented industry sectors in the MSCI Sweden, and the
approximate percentages of the MSCI Sweden represented thereby, were Electrical
& Electronics (34.76%), Health & Personal Care (16.79%) and Banking (8.37%), for
a total of approximately 59.92% of the MSCI Sweden. The MSCI Sweden represented
approximately 59.7% of the aggregate capitalization of the Swedish equity
markets at August 31, 1997.
The MSCI Switzerland Index ("MSCI Switzerland"). The MSCI Switzerland
consists primarily of stocks that are traded on the Zurich Stock Exchange. On
August 31, 1997, the MSCI Switzerland consisted of 36 stocks. The three largest
constituents of the MSCI Switzerland and the respective approximate percentages
of the MSCI Switzerland represented thereby were Novartis Namen (23.16%), Roche
Holding Genuss (15.55%) and Nestle (12.00%), for a total of approximately 50.71%
of the MSCI Switzerland. As of August 31, 1997, the ten largest constituents
comprised approximately 86.3% of the market capitalization of the MSCI
Switzerland. As of August 31, 1997, the three most highly represented industry
sectors in the MSCI Switzerland, and the approximate percentages of the MSCI
Switzerland represented thereby, were Health & Personal Care (47.48%), Banking
(17.72%) and Food & Household Products (12.00%), for a total of approximately
77.2% of the MSCI Switzerland. The MSCI Swit-
29
<PAGE> 30
zerland represented approximately 78.8% of the aggregate capitalization of the
Swiss equity markets at August 31, 1997.
The MSCI United Kingdom Index ("MSCI UK"). The MSCI UK consists primarily
of stocks that are traded on the London Stock Exchange. On August 31, 1997, the
MSCI UK consisted of 132 stocks. The three largest constituents of the MSCI UK
and the respective approximate percentages of the MSCI UK represented thereby
were British Petroleum (6.68%), Glaxo Wellcome (5.94%) and Lloyds TSB Group
(5.26%), for a total of approximately 17.88% of the MSCI UK. As of August 31,
1997, the ten largest constituents comprised approximately 39.76% of the market
capitalization of the MSCI UK. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI UK, and the approximate percentages of
the MSCI UK represented thereby, were Banking (15.60%), Health & Personal Care
(12.45%) and Merchandising (8.35%), for a total of approximately 36.4% of the
MSCI UK. The MSCI UK represented approximately 61.9% of the aggregate
capitalization of the United Kingdom equity markets at August 31, 1997.
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, Austria and
Germany 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. The figures provided below for 1997 are through August 29, 1997.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI AUSTRALIA INDEX
<S> <C>
1988 36.4
1989 9.3
1990 -17.54
1991 33.64
1992 -10.82
1993 35.17
1994 5.4
1995 11.19
1996 9.82
1997 -1.9
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI AUSTRIA INDEX
<S> <C>
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 12.61
1997 -3
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI BELGIUM INDEX
<S> <C>
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 21.08
1997 4.6
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI CANADA INDEX
<S> <C>
1988 17.07
1989 24.3
1990 -13
1991 11.08
1992 -12.15
1993 17.58
1994 -3.04
1995 18.31
1996 29
1997 12.5
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI FRANCE INDEX
<S> <C>
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 29.68
1997 2.6
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI GERMANY INDEX
<S> <C>
1988 20.6
1989 46.26
1990 -9.36
1991 8.16
1992 -10.27
1993 35.64
1994 4.66
1995 16.41
1996 23.03
1997 15.4
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI HONG KONG INDEX
<S> <C>
1988 28.12
1989 8.39
1990 9.17
1991 49.52
1992 32.29
1993 116.7
1994 -28.9
1995 22.57
1996 31.89
1997 1.3
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI ITALY INDEX
<S> <C>
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 8.64
1997 14.5
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI JAPAN INDEX
<S> <C>
1988 35.39
1989 1.71
1990 -36.1
1991 8.92
1992 -21.45
1993 25.48
1994 21.44
1995 0.69
1996 -4.67
1997 -3.4
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI MALAYSIA (FREE) INDEX
<S> <C>
1988 26.54
1989 55.76
1990 -7.91
1991 4.95
1992 17.76
1993 110
1994 -19.94
1995 5.16
1996 24.85
1997 -44.3
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI MEXICO (FREE) INDEX
<S> <C>
1988 71.98
1989 89.2
1990 62.65
1991 126.04
1992 24.98
1993 49.35
1994 -40.55
1995 -20.37
1996 18.7
1997 38.5
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI NETHERLANDS INDEX
<S> <C>
1988 14.19
1989 35.79
1990 -3.19
1991 17.8
1992 2.3
1993 35.28
1994 11.7
1995 27.71
1996 37.19
1997 17
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) 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 -0.77
1997 -17.6
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI SPAIN INDEX
<S> <C>
1988 13.53
1989 9.76
1990 -13.85
1991 15.63
1992 -21.87
1993 29.78
1994 -4.8
1995 29.83
1996 49.1
1997 11.6
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI SWEDEN INDEX
<S> <C>
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 41.08
1997 13.4
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI SWITZERLAND INDEX
<S> <C>
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 19.65
1997 20.9
</TABLE>
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) MSCI UNITED KINGDOM INDEX
<S> <C>
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 15.78
1997 12.5
</TABLE>
MANAGEMENT OF THE FUND
Board of Directors. The Board 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
and the officers of the Fund appears in the Statement of Additional Information
under the heading "Management of the Fund."
32
<PAGE> 33
Adviser. Barclays Global Fund Advisors is the Adviser to the Fund and,
subject to the supervision of the Board of the Fund, is responsible for the
investment management of each WEBS Index Series, which includes application of
portfolio optimization techniques. The Adviser is located at 45 Fremont Street,
San Francisco, California 94105. The Adviser is a California Corporation
indirectly owned by Barclays Bank PLC and is registered as an investment adviser
under the Investment Advisers Act of 1940. As of August 31, 1997, the Adviser
and its parent, Barclays Global Investors, N.A., manage, administer or advise
assets aggregating in excess of $483 billion. For its investment management
services to each WEBS Index Series, the Adviser is paid management fees equal to
each WEBS Index Series' allocable portion of: .27% per annum of the aggregate
net assets of the 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. The
Adviser may from time to time reimburse expenses to one or more WEBS Index
Series. From time to time, a WEBS Index Series, to the extent consistent with
its investment objective, policies and restrictions, may invest in the
securities of companies with which the Adviser has a lending relationship.
Administrator. PFPC Inc. (the "Administrator"), 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 MSTC in its capacity as Custodian, or by PNC
Bank, N.A. in its capacity as Transfer Agent. The Administrator has no role in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund. For the administrative and fund accounting
services the Administrator provides to the Fund, the Administrator is paid
aggregate fees equal to each WEBS Index Series' allocable portion of: .22% per
annum of the aggregate average daily net assets of the Fund up to $1.5 billion;
plus .15% per annum of the aggregate average daily net assets of the Fund
between $1.5 billion and $3 billion, plus .14% per annum of the aggregate
average daily net assets of the Fund between $3 billion and $5 billion, plus
.13% per annum of the aggregate average daily net assets of the Fund between $5
billion and $7.5 billion, plus .115% per annum of the aggregate average daily
net assets of the Fund between $7.5 billion and $10 billion, plus .10% per annum
of the aggregate average daily net assets of the Fund in excess of $10 billion
(the "Standard Fee Schedule"). The Administrator pays Morgan Stanley Trust
Company a fee of .05% of the average daily net assets of the Fund for
sub-administration services as described under "Custodian, Lending Agent and
Sub-Administrator" below. From time to time the Administrator may waive all or a
portion of its fees or may reimburse expenses to one or more WEBS Index Series.
See "Investment Advisory, Management, Administrative and Distribution
Services -- The Administrator" in the Statement of Additional Information.
If the Administrator is terminated within the first three years of the
Fund's operations, except if 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.
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
33
<PAGE> 34
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 (the "Exchange Act") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"). The Fund has a
distribution plan pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1 Plan").
Each WEBS Index Series operates the Rule 12b-1 Plan in accordance with its terms
and the NASD Rules concerning maximum sales charges. Under the Rule 12b-1 Plan,
the Distributor is paid an annual fee as compensation in connection with the
offering and sale of shares of each WEBS Index Series. The fees to be paid to
the Distributor under the Rule 12b-1 Plan are calculated and paid monthly with
respect to each WEBS Index Series at a rate set from time to time by the Board
of Directors, provided that the annual rate may not exceed .25% of the average
daily net assets of such WEBS Index Series. The Board of Directors has
determined to limit the annual fee payable under the 12b-1 Plan with respect to
each WEBS Index Series so as not to exceed .20% of the average daily net assets
of each WEBS Index Series until further notice. From time to time the
Distributor may waive all or a portion of the fees. These fees may be used to
cover the expenses of the Distributor primarily intended to result in the sale
of shares of each WEBS Index Series including payments for any activities or
expenses primarily intended to result in or required for the sale of the WEBS
Index Series' shares, including promotional and marketing activities related to
the sale of shares of the WEBS Index Series, expenses related to the
preparation, printing and distribution of prospectuses and sales literature,
certain communications to and with shareholders, advertisements, and payments
made to representatives or others for selling shares of the WEBS Index Series or
for providing ongoing distribution assistance, shareholder services and/or
maintenance of shareholder accounts. The Distributor has entered into sales and
investor services agreements with broker-dealers or other persons that are DTC
Participants (as defined under "Book-Entry Only System" below) to provide
distribution assistance, including broker-dealer and shareholder support and
educational and promotional services. Under the terms of each sales and investor
services agreement, the Distributor will pay such broker-dealers or other
persons, out of 12b-1 fees received from the WEBS Index Series, at the annual
rate of .08% of 1% of the average daily net asset value of WEBS held through DTC
for the account of such DTC Participant. The Distributor may retain any amount
of its fee that is not expended for the foregoing purposes. The amount of such
fee is not dependent upon the distribution expenses actually incurred by the
Distributor. The Distributor has no role in determining the investment policies
of the 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, Lending Agent and Sub-Administrator. Morgan Stanley Trust
Company ("MSTC") serves as the Custodian for the cash and portfolio securities
of each WEBS Index Series of the Fund, as Lending Agent for each WEBS Index
Series and as Sub-Administrator. As Lending Agent, MSTC causes the delivery of
loaned securities from the 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%
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<PAGE> 35
of the net investment income earned on the collateral for securities loaned.
MSTC also provides certain sub-administrative services relating to the Fund
pursuant to a Sub-Administration Agreement and receives a fee from the
Administrator equal to .05% of the Fund's average daily net assets for providing
such services. MSTC may from time to time reimburse expenses to one or more WEBS
Index Series. MSTC, as Custodian, Lending Agent and Sub-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 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, Pennsylvania 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, 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.
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<PAGE> 36
The AMEX disseminates during its trading day an indicative optimized
portfolio value ("IOPV") for each WEBS Index Series. The IOPV on a per WEBS
basis should not be viewed as a real time update of the net asset value per WEBS
share of the Fund, which is calculated only once a day. See "Exchange Listing
and Trading" in the Statement of Additional Information for additional details.
INVESTMENT CONSIDERATIONS AND RISKS
An investment in the WEBS of a WEBS Index Series involves risks similar to
those of investing in a broadly-based portfolio of equity securities traded on
exchanges in the relevant foreign securities market, such as market fluctuations
caused by such factors as economic and political developments, changes in
interest rates and perceived trends in stock prices. Investing in WEBS generally
involves certain risks and considerations not typically associated with
investing in a fund that invests in the securities of U.S. issuers. These risks
could include generally less liquid and less efficient securities markets;
generally greater price volatility; exchange rate fluctuations and exchange
controls; less publicly available information about issuers; the 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 October 8, 1992 to October 8, 1997, the average
price volatility of the Standard and Poor's 500 Index, a broad measure of the
U.S. equity market, was 9.82%. In contrast, during the same period, the average
price volatility of the respective MSCI Indices was as follows: the MSCI
Australia (14.66%), the MSCI Austria (14.21%), the MSCI Belgium (11.11%), the
MSCI Canada (13.22%), the MSCI France (13.59%), the MSCI Germany (12.47%), the
MSCI Hong Kong (24.86%), the MSCI Italy (24.63%), the MSCI Japan (19.78%), the
MSCI Malaysia (Free) (25.73%), the MSCI Mexico (Free) (39.81%), the MSCI
Netherlands (11.71%), the MSCI Singapore (Free) (21.81%), the MSCI Spain
(17.52%), the MSCI Sweden (17.89%), the MSCI Switzerland (14.13%), and the MSCI
United Kingdom (11.18%). Short-term volatility in these markets can be
significantly greater.
Foreign Currency Fluctuations
Because each WEBS Index Series' assets are generally invested in non-U.S.
securities, and because a substantial portion of the revenues and income of each
WEBS Index Series are received in a foreign currency, while WEBS Index Series
dividends and other distributions are paid in U.S. dollars, the dollar value of
a WEBS Index Series' net assets are adversely affected by
36
<PAGE> 37
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.
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 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
37
<PAGE> 38
WEBS Index Series will continue to be met or will remain unchanged. See
"Exchange Listing and Trading of WEBS."
The net asset value of the WEBS of a WEBS Index Series fluctuate with
changes in the market value of the portfolio securities of the WEBS Index Series
and changes in the market rate of exchange between the U.S. dollar and the
subject foreign currency. 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 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 included 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
38
<PAGE> 39
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 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 MSCI 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
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<PAGE> 40
of a WEBS Index Series that constitute a Creation Unit for such WEBS Index
Series and the value of such Creation Unit at August 31, 1997:
<TABLE>
<CAPTION>
VALUE PER
WEBS INDEX SERIES WEBS PER CREATION UNIT CREATION UNIT
- ----------------------------------------------------------- ---------------------- -------------
(IN DOLLARS)
<S> <C> <C>
Australia WEBS Index Series................................ 200,000 2,070,271
Austria WEBS Index Series.................................. 100,000 1,051,114
Belgium WEBS Index Series.................................. 40,000 625,523
Canada WEBS Index Series................................... 100,000 1,342,640
France WEBS Index Series................................... 200,000 2,901,111
Germany WEBS Index Series.................................. 300,000 4,894,449
Hong Kong WEBS Index Series................................ 75,000 1,104,487
Italy WEBS Index Series.................................... 150,000 2,499,557
Japan WEBS Index Series.................................... 600,000 7,568,662
Malaysia (Free) WEBS Index Series.......................... 75,000 616,844
Mexico (Free) WEBS Index Series............................ 100,000 1,511,475
Netherlands WEBS Index Series.............................. 50,000 1,071,687
Singapore (Free) WEBS Index Series......................... 100,000 865,952
Spain WEBS Index Series.................................... 75,000 1,386,823
Sweden WEBS Index Series................................... 75,000 1,373,859
Switzerland WEBS Index Series.............................. 125,000 1,723,984
United Kingdom WEBS Index Series........................... 200,000 3,300,990
</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.
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. The Fund will issue Creation Units of WEBS
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<PAGE> 41
prior to receipt of all or a portion of the relevant Deposit Securities in
certain circumstances where the purchaser, among other things, posts collateral
to secure its obligation to deliver such outstanding Deposit 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." The Shareholder
Transaction Expenses table is subject to revision from time to time. 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.
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)
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<PAGE> 42
are listed in the Shareholder Transaction Expenses table in "Summary of Fund
Expenses." The Shareholder Transaction Expenses table may be subject to revision
from time to time. 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 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
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<PAGE> 43
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 long-term
capital gain or loss if the WEBS have been held for more than eighteen months, a
mid-term capital gain or loss if held for more than twelve months up to and
including eighteen months and otherwise as a short-term capital gain or loss.
However, if WEBS on which an adjusted net long-term capital gain distribution or
a mid-term capital gain distribution has been received are subsequently sold or
redeemed and such WEBS have been held for six months or less, any loss realized
will be treated as either an adjusted net long-term capital loss or a mid-term
capital loss to the extent that it offsets the corresponding adjusted net
long-term capital gain distribution or mid-term capital gain distribution.
Moreover, any loss realized on a sale or exchange of WEBS will be deferred to
the extent that the shares disposed of are replaced within a 61-day period
beginning 30 days before and ending 30 days after the disposition of the shares,
in which case the basis of the shares acquired will be adjusted upward to
reflect the deferred loss.
Each WEBS Index Series may be subject to foreign income taxes withheld at
source. As more than 50% of the value of the total assets of each WEBS Index
Series at the close of its taxable year will consist of stock or securities of
foreign corporations, a WEBS Index Series will be eligible (and intends) to file
an election with the Internal Revenue Service to "pass through" to its investors
the amount of foreign income taxes (including withholding taxes) paid by the
WEBS Index Series, provided that the WEBS Index Series and its investor held the
security on the dividend entitlement date and for at least fifteen additional
days immediately before and/or thereafter. Subject to certain limitations, the
foreign income taxes passed through may qualify as a deduction in calculating
U.S. taxable income or as a credit in calculating U.S. federal income tax. Each
investor will be notified of the investor's portion of the foreign income taxes
43
<PAGE> 44
paid to each country and the portion of dividends that represents income derived
from sources within each country.
The Fund may be required to withhold for U.S. federal income tax purposes
31% of the dividends and distributions payable to investors who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the U.S. Internal Revenue Service
that they are subject to backup withholding. Backup withholding is not an
additional tax; amounts withheld may be credited against the investor's U.S.
federal income tax liability.
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
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
44
<PAGE> 45
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 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.
45
<PAGE> 46
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. The shares of each series are fully paid and non-assessable; have no
preference as to conversion, exchange, dividends, retirement or other features;
and have no pre-emptive rights. Each share has one vote with respect to matters
upon which a shareholder vote is required; shareholders have no cumulative
voting rights with respect to their shares. Shares of all series vote together
as a single class except that if the matter being voted on affects only a
particular WEBS Index Series it will be voted on only by that WEBS Index Series
and if a matter affects a particular WEBS Index Series differently from other
WEBS Index Series, that WEBS Index Series will vote separately on such matter.
Annual meetings of shareholders will not be held except as required by the 1940
Act and other applicable law.
Absent an applicable exemption or other relief from the SEC or its staff,
officers and directors of the Fund and beneficial owners of 10% of the WEBS of a
WEBS Index Series ("Insiders") would be subject to the insider reporting,
short-swing profit and short sale provisions in Section 16 of the Exchange Act
and the SEC's rules thereunder. In a "no action letter", the SEC staff advised
the Fund that the staff will not recommend SEC enforcement action if Insiders do
not file reports required by Section 16(a) of the Exchange Act and the rules
thereunder with respect to transactions in the WEBS of the relevant WEBS Index
Series. Insiders should consult with their own legal counsel concerning their
obligations under Section 16 of the Exchange Act, and should note that the no
action letter does not address other requirements under the Exchange Act,
including those imposed by Section 13(d) thereof and the rules thereunder.
The acquisition of WEBS of each WEBS Index Series by investment companies
is subject to the restrictions of Section 12(d)(1) of the 1940 Act and
applicable state regulations.
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.
46
<PAGE> 47
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.
47
<PAGE> 48
[WEBS LOGO]
FFCPROSP98
<PAGE> 49
WEBS INDEX FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 29, 1997
This Statement of Additional Information is not a Prospectus, and
should be read in conjunction with the Prospectus dated October 29, 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.
Capitalized terms used herein but not defined have the same meaning as in the
Prospectus, unless otherwise noted.
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
General Description of the Fund.................................................................. 1
Investment Policies and Restrictions ........................................................... 1
Special Considerations and Risks................................................................. 12
The MSCI Indices................................................................................. 22
Exchange Listing and Trading..................................................................... 37
Management of the Fund .......................................................................... 38
Investment Advisory, Management, Administrative and Distribution Services........................ 41
Brokerage Transactions .......................................................................... 44
Book Entry Only System .......................................................................... 45
Purchase and Issuance of WEBS in Creation Units.................................................. 46
Redemption of WEBS in Creation Units ........................................................... 48
Determining Net Asset Value...................................................................... 49
Dividends and Distributions...................................................................... 50
Taxes ........................................................................................... 50
Capital Stock and Shareholder Reports .......................................................... 51
Performance Information ........................................................................ 53
Counsel and Independent Auditors................................................................. 56
Financial Statements............................................................................. 56
Appendices
APPENDIX A: MSCI Indices as of August 31, 1997
APPENDIX B: Holidays Applicable to Each WEBS Index Series
APPENDIX C: Supplemental Educational Information on WEBS
- WEBS Investment Highlights
- The Facts About 17 Foreign Markets
- Frequently Asked Questions (Q & A)
- 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.
("LICENSEE"). THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY
CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL
INTERNATIONAL S.A.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY MEMBER OF
THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY, OR
IN THE WEBS OF ANY WEBS INDEX SERIES PARTICULARLY, OR THE ABILITY OF THE
INDICES IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN
STANLEY IS THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF
MORGAN STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK
("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO
MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND
CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX SERIES OR THE ISSUER
THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS
OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX SERIES OR THE OWNERS OF THE WEBS OF
ANY WEBS INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR
CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN
STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS
RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN THE DETERMINATION OF THE TIMING
OF, PRICES OF, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED
OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY
WEBS INDEX SERIES.
i
<PAGE> 51
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, OWNERS OF THE PRODUCTS, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA
INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED UNDER ANY LICENSE
AGREEMENT OR FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY
EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO THE MSCI INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR CIPSA HAVE ANY LIABILITY FOR ANY
DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES
(INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The information contained herein regarding MSCI, the MSCI Indices, local
securities markets and The Depository Trust Company ("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 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," "(pound)" or "L" are to British Pounds Sterling. On August 29, 1997,
the 4:00 p.m. 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 1.3615, ATS 12.6685,
BEF 37.16, CAD 1.3885, FRF 6.0655, DEM 1.8002, HKD 7.7490, ITL 1760.705, JPY
120.29, MYR 2.9155, MXN 7.8175, NLG 2.0265, SGD 1.5125, ESP 152.03, SEK 7.851,
CHF 1.4841 and GBP 0.6166. Some numbers in this Statement of Additional
Information have been rounded. All US Dollar equivalents provided in this
Statement of Additional Information are calculated at the exchange rate
prevailing on the date to which the corresponding foreign currency amount
refers.
ii
<PAGE> 52
GENERAL DESCRIPTION OF THE FUND
WEBS Index Fund, Inc. (the "Fund") is a management investment company
organized as a series fund. The Fund currently 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 August 31, 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 (Free) 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 the requirements of the Securities and
Exchange Commission (the "SEC") 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
Limitations" 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 represented in the relevant MSCI Index and will at
all times invest at least 90% of its total assets in such stocks except, that
in order to permit the Adviser additional flexibility to comply with the
requirements of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and other regulatory requirements and to manage future
corporate actions and index changes in the smaller markets, each of the
Austria, Belgium, Hong Kong, Mexico (Free), Netherlands, Spain, Sweden, and
Switzerland WEBS Index Series will at all times invest at least 80% of its
total assets in such stocks and at least 10% of the remaining 20% of its total
assets in such stocks or in stocks included in the revelant market, but not in
the relevant MSCI Index. A WEBS Index Series may invest its remaining assets in
Short-Term Investments (defined below), in stocks that are in the relevant
market but not the relevant MSCI Index, and/or in combinations of certain stock
index futures contracts, options on such futures contracts, stock index
options, stock index swaps, cash, local currency and forward currency exchange
contracts that are intended to provide the WEBS Index Series with exposure to
such stocks (the WEBS Index Series will not use such instruments to leverage
their investment portfolios). "Short-Term Investments" are short-term high
quality debt securities that include: obligations of the United States
Government and its agencies or instrumentalities; commercial paper (rated
Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's Rating
Group), bank certificates of deposit and bankers' acceptances; repurchase
agreements collateralized by the foregoing securities; participation interests
in such securities; and shares of money market funds (subject to applicable
limits under the Investment Company Act of 1940, as amended, (the "1940 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 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
1
<PAGE> 53
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 31, 1997, the total market
capitalization of the Australian equity markets was approximately AUD 419.4
billion or US$307.9 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 (the "Act")
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 certificates 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.
Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Austrian equity markets was approximately ATS 451.4
billion or US$35.6 billion.
The Belgian Equity Markets
General Background. The Brussels Stock Exchange (BSE) was founded by
Napoleonic 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 organizes and supervises the different markets and ensures market
transparency. The Stock Exchange Committee also admits or dismisses brokerage
firms and ensures compliance with all regulations. The Stock Exchange Committee
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 31, 1997, the total market
capitalization of the Belgian equity markets was
2
<PAGE> 54
approximately BEF 4,731.1 billion or US$126.8 billion.
The Canadian Equity Markets
General Background. The first Canadian stock exchange appeared in the
1870s. 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 encompass 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 31, 1997, the total market
capitalization of the Canadian markets was approximately CAD 664 billion or
US$478.2 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 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 31, 1997, the total market
capitalization of the French equity markets was approximately FRF 3,507.6
billion or US$578.3 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
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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 31, 1997, the total market
capitalization of the Germany equity markets was approximately DEM 1,261.1
billion or US$700.5 billion.
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 31, 1997, the total market
capitalization of the Hong Kong equity markets was approximately HKD 3,278.1
billion or US$423 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 31, 1997, the total market
capitalization of the Italian equity markets was approximately ITL 500,698.7
billion or US$284.4 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
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(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
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 tax 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 31, 1997, the total market
capitalization of the Japanese equity markets was approximately JPY 349,605.2
billion or US$2,906.4 billion.
The Malaysian Equity Markets
General Background. The securities industry in Malaysia dates back to
the early 1930's. Kuala Lumpur and Singapore were a single exchange until 1973
when they separated and the Kuala Lumpur Stock Exchange (KLSE) was formed. The
KLSE operated under a provisional set of rules until 1983 when a new Securities
Industry Act came into force. As of April 30, 1993, 320 companies were listed
on the KLSE main board. A Second Board, established in 1988, allows smaller
companies to tap additional capital. Fifty-seven companies were listed on the
Second Board as of April 30, 1993. Over the years, the KLSE's close links with
the Stock Exchange of Singapore (SES) has rendered it very vulnerable to
developments in Singapore. Consequently, the Government decided, as a matter of
national policy, on a delisting of Malaysian incorporated companies from the
SES. This was effected on January 1, 1990. A similar move was made by
Singapore, resulting in the delisting of all Singapore companies on the KLSE on
January 1, 1990. There are two main stock indices in Malaysia. The wider
ranging KLSE Composite represents 80 counters. The New Straits Times Industrial
Index is an average of 30 industrial stocks.
Reporting, Accounting and Auditing. Malaysian reporting, accounting
and auditing standards differ substantially from U.S. standards. In general,
Malaysian corporations do not provide all of the disclosure required by U.S.
law and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Malaysian equity markets was approximately MYR 473.9
billion or US$162.5 billion.
The Mexican Equity Markets
General Background. There is only one stock exchange in Mexico, the
Bolsa Mexicana de Valores (BMV), which was established in 1894 and is located
in Mexico City. The stock exchange is a private corporation whose shares are
owned solely by its authorized members and operates under the stock market laws
passed by the government. The National Banking and Securities Commission (CNV)
supervises the stock exchange. The Mexican exchange operates primarily via the
open outcry method. However, firm orders in writing can supersede this system,
provided there is a perfect match of the details of a buy and sell order.
Executions on the exchange can be done by members only. Membership of the stock
exchange is restricted to Casas de Bolsa brokerage houses and Especialistas
Bursatiles (stock exchange specialists).
Reporting, Accounting and Auditing. Mexican reporting, accounting and
auditing standards differ substantially from U.S. standards. In general,
Mexican corporations do not provide all of the disclosure required by U.S. law
and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Mexican equity markets was approximately MXN 1,214.4
billion or US$ 143.7 billion.
The Netherlands Equity Markets
General Background. Trading securities on the AEX Stock Exchange (AEX)
(formerly the Amsterdam Stock Exchange) started at the beginning of the
seventeenth century. The United East India Company was the first company in
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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 AEX 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 AEX 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 31, 1997, the total market
capitalization of the Dutch equity markets was approximately NLG 911.5 billion
or US$449.8 billion.
The Singaporean Equity Markets
General Background. The Stock Exchange of Singapore (SES) was formed
in 1973 with the separation of the joint stock exchange with Malaysia, which
had been in existence since 1938. The linkage between the SES and the Kuala
Lumpur Stock Exchange (KLSE) remained strong as many companies in Singapore and
Malaysia jointly listed on both exchanges, until January 1, 1990 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 31, 1997, the total market
capitalization of the Singaporean markets was approximately SGD 181.3 billion
or US$119.9 billion.
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 31, 1997, the total market
capitalization of the Spanish equity markets was approximately ESP 30,769.4
billion or US$202.4 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
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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 SwedishChamber 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 31, 1997, the total market
capitalization of the Swedish equity markets was approximately SEK 2,036.8
billion or US$259.4 billion.
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 31, 1997, the total market
capitalization of the Swiss equity markets was approximately CHF 719.7 billion
or US$484.9 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 31, 1997, the total market
capitalization of the United Kingdom equity markets was approximately GBP
1,191.2 billion or US$1,931.9 billion.
OTHER FUND INVESTMENTS
Although the policy of each WEBS Index Series of the Fund is to remain
substantially fully invested in equity
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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, cash, local currency and forward currency exchange
contracts that are intended to provide the WEBS Index Series with exposure to
such equity securities. A WEBS Index Series may invest temporarily in cash,
local currency, forward currency contracts and certain Short-Term Investments.
Such investments 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 Series' portfolio composition or
weighting.) Ordinarily, securities will be sold from a WEBS Index Series only
to reflect certain administrative changes in an MSCI 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 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 "SEC"). The SEC 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 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
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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 or
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 and to invest securities lending cash collateral. 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 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 WEBS 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
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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 are 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).
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 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;
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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;
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 a WEBS
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 WEBS 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 are 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. 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
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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.
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, exchange
control regulations and the costs that may be incurred in connection with
conversions between various currencies. Investing in a WEBS Index Series whose
portfolio contains 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 a WEBS 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.
A WEBS Index Series will minimize the risk 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 (or gain) to the investor. For example,
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if at the time of purchase, 10% of the value of a 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 futures contracts are used, and the fact that steps
will be taken to eliminate the leverage of any futures positions, a WEBS 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 IndexSeries 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. 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
will be qualifying income for purposes of the 90% requirement.
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
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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. The development of a unified common European market has promoted the
free flow of goods and services; however, since September 1992, Europe's
monetary policy has been affected by fluctuating currencies. Additionally,
1993's tight monetary policies and high inflation caused Europe's economies to
ebb into recession.
The Maastricht Treaty on economic and monetary union (the "EMU") is
intended to provide its members with a stable monetary framework. The prospect
of EMU has triggered a sharp convergence of interest rates across Europe, with
risk premium over the German interest rates levels having decreased. Adding to
the favorable monetary conditions, the monetary easing experienced by core
countries has triggered a strong depreciation of their currencies.
Consequently, European activity has accelerated again in 1997.
The prospect of the EMU has reduced the roles of exchange rate
depreciation, fiscal profligacy and political control over central banks on the
business cycle. As a result, the European cycle is becoming less volatile. We
believe that future core European business cycles will resemble those in the
US, where swings in activity are determined mainly by exogenous shocks to the
system, policy mistakes and inventory corrections.
The EMU is likely to take place in 1999 with Austria, Belgium,
Finland, France, Germany, Ireland, Luxembourg, Spain, Portugal, and the
Netherlands (there is a chance Italy may still join). The costs associated with
a delay and possible abandonment appear to be too great to allow the political
leaders to walk away from their commitment. The EMU should be a net plus for
European investment spending and for economic growth. In addition, a less
volatile business cycle should be beneficial for future business planning. This
should be a net plus for shareholder value and for the markets in general. The
community's future challenge will be to allow more countries into the EMU while
maintaining its stability.
Austria. Austria's small population and its limited domestic market
are not sufficient to support single large industrial sectors. Since raw
materials are limited and the terrain supports only a small agricultural
sector, Austria's Gross Domestic Product ("GDP") is based on its labor force
and service industry. Its skilled labor force has focused on special niche
industries for export, with high value added through technological
applications, and a vibrant services sector, based initially on tourism, has
emerged and currently accounts for over 60% of Austria's GDP.
As a result of the second world war, much of the Austrian industrial
sector was converted to public ownership and the Austrian Industrial
Administration Company ("OIAG") was created to function as a holding company
for these nationalized industries. Due to global recession and the troublesome
state of public finance in Austria, the government attempted to reduce the
drain of the OIAG on the country's budget by reducing the OIAG's labor force
and reorganizing 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. With the steady trend toward privatization and the increased importance
of foreign capital, Austria is a likely member of the EMU.
Belgium. Rising new industries in Belgium include light engineering,
chemicals, and food processing and services, with the service industry sector
currently accounting for approximately 70% of GDP. Even though the agricultural
sector is small, accounting for only about 2% of GDP, its importance is
reflected in Belgium's thriving food processing business. Some of Belgium's
traditional industries, coal, steel, textiles and heavy engineering, have
experienced a steep decline over the past two decades but this decline has been
partly 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, together with a successful strategy of
competitive disinflation and a lower domestic demand growth, has led to
substantial current account surpluses. Exports are running at approximately 77%
of GDP and imports at approximately 74%.
High unemployment rates and a large public debt 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,
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but this trend reversed itself in 1991. The rise in the deficit was
fueled by an economic slowdown, followed by a recession in 1993, along with
increasing social security and interest payments. By 1993, the deficit had
increased to 7.2% of GDP. Belgium implemented a series of tough fiscal
restrictions over the last four years with a view to meeting the Maastricht
criteria. As a result, the budget deficit fell from 7.2% of GDP in 1993, to
2.9% in 1996. The debt to GDP ratio has also started to decline.
France. France is a leading industrial 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
textile industries have given way to the fast growing aerospace, chemicals and
pharmaceuticals, plastics and telecommunications industries. The automobile
industry, the most important industry in the early eighties, has been largely
overtaken by capital goods industries. The capital goods industries account for
one-fifth of the country's exports and supply as many jobs as the agricultural
sector.
High unemployment rates (currently 12.5%) and a soaring budget deficit
are some of the main economic concerns that have plagued France for the past
decade. Since 1993, the government has been trying to solve these problems
through a mix of higher taxes, which reached a record level in 1995, and a
reduction of non-wage costs. In 1996, the largest attempt to cut the budget
deficit was implemented, leading to a disparity of interest rate differentials
vis-a-vis Germany.
The government's 1996 implementation of an unpopular far-reaching
reform of the social security system, which aimed to curb health care spending
through tighter control from the Parliament and supervisory bodies, resulted in
a protracted strike.
In 1997, the unexpected Socialist victory in the early general
election raised fresh doubts about the French authorities' commitment to cut
the budget deficit in line with the EMU requirements. However, the new
government finally decided to implement a temporary 10% corporate tax increase,
the second one since 1995, and cut spending, which should allow France to
qualify for the EMU. The government also envisions reducing current employees'
weekly working time and hiring 350,000 youths in the public sector to cut
unemployment rates.
The future economic challenges facing the French government include
reducing the budget deficit to a level acceptable to the EMU requirements,
downsizing and restructuring the public sector and improving the business
environment, particularly by increasing labor market flexibility.
Germany. Germany, the third largest economy in the world, has faced
substantial economic challenges resulting from the reunification of East and
West Germany. The former East Germany, which had been insulated from any real
competition, was under invested in housing and infrastructure and was not
geared to handle full economic and political union with West Germany. In
addition, the cost of reunification, which West Germany intended to finance
with increased taxes, proved to be much greater than anticipated due to the
high cost of social security transfers, extensive environmental damage and a
worse than expected economic condition. As a result, the public sector deficit
rose from 0% to 7.5% in 1993 and the Bundesbank (central bank) sharply raised
interest rates, causing the economy to recess.
Germany began to recover from recession in 1994, but the rise in
interest rates and the appreciation of the deutschemark restricted market
advances. The sharp monetary eases implemented by the Bundesbank along with the
depreciation of the deutschemark through 1997 have created very favorable
monetary conditions to which the economy is responding. Germany's fiscal health
and prosperity over the next few years will largely depend on the continued
growth of capitalism in eastern Germany.
Italy. Italy is a net importer of agricultural products and also
imports most of its energy products. Aside from tourism and design, Italy's
service sector is not very competitive. Through networks of small and
medium-sized companies Italy's strengths lie in its manufacturing sector,
particularly in 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. In September 1992, the lira collapsed and was forced to leave the
Exchange Rate Mechanism (ERM). The lira recovered in 1996 and returned to the
ERM by the end of that year.
The Bank of Italy, operating autonomously, has historically followed a
tough monetary policy in an effort to prevent government borrowing from causing
inflation.
Beginning in 1991, the government implemented a fiscal policy that
reduced government borrowing through tax measures and spending cuts. Since
then, successive governments have delivered to parliament ambitious budget laws
that included revenue raising measures and cuts to the pension system, health
service, local government and defense. Despite the slow pace of reform to avoid
social unrest, impressive improvements have been made to realize 1997's
3%-of-GDP deficit target as required by the Maastricht Treaty.
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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, it resumed in 1995 and is
still proceeding.
The Netherlands. The Netherlands boasts one of the highest levels of
GDP per capita in the world. While industry is its most important sector, the
Netherlands also benefits from agricultural and natural gas resources.
Foreign trade is vital to the Netherlands, accounting for
approximately 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 an increased unemployment rate. Additionally, 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 is 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. The Netherlands has
efficiently increased the flexibility of its labor market and cut indirect wage
costs. As a consequence, the Netherlands should outperform the European average
in terms of economic performance over the years to come.
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 along with a rise in
unemployment in the early 1990s. Currently, the government faces the challenges
of addressing the domestic concerns of controlling inflation, reducing the
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 goal of maintaining a stable currency. The resulting
huge inflow of foreign capital caused the Spanish economy to lose some of its
competitiveness. Despite the devaluation of the peseta and the easing of
monetary policy in 1993, Spain slipped into its worst recession in 30 years.
Economic growth has recovered since then, averaging 2.4% from 1994-96. The
center-right government elected in 1996 has displayed a strong ability to
control public spending through structural reforms. By the end of 1997, Spain
should be able to fulfill all the Maastricht criteria and its participation in
the EMU should not be questioned.
In June of 1994, Spain experienced a general strike by the trade
unions. The strike, while unsuccessful, led to reforms in the labor market to
ease the rigid regulations that govern permanent job contracts. Spanish
unemployment is currently the highest in the European Union; however, 1997's
strong economic growth and new reforms to improve the flexibility of the labor
market have decreased the rate of unemployment from 24.6% in 1994 to 20.5% as
of July 1997.
Sweden. Sweden has a highly developed and successful industrial
sector. The chief industries, most of which are privately owned, 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.
Successive governments have traditionally afforded Swedes generous
benefits for unemployment, sick leave, child care, elderly care and general
public welfare, along with state medical care. This extensive social welfare
system has proved unsustainable in recent years and has resulted in large
government deficits. Furthermore, a wide tax wedge, caused by the generous
social benefits, is a key impediment to job creation and is the reason for the
high unemployment rate. Almost half of the personal disposable income received
by Swedes resulted from transfer payments, a system for redistributing income.
Sweden suffered a severe recession in the early 1990s causing GDP to
fall 5% between 1990 and 1993. The economic recovery gathered pace in 1994 and
is now in its fourth year. Nonetheless, the recession led to a drop in the
standard of living and has left Sweden with a large gap in its public finances.
The budget deficit peaked in 1993 at 12.3% of GDP.
Sweden, which joined the European Community on January 1, 1995,
received strong pressure to bring its public finances under control. A fiscal
consolidation plan, entailing a tightening of policy over a period of four
years, was approved by Parliament in 1995. The implementation of the plan is
currently on track and Sweden is most likely to achieve a balanced budget in
1998. The resulting improvement in investor and business confidence has boosted
Sweden's economic prospects and, despite the continuing fiscal consolidation,
such economic prospects are some of the best in Europe for the remainder of the
decade.
Switzerland. Due to its lack of raw materials, Switzerland has based
its economic growth on its highly skilled labor market and technological
manufacturing expertise. Switzerland's strengths lie in chemicals and
pharmaceuticals, watches, precision instruments (machinery equipments),
engineering, food, financial services and
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tourism. Additionally, its small domestic market's reliance on exports
accounted for 36% of the GDP in 1994.
Historically, Switzerland has experienced low unemployment levels due
to its heavy dependence on foreign labor to supplement its labor force.
However, from 1990 through the first half of 1997, the unemployment rate rose
substantially, peaking at 5.7% in mid 1997, resulting from seven years of
recession and stagnation. Some signs of economic revival have appeared in 1997,
since the economy traditionally operates in tandem with the rest of Europe.
Moreover, because of its safe haven status, the currency has been under
increased pressures due to the prospect of the EMU currency, the Euro, which in
turn has aggravated the economic situation. For the remainder of 1997 and
forward, the monetary policy is likely to remain targeted at the exchange rate.
The United Kingdom. The May 1 general election resulted in a landslide
victory for the Labor Party, led by Tony Blair, which had been out of office
since May 1979. In its first few months, the Labor Party administration has
shown signs of pursuing policies which are very similar to the market-oriented
policies of the outgoing government. It has granted operational independence to
the Bank of England, a step which the Conservative government had been
reluctant to take.
The new government is more open to EMU than the outgoing
administration, but early participation nonetheless remains unlikely. The Labor
leadership is in favor of the EMU in principle, but has stated that any
eventual practical decision to join must be preceded by a greater economic
convergence than that specified by the Maastricht Treaty and a formal
referendum.
The UK economy has grown since 1993, and has continued to grow
strongly during early 1997. Measured unemployment has fallen sharply, toward
levels more typical of the United States than of Continental Europe, and
corporate profitability has been approaching levels not seen since the 1960s.
Unfortunately, inflation performance remains disappointing, and it is still
uncertain whether the independent central bank will be successful at
fine-tuning the business cycle.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<CAPTION>
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Austria ........................... 1.1 1.8 3.0 0.4
Belgium ........................... 1.4 1.9 2.3 -1.3
France ........................... 1.3 2.2 2.8 -1.3
Germany ........................... 1.4 1.9 2.9 -1.1
Italy ........................... 0.7 3.0 2.2 -1.2
Netherlands......................... 2.7 2.4 2.7 0.2
Spain ........................... 2.2 2.8 2.1 -1.2
Sweden ........................... 1.1 3.6 3.3 -2.2
Switzerland......................... -0.7 0.1 1.0 -0.8
United Kingdom...................... 2.1 2.5 3.8 2.1
</TABLE>
Source: World Economic Outlook, May 1997 (International Monetary Fund)
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, accordingly, are 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, along with the reduction of foreign investment
in the local economies and a general decline 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 Asian countries. Rapidly rising
household incomes have fostered large middle classes and new waves of consumer
spending. The 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
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the sole source of growth for these 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.
In recent months, the Southeast Asian currency markets have come under
severe selling pressure from abroad, as foreign investors and speculators alike
have heavily sold regional currencies viewed to be overvalued. The Thai Baht
was the first to come under pressure, but Indonesian, Malaysian, Phillipine,
Singaporean, Taiwanese, South Korean and Hong Kong currencies have all been
affected. Equity and fixed income markets have also faced selling pressure as
foreign investors have been concerned with the overall financial prospects of
the region. For the near to intermediate term at least, these developments
could lead to higher interest rates, lower economic growth and continued
volatility in the currency and securities markets in the region.
Australia. Australia has a prosperous Western-style capitalist
economy, with 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 largest exporter of beef and wool, the second-largest exporter of mutton
and among the top wheat exporters in the world. 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 could have a large 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 land care and reform the public housing policy. Additionally, the
government has continued to support privatization of state-owned enterprises.
While economic data suggests an easing from the unsustainable rates of
growth reached during 1994, the outlook is for continued, but moderate economic
growth. While GDP grew by 3.2% in 1995, debt is expected to continue to rise.
Regardless of the intensification of the severe drought in eastern
Australia, economic growth was strong in 1994-95 and improvements were made in
reducing unemployment. The inflation rate reached 5.1% in 1995. This was the
result of increased food prices, due to the drought, and the government's
increased taxes on tobacco and motor vehicles.
Hong Kong. The transfer of sovereignty from Britain to China, which
has created a sense of uncertainty in Hong Kong's economy, has largely been a
smooth transition. Under the principle of "one country, two systems," Hong Kong
is now a special administrative region (SAR) of the People's Republic of China
and is empowered with a high degree of autonomy. It has retained its
administrative, legislative and judicial systems. The SAR government has full
control over its monetary and fiscal policies and it maintains its own customs
and immigration control, separate from the mainland. Except for issues relating
to national security and foreign policy, the SAR is largely run as an
independent territory.
The first chief executive of the SAR, Mr. C.H. Tung, a former shipping
tycoon, has vowed to make a difference in the lives of the people of Hong Kong,
by focusing his attention on the areas of housing, education and
infrastructure. In the past, the chronic shortage of housing has been a strong
influence on the property market. Hong Kong property prices today are among the
highest in the world. The Tung administration will announce a major housing
package in October 1997, detailing its plan to double the supply of apartments
in the territory. Worth noting is that there is heavy exposure to the property
market in Hong Kong's banking sector as well as the stock market as a whole.
The integration of Hong Kong's economy with that of the mainland
continues apace. While the integration process in the 1980's was driven by the
relocation of Hong Kong's labor-intensive manufacturing sector to Southern
China, the integration theme for the 1990's is that of Hong Kong becoming a
service center for China's fast growing economy. A large number of mainland
companies have established offices in Hong Kong as a window for interaction
with the global economy. The Hong Kong financial sector is increasing its role
in the intermediation of foreign funds for investment in China. Close to half
of the FDI into China goes through Hong Kong. Furthermore, Hong Kong is
increasingly playing a role in intermediating China's savings for investment in
China. Hong Kong is well on its way in becoming a bona fide financial center
for China.
The Hong Kong dollar, which is pegged to the U.S. dollar, has come
under recent selling pressure as have most Asian currencies. Both the Hong
Kong government and the Central Bank of China have significant U.S. dollar
reserves, which are expected to be used to defend the peg. There can be no
assurance that a substantial devaluation will not occur. Hong Kong's property,
bond, equity and currency markets have all recently experienced
downside pressure, partly as a result of devaluation fears.
Japan. Japan's economy, the second-largest in the world, has grown
substantially over the last three decades. However in 1995, the Japanese
economy expanded by just 0.9% and its budget showed a deficit of 5.9% 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. Profits have fallen sharply,
unemployment has reached a historical high and consumer confidence is low. The
banking sector continues to suffer from nonperforming loans. Numerous cuts of
the
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discount-rate 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. Finally, Japan is reforming its political process and
deregulating its economy. This has resulted in 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 to anticipate 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 tariffs and other protectionist measures, as well as the
economic condition of its trading partners. Japan subsidizes its agricultural
industry since only 19% of its land is suitable for cultivation. 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, has caused
trade tensions, particularly with the United States. Some trade agreements 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. Additionally,
the strength of the yen itself may prove an impediment to strong continued
exports and economic recovery, because it makes Japanese goods sold in other
countries more expensive and reduces the value of foreign earnings repatriated
to Japan. Since 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, which
resulted in the death of 5,000 people and billions of dollars of damage,
natural disasters can be significant enough to affect the country's economy.
Malaysia. Over the last two decades, Malaysia has experienced rapid
industrialization, transforming a once commodity driven economy to one
dominated by the manufacturing sector. Although commodities remain important to
the Malaysian economy, where tin, rubber, palm oil, timber, oil and gas have
played a leading role, the electronics sector is now the fastest growing and
most important sector by far. 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 is allowed,
Malaysia has experienced a high rate of reinvestment of profits from foreign
direct investment.
The Bank Negara Malaysia (the central bank) manages the exchange value
of the Ringgit against a basket of foreign currencies. Recently, there has been
significant selling pressure on the ringgit as foreign investors have
dramatically sold down the currency. The general feeling of currency
overvaluation has hurt the Southeast Asian market, in particular Thailand and
Malaysia, and has been compounded by speculative currency trading. The weak
Ringgit has caused an outflow of foreign capital which has in turn hurt other
Malaysian markets. While the Malaysian government has recently lifted certain
selling restrictions on particular financial assets, these restrictions have
contributed to a general feeling of apprehension among foreign investors as to
the Malaysian government's commitment to free market dynamics and the Malaysian
government's ability to stabilize its own financial markets.
The future direction of Malaysian manufacturing, and the economy as a
whole, depends on the performance of manufactured exports. Foreign direct
investment is the source of Malaysia's export dynamism. Malaysia is developing
its human capital base and its infrastructure in order to continue attracting
foreign investment. This strategy has led to an increased import-intensity of
growth. It also makes Malaysia vulnerable to potentially volatile foreign
capital flows, as has recently been the case, and downturns in demand in its
export markets. Malaysia's continued success depends on reducing the import
content of exports through increased technology transfer to develop linkages
between exporters and domestic input supplies.
Singapore. Singapore has become a high-income, highly industrialized
country though rapid growth in its
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manufacturing sector due largely to significant foreign investment. Of
particular importance is the electronics industry in which Singapore is the
leading producer of disk drives. The financial and business services sector has
also experienced recent growth, while the mining and agriculture sectors are of
minimal importance. Oil refining and chemical industries have long been
important and recently a significant pharmaceutical sector has emerged. Since
1987, annual growth has been high, ultimately reaching 10% in 1993 and 1994 and
9% in 1995. This sustained annual growth can be attributed to high investment
and exports. Personal consumption growth has been low, which makes Singapore
the highest saving country in the world.
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. The taxes
are relatively high, but rates are stable. Monetary policy has aimed at keeping
inflation low by using the exchange rate as the main instrument. Labor market
pressure has been controlled by setting limits on the percentage of foreign
labor employed and applying a levy 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. Though foreign
investment is a key to the continued prosperity of Singapore, the main concern
about future prospects is that productivity growth has not been consistent over
the years. With one of the highest investment rates in the world, sustaining
rapid output growth increasingly will depend on boosting productivity growth.
Singapore's financial markets have come under recent selling pressure,
as fears that the Singapore Dollar may be overvalued have spurred both
fundamental and speculative currency selling. The weakened Singapore Dollar has
resulted in increased selling pressure on other Singapore markets. The Monetary
Authority of Singapore has largely been allowing the Singapore dollar to
fluctuate according to market forces, resulting in a recent depreciation.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<CAPTION>
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Australia..................................... 4.0 3.2 5.2 3.4
Hong Kong..................................... 4.5 4.8 5.3 6.1
Japan ..................................... 3.6 1.4 0.6 0.1
Malaysia ..................................... 8.4 9.5 9.2 8.3
Singapore..................................... 7.0 8.8 10.1 10.4
</TABLE>
Source: World Economic Outlook, May 1997 (International Monetary Fund)
Canada
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
approximately 25% of Canadian production, Canada is highly dependent on the
U.S. market as a source of demand for manufacturing, agricultural goods, energy
and other raw material products. Nearly 80% of Canada's external trade is with
the U.S. and close ties exist between U.S. and Canadian manufacturers
(two-thirds of the foreign direct investment into Canada is from the U.S.).
Both the Free Trade Agreement with the U.S. and the North American Free Trade
Agreement increased the ties between the two nations, guaranteeing Canada's
access to its largest export market.
In early 1990, due to reduced domestic demand and the beginnings of a
downturn in the U.S., the economy ebbed into recession. The recession hit the
manufacturing sector the hardest, but continued 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, arriving at approximately 5% of
GDP per annum. In addition, Canada's poor export performance during the
recession hinted at reduced competitiveness internationally. Since that time,
Canada has made some progress in restructuring its industries. At the same
time, it has grappled with its fiscal deficits and has developed a plan to
bring its federal budget into balance by the end of the century. Moreover, the
provinces have also reined in their fiscal excesses: seven of the ten had
balanced budgets in 1996.
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The fiscal restructuring across all levels of government led to significant
public sector job losses; although these were offset for the most part by
private sector job gains, overall employment growth remained below par. As a
result, Canada's unemployment rate has remained above 9% since 1990.
With the fiscal drag on the economy having reached its maximum in
1996, the continued strength in investment in machinery and equipment, along
with a competitively-valued Canadian dollar, suggest that Canada may have
brighter prospects in the short run. Risks remain however. Continued economic
sluggishness may diminish Canada's fiscal resolve and bring about a call for
tax cuts. Due to the high level of outstanding debt in the public sector, it
will be difficult for Canada to maintain advances made in its competitiveness
over the long run. Another significant problem faced by the Canadian economy is
the ongoing uncertainty caused by the separatist movement in Quebec, Canada's
second largest and second most populous province. After a very narrow defeat in
the October 1995 referendum campaign, Quebec's separatist government vowed to
hold another referendum within a year of its reelection. The next provincial
election in Quebec must take place by summer 1999.
CANADIAN REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<CAPTION>
<S> <C>
1996 1.5
1995 2.3
1994 4.1
1993 2.2
1992 0.8
1991 -1.8
</TABLE>
Source: World Economic Outlook, May 1997 (International Monetary Fund)
Mexico
Mexico. During the 1980's, Mexico pursued policies designed to reform
the economy and promote sustained growth. These policies included fiscal
discipline, tax reform, opening the economy, deregulation and privatization.
While successful in reducing inflation and raising growth, these policies
resulted in a substantial budget deficit and an overvalued exchange rate by the
end of 1994, which made the country unable to withstand the shocks that
occurred in 1994. This resulted in the destabilization of the Mexican economy
at the end of 1994. These shocks included a series of violent internal
political events, a sharp turnaround in U.S. interest rate policy, beginning in
February 1994, and a belated recognition by financial market participants of
too-large growth in monetary aggregates and fiscal red ink. All combined to
create a crisis of confidence on the part of foreign portfolio investors.
In December 1994, a sharp and rapid devaluation of the peso ensued,
engendering higher inflation and new concerns, both about Mexico's ability to
repay its short-term obligations and the stability of the Mexican banking
system. These concerns led to higher interest rates and an eventual refinancing
of internal bank obligations or refunding debt issues in 1995. Also in 1995,
the government amortized US$29 billion of short-term dollar-linked debt, of
which two thirds was actually paid in dollars using longer-term funds borrowed
from the International Monetary Fund and the U.S. Department of Treasury. U.S.
Treasury obligations have since been repaid.
In 1995-96, using a mix of tight monetary policy and tight fiscal
discipline, the Mexican government endeavored to restore stability in 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. The government was successful on
the whole, reducing inflation and the volatility of the exchange rate and
reducing nominal interest rates. Mexico's overall operational fiscal balance
budgets in 1995 and 1996 equaled .7% and -.8% of GDP, respectively. In 1996,
there were significant declines in real and nominal interest rates.
Mexico's GDP, which declined 6.2% in 1995, grew by 5.1% in 1996 and
inflation totaled 27.7%, according to official estimates from Mexico's Ministry
of Finance. Mexico's balance of payment's deficit was reduced from US$29.4
billion in 1994, to US$1.8 billion in 1996, all according to official
government estimates. Also according to official estimates, economic growth has
averaged 6.4% in the six quarters since 1996, suggesting that sustainable
recovery is underway.
According to official statistics, inflation, which reached a peak in
April 1995 with the 8% growth in consumer prices, has averaged 1.6% in the
twelve months ending with June 1997. The Mexican peso has remained relatively
stable in 1997, despite the July 6, 1997 Congressional election losses by the
governing party, the PRI. The 48-hour interbank Mexican peso equaled M$7.66 on
December 31, 1996, and M$7.82 on July 31. Real interest rates have continued to
decline in 1997.
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<PAGE> 73
MEXICO REAL GDP RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<S> <C>
1996 5.1
1995 -6.2
1994 4.5
1993 2.0
1992 3.6
1991 4.2
</TABLE>
Source: World Economic Outlook, October 1996 (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 China,
Indonesia, Malaysia, Mexico, the Philippines, Singapore and Thailand, and for
those regional and international indices which include such markets.
Indonesia, Malaysia, Singapore and Thailand currently impose foreign
ownership limits on domestic stock, and when the foreign ownership limit is
reached, foreigners may only trade with other foreigners, frequently at a price
that is higher than the price available to domestic investors. The Free Indices
for such countries are designed to reflect the actual investment conditions for
international investors by using the foreign prices for stocks where relevant.
The Free Indices for Indonesia, Malaysia, Singapore and Thailand will use
foreign prices only when a foreign ownership limit is reached on a constituent
stock and a determination is made that there is sufficient long-term liquidity
at the foreign price. To compensate for the distorting inflation of a company's
weight that may occur as a result of using the higher foreign prices for its
shares, a compensating factor called a Free Market Capitalization Factor
("FMCF") may be applied to the total number of shares of a "foreign priced"
constituent stock in the respective Index. A FMCF is the approximate ratio of
domestic price to foreign price and is applied in an effort to align the free
market capitalization weight with the domestic market capitalization weight.
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
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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 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 may 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 the market
risks overwhelming the index with names. Within these constraints, MSCI strives
to include smaller capitalization stocks, provided they exhibit sufficient
liquidity.
23
<PAGE> 75
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 Index Series' benchmark Index, the MSCI Mexico
(Free) Index, reflects the reinvestment of gross dividends. "Gross dividends"
means dividends before reduction for taxes withheld at source.
DIVIDEND TREATMENT
In respect of developed markets, MSCI Indices with dividends
reinvested constitute an estimate of total return arrived at by reinvesting one
twelfth of the year 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 p.m.
London time by the WM Company and are sourced whenever possible from
multi-contributor quotes on Reuters. Representative rates are selected for each
currency based on a number of "snapshots" of the latest contributed quotations
taken from the Reuters service at short intervals around 4 PM. WM/Reuters
provides closing bid and offer rates. MSCI uses these to calculate the
mid-point to 5 decimal places.
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
24
<PAGE> 76
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 based on their broad industry, but
also based on 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 its substantial size
and liquidity.
Deletions. MSCI's primary concern when considering deletions is the
continuity of the indices. Of secondary concern are the turnover costs
associated with deletions. The indices must represent the full investment
cycle, including bear as well as bull markets. Out-of-favor stocks may exhibit
declining price, market capitalization or liquidity, and yet continue to be
good representatives of their industry.
Companies may be deleted because they have diversified away from their
industry classification, because the industry has evolved in a different
direction from the company's thrust, or because a better industry
representative exists (either a new issue or an existing company). In addition,
in order not to exceed the 60% target coverage of industries and countries,
adding new index companies may entail corresponding deletions. Usually such
deletions take place within the same industry, but there are occasional
exceptions.
Each of the MSCI Indices utilized as the benchmark for a 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 31, 1997, the MSCI Australia Index (with net dividends
reinvested) (the "MSCI Australia") consisted of 55 stocks with an aggregate
market capitalization of approximately AUD230.4 billion or US$169.2 billion. In
percentage terms, the MSCI Australia represented approximately 54.9% of the
total market capitalization of Australia on August 31, 1997.
The ten largest constituents of the MSCI Australia and the respective
approximate percentages of the MSCI Australia represented by such constituents
as of August 31, 1997 were, in order:
<TABLE>
<CAPTION>
<S> <C> <C>
1 Broken Hill Prop Co....................................14.83%
2 National Australia Bank................................12.13%
3 Westpac Banking........................................ 6.10%
4 News Corp.............................................. 5.34%
5 Coca-Cola Amatil....................................... 5.08%
6 News Corp Plvo......................................... 3.40%
7 WMC.................................................... 3.38%
8 Lend Lease............................................. 3.18%
9 Coles Myer............................................. 3.15%
10 Rio Tinto Ltd (Cra).................................... 2.87%
</TABLE>
25
<PAGE> 77
As of August 31, 1997, the largest five constituents together
comprised approximately 43.48 of the market capitalization of the MSCI
Australia; the largest ten constituents comprised approximately 59.46% of the
market capitalization of the MSCI Australia; and the largest 20 constituents
comprised approximately 78.56% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Banking......................................................18.23%
2. Energy Sources...............................................16.98%
3. Metals - Non Ferrous......................................... 9.33%
4. Broadcasting & Publishing................................... 8.74%
5. Beverages & Tobacco.......................................... 7.65%
6. Building Materials & Components.............................. 6.65%
7. Real Estate.................................................. 6.58%
8. Multi-Industry............................................... 3.81%
9. Merchandising................................................ 3.49%
10. Business & Public Services................................... 2.59%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Australia Index as of August 31, 1997.
THE MSCI AUSTRIA INDEX
On August 31, 1997, the MSCI Austria Index (with net dividends
reinvested) (the "MSCI Austria") consisted of 24 stocks with an aggregate
market capitalization of approximately ATS298 billion or US$23.5 billion. In
percentage terms, the MSCI Austria represented approximately 66.0% of the total
market capitalization of Austria on August 31, 1997.
The ten largest constituents of the MSCI Austria and the respective
approximate percentages of the MSCI Austria represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1 OMV AG..................................................15.17%
2 Bank Austria Stamm......................................12.17%
3 Va Technologie..........................................11.70%
4 Verbund Oesterr Elek A.................................. 8.91%
5 Creditanstalt Stamm..................................... 7.49%
6 Wienerberger Baustoff................................... 7.17%
7 Ea-generali Stamm....................................... 7.01%
8 Boehler-uddeholm........................................ 3.67%
9 Flughafen Wien.......................................... 3.45%
10 Creditanstalt Vorzug.................................... 3.27%
</TABLE>
As of August 31, 1997, the largest five constituents together comprised
approximately 55.44% of the market capitalization of the MSCI Austria; the
largest ten constituents comprised approximately 80.01% of the market
capitalization of the MSCI Austria; and the largest 20 constituents comprised
approximately 91.91% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Banking..................................................26.26%
2. Energy Sources...........................................15.17%
3. Machinery & Engineering..................................14.15%
4. Utilities - Electrical & Gas............................. 8.91%
5. Insurance................................................ 7.32%
6. Building Materials & Components.......................... 7.17%
7. Misc. Materials & Commodities............................ 5.23%
8. Metals - Steel........................................... 3.67%
9. Business & Public Services............................... 3.45%
10. Transportation - Airlines................................ 2.61%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Austria Index as of August 31, 1997.
26
<PAGE> 78
THE MSCI BELGIUM INDEX
On August 31, 1997, the MSCI Belgium Index (with net dividends
reinvested) (the "MSCI Belgium") consisted of 17 stocks with an aggregate
market capitalization of approximately BEF2,637.7 billion or US$70.9 billion.
In percentage terms, the MSCI Belgium represented approximately 56.0% of the
total market capitalization of Belgium on August 31, 1997.
On August 31, 1997, the ten largest constituents of the MSCI Belgium
and the respective approximate percentages of the MSCI Belgium represented by
such constituents as of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1 Electrabel...............................................15.14%
2 Petrofina................................................11.79%
3 Fortis Ag................................................11.56%
4 Generale Banque.......................................... 8.73%
5 Tractebel................................................ 7.83%
6 Kredietbank.............................................. 6.95%
7 Solvay................................................... 6.61%
8 Royale Belge............................................. 6.22%
9 Groupe Bruxelles Lambert ................................ 5.11%
10 Barco.................................................... 3.39%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 55.05% of the market capitalization of the MSCI
Belgium; the largest ten constituents comprised approximately 83.33% of the
market capitalization of the MSCI Belgium; and the largest 15 constituents
comprised approximately 97.54% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Utilities - Electrical & Gas............................... 22.97%
2. Insurance.................................................. 17.78%
3. Banking.................................................... 16.79%
4. Energy Sources............................................. 11.79%
5. Multi-Industry............................................. 8.38%
6. Chemicals.................................................. 6.61%
7. Electronic Components, Instruments......................... 3.39%
8. Merchandising.............................................. 3.35%
9. Metals - Non Ferrous....................................... 2.99%
10. Building Materials & Components............................ 2.61%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Belgium Index as of August 31, 1997.
THE MSCI CANADA INDEX
On August 31, 1997, the MSCI Canada Index (with net dividends
reinvested) (the "MSCI Canada") consisted of 84 stocks with an aggregate market
capitalization of approximately CAD424.8 billion or US$305.9 billion. In
percentage terms, the MSCI Canada represented approximately 64.0% of the total
market capitalization in Canada on August 31, 1997.
The ten largest constituents of the MSCI Canada and the respective
approximate percentages of the MSCI Canada represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Northern Telecom............................................... 8.50%
2. BCE Inc ....................................................... 5.89%
3. Royal Bank of Canada........................................... 4.73%
4. Thomson Corp................................................... 4.51%
5. Seagram Co..................................................... 4.19%
6. Canadian Imperial Bank......................................... 3.49%
7. Bank Nova Scotia............................................... 3.44%
8. Canadian Pacific............................................... 3.30%
9. Bank Montreal.................................................. 3.25%
10. Imperial Oil................................................... 2.79%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 27.82% of the market
27
<PAGE> 79
capitalization of the MSCI Canada; the largest ten constituents comprised
approximately 44.09% of the market capitalization of the MSCI Canada; and the
largest 20 constituents comprised approximately 63.93% of the market
capitalization of the MSCI Canada.
The ten most highly represented industry sectors in the MSCI Canada,
and the approximate percentages of the MSCI Canada represented thereby as of
August 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Banking...................................................... 15.63%
2. Energy Sources............................................... 13.96%
3. Electrical & Electronics..................................... 11.04%
4. Metals - Non Ferrous......................................... 8.18%
5. Telecommunications........................................... 6.84%
6. Multi-Industry............................................... 6.31%
7. Broadcasting & Publishing................................... 5.79%
8. Beverages & Tobacco.......................................... 4.74%
9. Gold Mines................................................... 4.73%
10. Utilities - Electrical & Gas................................. 3.90%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Canada
Index as of August 31, 1997.
THE MSCI FRANCE INDEX
On August 31, 1997, the MSCI France Index (with net dividends
reinvested) (the "MSCI France") consisted of 68 stocks with an aggregate market
capitalization of approximately FRF2,468.4 billion or US$406.9 billion. In
percentage terms, the MSCI France represented approximately 70.4% of the total
market capitalization in France on August 31, 1997.
The ten largest constituents of the MSCI France and the respective
approximate percentages of the MSCI France represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Elf Aquitaine................................................ 7.46%
2. Loreal....................................................... 5.94%
3. Carrefour.................................................... 5.70%
4. Total Sa..................................................... 5.62%
5. AXA-UAP...................................................... 5.18%
6. Alcatel Alsthom.............................................. 4.88%
7. LVMH......................................................... 4.48%
8. Generale Eaux (CIE).......................................... 3.68%
9. Suez Lyonnaise............................................... 3.11%
10. Rhone-Poulenc Ord A.......................................... 3.02%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 29.9% of the market capitalization of the MSCI France;
the largest ten constituents comprised approximately 49.07% of the market
capitalization of the MSCI France; and the largest 20 constituents comprised
approximately 73.43% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Energy Sources................................................. 13.08%
2. Health & Personal Care......................................... 12.03%
3. Merchandising.................................................. 11.28%
4. Business & Public Services..................................... 8.85%
5. Electrical & Electronics....................................... 8.50%
6. Banking........................................................ 7.48%
7. Recreation, Other Consumer Goods............................... 5.79%
8. Insurance...................................................... 5.18%
9. Building Materials & Components................................ 4.51%
10. Food & Household Products...................................... 3.68%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI France
Index as of August 31, 1997.
THE MSCI GERMANY INDEX
28
<PAGE> 80
On August 31, 1997, the MSCI Germany Index (with net dividends
reinvested) (the "MSCI Germany") consisted of 67 stocks with an aggregate
market capitalization of approximately DEM975.1 billion or US$541.7 billion. In
percentage terms, the MSCI Germany represented approximately 77.3% of the total
market capitalization in Germany on August 31, 1997.
The ten largest constituents of the MSCI Germany and the respective
approximate percentages of the MSCI Germany represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Allianz....................................................... 9.39%
2. Deutsche Telekom.............................................. 8.10%
3. Daimler-Benz.................................................. 7.14%
4. Siemens Stamm................................................. 6.38%
5. Deutsche Bank................................................. 5.75%
6. Veba.......................................................... 4.96%
7. Bayer......................................................... 4.93%
8. Muenchener Rueck Nam.......................................... 4.38%
9. BASF.......................................................... 3.92%
10. Volkswagen Stamm.............................................. 3.69%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 36.76% of the market capitalization of the MSCI
Germany; the largest ten constituents comprised approximately 58.64% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Insurance................................................... 15.16%
2. Banking..................................................... 13.64%
3. Automobiles................................................. 11.69%
4. Utilities - Electrical & Gas................................ 11.37%
5. Telecommunications.......................................... 11.26%
6. Chemicals................................................... 8.86%
7. Electrical & Electronics.................................... 6.38%
8. Business & Public Services.................................. 4.34%
9. Health & Personal Care...................................... 3.08%
10. Merchandising............................................... 2.80%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Germany Index as of August 31, 1997.
THE MSCI HONG KONG INDEX
On August 31, 1997, the MSCI Hong Kong Index (with net dividends
reinvested) (the "MSCI Hong Kong") consisted of 35 stocks with an aggregate
market capitalization of approximately HKD1,723.2 billion or US$222.4 billion.
In percentage terms, the MSCI Hong Kong represented approximately 52.6% of the
total market capitalization in Hong Kong on August 31, 1997.
The ten largest constituents of the MSCI Hong Kong and the respective
approximate percentages of the MSCI Hong Kong represented by such constituents
as of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Hutchison Whampoa.............................................. 14.50%
2. Sun Hung Kai Properties........................................ 12.20%
3. Hongkong Telecom............................................... 11.06%
4. Cheung Kong Holdings........................................... 10.93%
5. Hang Seng Bank................................................. 10.48%
6. Swire Pacific A................................................ 5.42%
7. New World Development.......................................... 5.33%
8. China Light & Power Co......................................... 5.18%
9. Wharf Holdings................................................. 3.75%
10. Hongkong China Gas............................................. 3.05%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 59.17% of the market capitalization of the MSCI Hong
Kong; the largest ten constituents comprised approximately 81.9% of the market
capitalization of the MSCI Hong Kong; and the largest 20 constituents comprised
approximately 94.28% of the market
29
<PAGE> 81
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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Real Estate..................................................... 37.49%
2. Multi-Industry.................................................. 21.09%
3. Banking......................................................... 13.26%
4. Telecommunications.............................................. 11.06%
5. Utilities - Electrical & Gas.................................... 8.23%
6. Transportation - Airlines....................................... 2.52%
7. Leisure & Tourism............................................... 1.87%
8. Broadcasting & Publishing...................................... 1.52%
9. Merchandising................................................... 0.68%
10. Financial Services.............................................. 0.53%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Hong
Kong Index as of August 31, 1997.
THE MSCI ITALY INDEX
On August 31, 1997, the MSCI Italy Index (with net dividends
reinvested) (the "MSCI Italy") consisted of 55 stocks with an aggregate market
capitalization of approximately ITL353,537.2 billion or US$200.8 billion. In
percentage terms, the MSCI Italy represented approximately 70.6% of the total
market capitalization of Italy on August 31, 1997.
The ten largest constituents of the MSCI Italy and the respective
approximate percentages of the MSCI Italy represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. ENI............................................................ 22.10%
2. Tim Ord........................................................ 11.19%
3. Telecom Italia Ord............................................. 10.76%
4. Assicurazioni Generali......................................... 9.28%
5. Fiat Ord....................................................... 5.63%
6. INA............................................................ 2.91%
7. San Paolo Di Torino Ord........................................ 2.82%
8. Imi Istituto Mobilia........................................... 2.77%
9. Mediaset....................................................... 2.57%
10. Credito Italiano Ord........................................... 2.30%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 58.96% of the market capitalization of the MSCI Italy;
the largest ten constituents comprised approximately 72.33% of the market
capitalization of the MSCI Italy; and the largest 20 constituents comprised
approximately 88.07% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Telecommunications......................................... 24.86%
2. Energy Sources............................................. 22.10%
3. Insurance.................................................. 14.70%
4. Banking.................................................... 14.04%
5. Automobiles................................................ 7.09%
6. Broadcasting & Publishing................................. 2.95%
7. Utilities - Electrical & Gas............................... 2.53%
8. Industrial Components...................................... 2.28%
9. Multi-Industry............................................. 2.04%
10. Textiles & Apparel......................................... 1.66%
</TABLE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Italy Index as of August 31, 1997.
THE MSCI JAPAN INDEX
On August 31, 1997 the MSCI Japan Index (with net dividends
reinvested) (the "MSCI Japan") consisted of 310 stocks with an aggregate market
capitalization of approximately JPY227,992.1 billion or US$1,895.4 billion. In
30
<PAGE> 82
percentage terms, the MSCI Japan represented approximately 65.2% of the total
market capitalization in Japan on August 31, 1997.
The ten largest constituents of the MSCI Japan and the respective
approximate percentages of the MSCI Japan represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. NTT Corp..................................................... 6.31%
2. Toyota Motor Corp............................................ 5.25%
3. Bank Tokyo-Mitsubishi........................................ 4.48%
4. Sumitomo Bank................................................ 2.45%
5. Matsushita Elect Ind'l....................................... 2.06%
6. Fuji Bank.................................................... 1.87%
7. Industrial Bank of Japan..................................... 1.85%
8. Sony Corp.................................................... 1.79%
9. Hitachi...................................................... 1.63%
10. Honda Motor Co............................................... 1.59%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 20.55% of the market capitalization of the MSCI Japan;
the largest ten constituents comprised approximately 29.28% of the market
capitalization of the MSCI Japan; and the largest 20 constituents comprised
approximately 41.18% of the market capitalization of the MSCI Japan.
The ten most highly represented industry sectors in the MSCI Japan,
and the approximate percentages of the MSCI Japan represented thereby as of
August 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Banking..................................................... 17.17%
2. Automobiles................................................. 7.69%
3. Telecommunications.......................................... 6.31%
4. Appliances & Household Durables............................. 5.12%
5. Health & Personal Care...................................... 4.63%
6. Machinery & Engineering..................................... 4.22%
7. Electronic Components, Instruments.......................... 4.11%
8. Industrial Components....................................... 3.75%
9. Chemicals................................................... 3.70%
10. Merchandising............................................... 3.53%
</TABLE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Japan Index as of August 31, 1997.
THE MSCI MALAYSIA (FREE) INDEX
On August 31, 1997, the MSCI Malaysia (Free) Index (with net dividends
reinvested) (the "MSCI Malaysia (Free)") consisted of 76 stocks with an
aggregate market capitalization of approximately MYR250.6 billion or US$85.9
billion. In percentage terms, the MSCI Malaysia (Free) represented
approximately 52.9% of the total market capitalization of Malaysia on August
31, 1997.
The ten largest constituents of the MSCI Malaysia (Free) and the
respective approximate percentages of the MSCI Malaysia (Free) represented by
such constituents as of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Tenaga Nasional............................................. 10.76%
2. Telekom Malaysia............................................ 10.65%
3. Malayan Banking............................................. 8.85%
4. Sime Darby.................................................. 6.40%
5. United Engineers (Mal)...................................... 3.76%
6. RHB Capital (DCB Hldgs)..................................... 3.33%
7. Rothmans Pall Mall (Mal).................................... 2.68%
8. Resorts World............................................... 2.44%
9. Malaysia Int'l Shipping..................................... 2.39%
10. Proton...................................................... 1.84%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 40.42% of the market capitalization of the MSCI
Malaysia (Free); the largest ten constituents comprised approximately 53.1% of
the market capitalization of the MSCI Malaysia (Free) and the largest 20
constituents comprised approximately 68.78% of the market capitalization of the
MSCI Malaysia (Free).
31
<PAGE> 83
The ten most highly represented industry sectors in the MSCI Malaysia
(Free), and the approximate percentages of the MSCI Malaysia (Free) represented
thereby as of August 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Banking...................................................... 15.12%
2. Multi-Industry............................................... 13.88%
3. Telecommunications........................................... 11.39%
4. Utilities - Electrical & Gas................................. 10.76%
5. Misc. Materials & Commodities................................ 6.88%
6. Leisure & Tourism............................................ 5.76%
7. Financial Services........................................... 4.73%
8. Automobiles.................................................. 4.46%
9. Beverages & Tobacco.......................................... 3.78%
10. Real Estate.................................................. 3.49%
</TABLE>
Appendix A hereto contains a complete list of the securities
constituting the MSCI Malaysia (Free) Index as of August 31, 1997.
THE MSCI MEXICO (FREE) INDEX
On August 31, 1997, the MSCI Mexico (Free) Index (with gross dividends
reinvested) (the "MSCI Mexico (Free)") consisted of 40 stocks with an aggregate
market capitalization of approximately MXN741.5 billion or US$95 billion. In
percentage terms, the MSCI Mexico (Free) represented approximately 66.1% of the
total market capitalization of Mexico on August 31, 1997.
On August 31,1997, the ten largest constituents of the MSCI Mexico
(Free) and the respective approximate percentages of the MSCI Mexico (Free)
represented by such constituents as of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Telmex Telefonos Mex L..................................... 14.50%
2. Grupo Modelo C............................................. 7.24%
3. Grupo Carso................................................ 6.69%
4. Kimberly-Clark Mexico A.................................... 6.48%
5. Telmex Telefonos Mex A..................................... 5.83%
6. Grupo Televisa CPO......................................... 5.34%
7. Alfa....................................................... 4.82%
8. Cifra B.................................................... 4.81%
9. Fomento Economico Mex...................................... 3.94%
10. Cemex A.................................................... 2.92%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 40.74% of the market capitalization of the MSCI Mexico
(Free); the largest ten constituents comprised approximately 62.57% of the
market capitalization of the MSCI Mexico (Free); and the largest 20
constituents comprised approximately 85.57% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Telecommunications.......................................... 20.33%
2. Beverages & Tobacco......................................... 14.74%
3. Multi-Industry.............................................. 14.15%
4. Merchandising............................................... 9.28%
5. Building Materials & Components............................. 8.86%
6. Health & Personal Care...................................... 6.48%
7. Broadcasting & Publishing.................................. 5.34%
8. Metals - Non Ferrous........................................ 4.77%
9. Banking..................................................... 4.74%
10. Food & Household Products................................... 4.18%
</TABLE>
Appendix A hereto contains a complete list of the securities
constituting the MSCI Mexico (Free) Index as of August 31, 1997.
THE MSCI NETHERLANDS INDEX
On August 31, 1997, the MSCI Netherlands Index (with net dividends
reinvested) (the "MSCI Netherlands") consisted of 22 stocks with an aggregate
market capitalization of approximately NLG638.9 billion or US$315.3
32
<PAGE> 84
billion. In percentage terms, the MSCI Netherlands represented approximately
70.1% of the total market capitalization of the Netherlands on August 31, 1997.
The ten largest constituents of the MSCI Netherlands and the
respective approximate percentages of the MSCI Netherlands represented by such
constituents as of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Royal Dutch Petroleum Co.................................... 34.64%
2. ING Groep N.V............................................... 11.39%
3. Unilever NV Cert............................................ 10.30%
4. ABN Amro Holding............................................ 8.69%
5. Philips Electronics......................................... 8.01%
6. Kon. PTT Nederland.......................................... 5.31%
7. Ahold....................................................... 4.06%
8. Akzo Nobel.................................................. 3.51%
9. Elsevier.................................................... 3.21%
10. Wolters kluwer.............................................. 2.56%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 73.03% of the market capitalization of the MSCI
Netherlands; the largest ten constituents comprised approximately 91.68% of the
market capitalization of the MSCI Netherlands; and the largest 20 constituents
comprised approximately 99.58% 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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Energy Sources................................................ 34.64%
2. Financial Services............................................ 11.39%
3. Food & Household Products..................................... 10.30%
4. Banking....................................................... 8.69%
5. Appliances & Household Durables............................... 8.01%
6. Broadcasting & Publishing.................................... 5.77%
7. Telecommunications............................................ 5.31%
8. Merchandising................................................. 4.06%
9. Chemicals..................................................... 3.51%
10. Beverages & Tobacco........................................... 2.52%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Netherlands as of August 31, 1997.
THE MSCI SINGAPORE (FREE) INDEX
The MSCI Singapore (Free) Index (with net dividends reinvested) (the
"MSCI Singapore (Free)") is a "free" index in that it excludes companies and
share classes that are not purchasable by foreigners. On August 31, 1997, the
MSCI Singapore (Free) consisted of 37 stocks with an aggregate market
capitalization of approximately SGD95.9 billion or US$63.4 billion. In
percentage terms, the MSCI Singapore (Free) represented approximately 52.9% of
the total market capitalization of Singapore on August 31, 1997
The ten largest constituents of the MSCI Singapore (Free) and the
respective approximate percentages of the MSCI Singapore (Free) represented by
such constituents as of August 31, 1997 were in order:
<TABLE>
<S> <C> <C>
1. Singapore Telecom.......................................... 14.05%
2. OCBC Bank Fgn.............................................. 10.43%
3. United Overseas Bank Fgn................................... 10.31%
4. Singapore Airlines Fgn..................................... 10.29%
5. Development Bk Sing Fgn.................................... 8.08%
6. City Developments.......................................... 7.90%
7. Keppel Corp................................................ 4.28%
8. DBS Land................................................... 4.09%
9. Singapore Press Hldg Fgn................................... 4.04%
10. Creative Technology........................................ 2.82%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 53.16% of the market capitalization of the MSCI
Singapore (Free); the largest ten constituents comprised approximately 76.29%
of the market capitalization of the MSCI Singapore (Free); and the largest 20
constituents comprised approximately 91.27% of the market capitalization of the
MSCI Singapore (Free).
33
<PAGE> 85
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 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Banking..................................................... 28.81%
2. Real Estate................................................. 17.43%
3. Telecommunications.......................................... 14.05%
4. Transportation - Airlines................................... 10.29%
5. Multi-industry.............................................. 7.68%
6. Broadcasting & Publishing.................................. 4.04%
7. Electronic Components, Instruments.......................... 3.12%
8. Beverages & Tobacco......................................... 2.49%
9. Leisure & Tourism........................................... 2.36%
10. Automobiles................................................. 2.12%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Singapore (Free) as of August 31, 1997.
THE MSCI SPAIN INDEX
On August 31, 1997, the MSCI Spain Index (with net dividends
reinvested) (the "MSCI Spain") consisted of 31 stocks with an aggregate market
capitalization of approximately ESP21,555.4 billion or US$141.8 billion. In
percentage terms, the MSCI Spain represented approximately 70.1% of the total
market capitalization of Spain on August 31, 1997.
The ten largest constituents of the MSCI Spain and the respective
approximate percentages of the MSCI Spain represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Telefonica De Espana......................................... 17.22%
2. Endesa Empresa Nal Elec...................................... 14.81%
3. Banco Bilbao Vizcaya......................................... 12.57%
4. Banco Santander.............................................. 9.42%
5. Repsol....................................................... 8.38%
6. Iberdrola.................................................... 7.15%
7. Gas Natural SDG.............................................. 4.74%
8. Argentaria Corp Bancaria..................................... 4.30%
9. Banco Central Hispano........................................ 4.28%
10. Autopistas Cesa (Acesa)...................................... 2.02%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 62.4% of the market capitalization of the MSCI Spain;
the largest ten constituents comprised approximately 84.89% of the market
capitalization of the MSCI Spain; and the largest 20 constituents comprised
approximately 96.34% of the market capitalization of MSCI Spain.
The ten most highly represented industry sectors in the MSCI Spain and
the approximate percentages of the MSCI Spain represented thereby as of August
31, 1997 were:
<TABLE>
<S> <C> <C>
1. Banking........................................................ 30.57%
2. Utilities - Electrical & Gas................................... 28.38%
3. Telecommunications............................................. 17.22%
4. Energy Sources................................................. 8.38%
5. Business & Public Services..................................... 3.63%
6. Construction & Housing......................................... 2.03%
7. Real Estate.................................................... 1.54%
8. Beverages & Tobacco............................................ 1.47%
9. Metals - Steel................................................. 1.36%
10. Insurance...................................................... 1.18%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Spain
as of August 31, 1997.
THE MSCI SWEDEN INDEX
On August 31, 1997, the MSCI Sweden Index (with net dividends
reinvested) (the "MSCI Sweden") consisted of 29 stocks with an aggregate market
capitalization of approximately SEK1,216.5 billion or US$154.9 billion. In
percentage terms, the MSCI Sweden represented approximately 59.7% of the total
market capitalization of Sweden on August 31, 1997.
34
<PAGE> 86
The ten largest constituents of the MSCI Sweden and the respective
approximate percentages of the MSCI Sweden represented by such constituents as
of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Ericsson (LM) B............................................. 25.93%
2. Astra A..................................................... 13.80%
3. Abb AB A.................................................... 6.29%
4. Hennes & Mauritz B.......................................... 5.05%
5. Volvo B..................................................... 5.03%
6. Svenska Handelsbk A......................................... 4.31%
7. Skand.Enskilda Banken A..................................... 3.66%
8. Electrolux B................................................ 3.37%
9. Astra B..................................................... 2.99%
10. Skanska B................................................... 2.92%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 56.1% of the market capitalization of the MSCI Sweden;
the largest ten constituents comprised approximately 73.35% of the market
capitalization of the MSCI Sweden; and the largest 20 constituents comprised
approximately 93.43% of the market capitalization of the MSCI Sweden.
The ten most highly represented industry sectors in the MSCI Sweden,
and the approximate percentages of the MSCI Sweden represented thereby as of
August 31, 1997 were:
<TABLE>
<S> <C> <C>
1. Electrical & Electronics..................................... 34.76%
2. Health & Personal Care....................................... 16.79%
3. Banking...................................................... 8.37%
4. Automobiles.................................................. 7.31%
5. Forest Products & Paper...................................... 6.13%
6. Merchandising................................................ 5.05%
7. Machinery & Engineering...................................... 3.58%
8. Appliances & Household Durables.............................. 3.37%
9. Construction & Housing....................................... 2.92%
10. Insurance.................................................... 2.57%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Sweden
as of August 31, 1997.
THE MSCI SWITZERLAND INDEX
On August 31, 1997, the MSCI Switzerland Index (with net dividends
reinvested) (the "MSCI Switzerland") consisted of 36 stocks with an aggregate
market capitalization of approximately CHF567.2 billion or US$382.2 billion. In
percentage terms, the MSCI Switzerland represented approximately 78.8% of the
total market capitalization in Switzerland on August 31, 1997.
The ten largest constituents of the MSCI Switzerland and the
respective approximate percentages of the MSCI Switzerland represented by such
constituents as of August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. Novartis Namen............................................... 23.16%
2. Roche Holding Genuss......................................... 15.55%
3. Nestle....................................................... 12.00%
4. Roche Holding Inhaber........................................ 6.33%
5. Credit Suisse................................................ 6.15%
6. UBS INH (Schweiz Bankges).................................... 5.52%
7. Schweiz Rueckvers............................................ 5.09%
8. Schweiz Bankverein........................................... 4.90%
9. Zuerich Versicherung......................................... 4.47%
10. ABB Ag Inhaber............................................... 3.13%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 63.19% of the market capitalization of the MSCI
Switzerland; the largest ten constituents comprised approximately 86.3% of the
market capitalization of the MSCI Switzerland; and the largest 20 constituents
comprised approximately 96.4% 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 31, 1997 were:
35
<PAGE> 87
<TABLE>
<S> <C> <C>
1. Health & Personal Care....................................... 47.48%
2. Banking...................................................... 17.72%
3. Food & Household Products.................................... 12.00%
4. Insurance.................................................... 9.56%
5. Electrical & Electronics..................................... 3.55%
6. Business & Public Services................................... 2.41%
7. Building Materials & Components.............................. 1.75%
8. Multi-Industry............................................... 1.39%
9. Machinery & Engineering...................................... 1.36%
10. Recreation, Other Consumer Goods............................. 1.05%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI
Switzerland as of August 31, 1997.
THE MSCI UNITED KINGDOM INDEX
On August 31, 1997 , the MSCI United Kingdom Index (with net dividends
reinvested) (the "MSCI UK") consisted of 132 stocks with an aggregate market
capitalization of approximately GPB737.3 billion or US$1,195.8 billion. In
percentage terms, the MSCI UK represented approximately 61.9% of the aggregate
capitalization of the United Kingdom markets on August 31, 1997.
The ten largest constituents of the MSCI UK and the respective
approximate percentages of the MSCI UK represented by such constituents as of
August 31, 1997 were, in order:
<TABLE>
<S> <C> <C>
1. British Petroleum............................................. 6.68%
2. Glaxo Wellcome................................................ 5.94%
3. Lloyds TSB Group.............................................. 5.26%
4. HSBC Holdings (HKD 10)........................................ 4.46%
5. Smithkline Beecham............................................ 4.00%
6. British Telecom............................................... 3.44%
7. Barclays...................................................... 2.92%
8. Zeneca Group.................................................. 2.51%
9. HSBC Holdings (GBP 0.75)...................................... 2.29%
10. Marks & Spencer............................................... 2.26%
</TABLE>
As of August 31, 1997, the largest five constituents together
comprised approximately 26.34% of the market capitalization of the MSCI UK; the
largest ten constituents comprised approximately 39.76% of the market
capitalization of the MSCI UK; and the largest 20 constituents comprised
approximately 56.16% 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 31,
1997 were:
<TABLE>
<S> <C> <C>
1. Banking....................................................... 15.60%
2. Health & Personal Care........................................ 12.45%
3. Merchandising................................................. 8.35%
4. Energy Sources................................................ 7.32%
5. Telecommunications............................................ 6.40%
6. Multi-Industry................................................ 5.31%
7. Food & Household Products..................................... 4.70%
8. Utilities - Electrical & Gas.................................. 4.69%
9. Insurance..................................................... 4.58%
10. Business & Public Services.................................... 3.91%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI UK as
of August 31, 1997.
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 (29.7%), the United Kingdom (20.25%), Germany (9.04%), France
(7.04%), Switzerland (6.70%), Netherlands (5.32%), Hong Kong (3.67%), Singapore
(1.02%), Belgium (1.14%), Malaysia (1.27%), Australia (2.82%), Spain (2.53%),
Italy (3.67%), Sweden (2.73%), Denmark (1.01%), Finland (0.82%), Norway
(0.59%), New Zealand (0.35%), Austria (0.40%) and Ireland (0.37%). The
weightings shown parenthetically are based on the EAFE Index as of September
29, 1997.
36
<PAGE> 88
Investors may purchase WEBS of different WEBS 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 "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 WEBS
Index Series, in order to achieve the basket weightings listed below:
<TABLE>
<CAPTION>
Number of % of Value
WEBS Index Series WEBS of Basket
-------------------------- ---------- ----------
<S> <C> <C>
Japan 246,700 30.23%
United Kingdom 117,300 20.90%
Germany 53,300 9.33%
France 45,200 7.26%
Switzerland 46,300 6.92%
Netherlands 23,600 5.49%
Hong Kong 24,300 3.78%
Australia 26,000 2.91%
Malaysia (Free) 16,400 1.31%
Italy 19,400 3.78%
Sweden 13,600 2.81%
Spain 12,500 2.61%
Singapore (Free) 11,900 1.06%
Belgium 7,200 1.18%
Austria 3,700 0.41%
</TABLE>
The total cost of the above basket of WEBS, again using the values per
Creation Unit in the Prospectus, would be $10,000,000. 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 96.86% of the value of
such index on September 29, 1997.
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 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 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 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 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 the 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 Index Series
basis disseminated during AMEX trading hours should not be viewed as a real
time update of the net asset value per WEBS share of the Fund, which is
calculated only once a day. It is possible that the value of the portfolio of
securities held by
37
<PAGE> 89
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 weighting as the Deposit Securities of the particular WEBS 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 (Free), 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.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS OF THE FUND
The Board 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 currently consists of
five Directors. Nathan Most is an "interested" director, as defined in the 1940
Act, by reason of his position as President of the Fund.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
- --------------------------- ------------------------- -----------------------
<S> <C> <C>
Nathan Most Director, President and Senior Vice President (retired) (from
P.O. Box 193 Chairman of the Board 1992 to 1996) and Vice President (from
Burlingame, CA 94011-0193 1980 to 1992) of the American Stock
Age 83 Exchange, Inc.; President and CEO
(retired) (from 1982 to 1996) of AMEX
Commodities Corporation.
John B. Carroll Director Vice President of Investment Management
Vice President, Investment (since 1984) of GTE Corporation; Trustee
Management and Member of the Executive Committee
GTE Corporation (since 1991) of The Common Fund, a
One Stamford Forum non-profit organization; Member of the
Stamford, CT 06904 Investment Committee (since 1988) of the
Age 62 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
Advisory Director Managing Director (from 1985 to 1995) of
Morgan Stanley & Co., Morgan Stanley & Co. Incorporated;
Incorporated Chairman (since 1994) and Trustee (since
1251 Avenue of the Americas 1985) of the Board of Trustees of
23rd Floor Macalester College; Trustee (since 1995)
New York, NY 10020 of the Russell Sage Foundation; Member
Age 47 (since 1994) of Wilmer Eye Institute
Advisory Counsel at Johns Hopkins
University Hospital; President (since
1992) of the Hultquist Foundation.
</TABLE>
38
<PAGE> 90
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
- --------------------------- ------------------------- -----------------------
<S> <C> <C>
Lloyd N. Morrisett Director President (since 1969) of The John and
President Mary R. Markle Foundation; Member (since
The Markle Foundation 1968) of the Council on Foreign
75 Rockefeller Plaza Relations; Member (since 1970) of the
Suite 1800 American Association for the Advancement
New York, NY 10099 of Science; Chairman (since 1970) of the
Age 67 Children's Television Workshop; Director
(since 1976) of Haskins Laboratories,
Inc.; Director (1990-January, 1997) 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
President 1994) of General Motors Investment
General Motors Investment Management Corporation; Vice President
Management Corp. and Treasurer (from 1991 to 1994) of
767 Fifth Avenue Hughes Electronics; President (from 1984
New York, NY 10153 to 1991) of Hughes Investment Management
Age 50 Company; Director (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 General 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.
</TABLE>
39
<PAGE> 91
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
- --------------------------- ------------------------- -----------------------
<S> <C> <C>
Stephen M. Wynne Treasurer Chairman of PFPC Trustee & Custodial
Executive Vice President Services Ltd. (since 1995); Executive
PFPC Inc. 400 Bellevue Parkway Vice President and Chief Accounting
Wilmington, DE 19809 Officer (since 1993) and Senior Vice
Age 42 President and Chief Accounting Officer
(from 1991 to 1993) of PFPC Inc.;
Executive Vice President (from 1993 to
1995) of PFPC International; Vice
President and Chief Accounting Officer
(since 1987) of PNC Institutional
Management Corp.
R. Sheldon Johnson Secretary Managing Director, Global Equity
Managing Director Derivatives, Morgan Stanley & Co.
Morgan Stanley & Co. Incorporated (since 1988).
Incorporated
1585 Broadway
New York, NY 10036
Age 50
Stephen C. Beach Assistant Treasurer Senior Vice President - Product and
Senior Vice President Client Development (since 1995) and
PFPC Inc. Managing Counsel (from 1990 to 1994) of
400 Bellevue Parkway PFPC Inc.
Wilmington, DE 19809
Age 44
JoAnne M. Bennick Assistant Treasurer Vice President and Director of Quality
Vice President Assurance (since 1993) of PFPC Inc.;
PFPC Inc. Audit Manager (from 1990 to 1993) and
103 Bellevue Parkway Audit Associate (from 1985 to 1990) of
Wilmington, DE 19809 Coopers & Lybrand.
Age 38
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.;
400 Bellevue Parkway General Counsel (from 1986 to 1992) of
Wilmington, DE 19809 SunAmerica Asset Management Inc.
Age 46
Kathleen L. Thren Assistant Secretary Counsel of PNC Bank, N.A. (since 1996);
Counsel Attorney (from 1993 to 1996) of Drinker
PFPC Inc. Biddle & Reath; Attorney (from 1991 to
400 Bellevue Parkway 1993) of L'Abbate & Balkan.
Wilmington, DE 19809
Age 32
</TABLE>
- ---------
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the remuneration of Directors and officers
of the Fund for the fiscal year ended August 31, 1997.
<TABLE>
<CAPTION>
PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM
NAME OF PERSON, POSITION AGGREGATE COMPENSATION BENEFITS ACCRUED AS PART OF BENEFITS UPON REGISTRANT AND FUND
FROM REGISTRANT FUND EXPENSES RETIREMENT COMPLEX PAID TO DIRECTORS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nathan Most, Director, $40,000 None None $40,000
President and Chairman of the
Board
</TABLE>
40
<PAGE> 92
<TABLE>
<S> <C> <C> <C> <C>
John B. Carroll, Director $40,000 None None $40,000
Timothy A. Hultquist, Director $40,000 None None $40,000
Lloyd N. Morrisett, Director $40,000 None None $40,000
W. Allen Reed, Director $40,000 None None $40,000
</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") acts as investment adviser
to the Fund and, subject to the supervision of the Board, is responsible for
the investment management of each WEBS 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. As of
August 31, 1997, the Adviser and its parent, Barclays Global Investors, N.A.,
manage, administer or advise assets aggregating in excess of $483 billion as of
August 31, 1997.
The Adviser serves as investment adviser to each WEBS 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 and in conformity with the
stated investment policies of each WEBS Index Series, manages the investment of
each WEBS Index Series' assets. The Adviser may enter into subadvisory
agreements with additional investment advisers to act as subadvisers with
respect to particular WEBS 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 WEBS Index Series. For its investment management
services to each WEBS Index Series the Adviser is paid management fees equal to
each WEBS Index Series' allocable portion of: .27% per annum of the aggregate
net assets of the 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. The
Adviser may from time to time reimburse expenses to one or more WEBS Index
Series. The Fund's management fees, like those paid by most index funds, are
lower than those paid by many actively managed funds. One reason for the
difference in fee levels is that passive management requires fewer investment,
research and trading decisions, thereby justifying lower fees. Pursuant to the
Management Agreement, the Adviser 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 from commencement of operations (March 11, 1996) to August
31, 1996 and the fiscal year ended August 31, 1997, respectively, the Fund paid
fees to the Adviser for its advisory service as follows: Australia WEBS Index
Series $10,350 and $49,326; Austria WEBS Index Series $9,748 and $8,459;
Belgium WEBS Index Series $2,045 and $38,995; Canada WEBS Index Series $13,800
and $59,093; France WEBS Index Series $14,503 and $35,574; Germany WEBS Index
Series $16,309 and $49,546; Hong Kong WEBS Index Series $7,597 and $40,743;
Italy WEBS Index Series $25,345 and $78,513; Japan WEBS Index Series $105,230
and $318,796; Malaysia (Free) WEBS Index Series $7,550 and $44,814; Mexico
(Free) WEBS Index Series $5,552 and $26,482; Netherlands WEBS Index Series
$5,510 and $22,577; Singapore (Free) WEBS Index Series $8,578 and $34,141;
Spain WEBS Index Series $6,162 and $14,044; Sweden WEBS Index Series $4,522 and
$15,088; Switzerland WEBS Index Series $8,392 and $24,197; and United Kingdom
WEBS Index Series $14,599 and $57,283.
THE ADMINISTRATOR
41
<PAGE> 93
PFPC Inc. (the "Administrator"), an indirect wholly owned subsidiary of
PNC Bank Corp., 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 ("MSTC") in its capacity as Custodian, or by PNC Bank, N.A. ("PNC") in
its capacity as Transfer Agent. The 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 the Administrator is 400
Bellevue Parkway, Wilmington, DE 19809.
For the administrative and fund accounting services the Administrator
provides to the Fund, PFPC is paid aggregate fees equal to each WEBS Index
Series' allocable portion of: .22% per annum of the aggregate average daily net
assets of the Fund up to $1.5 billion; plus .15% per annum of the aggregate
average daily net assets of the Fund between $1.5 billion and $3 billion, plus
.14% per annum of the aggregate average daily net assets of the Fund between $3
billion and $5 billion, plus .13% per annum of the aggregate average daily net
assets of the Fund between $5 billion and $7.5 billion, plus .115% per annum of
the aggregate average daily net assets of the Fund between $7.5 billion and $10
billion, plus .10% per annum of the aggregate average daily net assets of the
Fund in excess of $10 billion. The Administrator pays Morgan Stanley Trust
Company a fee of .05% of the average daily net assets of the Fund for
sub-administration services as described under "Custodian, Lending Agent and
Sub-Administrator" below. The current fee arrangements with the Administrator,
and the sub-administration arrangements, became effective as of the date of
this Statement of Additional Information. The Administrator may from time to
time waive all or a portion of its fees or may reimburse expenses to one or
more WEBS Index Series.
If the Administrator is terminated within the first three years of the
Fund's operations, except if 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.
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, 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 from commencement of operations to August 31, 1996 and for
the fiscal year ended August 31, 1997, respectively, the Fund paid fees to the
Administrator for its administrative services as follows: Australia WEBS Index
Series $6,524 and $31,057; Austria WEBS Index Series $6,123 and $5,326; Belgium
WEBS Index Series $1,289 and $24,552; Canada WEBS Index Series $8,682 and
$37,207; France WEBS Index Series $9,081 and $22,398; Germany WEBS Index Series
$10,284 and $31,196; Hong Kong WEBS Index Series $4,793 and $25,653; Italy WEBS
Index Series $15,927 and $49,434; Japan WEBS Index Series $66,484 and $200,723;
Malaysia (Free) WEBS Index Series $4,761 and $28,216; Mexico (Free) WEBS Index
Series $3,503 and $16,674; Netherlands WEBS Index Series $3,475 and $14,215;
Singapore (Free) WEBS Index Series $5,412; and $21,496; Spain WEBS Index Series
$3,858 and $8,842; Sweden WEBS Index Series $2,878 and $9,500; Switzerland WEBS
Index Series $5,251 and $15,235; and United Kingdom WEBS Index Series $9,200
and $36,067.
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 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 1940 Act. Under the Fund's Plan, for each WEBS
Index Series the Distributor is entitled to receive a distribution fee, accrued
daily and paid monthly, calculated with respect to each WEBS Index Series at a
rate set from time to time by the Board of Directors, provided that the annual
rate may not exceed .25% of the average daily net assets of such WEBS Index
Series. The Board of Directors has determined to limit the annual fee payable
under the Rule 12b-1 Plan with respect to each WEBS Index Series so as not to
exceed .20% of the average daily net assets of each WEBS Index Series until
further notice. From time to time the Distributor may waive all or a portion of
these fees.
42
<PAGE> 94
The Plan is designed to enable the Distributor to be compensated by the
Fund for distribution services provided by it with respect to each WEBS Index
Series. Payments under the Plan are not tied exclusively to the distribution
expenses actually incurred by the Distributor. The Board, 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, 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 WEBS 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 WEBS
Index Series of the Fund, by a vote of a majority of the outstanding voting
securities of such WEBS Index Series of the Fund (as such vote is defined in
the 1940 Act). If a Plan is terminated (or not renewed) with respect to any one
or more WEBS Index Series of the Fund, it may continue in effect with respect
to any WEBS 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 periodic reports of any amounts expended under the Plan and
the purpose for which such expenditures were made.
The Distributor may also enter into sales and investor services agreements
with broker-dealers or other persons that are DTC Participants (as defined
below) to provide distribution assistance, including broker-dealer and
shareholder support and educational and promotional services. Under the terms
of each sales and investor services agreement, the Distributor will pay such
broker-dealers or other persons, out of Rule 12b-1 fees received from the WEBS
Index Series, at the annual rate of .08 of 1% of the average daily net asset
value of WEBS held through DTC for the account of such DTC Participant.
For the period from commencement of operations to August 31, 1996 and for
the fiscal year ended August 31, 1997, respectively, the Distributor received
the following amounts pursuant to the Plan with respect to each WEBS Index
Series: Australia WEBS Index Series, $9,583 and $45,672; Austria WEBS Index
Series, $9,026 and $7,833; Belgium WEBS Index Series, $1,894 and $36,106;
Canada WEBS Index Series, $12,780 and $54,716; France WEBS Index Series,
$13,429 and $32,938; Germany WEBS Index Series, $15,100 and $45,876; Hong Kong
WEBS Index Series, $7,034 and $37,724; Italy WEBS Index Series, $23,467 and
$72,698; Japan WEBS Index Series, $97,436 and $295,181; Malaysia (Free) WEBS
Index Series, $6,990 and $41,495; Mexico (Free) WEBS Index Series, $5,141 and
$24,521; Netherlands WEBS Index Series, $5,102 and $20,904; Singapore Index
(Free) WEBS Index Series, $7,943 and $31,612; Spain WEBS Index Series, $5,706
and $13,003; Sweden WEBS Index Series, $4,187 and $13,971; Switzerland WEBS
Index Series, $7,770 and $22,405; and United Kingdom WEBS Index Series, $13,517
and $53,040.
In the aggregate, the Distributor received $246,107 and $849,695 for the
period from commencement of operations to August 31, 1996 and for the fiscal
year ended August 31, 1997, respectively, from the WEBS Index Series pursuant
to the Plan, retaining $19,689 and $67,976, respectively, and paying out the
remainder to unaffiliated third parties. The retained amounts represent .02%,
respectively, of the average daily net assets of the WEBS 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 from
commencement of operations to August 31, 1996 and during the fiscal year ended
August 31, 1997, the Distributor paid $184,746 and $494,970; $26,779 and
$342,394; and $14,893 and $35,841, respectively, for (1) postage and other
expenses of distributing prospectuses, statements of additional information and
other marketing materials, (2) advertising-related expenses and (3)
compensation to broker-dealers for distribution assistance, respectively, which
amounts were allocated to payments made under the Plan by each WEBS 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 WEBS 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, LENDING AGENT AND SUB-ADMINISTRATOR
MSTC serves as the Custodian for the cash and portfolio securities of each
WEBS Index Series of the Fund pursuant to a Custodian Agreement between MSTC
and the Fund and as Lending Agent for 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
43
<PAGE> 95
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. Commencing the date of
this Statement of Additional Information, MSTC also provides certain
sub-administrative services relating to the Fund pursuant to a
Sub-Administration Agreement and receives a fee from the Administrator equal to
.05% of the Fund's average daily net assets for providing such services. MSTC
may from time to time reimburse expenses to one or more WEBS Index Series.
MSTC, as Custodian, Lending Agent and Sub-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 MSTC is One
Pierrepont Plaza, Brooklyn, New York, 11201.
For its custody services to each WEBS Index Series, MSTC will be paid per
annum fees based on the aggregate net assets of the WEBS 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 (.10%); Germany WEBS Index Series (.10%); Hong Kong WEBS Index
Series (.12%); Italy WEBS Index Series (.09%); Japan WEBS Index Series (.06%);
Malaysia (Free) WEBS Index Series (.12%); 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
(.07%). As remuneration for its services in connection with lending portfolio
securities of the WEBS Index Series, MSTC is paid by the Fund, in respect of
each WEBS 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. 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 the Transfer Agent is Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19110.
ADDITIONAL EXPENSES
In addition to the fees described above, the Fund is responsible for
expenses that include, among other things, organizational expenses (which were
capitalized at the commencement of operations and are being amortized on the
reverse sum of the years digits method), 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 WEBS Index Series pays a license fee to Morgan Stanley equal to .03% per
annum of the aggregate net assets of the WEBS 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 WEBS 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 a WEBS Index Series, to reduce expenses of
the WEBS 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 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 WEBS 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.
44
<PAGE> 96
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 Exchange Act. DTC was created to hold
securities of its participants (the "DTC Participants") and to facilitate the
clearance and settlement of securities transactions among the DTC Participants
in such securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the New York Stock Exchange, Inc., the
AMEX 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
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
45
<PAGE> 97
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 WEBS 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 WEBS Index Series are open for
business. As of the date of the 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
WEBS Index Series are set forth in Appendix B to this Statement of Additional
Information.
PORTFOLIO DEPOSIT
The consideration for purchase of a Creation Unit of WEBS of a WEBS 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 WEBS 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 WEBS 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 WEBS
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 WEBS 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 WEBS 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 WEBS 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 WEBS 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
WEBS 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 WEBS 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.
46
<PAGE> 98
ROLE OF THE AUTHORIZED PARTICIPANT
Creation Units of WEBS may be purchased only by or through a DTC
Participant that has entered into an Authorized Participant Agreement with the
Fund and the Distributor ("Authorized Participant"). Such Authorized
Participant will agree pursuant to the terms of such Authorized Participant
Agreement on behalf of itself or any investor on whose behalf it will act, as
the case may be, to certain conditions, including that such Authorized
Participant will make available in advance of each purchase of WEBS an amount
of cash sufficient to pay the Cash Component, once the net asset value of a
Creation Unit is next determined after receipt of the purchase order in proper
form, together with the transaction fee described below. The Authorized
Participant may require the investor to enter into an agreement with such
Authorized Participant with respect to certain matters, including payment of
the Cash Component. Investors who are not Authorized Participants must make
appropriate arrangements with an Authorized Participant. Investors should be
aware that their particular broker may not be a DTC Participant or may not have
executed an Authorized Participant Agreement, and that therefore orders to
purchase Creation Units of Fund shares may have to be placed by the investor's
broker through an Authorized Participant. As a result, purchase orders placed
through an Authorized Participant may result in additional charges to such
investor. The Fund does not expect to enter into an Authorized Participant
Agreement with more than a small number of DTC Participants that have
international capabilities. A list of the current 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 WEBS Index Series, the Custodian shall
cause the subcustodian of the WEBS 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 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 WEBS 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
46
<PAGE> 99
WEBS 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 WEBS 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 WEBS 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
Except as provided herein, a Creation Unit of WEBS of a WEBS 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.
To the extent contemplated by an Authorized Participant's agreement
with the Fund, the Fund will issue Creation Units of WEBS to such Authorized
Participant notwithstanding the fact that the corresponding Portfolio Deposits
have not been received in part or in whole, 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 such amount as required by the
Fund in accordance with its then-effective procedures, provided that such
amount shall be no less than 105% of the value of the missing Deposit
Securities. Information concerning the Fund's current procedures for
collateralization of missing Deposit Securities is available from the
Distributor. 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 a WEBS Index Series, they will be effected in essentially the same manner
as in-kind purchases thereof. In the case of a cash purchase, the investor must
pay the cash equivalent of the Deposit Securities it would otherwise be
required to provide through an in-kind purchase, plus the same Cash Component
required to be paid by an in-kind purchaser. In addition, to offset the Fund's
brokerage and other transaction costs associated with using the cash to
purchase the requisite Deposit Securities, the investor will be required to pay
a fixed purchase transaction fee, plus an additional variable charge for cash
purchases, which is expressed as a percentage of the value of the Deposit
Securities. The transaction fees for in-kind and cash purchases of Creation
Units of WEBS are described below.
PURCHASE TRANSACTION FEE
A purchase transaction fee payable to the Fund is imposed to compensate
the Fund for the transfer and other transaction costs of a WEBS 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 WEBS INDEX SERIES IN THE SHAREHOLDER
TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND EXPENSES" IN THE PROSPECTUS.
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 WEBS Index Series is set forth below for illustrative purposes only.
The exchange rate reflected in the table is Y 118.70 per US$1.
47
<PAGE> 100
<TABLE>
<CAPTION>
UNIT CREATION DAILY NAV
UNIT CREATION CALCULATION CALCULATION
CALCULATION IN UNITED IN UNITED
IN JAPANESE YEN STATES DOLLARS STATES DOLLARS
--------------- -------------- --------------
<S> <C> <C> <C>
Execution............................. 894,385,627 7,534,841 7,534,841
Commissions........................... 894,386 7,535 N/A
Stamp Taxes........................... 0 0 N/A
Risk Premium.......................... 0 0 N/A
Accrued Income........................ 4,014,553 33,821 33,821
Creation Charge....................... 1,056,430 8,900 N/A
WEBS Unit Value....................... 900,350,996 7,585,097 7,568,662
Per WEBS.............................. 12.64 12.61
Shares................................ 600,000
</TABLE>
See "Management of the Fund," in the Prospectus, and "Investment
Advisory, Management, Administrative and Distribution Services" herein, for
additional information concerning the distribution arrangements for WEBS.
REDEMPTION OF WEBS IN CREATION UNITS
The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Redemption of WEBS in
Creation Units."
WEBS may be redeemed only in Creation Units at their net asset value
next determined after receipt of a redemption request in proper form by the
Distributor and only on a day on which the AMEX is open for trading. THE FUND
WILL NOT REDEEM WEBS IN AMOUNTS LESS THAN CREATION UNITS. Beneficial Owners
also may sell WEBS in the secondary market, but must accumulate enough WEBS to
constitute a Creation Unit in order to have such shares redeemed by the Fund.
There can be no assurance, however, that there will be sufficient liquidity in
the public trading market at any time to permit assembly of a Creation Unit of
WEBS. Investors should expect to incur brokerage and other costs in connection
with assembling a sufficient number of WEBS to constitute a redeemable Creation
Unit. See "Investment Considerations and Risks" in the Prospectus.
With respect to each WEBS 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 redemption requests received in proper form (as
defined below) on that day. Unless cash redemptions are available or specified
for a WEBS Index Series, the redemption proceeds for a Creation Unit generally
consist of Deposit Securities as announced by the Distributor on the Business
Day of the request for redemption, plus cash in an amount equal to the
difference between the net asset value of the shares being redeemed, as next
determined after a receipt of a request in proper form, and the value of the
Deposit Securities, less the redemption transaction fee described below. The
redemption transaction fee described below is deducted from such redemption
proceeds. In the case of a resident Australian or New Zealand 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 WEBS
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 WEBS INDEX
SERIES IN THE SHAREHOLDER TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND
EXPENSES" IN THE PROSPECTUS. 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 WEBS 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 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
48
<PAGE> 101
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's
facilities by the AMEX closing time on the same day that the redemption request
is received, the redemption request shall be rejected and may be resubmitted
the next day that the AMEX is open for business. Investors should be aware that
the deadline for such transfers of shares through the DTC system may be
significantly earlier than the close of business on the AMEX. Those making
redemption requests should ascertain the deadline applicable to transfers of
shares through the DTC system by contacting the operations department of the
broker or depositary institution effecting the transfer of the WEBS.
Upon receiving a redemption request, the Distributor shall notify the
Fund and the Fund's Transfer Agent of such redemption request. The tender of an
investor's WEBS for redemption and the distribution of the cash redemption
payment in respect of Creation Units redeemed will be effected through DTC and
the relevant Authorized Participant to the beneficial owner thereof as recorded
on the book-entry system of DTC or the DTC Participant through which such
investor holds WEBS, as the case may be, or by such other means specified by
the Authorized Participant submitting the redemption request. See "Book-Entry
System Only."
IN CONNECTION WITH TAKING DELIVERY OF SHARES OF DEPOSIT SECURITIES
UPON REDEMPTION OF WEBS, A REDEEMING BENEFICIAL OWNER OR AUTHORIZED PARTICIPANT
ACTING ON BEHALF OF SUCH BENEFICIAL OWNER MUST MAINTAIN APPROPRIATE SECURITY
ARRANGEMENTS WITH A QUALIFIED BROKER-DEALER, BANK OR OTHER CUSTODY PROVIDERS 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 WEBS 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 a WEBS 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 SEC, IN RESPECT OF EACH WEBS 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 WEBS 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 WEBS Index Series). Redemptions of WEBS for Deposit
Securities will be subject to compliance with applicable United States federal
and state securities laws and each WEBS Index Series (whether or not it
otherwise permits cash redemptions) reserves the right to redeem Creation Units
for cash to the extent that the WEBS 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 and New
Zealand 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 a WEBS Index Series may trade on
the relevant exchange(s) on days that the AMEX is closed or are otherwise not
Business Days for such WEBS Index Series, stockholders may not be able to
redeem their shares 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 right of redemption may be suspended or the date of payment
postponed with respect to any WEBS 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 WEBS 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 SEC.
DETERMINING NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Prospectus
49
<PAGE> 102
entitled "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 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 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.
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 WEBS 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 WEBS 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 1940 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 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 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 DTC 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 WEBS Index Series as a regulated investment company ("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 WEBS Index Series has the right to reject
an order for a purchase of WEBS if the purchaser (or group of purchasers)
would, upon obtaining the WEBS so ordered, own 80% or more of the outstanding
WEBS of a given WEBS Index Series and if, pursuant to section 351 of the
Internal Revenue Code, the respective WEBS 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 WEBS Index Series intends to qualify for and to elect treatment
as a separate RIC 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;
and (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
50
<PAGE> 103
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)(3)(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).
Each WEBS Index Series may be subject to foreign income taxes withheld
at source. Each WEBS Index Series will elect to "pass through" to its investors
the amount of foreign income taxes paid by the WEBS Index Series provided that
the WEBS Index Series and its investor held the security on the dividend
entitlement date and for at least fifteen additional days immediately before
and/or thereafter, 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
WEBS 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 WEBS 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 WEBS Index Series and (ii)
the portion of any dividend paid by the WEBS Index Series which represents
income derived from foreign sources; the WEBS 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 WEBS 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 WEBS Index Series' foreign income taxes.
If any WEBS Index Series owns shares in certain foreign investment
entities, referred to as "passive foreign investment companies," the WEBS Index
Series will be subject to one of the following special tax regimes: (i) the
WEBS 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 WEBS Index Series as a
dividend to its shareholders; (ii) if the WEBS Index Series were able and
elected to treat a passive foreign investment company as a "qualified electing
fund," the WEBS Index Series would be required each year to include in income,
and distribute to shareholders in accordance with the distribution requirements
set forth above, the WEBS 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 WEBS Index Series or (iii) the
WEBS Index Series is entitled to mark-to-market annually the shares of the
passive foreign investment company, and is required to distribute to
shareholders any such mark-to-market gains in accordance with the distribution
requirements set forth above.
A WEBS 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 WEBS 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 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.
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
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<PAGE> 104
Hong Kong WEBS Index Series, the Italy WEBS Index Series, the Japan WEBS Index
Series, the Malaysia (Free) 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 has been issued a separate class of capital stock. The Board
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 WEBS 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 WEBS 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 (Free) 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 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 WEBS Index
Series, and in the net distributable assets of such WEBS 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 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. 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 WEBS 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, 1997, the name, address and percentage of
ownership of each DTC Participant that owned of record 5% or more of the
outstanding shares of each WEBS Index Series were as follows: The Bank of New
York, One Wall Street, New York, NY 10286, Italy WEBS Index Series, 8.83%,
Sweden WEBS Index Series, 18.87%, Spain WEBS Index Series, 19.25%; Bear,
Stearns Securities Corp., One Metrotech Center North, Brooklyn, NY 11201-3859,
Singapore (Free) WEBS Index Series, 22.26%; Boston Safe Deposit and Trust
Company, One Cabot Road, Medford, MA 02155, Canada WEBS Index Series, 50.5%;
Brown Bros. Harriman & Co., 59 Wall Street, New York, NY 10005, Australia WEBS
Index Series, 7.44%, Austria WEBS Index Series, 9.91%, Hong Kong WEBS Index
Series, 6.52%, United Kingdom WEBS Index Series, 8.62%, Italy WEBS Index
Series, 26.67%, Switzerland WEBS Index Series, 11.87%, Spain WEBS Index Series,
7.03%, Singapore (Free) WEBS Index Series, 5.9%, Malaysia (Free) WEBS Index
Series, 6.55%; Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, Australia WEBS Index Series, 52.92%; Schwab (Charles) & Co., Inc.,
Newport Financial Center, 111 Pavonia Avenue East, 3rd Floor, Jersey City, NJ
07310, Austria WEBS Index Series, 5.36%, Malaysia (Free) WEBS Index Series,
5.32%; Citibank, N.A., 1410 Westshore Blvd., Tampa, FL 33607, France WEBS Index
Series, 6.46%, Germany WEBS Index Series, 13.15%, Italy WEBS Index Series,
9.91%; Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp., One
Pershing Plaza, Jersey City, NJ 07399, United Kingdom WEBS Index Series, 6.54%;
Investors Fiduciary Trust Company/SSB., 1776 Heritage Drive, Quincy, MA 02171,
Belgium WEBS Index Series, 21.27%; Morgan Stanley & Co. Incorporated, One
Pierrepont Plaza, Brooklyn, NY 11201, Australia WEBS Index Series, 5.96%,
Canada WEBS Index Series, 7.66%, France WEBS Index Series, 28.14%, United
Kingdom WEBS Index Series, 11.23%, Germany WEBS Index Series, 7.08%, Hong Kong
WEBS Index Series, 23.07%, Sweden WEBS Index Series, 6.91%, Spain WEBS Index
Series, 16.08%, Austria WEBS Index Series, 18.17%, Singapore (Free) WEBS Index
Series, 7.15%, Mexico (Free) WEBS Index Series, 8.29%, Japan WEBS Index Series,
6.10%, Netherlands WEBS Index Series, 9.57%; Merrill Lynch Pierce Fenner &
Smith Safekeeping, 101 Hudson Street, Jersey City, NJ 07302, Australia WEBS
Index Series, 5.52%, Japan WEBS Index Series, 6.24%; Northern Trust Company,
801 S. Canal Street, Chicago, IL 60607, Belguim WEBS Index Series, 11.78%,
Japan WEBS Index Series, 26.77%, Netherlands WEBS Index Series, 12.72%;
PaineWebber Incorporated, 1000 Harbor Blvd., Weehawken, NJ 07086, France WEBS
Index Series, 9.10%, Germany WEBS Index Series, 11.41%, Hong Kong WEBS Index
Series, 8.47%, Sweden WEBS Index Series, 10.60%, Singapore (Free) WEBS Index
Series, 10.37%, Mexico (Free) WEBS Index Series, 10.57%, Malaysia (Free) WEBS
Index Series, 9.46%, Switzerland WEBS Index Series, 8.27%; PNC Bank, N.A./Super
Philadelphia, 103 Bellevue Parkway, Wilmington, DE 19809, Belgium WEBS Index
Series, 11.87%, Italy WEBS Index Series, 13.33%, Switzerland WEBS Index Series,
9.16%, Malaysia
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<PAGE> 105
(Free) WEBS Index Series, 10.53%; Prudential Securities Incorporated, 1 New
York Plaza, 9th Floor, New York, NY 10292, Sweden WEBS Index Series, 8.45%,
Spain WEBS Index Series, 7.93%; Smith Barney Inc., 333 West 34th Street, 3rd
Floor, New York, NY 10001, Belgium WEBS Index Series, 20.72%, Austria WEBS
Index Series, 34.76%, Switzerland WEBS Index Series, 11.43%, Japan WEBS Index
Series, 6.75%, Germany WEBS Index Series, 7.33%, Hong Kong WEBS Index Series,
8.80%, Singapore (Free) WEBS Index Series, 8.81%, Malaysia (Free) WEBS Index
Series, 5.16%; State Street Bank & Trust, 1776 Heritage Drive, Quincy, MA
02171, Belgium WEBS Index Series, 13.66%, France WEBS Index Series, 9.89%,
Germany WEBS Index Series, 7.20%, Hong Kong WEBS Index Series, 8.21%, United
Kingdom WEBS Index Series, 15.52%, Italy WEBS Index Series, 5.60%, Switzerland
WEBS Index Series, 9.40%, Sweden WEBS Index Series, 18.78%, Spain WEBS Index
Series, 10.82%, Mexico (Free) WEBS Index Series, 16.25%, Malaysia (Free) WEBS
Index Series, 8.85%, Japan WEBS Index Series, 9.35%, Netherlands WEBS Index
Series, 17.23%; Spear, Leeds & Kellogg, 120 Broadway, 5th Floor, New York, NY
10006, Hong Kong WEBS Index Series, 5.70%, Mexico (Free) WEBS Index Series,
11.80%, Netherlands WEBS Index Series, 9.40%; Wells Fargo Bank, N.A., 464
California Street, San Francisco, CA 94104, France WEBS Index Series, 8.85%,
Germany WEBS Index Series, 5.82%, United Kingdom WEBS Index Series, 10.01%,
Switzerland WEBS Index Series, 6.00%, Netherlands WEBS Index Series, 9.15%; and
Dean Witter Reynolds, Inc., 5 World Trade Center, 5th Floor, New York, NY
10048, Hong Kong WEBS Index Series, 5.75%, Mexico (Free) WEBS Index Series,
6.83%.
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 auditors
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 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 are expressed in terms of
the 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 a WEBS Index Series,
if shorter). Such total return figures will reflect the deduction of a
proportional share of such WEBS Index Series' expenses on an annual basis, and
will assume that all dividends and distributions are reinvested when paid.
Total return is calculated according to the following formula: P(1 +
T)(n) = ERV (where P = a hypothetical initial payment of $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). The total return for the period from commencement of operations
to August 31, 1996 and for the fiscal year ended August 31, 1997, respectively,
for each of the WEBS Index Series was: Australia WEBS Index Series 3.88% and
6.23%; Austria WEBS Index Series (3.39)% and 1.06%; Belgium WEBS Index Series
5.01% and 9.26%; Canada WEBS Index Series 4.63% and 28.50%; France WEBS Index
Series 4.95% and 16.60%; Germany WEBS Index Series 4.00% and 20.51%; Hong Kong
WEBS Index Series 3.22% and 17.80%; Italy WEBS Index Series 4.11% and 23.37%;
Japan WEBS Index Series (3.11)% and (11.97)%; Malaysia (Free) WEBS Index Series
4.28% and (40.20)%; Mexico (Free) WEBS Index Series 15.93% and 35.21%;
Netherlands WEBS Index Series 11.19% and 28.04%; Singapore (Free) WEBS Index
Series (6.73)% and (23.48)%; Spain WEBS Index Series 8.45% and 39.15%; Sweden
WEBS Index Series 14.13% and 30.10%; Switzerland WEBS Index Series 2.60% and
16.69%; and United Kingdom WEBS Index Series 10.41% and 30.48%.
Quotations of a cumulative total return will be 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 will 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 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 a WEBS 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
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<PAGE> 106
premium or accretion of market and original issue discount. Yield is calculated
by dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to
the following formula: YIELD = 2[(a-b/cd + 1)(6)-1] (where a = dividends and
interest earned during the period, b = expenses accrued for the period (net of
reimbursements), c = the average daily number of shares outstanding during the
period that were entitled to receive dividends and d = the maximum offering
price per share on the last day of the period).
Quotations of cumulative total return, average annual total return or
yield reflect only the performance of a hypothetical investment in 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.
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.
A comparison of the quoted non-standard performance offered for
various investments is valid only if performance is calculated in the same
manner. Since there are different methods for calculating performance,
investors should consider the effects of the methods used to calculate
performance when comparing performance of the Fund with performance quoted with
respect to other investment companies or types of investments.
Because some or all of the Fund's investments are denominated in
foreign currencies, the strength or weakness of the U.S. dollar as against
these currencies may account for part of the Fund's investment performance.
Historical information on the value of the dollar versus foreign currencies may
be used from time to time in advertisements concerning the Fund. Such
historical information is not indicative of future fluctuations in the value of
the U.S. dollar against these currencies. In addition, marketing materials may
cite country and economic statistics and historical stock market performance
information for any of the countries in which the Fund invests, including, but
not limited to, the following: population growth, gross domestic product,
inflation rate, average stock market price-earnings ratios and the total value
of stock markets. Sources for such statistics may include official publications
of various foreign governments and exchanges.
From time to time, in advertising and marketing literature, the Fund's
performance may be compared to the performance of broad groups of open-end and
closed-end investment companies with similar investment goals, as tracked by
independent organizations such as Investment Company Data, Inc., Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar,
Inc., Value Line Mutual Fund Survey and other independent organizations. When
these organizations' tracking results are used, the Fund will be compared to
the appropriate fund category, that is, by fund objective and portfolio
holdings, or to the appropriate volatility grouping, where volatility is a
measure of a fund's risk.
In addition, in connection with the communication of its performance
to current or prospective shareholders, the Fund also may compare those figures
to the performance of certain unmanaged indices which may assume the
reinvestment of dividends or interest but generally do not reflect deductions
for administrative and management costs. Examples of such indices include, but
are not limited to the following:
Dow Jones Industrial Average
Consumer Price Index
Standard & Poor's 500 Composite Stock Price Index (S&P 500)
NASDAQ OTC Composite Index
NASDAQ Industrials Index
International Finance Corporation's (Global) Composite and
(Investable) Composite Indices
Morgan Stanley Capital International Indices
NASDAQ Composite Index
Wilshire 5000 Stock Index
For examples of how these sources of information have been used,
please see Appendix C to this Statement of Additional Information,
"Supplemental Educational Information on WEBS."
In addition, the Fund from time to time may compare the results of
each WEBS Index Series to the following national benchmarks:
COUNTRY NATIONAL INDEX
Australia All Ordinares
Austria Vienna Stock Exchange
Belgium Brussels Stock Exchange
54
<PAGE> 107
Canada Toronto 300
France CAC40
Germany DAX
Hong Kong Hang Seng
Italy BCI
Japan Nikkei 225
Malaysia KLSE
Mexico IPC
Netherlands CBS All Share
Singapore SES All
Spain Madrid Stock Exchange
Sweden Aff. General
Switzerland Swiss Bank
U.K. FTSE100
From time to time, the Fund may use in marketing materials a graph
entitled "The Efficient Frontier," which illustrates the historical risks and
returns of selected unmanaged indices which track the performance of various
combinations of United States and international securities for a certain time
period, such as twenty years. A twenty year graph, for example, shall use
twenty year annualized international returns represented by the MSCI Europe,
Australasia and Far East (EAFE) Index and twenty year annualized United States
returns represented by the S&P 500 Index. Risk is measured by the standard
deviation in overall performance within each index. Data presented in the graph
shall be provided by Ibbotson Associates, Inc. Performance of an index is
historical and does not represent performance of the Fund, and is not a
guarantee of future results. For an example of the use of an "Efficient
Frontier" graph, please see "The Case for International Index Investing" at
Appendix C of this Statement of Additional Information.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements and
sales literature concerning the Fund, including reprints of, or selections
from, editorials or articles about the Fund. Sources for Fund performance
information and articles about the Fund include, but are not limited to, the
following:
American Association of Individual Investors' Journal, a monthly
publication of the AAII that includes articles on investment analysis
techniques.
Barron's, a Dow Jones and Company, Inc. business and financial weekly
that periodically reviews investment company performance data.
Business Week, a national business weekly that periodically reports
the performance rankings and ratings of a variety of investment
companies investing abroad.
CDA Investment Technologies, an organization that provides performance
and ranking information through examining the dollar results of
hypothetical mutual fund investments and comparing these results
against appropriate indices.
Forbes, a national business publication that from time to time reports
the performance of specific investment companies.
Fortune, a national business publication that periodically rates the
performance of a variety of investment companies.
The Frank Russell Company, a West-Coast investment management firm
that periodically evaluates international stock markets and compares
foreign equity market performance to U.S. stock market performance.
Ibbotson Associates, Inc., a company specializing in investment
research and data.
Investment Company Data, Inc., an independent organization that
provides performance ranking information for broad classes of mutual
funds.
Investor's Business Daily, a daily newspaper that features financial,
economic, and business news.
55
<PAGE> 108
Kiplinger's Personal Finance Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of
fund.
Money, a monthly magazine that from time to time features both
specific funds and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm
that compiles statistical information.
The New York Times, a nationally distributed newspaper that regularly
covers financial news.
Smart Money, a national personal finance magazine published monthly by
Dow Jones & Company, Inc. and The Hearst Corporation that focuses on
ideas for investing, spending and saving.
Value Line Mutual Fund Survey, an independent organization that
provides biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper that
regularly covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies,
including comparative data on funds' backgrounds, management policies,
salient features, management results, income and dividend records and
price ranges.
Worth, a national publication distributed ten times per year by
Capital Publishing Company, a subsidiary of Fidelity Investments that
focuses on personal financial journalism.
COUNSEL AND INDEPENDENT AUDITORS
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, are
counsel to the Fund and have passed upon the validity of the Fund's shares.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, serve
as the independent auditors 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, 1997 (the
"1997 Annual Report") are incorporated in this Statement of Additional
Information by reference. No other parts of the 1997 Annual Report are
incorporated by reference herein. The financial statements included in the 1997
Annual Report have been audited by the Fund's independent auditors, Ernst &
Young LLP, whose report thereon is incorporated herein by reference. Additional
copies of the 1997 Annual Report may be obtained at no charge by telephoning
the Distributor at 1-800-810-WEBS (9327).
EDUCATIONAL MATERIALS
Attached as Appendix C to this Statement of Additional Information are
certain supplemental educational materials concerning WEBS.
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<PAGE> 109
APPENDIX A-1
MSCI AUSTRALIA INDEX AS OF AUGUST 31, 1997
<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 25,090 14.83%
NATIONAL AUSTRALIA BANK Finance 20,532 12.13%
WESTPAC BANKING Finance 10,315 6.10%
NEWS CORP Services 9,034 5.34%
COCA-COLA AMATIL Consumer Goods 8,600 5.08%
NEWS CORP PLVO Services 5,759 3.40%
WMC Materials 5,724 3.38%
LEND LEASE Finance 5,381 3.18%
COLES MYER Services 5,328 3.15%
RIO TINTO LTD (CRA) Materials 4,855 2.87%
BRAMBLES INDUSTRIES Services 4,378 2.59%
AMCOR Materials 3,908 2.31%
FOSTERS BREWING GROUP Consumer Goods 3,700 2.19%
CSR Materials 3,574 2.11%
BORAL Materials 3,326 1.97%
PIONEER INTERNATIONAL Materials 2,987 1.77%
SANTOS Energy 2,875 1.70%
PACIFIC DUNLOP Multi-Industry 2,640 1.56%
ICI AUSTRALIA Materials 2,486 1.47%
NORTH Materials 2,416 1.43%
WESTFIELD TRUST Finance 2,191 1.29%
SOUTHCORP HOLDINGS Multi-Industry 2,110 1.25%
GENERAL PROPERTY TRUST Finance 2,066 1.22%
NORMANDY MINING Gold 1,978 1.17%
MIM HOLDINGS Materials 1,961 1.16%
AUSTRALIAN GAS LIGHT CO Energy 1,832 1.08%
GOODMAN FIELDER Consumer Goods 1,797 1.06%
GIO AUSTRALIA HLDGS Finance 1,795 1.06%
SMITH (HOWARD) Multi-Industry 1,702 1.01%
QBE INSURANCE GROUP Finance 1,584 0.94%
TABCORP HOLDINGS Services 1,508 0.89%
HARDIE (JAMES) IND Materials 1,373 0.81%
LEIGHTON HOLDINGS Capital Equipment 1,273 0.75%
BURNS, PHILP & CO Consumer Goods 931 0.55%
EMAIL Consumer Goods 912 0.54%
AUSTRALIAN NATIONAL IND Materials 903 0.53%
CROWN Services 894 0.53%
STOCKLAND TRUST Finance 818 0.48%
QCT RESOURCES Energy 762 0.45%
SYDNEY HBR CASINO PREF Services 745 0.44%
</TABLE>
A-1
<PAGE> 110
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
FUTURIS CORP Capital Equipment 716 0.42%
FAULDING (F.H.) & CO Consumer Goods 702 0.42%
SCHRODERS PROPERTY FUND Finance 680 0.40%
ROTHMANS (AUSTRALIA) Consumer Goods 643 0.38%
RGC Materials 594 0.35%
JONES (DAVID) Services 571 0.34%
PLUTONIC RESOURCES Gold 536 0.32%
NEWCREST MINING Gold 459 0.27%
GREAT CENTRAL MINES Gold 429 0.25%
METAL MANUFACTURES Capital Equipment 391 0.23%
ASHTON MINING Materials 329 0.19%
SONS OF GWALIA Gold 324 0.19%
RESOLUTE Gold 317 0.19%
DELTA GOLD Gold 254 0.15%
ABERFOYLE Materials 236 0.14%
</TABLE>
A-2
<PAGE> 111
APPENDIX A-2
MSCI AUSTRIA INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
OMV AG Energy 3,568 15.17%
BANK AUSTRIA STAMM Finance 2,863 12.17%
VA TECHNOLOGIE Capital Equipment 2,752 11.70%
VERBUND OESTERR ELEK A Energy 2,097 8.91%
CREDITANSTALT STAMM Finance 1,763 7.49%
WIENERBERGER BAUSTOFF Materials 1,686 7.17%
EA-GENERALI STAMM Finance 1,649 7.01%
BOEHLER-UDDEHOLM Materials 863 3.67%
FLUGHAFEN WIEN Services 812 3.45%
CREDITANSTALT VORZUG Finance 770 3.27%
MAYR-MELNHOF KARTON Materials 692 2.94%
AUSTRIAN AIRLINES Services 614 2.61%
BANK AUSTRIA VORZUG Finance 594 2.52%
RADEX-HERAKLITH NDUSTR. Materials 537 2.28%
BBAG OESTERR BRAU TAMM Consumer Goods 474 2.01%
STEYR-DAIMLER-PUCH Capital Equipment 297 1.26%
BWT STAMM Capital Equipment 280 1.19%
BAU HOLDING STAMM Capital Equipment 262 1.11%
AUSTRIA MIKRO SYSTEME Capital Equipment 234 1.00%
LENZING Materials 230 0.98%
BANK AUSTRIA PART Finance 188 0.80%
UNIVERSALE-BAU Capital Equipment 146 0.62%
BAU HOLDING VORZUG Capital Equipment 83 0.35%
EA-GENERALI VORZUG Finance 73 0.31%
</TABLE>
A-3
<PAGE> 112
APPENDIX A-3
MSCI BELGIUM INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
ELECTRABEL Energy 10,747 15.14%
PETROFINA Energy 8,367 11.79%
FORTIS AG Finance 8,208 11.56%
GENERALE BANQUE Finance 6,196 8.73%
TRACTEBEL Energy 5,556 7.83%
KREDIETBANK Finance 4,934 6.95%
SOLVAY Materials 4,691 6.61%
ROYALE BELGE Finance 4,413 6.22%
GROUPE BRUXELLES LAMBERT Multi-Industry 3,629 5.11%
BARCO Capital Equipment 2,406 3.39%
DELHAIZE-LE LION Services 2,380 3.35%
GEVAERT Multi-Industry 2,317 3.26%
UNION MINIERE Materials 2,125 2.99%
CBR (CIMENTERIES) Materials 1,850 2.61%
BEKAERT Capital Equipment 1,420 2.00%
GLAVERBEL (GROUPE) Materials 956 1.35%
KREDIETBANK VVPR Finance 785 1.11%
</TABLE>
A-4
<PAGE> 113
APPENDIX A-4
MSCI CANADA INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
NORTHERN TELECOM Capital Equipment 25,993 8.50%
BCE INC Capital Equipment 18,028 5.89%
ROYAL BANK OF CANADA Finance 14,462 4.73%
THOMSON CORP Services 13,806 4.51%
SEAGRAM CO Consumer Goods 12,805 4.19%
CANADIAN IMPERIAL BANK Finance 10,678 3.49%
BANK NOVA SCOTIA Finance 10,530 3.44%
CANADIAN PACIFIC Multi-Industry 10,093 3.30%
BANK MONTREAL Finance 9,941 3.25%
IMPERIAL OIL Energy 8,531 2.79%
BARRICK GOLD CORP Gold 8,447 2.76%
ALCAN ALUMINIUM Materials 7,931 2.59%
NEWBRIDGE NETWORKS CORP Capital Equipment 7,789 2.55%
BOMBARDIER B Capital Equipment 6,565 2.15%
IMASCO Multi-Industry 6,519 2.13%
NORANDA INC Materials 4,805 1.57%
MAGNA INTERNATIONAL A Materials 4,717 1.54%
LAIDLAW Services 4,699 1.54%
PETRO-CANADA Energy 4,680 1.53%
INCO COMMON Materials 4,517 1.48%
PLACER DOME Gold 4,150 1.36%
TRANSCANADA PIPELINES Energy 4,124 1.35%
POTASH CORP SASKATCHEWAN Materials 3,978 1.30%
NOVA CORP Energy 3,864 1.26%
TALISMAN ENERGY Energy 3,581 1.17%
SUNCOR ENERGY Energy 3,440 1.12%
ABITIBI-CONSOLIDATED Materials 3,395 1.11%
CANADIAN OCCIDENTAL Energy 3,370 1.10%
FAIRFAX FINANCIAL HLDGS Finance 3,114 1.02%
WESTON (GEORGE) Services 3,031 0.99%
RENAISSANCE ENERGY Energy 2,955 0.97%
TELUS CORP Capital Equipment 2,884 0.94%
GULF CANADA RESOURCES Energy 2,727 0.89%
EDPERBRASCAN CORP A Multi-Industry 2,708 0.89%
POWER CORP OF CANADA Finance 2,686 0.88%
CANADIAN NAT RESOURCES Energy 2,520 0.82%
ALBERTA ENERGY CO Energy 2,490 0.81%
IPL ENERGY Energy 2,429 0.79%
LOEWEN GROUP Services 2,317 0.76%
NORCEN ENERGY RESOURCES Energy 2,251 0.74%
</TABLE>
A-5
<PAGE> 114
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
COMINCO Materials 2,214 0.72%
NATIONAL BANK OF CANADA Finance 2,195 0.72%
TRANSALTA CORP Energy 1,988 0.65%
WESTCOAST ENERGY Energy 1,950 0.64%
CAMECO CORP Materials 1,848 0.60%
TECK CORP B Materials 1,820 0.59%
MOORE CORP Services 1,770 0.58%
DOFASCO Materials 1,749 0.57%
MACMILLAN BLOEDEL Materials 1,559 0.51%
METHANEX CORP Materials 1,554 0.51%
HUDSON'S BAY CO Services 1,541 0.50%
AGRIUM Materials 1,538 0.50%
ANDERSON EXPLORATION Energy 1,523 0.50%
CANADIAN TIRE CORP A Services 1,514 0.49%
SOUTHAM Services 1,432 0.47%
RIO ALGOM Materials 1,407 0.46%
POCO PETROLEUMS Energy 1,263 0.41%
DOMTAR Materials 1,246 0.41%
ROGERS COMMUNICATIONS B Services 1,239 0.40%
QUEBECOR B Services 1,228 0.40%
AVENOR Materials 1,227 0.40%
AIR CANADA COMMON Services 1,224 0.40%
UNITED DOMINION IND Capital Equipment 1,220 0.40%
EXTENDICARE SV Services 1,210 0.40%
MDS B Consumer Goods 1,178 0.39%
MOLSON COS A Consumer Goods 1,079 0.35%
RANGER OIL Energy 954 0.31%
STELCO A Materials 897 0.29%
CAE Capital Equipment 845 0.28%
ECHO BAY MINES Gold 703 0.23%
CAMBIOR Gold 644 0.21%
COTT CORP Consumer Goods 609 0.20%
OSHAWA GROUP A Services 586 0.19%
PROVIGO Services 523 0.17%
CO-STEEL Materials 518 0.17%
INCO VBN Materials 479 0.16%
CCL INDUSTRIES B Materials 427 0.14%
AGNICO-EAGLE MINES Gold 364 0.12%
COREL CORP Services 351 0.11%
INT'L FOREST PRODUCTS A Materials 238 0.08%
DOMINION TEXTILE Consumer Goods 223 0.07%
PEGASUS GOLD Gold 175 0.06%
SPAR AEROSPACE Capital Equipment 118 0.04%
REPAP ENTERPRISES Materials 21 0.00%
</TABLE>
A-6
<PAGE> 115
APPENDIX A-5
MSCI FRANCE INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
ELF AQUITAINE Energy 30,377 7.46%
LOREAL Consumer Goods 24,153 5.94%
CARREFOUR Services 23,214 5.70%
TOTAL SA Energy 22,865 5.62%
AXA-UAP Finance 21,063 5.18%
ALCATEL ALSTHOM Capital Equipment 19,864 4.88%
LVMH Consumer Goods 18,238 4.48%
GENERALE EAUX (CIE) Services 14,977 3.68%
SUEZ LYONNAISE(LYONNAISE Services 12,667 3.11%
RHONE-POULENC ORD A Consumer Goods 12,276 3.02%
SAINT-GOBAIN Materials 12,246 3.01%
SOCIETE GENERALE Finance 11,875 2.92%
AIR LIQUIDE Materials 11,203 2.75%
DANONE (GROUPE) Consumer Goods 10,854 2.67%
SANOFI Consumer Goods 10,160 2.50%
PINAULT-PRINT.-REDOUTE Services 9,575 2.35%
BNP BANQUE NTLE PARIS Finance 9,106 2.24%
PARIBAS(CIE FINANCIERE)A Finance 8,583 2.11%
SCHNEIDER Capital Equipment 7,824 1.92%
MICHELIN B Materials 7,696 1.89%
PROMODES Services 6,909 1.70%
LAFARGE (FRANCE) Materials 6,101 1.50%
PEUGEOT SA Consumer Goods 5,626 1.38%
ACCOR Services 5,325 1.31%
CANAL + Services 5,059 1.24%
HAVAS Services 4,988 1.23%
LEGRAND ORD Capital Equipment 4,938 1.21%
VALEO Capital Equipment 4,238 1.04%
USINOR Materials 4,222 1.04%
BIC Consumer Goods 4,002 0.98%
SODEXHO ALLIANCE Services 3,403 0.84%
ERIDANIA BEGHIN-SAY Consumer Goods 3,384 0.83%
THOMSON-CSF Capital Equipment 3,214 0.79%
LAGARDERE Multi-Industry 3,197 0.79%
CASINO ORD Services 3,180 0.78%
COMPAGNIE BANCAIRE Finance 3,123 0.77%
PERNOD RICARD Consumer Goods 2,635 0.65%
ESSILOR INTERNATIONAL Consumer Goods 2,353 0.58%
COMPTOIRS MODERNES Services 2,336 0.57%
IMETAL Materials 2,086 0.51%
</TABLE>
A-7
<PAGE> 116
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
SIDEL Capital Equipment 2,014 0.49%
BOUYGUES ORD Capital Equipment 2,009 0.49%
TECHNIP Capital Equipment 1,983 0.49%
SAGEM Capital Equipment 1,951 0.48%
PRIMAGAZ Energy 1,715 0.42%
SEITA Consumer Goods 1,596 0.39%
PATHE Services 1,435 0.35%
EURAFRANCE Finance 1,384 0.34%
SIMCO Finance 1,159 0.28%
CLUB MEDITERRANEE Services 1,102 0.27%
SALOMON SA Consumer Goods 1,082 0.27%
SEFIMEG Finance 1,051 0.26%
UNIBAIL Finance 904 0.22%
NATEXIS(CREDIT NATIONAL) Finance 885 0.22%
MOULINEX Consumer Goods 837 0.21%
GTM-ENTREPOSE Capital Equipment 833 0.20%
CPR Finance 799 0.20%
SOMMER-ALLIBERT Materials 765 0.19%
BONGRAIN Consumer Goods 750 0.18%
CASINO ADP Services 685 0.17%
GENERALE GEOPHYSIQUE Capital Equipment 622 0.15%
UNION IMMOBILIERE FRANCE Finance 573 0.14%
CHARGEURS Consumer Goods 455 0.11%
EUROPE 1 Services 380 0.09%
NORD-EST Materials 277 0.07%
SKIS ROSSIGNOL Consumer Goods 232 0.06%
FINEXTEL Finance 197 0.05%
DMC DOLLFUS MIEG & CIE Consumer Goods 136 0.03%
</TABLE>
A-8
<PAGE> 117
APPENDIX A-6
MSCI GERMANY INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
ALLIANZ Finance 50,884 9.39%
DEUTSCHE TELEKOM Capital Equipment 43,896 8.10%
DAIMLER-BENZ Consumer Goods 38,652 7.14%
SIEMENS STAMM Capital Equipment 34,581 6.38%
DEUTSCHE BANK Finance 31,139 5.75%
VEBA Energy 26,882 4.96%
BAYER Materials 26,718 4.93%
MUENCHENER RUECK NAM Finance 23,727 4.38%
BASF Materials 21,252 3.92%
VOLKSWAGEN STAMM Consumer Goods 19,962 3.69%
DRESDNER BANK Finance 19,546 3.61%
MANNESMANN Capital Equipment 17,088 3.15%
RWE STAMM Energy 15,280 2.82%
BAYER VEREINSBANK STAMM Finance 13,772 2.54%
SAP STAMM Services 13,485 2.49%
VIAG Energy 11,056 2.04%
METRO STAMM Services 10,299 1.90%
SAP VORZUG Services 9,754 1.80%
BAYER HYPOTHEKEN BANK Finance 9,425 1.74%
RWE VORZUG Energy 8,363 1.54%
LUFTHANSA Services 7,674 1.42%
THYSSEN Materials 7,216 1.33%
SCHERING Consumer Goods 6,670 1.23%
MERCK KGAA Consumer Goods 6,593 1.22%
LINDE Capital Equipment 5,673 1.05%
ADIDAS Consumer Goods 5,479 1.01%
VOLKSWAGEN VORZUG Consumer Goods 4,712 0.87%
DEGUSSA Materials 4,500 0.83%
PREUSSAG Multi-Industry 4,286 0.79%
HEIDELBERGER ZEMENT STAM Materials 3,616 0.67%
BEIERSDORF Consumer Goods 3,402 0.63%
HOCHTIEF Capital Equipment 3,305 0.61%
AACHEN & MUNCH BET NAMEN Finance 3,290 0.61%
MAN STAMM Capital Equipment 3,032 0.56%
KARSTADT Services 2,907 0.54%
SGL CARBON Materials 2,615 0.48%
AXA COLONIA KONZ STAMM Finance 2,404 0.44%
CONTINENTAL Materials 2,299 0.42%
BILFINGER + BERGER Capital Equipment 1,500 0.28%
PWA PAPIERWERKE WALDHOF Materials 1,308 0.24%
</TABLE>
A-9
<PAGE> 118
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
BUDERUS Materials 1,240 0.23%
DOUGLAS HOLDING Services 1,120 0.21%
FAG KUGELFISCHER Materials 1,108 0.20%
MAN VORZUG Capital Equipment 992 0.18%
AGIV AG IND & VERKEHR Multi-Industry 933 0.17%
GROHE (FRIEDRICH) VORZUG Materials 833 0.15%
METRO VORZUG Services 816 0.15%
AACHEN & MUNCH BET INH Finance 807 0.15%
MUENCHENER RUECK INH Finance 608 0.11%
DYCKERHOFF STAMM Materials 553 0.10%
IWKA Capital Equipment 548 0.10%
DYCKERHOFF VORZUG Materials 535 0.10%
DEUTZ Capital Equipment 492 0.09%
AXA COLONIA KONZ VORZUG Finance 417 0.08%
BRAU & BRUNNEN Consumer Goods 357 0.07%
RHEINMETALL STAMM Capital Equipment 320 0.06%
SALAMANDER Consumer Goods 286 0.05%
HOLSTEN-BRAUEREI Consumer Goods 244 0.05%
RHEINMETALL VORZUG Capital Equipment 194 0.04%
DIDIER-WERKE Capital Equipment 180 0.03%
STRABAG STAMM Capital Equipment 177 0.03%
HERLITZ STAMM Services 160 0.03%
DLW Materials 145 0.03%
HERLITZ VORZUG Services 132 0.02%
ESCADA STAMM Consumer Goods 120 0.02%
ESCADA VORZUG Consumer Goods 96 0.02%
</TABLE>
A-10
<PAGE> 119
APPENDIX A-7
MSCI HONG KONG INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
HUTCHISON WHAMPOA Multi-Industry 32,243 14.50%
SUN HUNG KAI PROPERTIES Finance 27,136 12.20%
HONGKONG TELECOM Capital Equipment 24,597 11.06%
CHEUNG KONG HOLDINGS Finance 24,313 10.93%
HANG SENG BANK Finance 23,306 10.48%
SWIRE PACIFIC A Multi-Industry 12,048 5.42%
NEW WORLD DEVELOPMENT Finance 11,849 5.33%
CHINA LIGHT & POWER CO Energy 11,528 5.18%
WHARF HOLDINGS Finance 8,330 3.75%
HONGKONG CHINA GAS Energy 6,771 3.05%
CATHAY PACIFIC AIRWAYS Services 5,598 2.52%
BANK EAST ASIA Finance 4,762 2.14%
HYSAN DEVELOPMENT Finance 2,988 1.34%
SINO LAND Finance 2,881 1.30%
HOPEWELL HOLDINGS Multi-Industry 2,614 1.18%
HANG LUNG DEVELOPMENT CO Finance 2,432 1.09%
CHINESE ESTATES HOLDINGS Finance 1,715 0.77%
SHANGRI-LA ASIA Services 1,622 0.73%
TELEVISION BROADCASTS Services 1,485 0.67%
HONGKONG SHANGHAI HOTEL Services 1,436 0.65%
WING LUNG BANK Finance 1,423 0.64%
SOUTH CHINA MORNING POST Services 1,396 0.63%
MIRAMAR HOTEL & INVEST. Finance 1,266 0.57%
PEREGRINE INVESTMENTS Finance 1,168 0.53%
REGAL HOTELS INT'L Services 1,095 0.49%
JOHNSON ELECTRIC HLDGS Capital Equipment 1,031 0.46%
DICKSON CONCEPTS INT'L Services 1,018 0.46%
SHUN TAK HOLDINGS Services 829 0.37%
KUMAGAI GUMI (HK) Capital Equipment 701 0.32%
HONGKONG AIRCRAFT HAECO Capital Equipment 609 0.27%
GIORDANO INTERNATIONAL Services 504 0.23%
ORIENTAL PRESS GROUP Services 502 0.23%
TAI CHEUNG HOLDINGS Finance 458 0.21%
VARITRONIX INTERNATIONAL Materials 391 0.18%
ELEC & ELTEK INT'L HLDGS Capital Equipment 326 0.15%
</TABLE>
A-11
<PAGE> 120
APPENDIX A-8
MSCI ITALY INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
ENI Energy 44,378 22.10%
TIM ORD Capital Equipment 22,473 11.19%
TELECOM ITALIA ORD(STET Capital Equipment 21,614 10.76%
ASSICURAZIONI GENERALI Finance 18,638 9.28%
FIAT ORD Consumer Goods 11,303 5.63%
INA Finance 5,834 2.91%
SAN PAOLO DI TORINO ORD Finance 5,669 2.82%
IMI ISTITUTO MOBILIARE Finance 5,571 2.77%
MEDIASET Services 5,158 2.57%
CREDITO ITALIANO ORD Finance 4,624 2.30%
BANCA COMMERCIALE ORD Finance 4,481 2.23%
PIRELLI SPA ORD Materials 3,727 1.86%
TELECOM ITALIA RNC(STET Capital Equipment 3,198 1.59%
MEDIOBANCA Finance 3,173 1.58%
MONTEDISON ORD Multi-Industry 3,023 1.51%
BANCO AMBROSIANO VEN ORD Finance 2,987 1.49%
EDISON ORD Energy 2,950 1.47%
RAS ORD Finance 2,800 1.39%
TIM RNC Capital Equipment 2,639 1.31%
BENETTON GROUP Consumer Goods 2,634 1.31%
PARMALAT FINANZIARIA Consumer Goods 2,298 1.14%
ITALGAS Energy 2,139 1.07%
BULGARI Consumer Goods 1,715 0.85%
FIAT PRIV Consumer Goods 1,609 0.80%
FIAT RNC Consumer Goods 1,328 0.66%
RINASCENTE ORD Services 1,266 0.63%
BANCA POPOLARE MILANO Finance 1,202 0.60%
SIRTI Capital Equipment 1,176 0.59%
ITALCEMENTI ORD Materials 1,108 0.55%
SAI ORD Finance 1,065 0.53%
OLIVETTI ORD Capital Equipment 938 0.47%
MONDADORI ORD Services 764 0.38%
CARTIERE BURGO ORD Materials 735 0.37%
MAGNETI MARELLI ORD Capital Equipment 718 0.36%
SNIA BPD ORD Multi-Industry 663 0.33%
RAS RNC Finance 647 0.32%
LANE G.MARZOTTO ORD Consumer Goods 573 0.29%
BANCO AMBROSIANO VEN RNC Finance 490 0.24%
FALCK ORD Materials 452 0.23%
PREVIDENTE (LA) Finance 360 0.18%
</TABLE>
A-12
<PAGE> 121
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
MONTEDISON RNC Multi-Industry 358 0.18%
IMPREGILO ORD Capital Equipment 330 0.16%
DANIELI & CO ORD Capital Equipment 266 0.13%
SASIB ORD Capital Equipment 247 0.12%
ITALCEMENTI RNC Materials 246 0.12%
SAI RNC Finance 179 0.09%
CEMENTIR Materials 176 0.09%
RINASCENTE RNC Services 137 0.07%
LANE G.MARZOTTO RISP Consumer Goods 134 0.07%
DANIELI & CO RNC Capital Equipment 129 0.06%
SASIB RNC Capital Equipment 124 0.06%
PIRELLI SPA RNC Materials 123 0.06%
SAFFA A ORD Materials 88 0.04%
RINASCENTE PRIV Services 81 0.04%
SNIA BPD RNC Multi-Industry 53 0.03%
</TABLE>
A-13
<PAGE> 122
APPENDIX A-9
MSCI JAPAN INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
NTT CORP Capital Equipment 119,581 6.31%
TOYOTA MOTOR CORP Consumer Goods 99,429 5.25%
BANK TOKYO-MITSUBISHI Finance 84,972 4.48%
SUMITOMO BANK Finance 46,480 2.45%
MATSUSHITA ELECT IND'L Consumer Goods 38,971 2.06%
FUJI BANK Finance 35,410 1.87%
INDUSTRIAL BANK OF JAPAN Finance 35,046 1.85%
SONY CORP Consumer Goods 34,015 1.79%
HONDA MOTOR CO Consumer Goods 30,131 1.59%
NOMURA SECURITIES CO Finance 26,110 1.38%
TOKYO ELECTRIC POWER CO Energy 25,867 1.36%
CANON INC Capital Equipment 23,888 1.26%
TAKEDA CHEMICAL IND Consumer Goods 23,410 1.24%
ITO-YOKADO CO Services 22,448 1.18%
MITSUBISHI HEAVY IND Capital Equipment 22,403 1.18%
FUJITSU Capital Equipment 22,175 1.17%
SAKURA BANK Finance 20,211 1.07%
FUJI PHOTO FILM CO Consumer Goods 19,851 1.05%
DENSO CORP Materials 19,115 1.01%
KANSAI ELECTRIC POWER CO Energy 18,305 0.97%
MITSUBISHI TRUST Finance 18,297 0.97%
EAST JAPAN RAILWAY CO Services 18,289 0.96%
MITSUBISHI ESTATE CO Finance 18,253 0.96%
BRIDGESTONE CORP Capital Equipment 17,882 0.94%
NEC CORP Capital Equipment 17,844 0.94%
TOKIO MARINE & FIRE Finance 17,778 0.94%
TOKAI BANK Finance 17,711 0.93%
NIPPON STEEL CORP Materials 17,527 0.92%
ASAHI BANK Finance 16,879 0.89%
NISSAN MOTOR CO Consumer Goods 16,253 0.86%
DAI NIPPON PRINTING CO Services 15,911 0.84%
MITSUBISHI CORP WHOLESALE & 15,504 0.82%
SANKYO CO Consumer Goods 13,917 0.73%
MITSUI & CO WHOLESALE & 12,944 0.68%
ROHM CO Capital Equipment 12,093 0.64%
KYOCERA CORP Capital Equipment 11,905 0.63%
SHARP CORP Consumer Goods 11,331 0.60%
SUMITOMO ELECTRIC IND Capital Equipment 10,995 0.58%
TOPPAN PRINTING CO Services 10,057 0.53%
</TABLE>
A-14
<PAGE> 123
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
MITSUBISHI ELECTRIC CORP Capital Equipment 9,871 0.52%
MURATA MANUFACTURING CO Capital Equipment 9,768 0.52%
SHIN-ETSU CHEMICAL CO Materials 9,532 0.50%
MITSUI FUDOSAN CO Finance 9,457 0.50%
TORAY INDUSTRIES Materials 9,321 0.49%
TOKYO ELECTRON Capital Equipment 9,233 0.49%
FANUC Capital Equipment 9,198 0.49%
KINKI NIPPON RAILWAY CO Services 9,147 0.48%
ASAHI GLASS CO Materials 8,959 0.47%
KAO CORP Consumer Goods 8,896 0.47%
SUMITOMO CORP WHOLESALE & 8,849 0.47%
JUSCO CO Services 8,653 0.46%
KIRIN BREWERY CO Consumer Goods 8,548 0.45%
DAIWA SECURITIES CO Finance 8,495 0.45%
TAISHO PHARMACEUTICAL CO Consumer Goods 8,446 0.45%
SHIZUOKA BANK Finance 8,366 0.44%
SECOM CO Services 8,280 0.44%
ADVANTEST CORP Capital Equipment 8,242 0.43%
TOHOKU ELECTRIC POWER CO Energy 8,194 0.43%
KAWASAKI STEEL CORP Materials 8,082 0.43%
YAMANOUCHI PHARM. Consumer Goods 7,912 0.42%
ASAHI CHEMICAL IND CO Materials 7,531 0.40%
JAPAN AIRLINES CO Services 7,439 0.39%
SUMITOMO METAL IND Materials 7,322 0.39%
NIPPON EXPRESS CO Services 7,091 0.37%
SANYO ELECTRIC CO Consumer Goods 6,975 0.37%
ACOM CO Finance 6,936 0.37%
MITSUI TRUST & BANK CO Finance 6,903 0.36%
SHISEIDO CO Consumer Goods 6,826 0.36%
ASAHI BREWERIES Consumer Goods 6,778 0.36%
TOKYO GAS CO Energy 6,774 0.36%
SEKISUI HOUSE Capital Equipment 6,765 0.36%
SUMITOMO CHEMICAL CO Materials 6,363 0.34%
KOMATSU Capital Equipment 6,234 0.33%
NIKON CORP Capital Equipment 6,120 0.32%
DAIWA HOUSE IND CO Capital Equipment 6,054 0.32%
AJINOMOTO CO Consumer Goods 5,935 0.31%
ITOCHU CORP WHOLESALE & 5,889 0.31%
MARUI CO Services 5,850 0.31%
OSAKA GAS CO Energy 5,801 0.31%
TOKYU CORP Services 5,798 0.31%
MITSUBISHI CHEMICAL CORP Materials 5,737 0.30%
KUBOTA CORP Capital Equipment 5,695 0.30%
NKK CORP Materials 5,624 0.30%
</TABLE>
A-15
<PAGE> 124
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
NIPPON OIL CO Energy 5,511 0.29%
NIPPON PAPER IND CO Materials 5,504 0.29%
KAWASAKI HEAVY IND Capital Equipment 5,444 0.29%
MARUBENI CORP WHOLESALE & 5,428 0.29%
TOYODA AUTOMATIC LOOM Capital Equipment 5,408 0.29%
SMC CORP Capital Equipment 5,342 0.28%
EISAI CO Consumer Goods 5,323 0.28%
OJI PAPER CO Materials 5,228 0.28%
KAJIMA CORP Capital Equipment 5,067 0.27%
JOYO BANK Finance 5,001 0.26%
HOYA CORP Consumer Goods 4,933 0.26%
DAIEI Services 4,889 0.26%
OMRON CORP Capital Equipment 4,881 0.26%
BANK YOKOHAMA Finance 4,844 0.26%
ORIX CORP Finance 4,827 0.25%
DAIICHI PHARMACEUTICAL Consumer Goods 4,780 0.25%
SEKISUI CHEMICAL CO Materials 4,680 0.25%
YAMATO TRANSPORT CO Services 4,647 0.25%
TOSTEM CORP Materials 4,569 0.24%
SUMITOMO MARINE & FIRE Finance 4,533 0.24%
OBAYASHI CORP Capital Equipment 4,510 0.24%
GUNMA BANK Finance 4,481 0.24%
HANKYU CORP Services 4,267 0.23%
NIPPON YUSEN K.K Services 4,265 0.23%
MITSUI MARINE & FIRE Finance 4,233 0.22%
SHIMIZU CORP Capital Equipment 4,149 0.22%
CREDIT SAISON CO Finance 4,138 0.22%
YASUDA TRUST & BANK CO Finance 4,128 0.22%
CHIBA BANK Finance 4,074 0.21%
TAISEI CORP Capital Equipment 4,018 0.21%
SEVENTY-SEVEN BANK Finance 4,008 0.21%
TEIJIN Materials 3,962 0.21%
TOTO Materials 3,924 0.21%
MINEBEA CO Materials 3,913 0.21%
TOYO SEIKAN KAISHA Materials 3,837 0.20%
FURUKAWA ELECTRIC CO Capital Equipment 3,710 0.20%
ODAKYU ELECTRIC RAILWAY Services 3,708 0.20%
EBARA CORP Capital Equipment 3,706 0.20%
KINDEN CORP Capital Equipment 3,693 0.19%
MYCAL CORP Services 3,616 0.19%
MITSUBISHI MATERIALS Materials 3,611 0.19%
PIONEER ELECTRONIC CORP Consumer Goods 3,583 0.19%
KURITA WATER INDUSTRIES Capital Equipment 3,511 0.19%
TOBU RAILWAY CO Services 3,491 0.18%
</TABLE>
A-16
<PAGE> 125
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
UNY CO Services 3,478 0.18%
SUMITOMO METAL MINING CO Materials 3,413 0.18%
TAKASHIMAYA CO Services 3,398 0.18%
NGK INSULATORS Materials 3,308 0.17%
HITACHI ZOSEN CORP Capital Equipment 3,216 0.17%
YAMAHA CORP Consumer Goods 3,193 0.17%
KOKUYO CO Services 3,119 0.16%
NISSIN FOOD PRODUCTS CO Consumer Goods 3,100 0.16%
YAMAZAKI BAKING CO Consumer Goods 3,040 0.16%
KURARAY CO Materials 3,032 0.16%
NAGOYA RAILROAD CO Services 3,031 0.16%
SHIMANO Consumer Goods 3,023 0.16%
NICHIDO FIRE & MARINE Finance 2,985 0.16%
TBS TOKYO BROADCASTING Services 2,951 0.16%
DAINIPPON INK Materials 2,927 0.15%
NSK Capital Equipment 2,919 0.15%
SEGA ENTREPRISES Consumer Goods 2,878 0.15%
FUJIKURA Capital Equipment 2,876 0.15%
YAMAGUCHI BANK Finance 2,810 0.15%
HIROSE ELECTRIC CO Capital Equipment 2,784 0.15%
NIPPON MEAT PACKERS Consumer Goods 2,747 0.14%
MITSUKOSHI Services 2,735 0.14%
ONWARD KASHIYAMA CO Consumer Goods 2,649 0.14%
NITTO DENKO CORP Materials 2,633 0.14%
KYOWA HAKKO KOGYO CO Consumer Goods 2,616 0.14%
TOHO CO Services 2,608 0.14%
NIPPON FIRE & MARINE Finance 2,510 0.13%
CITIZEN WATCH CO Consumer Goods 2,509 0.13%
UNI-CHARM CORP Consumer Goods 2,460 0.13%
CASIO COMPUTER CO Consumer Goods 2,432 0.13%
AUTOBACS SEVEN CO Services 2,419 0.13%
NANKAI ELECTRIC RAILWAY Services 2,417 0.13%
SAPPORO BREWERIES Consumer Goods 2,411 0.13%
MITSUBISHI RAYON CO Materials 2,389 0.13%
YAMAICHI SECURITIES CO Finance 2,371 0.13%
SHIONOGI & CO Consumer Goods 2,367 0.12%
MAKITA CORP Capital Equipment 2,208 0.12%
KANEKA CORP Materials 2,185 0.12%
CSK CORP Services 2,181 0.12%
ISETAN CO Services 2,162 0.11%
NTN CORP Capital Equipment 2,156 0.11%
ALPS ELECTRIC CO Capital Equipment 2,130 0.11%
HOKURIKU BANK Finance 2,122 0.11%
KEIHIN ELECTRIC EXPRESS Services 2,121 0.11%
</TABLE>
A-17
<PAGE> 126
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
CHUGAI PHARMACEUTICAL CO Consumer Goods 2,069 0.11%
MITSUI MINING & SMELTING Materials 2,067 0.11%
KONICA CORP Consumer Goods 2,063 0.11%
COSMO OIL CO Energy 2,048 0.11%
SHOWA DENKO K.K Materials 2,019 0.11%
AMADA CO Capital Equipment 1,967 0.10%
MITSUBISHI LOGISTICS Services 1,960 0.10%
AOYAMA TRADING CO Services 1,960 0.10%
MITSUI OSK LINES Services 1,951 0.10%
HOUSE FOODS(HOUSE FD IND Consumer Goods 1,940 0.10%
JAPAN ENERGY CORP Energy 1,937 0.10%
DAIKIN INDUSTRIES Capital Equipment 1,912 0.10%
NGK SPARK PLUG CO Materials 1,900 0.10%
MITSUBISHI GAS CHEMICAL Materials 1,890 0.10%
OLYMPUS OPTICAL CO Capital Equipment 1,885 0.10%
UBE INDUSTRIES Materials 1,881 0.10%
SUMITOMO HEAVY IND Capital Equipment 1,860 0.10%
SANWA SHUTTER CORP Materials 1,834 0.10%
ASHIKAGA BANK Finance 1,831 0.10%
HIGO BANK Finance 1,817 0.10%
NAMCO Services 1,787 0.09%
WACOAL CORP Consumer Goods 1,781 0.09%
MEIJI SEIKA KAISHA Consumer Goods 1,771 0.09%
CHICHIBU ONODA CEMENT Materials 1,722 0.09%
YOKOGAWA ELECTRIC CORP Capital Equipment 1,712 0.09%
SUMITOMO FORESTRY CO Materials 1,701 0.09%
NIPPON COMSYS CORP Capital Equipment 1,691 0.09%
TOKYO DOME CORP Services 1,660 0.09%
KOMORI CORP Capital Equipment 1,642 0.09%
NISHIMATSU CONSTRUCTION Capital Equipment 1,632 0.09%
MITSUBISHI OIL CO Energy 1,592 0.08%
DAITO TRUST CONSTRUCTION Capital Equipment 1,571 0.08%
DAINIPPON SCREEN MFG CO Capital Equipment 1,553 0.08%
NISSHINBO INDUSTRIES Consumer Goods 1,533 0.08%
TOSOH CORP Materials 1,533 0.08%
SEINO TRANSPORTATION CO Services 1,526 0.08%
HANKYU DEPARTMENT STORES Services 1,521 0.08%
MITSUI TOATSU CHEMICALS Materials 1,501 0.08%
ARABIAN OIL CO Energy 1,498 0.08%
NIPPON SHOKUBAI CO Materials 1,440 0.08%
NIPPON LIGHT METAL CO Materials 1,437 0.08%
KANDENKO CO Capital Equipment 1,408 0.07%
OKUMURA CORP Capital Equipment 1,391 0.07%
SKYLARK CO Services 1,385 0.07%
</TABLE>
A-18
<PAGE> 127
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
MITSUI ENGINEERING&SHIP. Capital Equipment 1,368 0.07%
TOYOBO CO Consumer Goods 1,367 0.07%
TAIYO YUDEN CO Capital Equipment 1,365 0.07%
KOYO SEIKO CO Materials 1,349 0.07%
Q. P. CORP Consumer Goods 1,342 0.07%
SNOW BRAND MILK PRODUCTS Consumer Goods 1,339 0.07%
FUJITA KANKO Services 1,299 0.07%
SEIYU Services 1,285 0.07%
TOKYO STEEL MFG CO Materials 1,273 0.07%
DAIMARU Services 1,261 0.07%
TAKARA SHUZO CO Consumer Goods 1,247 0.07%
KAMIGUMI CO Services 1,223 0.06%
TOKYO STYLE CO Consumer Goods 1,210 0.06%
MORI SEIKI CO Capital Equipment 1,204 0.06%
LION CORP Consumer Goods 1,193 0.06%
DAIFUKU CO Capital Equipment 1,191 0.06%
INAX CORP Materials 1,177 0.06%
SHIMACHU CO Services 1,161 0.06%
TAKARA STANDARD CO Consumer Goods 1,138 0.06%
NIPPON SHEET GLASS CO Materials 1,129 0.06%
MEIJI MILK PRODUCTS CO Consumer Goods 1,122 0.06%
KIKKOMAN CORP Consumer Goods 1,115 0.06%
KONAMI CO Services 1,109 0.06%
ORIENT CORP Finance 1,098 0.06%
EZAKI GLICO CO Consumer Goods 1,090 0.06%
KISSEI PHARMACEUTICAL CO Consumer Goods 1,066 0.06%
TAKUMA CO Capital Equipment 1,066 0.06%
DAICEL CHEMICAL IND Materials 1,063 0.06%
NICHIREI CORP Consumer Goods 1,062 0.06%
DAIDO STEEL CO Materials 1,058 0.06%
TSUBAKIMOTO CHAIN CO Capital Equipment 1,032 0.05%
NORITAKE CO Consumer Goods 1,021 0.05%
TEIKOKU OIL CO Energy 1,020 0.05%
OYO CORP Services 1,013 0.05%
TOKYO TATEMONO CO Finance 1,005 0.05%
SANDEN CORP Capital Equipment 990 0.05%
NIHON CEMENT CO Materials 982 0.05%
ITOHAM FOODS Consumer Goods 957 0.05%
NAGASE & CO Materials 952 0.05%
GUNZE Consumer Goods 946 0.05%
BROTHER INDUSTRIES Consumer Goods 938 0.05%
DENKI KAGAKU KOGYO K.K Materials 929 0.05%
KANSAI PAINT CO Materials 907 0.05%
KATOKICHI CO Consumer Goods 905 0.05%
</TABLE>
A-19
<PAGE> 128
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
DAIWA KOSHO LEASE CO Finance 897 0.05%
KAWASAKI KISEN KAISHA Services 891 0.05%
SUMITOMO OSAKA CEMENT CO Materials 890 0.05%
PENTA-OCEAN CONSTRUCTION Capital Equipment 869 0.05%
MITSUBISHI PAPER MILLS Materials 854 0.05%
AMANO CORP Capital Equipment 852 0.04%
JACCS CO Finance 831 0.04%
OKUMA CORP Capital Equipment 828 0.04%
ISHIHARA SANGYO KAISHA Materials 820 0.04%
TOEI CO Services 787 0.04%
NIPPON SHINPAN CO Finance 754 0.04%
KUMAGAI GUMI CO Capital Equipment 753 0.04%
IWATANI INTERNATIONAL Energy 748 0.04%
JGC CORP Capital Equipment 748 0.04%
KUREHA CHEMICAL IND CO Materials 739 0.04%
UNITIKA Materials 732 0.04%
KANEBO Consumer Goods 725 0.04%
UNIDEN CORP Capital Equipment 692 0.04%
MARUHA CORP Consumer Goods 676 0.04%
TOKYOTOKEIBA CO Services 670 0.04%
NIPPON SUISAN KAISHA Consumer Goods 667 0.04%
MAEDA ROAD CONSTRUCTION Capital Equipment 658 0.03%
NOF CORP Materials 656 0.03%
MAKINO MILLING MACHINE Capital Equipment 656 0.03%
MITSUI-SOKO CO Services 633 0.03%
NIPPON SHARYO Capital Equipment 622 0.03%
TOYO ENGINEERING CORP Capital Equipment 613 0.03%
MISAWA HOMES CO Capital Equipment 613 0.03%
SANRIO CO Consumer Goods 594 0.03%
KURABO INDUSTRIES Consumer Goods 572 0.03%
TRANS COSMOS Services 562 0.03%
KYUDENKO CORP Capital Equipment 553 0.03%
CHIYODA CORP Capital Equipment 542 0.03%
SANKYO ALUMINIUM IND CO Materials 530 0.03%
JAPAN STEEL WORKS Capital Equipment 516 0.03%
TOYO EXTERIOR CO Materials 510 0.03%
TOA CORP Capital Equipment 495 0.03%
OKAMOTO INDUSTRIES Multi-Industry 485 0.03%
RENOWN Consumer Goods 477 0.03%
DAIKYO Finance 459 0.02%
GAKKEN CO Services 435 0.02%
FUJITA CORP Capital Equipment 423 0.02%
HAZAMA CORP Capital Equipment 420 0.02%
HASEKO CORP Capital Equipment 403 0.02%
</TABLE>
A-20
<PAGE> 129
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
KAKEN PHARMACEUTICAL CO Consumer Goods 382 0.02%
NIIGATA ENGINEERING CO Capital Equipment 364 0.02%
NIPPON BEET SUGAR MFG CO Consumer Goods 362 0.02%
SATO KOGYO CO Capital Equipment 293 0.02%
AOKI CORP Capital Equipment 254 0.01%
JAPAN METALS & CHEMICALS Materials 228 0.01%
</TABLE>
A-21
<PAGE> 130
APPENDIX A-10
MSCI MALAYSIA (FREE) INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
TENAGA NASIONAL Energy 9,250 10.76%
TELEKOM MALAYSIA Capital Equipment 9,154 10.65%
MALAYAN BANKING Finance 7,608 8.85%
SIME DARBY Multi-Industry 5,505 6.40%
UNITED ENGINEERS (MAL) Multi-Industry 3,230 3.76%
RHB CAPITAL (DCB HLDGS) Finance 2,860 3.33%
ROTHMANS PALL MALL (MAL) Consumer Goods 2,301 2.68%
RESORTS WORLD Services 2,097 2.44%
MALAYSIA INT'L SHIPPING Services 2,058 2.39%
PROTON Consumer Goods 1,582 1.84%
PUBLIC BANK Finance 1,565 1.82%
NESTLE (MALAYSIA) Consumer Goods 1,488 1.73%
MALAYSIAN AIRLINE SYSTEM Services 1,466 1.70%
KUALA LUMPUR KEPONG Materials 1,455 1.69%
AMMB HOLDINGS Finance 1,422 1.65%
MAGNUM CORP Services 1,395 1.62%
GOLDEN HOPE PLANTATIONS Materials 1,322 1.54%
YTL CORP Capital Equipment 1,255 1.46%
BERJAYA LAND Services 1,161 1.35%
COMMERCE ASSET-HOLDING Finance 964 1.12%
RASHID HUSSAIN Finance 931 1.08%
PERLIS PLANTATIONS Materials 909 1.06%
NEW STRAITS TIMES PRESS Services 884 1.03%
EDARAN OTOMOBIL NASIONAL Consumer Goods 817 0.95%
MALAYSIAN RESOURCES CORP Finance 775 0.90%
IOI CORP Materials 758 0.88%
MBF CAPITAL Finance 735 0.85%
ORIENTAL HOLDINGS Consumer Goods 728 0.85%
MALAYSIA MINING CORP Materials 717 0.83%
UMW HOLDINGS Capital Equipment 715 0.83%
TAN CHONG MOTOR HOLDINGS Consumer Goods 710 0.83%
SHELL REFINING CO (FOM) Energy 679 0.79%
JAYA TIASA HOLDINGS Materials 679 0.79%
MALAYAN UNITED IND Multi-Industry 667 0.78%
TECHNOLOGY RESOURCES IND Capital Equipment 637 0.74%
PAN MALAYSIA CEMENT WRKS Materials 637 0.74%
MULTI-PURPOSE HOLDINGS Multi-Industry 607 0.71%
EKRAN Capital Equipment 603 0.70%
HIGHLANDS & LOWLANDS Materials 599 0.70%
METROPLEX Finance 596 0.69%
</TABLE>
A-22
<PAGE> 131
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
MALAYSIAN PACIFIC IND Capital Equipment 572 0.66%
AMSTEEL CORP Materials 561 0.65%
TIME ENGINEERING Capital Equipment 548 0.64%
MALAYSIAN OXYGEN CHEMICALS 532 0.62%
HUME INDUSTRIES MALAYSIA Materials 527 0.61%
GUINNESS ANCHOR Consumer Goods 518 0.60%
HONG LEONG PROPERTIES Finance 509 0.59%
BERJAYA GROUP Multi-Industry 509 0.59%
MALAYAN CEMENT Materials 505 0.59%
HONG LEONG INDUSTRIES Multi-Industry 497 0.58%
SUNGEI WAY HOLDINGS Materials 475 0.55%
TA ENTERPRISE Finance 450 0.52%
MULPHA INTERNATIONAL Multi-Industry 440 0.51%
RJ REYNOLDS Consumer Goods 431 0.50%
LEADER UNIVERSAL HLDGS Materials 420 0.49%
KEDAH CEMENT HOLDINGS Materials 412 0.48%
MYCOM Finance 383 0.44%
IDRIS HYDRAULIC MALAYSIA Finance 375 0.44%
LAND & GENERAL Multi-Industry 374 0.44%
KIAN JOO CAN FACTORY Materials 345 0.40%
IGB CORP Finance 325 0.38%
PROMET Capital Equipment 300 0.35%
LANDMARKS Services 298 0.35%
KEMAYAN CORP Materials 270 0.31%
SELANGOR PROPERTIES Finance 223 0.26%
MALAYSIAN MOSAICS WHOLESALE & 217 0.25%
PETALING GARDEN Finance 190 0.22%
PILECON ENGINEERING Capital Equipment 181 0.21%
JOHAN HOLDINGS Capital Equipment 172 0.20%
GOLDEN PLUS HOLDINGS Materials 151 0.18%
ANTAH HOLDINGS Finance 150 0.17%
MALAYAWATA STEEL Materials 133 0.15%
AOKAM PERDANA Materials 124 0.14%
ALUMINIUM COMPANY OF MAL Materials 118 0.14%
PALMCO HOLDINGS Materials 110 0.13%
KELANAMAS INDUSTRIES Multi-Industry 104 0.12%
</TABLE>
A-23
<PAGE> 132
APPENDIX A-11
MSCI MEXICO (FREE) INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
TELMEX TELEFONOS MEX L Capital Equipment 13779 14.50%
GRUPO MODELO C Consumer Goods 6877 7.24%
GRUPO CARSO Multi-Industry 6356 6.69%
KIMBERLY-CLARK MEXICO A Consumer Goods 6162 6.48%
TELMEX TELEFONOS MEX A Capital Equipment 5538 5.83%
GRUPO TELEVISA CPO Services 5073 5.34%
ALFA Multi-Industry 4583 4.82%
CIFRA B Services 4571 4.81%
FOMENTO ECONOMICO MEX. Consumer Goods 3747 3.94%
CEMEX A Materials 2777 2.92%
BIMBO ACP Consumer Goods 2705 2.85%
GRUPO MEXICO B Materials 2685 2.83%
DESC B Multi-Industry 2510 2.64%
EMPRESAS MODERNA ACP Consumer Goods 2448 2.58%
CEMEX B Materials 2388 2.51%
APASCO Materials 2069 2.18%
GRUPO FIN BANACCI B Finance 1934 2.04%
INDUSTRIAS PENOLES CP Materials 1851 1.95%
GRUPO ICA Capital Equipment 1659 1.75%
VITRO Materials 1583 1.67%
GRUPO FIN BANCOMER B Finance 1580 1.66%
LIVERPOOL (EL PUERTO) 1 Services 1502 1.58%
CIFRA C Services 1415 1.49%
TAMSA Capital Equipment 1252 1.32%
CEMEX CPO Materials 1188 1.25%
CONTROLADORA COM MEX UBC Services 1098 1.16%
GRUPO IND'L MASECA B2 Consumer Goods 1036 1.09%
GRUPO CONTINENTAL Consumer Goods 937 0.99%
GRUPO FIN BBV-PROBURSA B Finance 706 0.74%
GRUPO FIN BANACCI L Finance 518 0.55%
TRANSPORTACION MARIT. L Services 431 0.45%
EMPAQUES PONDEROSA Materials 374 0.39%
CYDSA Materials 361 0.38%
CONSORCIO G GRUPO DINA Capital Equipment 300 0.32%
GRUPO FIN SERFIN B Finance 261 0.27%
LIVERPOOL (EL PUERTO) C1 Services 233 0.25%
GRUPO HERDEZ B Consumer Goods 232 0.24%
GRUPO FIN SERFIN L Finance 209 0.22%
GRUPO SIMEC B Materials 73 0.08%
GRUPO SITUR B Services 31 0.03%
</TABLE>
A-24
<PAGE> 133
APPENDIX A-12
MSCI NETHERLANDS INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
ROYAL DUTCH PETROLEUM CO Energy 109,202 34.64%
ING GROEP Finance 35,903 11.39%
UNILEVER NV CERT Consumer Goods 32,459 10.30%
ABN AMRO HOLDING Finance 27,391 8.69%
PHILIPS ELECTRONICS Consumer Goods 25,249 8.01%
KON. PTT NEDERLAND Capital Equipment 16,745 5.31%
AHOLD (KON.) Services 12,792 4.06%
AKZO NOBEL Materials 11,078 3.51%
ELSEVIER Services 10,127 3.21%
WOLTERS KLUWER Services 8,058 2.56%
HEINEKEN NV Consumer Goods 7,935 2.52%
GETRONICS Services 2,607 0.83%
KLM Services 2,354 0.75%
OCE(OCE-VAN DER GRINTEN) Capital Equipment 2,344 0.74%
KONINKLIJKE KNP BT Materials 2,234 0.71%
HOOGOVENS (KON.) Materials 1,834 0.58%
ASR VERZEKER(STAD ROTTER Finance 1,662 0.53%
IHC CALAND Capital Equipment 1,548 0.49%
STORK (VER MACHINE.) Capital Equipment 1,258 0.40%
PAKHOED (KON.) Capital Equipment 1,098 0.35%
HOLLANDSCHE BETON GROEP Capital Equipment 735 0.23%
NEDLLOYD (KON.) Services 678 0.22%
</TABLE>
A-25
<PAGE> 134
APPENDIX A-13
MSCI SINGAPORE (FREE) INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
SINGAPORE TELECOM Capital Equipment 8,913 14.05%
OCBC BANK FGN Finance 6,615 10.43%
UNITED OVERSEAS BANK FGN Finance 6,539 10.31%
SINGAPORE AIRLINES FGN Services 6,529 10.29%
DEVELOPMENT BK SING FGN Finance 5,125 8.08%
CITY DEVELOPMENTS Finance 5,010 7.90%
KEPPEL CORP Multi-Industry 2,714 4.28%
DBS LAND Finance 2,594 4.09%
SINGAPORE PRESS HLDG FGN Services 2,565 4.04%
CREATIVE TECHNOLOGY Capital Equipment 1,787 2.82%
FRASER & NEAVE Consumer Goods 1,577 2.49%
CYCLE & CARRIAGE Consumer Goods 1,345 2.12%
PARKWAY HOLDINGS Finance 1,200 1.89%
SINGAPORE TECH IND'L Multi-Industry 1,049 1.65%
UIC UNITED INDUSTRIAL Finance 920 1.45%
NATSTEEL Materials 890 1.40%
UNITED OVERSEAS LAND Finance 683 1.08%
FIRST CAPITAL CORP Finance 655 1.03%
JURONG SHIPYARD Capital Equipment 615 0.97%
HOTEL PROPERTIES Services 570 0.90%
STRAITS TRADING Materials 550 0.87%
INCHCAPE BERHAD Multi-Industry 547 0.86%
NEPTUNE ORIENT LINES NOL Services 544 0.86%
OVERSEAS UNION ENT. Services 520 0.82%
SHANGRI-LA HOTEL Services 406 0.64%
COMFORT GROUP Services 387 0.61%
HAW PAR BROTHERS INT'L Multi-Industry 356 0.56%
METRO HOLDINGS Services 299 0.47%
SEMBAWANG MARITIME Services 298 0.47%
IPC CORP Capital Equipment 287 0.45%
ROBINSON AND CO Services 278 0.44%
HAI SUN HUP GROUP Services 277 0.44%
LUM CHANG HOLDINGS Multi-Industry 206 0.32%
GOLDTRON Capital Equipment 191 0.30%
VAN DER HORST Capital Equipment 162 0.25%
CHUAN HUP HOLDINGS Capital Equipment 134 0.21%
PRIMA Consumer Goods 111 0.18%
</TABLE>
A-26
<PAGE> 135
APPENDIX A-14
MSCI SPAIN INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
TELEFONICA DE ESPANA Capital Equipment 24,409 17.22%
ENDESA EMPRESA NAL ELEC. Energy 21,002 14.81%
BANCO BILBAO VIZCAYA Finance 17,817 12.57%
BANCO SANTANDER Finance 13,363 9.42%
REPSOL Energy 11,879 8.38%
IBERDROLA Energy 10,140 7.15%
GAS NATURAL SDG Energy 6,725 4.74%
ARGENTARIA CORP BANCARIA Finance 6,100 4.30%
BANCO CENTRAL HISPANO Finance 6,067 4.28%
AUTOPISTAS CESA (ACESA) Services 2,861 2.02%
UNION ELECTRICA FENOSA Energy 2,365 1.67%
TABACALERA Consumer Goods 1,967 1.39%
ACERINOX Materials 1,929 1.36%
FOMENTO CONST Y CONTR Capital Equipment 1,794 1.27%
MAPFRE (CORPORACION) Finance 1,672 1.18%
AGUAS DE BARCELONA Services 1,625 1.15%
ALBA (CORP FINANCIERA) Multi-Industry 1,592 1.12%
ZARDOYA OTIS Capital Equipment 1,190 0.84%
DRAGADOS Y CONSTRUCCION Capital Equipment 1,078 0.76%
VALLEHERMOSO Finance 1,000 0.71%
EBRO AGRICOLAS Consumer Goods 853 0.60%
METROVACESA Finance 837 0.59%
PROSEGUR Services 667 0.47%
PORTLAND VALDERRIVAS Materials 586 0.41%
VISCOFAN Materials 520 0.37%
URALITA Materials 510 0.36%
ENCE EMPR NAC CELULOSAS Materials 378 0.27%
URBIS (INMOBILIARIA) Finance 348 0.25%
SARRIO Materials 230 0.16%
ERCROS Materials 163 0.11%
AGUILA (EL) Consumer Goods 117 0.08%
</TABLE>
A-27
<PAGE> 136
APPENDIX A-15
MSCI SWEDEN INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
ERICSSON (LM) B Capital Equipment 40,179 25.93%
ASTRA A Consumer Goods 21,380 13.80%
ABB AB A Capital Equipment 9,745 6.29%
HENNES & MAURITZ B Services 7,826 5.05%
VOLVO B Consumer Goods 7,794 5.03%
SVENSKA HANDELSBK A Finance 6,678 4.31%
SKAND.ENSKILDA BANKEN A Finance 5,672 3.66%
ELECTROLUX B Consumer Goods 5,224 3.37%
ASTRA B Consumer Goods 4,635 2.99%
SKANSKA B Capital Equipment 4,532 2.92%
SCA SV CELLULOSA B Materials 4,388 2.83%
STORA KOPPARBERG A Materials 4,168 2.69%
SKANDIA FORSAKRING Finance 3,976 2.57%
ABB AB B Capital Equipment 3,934 2.54%
ATLAS COPCO A Capital Equipment 3,706 2.39%
VOLVO A Consumer Goods 3,540 2.28%
AGA A Materials 1,905 1.23%
SCANCEM A Materials 1,859 1.20%
ATLAS COPCO B Capital Equipment 1,834 1.18%
TRELLEBORG B Multi-Industry 1,808 1.17%
SKF B Materials 1,729 1.12%
SECURITAS B Services 1,713 1.11%
AGA B Materials 1,632 1.05%
SWEDISH MATCH Consumer Goods 1,411 0.91%
SKF A Capital Equipment 1,258 0.81%
STORA KOPPARBERG B Materials 935 0.60%
SVENSKA HANDELSBK B Finance 622 0.40%
ESSELTE A Services 475 0.31%
ESSELTE B Services 391 0.25%
</TABLE>
A-28
<PAGE> 137
APPENDIX A-16
MSCI SWITZERLAND INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
NOVARTIS NAMEN Consumer Goods 88,496 23.16%
ROCHE HOLDING GENUSS Consumer Goods 59,413 15.55%
NESTLE Consumer Goods 45,849 12.00%
ROCHE HOLDING INHABER Consumer Goods 24,177 6.33%
CREDIT SUISSE Finance 23,489 6.15%
UBS INH(SCHWEIZ BANKGES Finance 21,100 5.52%
SCHWEIZ RUECKVERS Finance 19,467 5.09%
SCHWEIZ BANKVEREIN Finance 18,731 4.90%
ZUERICH VERSICHERUNG Finance 17,067 4.47%
ABB AG INHABER Capital Equipment 11,954 3.13%
NOVARTIS INHABER Consumer Goods 9,364 2.45%
ADECCO PORTEUR Services 5,617 1.47%
UBS NAM(SCHWEIZ BANKGES Finance 4,388 1.15%
HOLDERBANK INHABER Materials 4,277 1.12%
ALUSUISSE-LONZA HLDG NAM Multi-Industry 3,534 0.92%
SAIRGROUP NAMEN(SWISSAIR Services 2,737 0.72%
SULZER Capital Equipment 2,554 0.67%
SGS SURVEILLANCE PORT Services 2,097 0.55%
SMH PORTEUR Consumer Goods 2,027 0.53%
SMH NOM Consumer Goods 1,980 0.52%
HOLDERBANK NAMEN Materials 1,797 0.47%
ALUSUISSE-LONZA HLDG INH Multi-Industry 1,762 0.46%
ABB AG NAMEN Capital Equipment 1,601 0.42%
KUONI REISEN NAMEN B Services 1,321 0.35%
SGS SURVEILLANCE NOM Services 986 0.26%
SCHINDLER NAMEN Capital Equipment 977 0.26%
VALORA HOLDING NAMEN Services 857 0.22%
SCHINDLER PART Capital Equipment 767 0.20%
SIKA FINANZ INHABER Materials 757 0.20%
FISCHER (GEORG) INHABER Capital Equipment 748 0.20%
FORBO HOLDING Materials 609 0.16%
DANZAS HOLDING Services 496 0.13%
JELMOLI HOLDING INHABER Services 451 0.12%
MOEVENPICK INHABER Services 356 0.09%
JELMOLI HOLDING NAMEN Services 225 0.06%
FISCHER (GEORG) NAMEN Capital Equipment 141 0.04%
</TABLE>
A-29
<PAGE> 138
APPENDIX A-17
MSCI UNITED KINGDOM INDEX AS OF AUGUST 31, 1997
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
BRITISH PETROLEUM Energy 79,888 6.68%
GLAXO WELLCOME Consumer Goods 71,015 5.94%
LLOYDS TSB GROUP Finance 62,861 5.26%
HSBC HOLDINGS (HKD 10) Finance 53,319 4.46%
SMITHKLINE BEECHAM Consumer Goods 47,778 4.00%
BRITISH TELECOM Capital Equipment 41,175 3.44%
BARCLAYS Finance 34,903 2.92%
ZENECA GROUP Consumer Goods 30,038 2.51%
HSBC HOLDINGS (GBP 0.75) Finance 27,350 2.29%
MARKS & SPENCER Services 26,993 2.26%
BAT INDUSTRIES Multi-Industry 25,978 2.17%
UNILEVER PLC Consumer Goods 22,585 1.89%
CABLE & WIRELESS Capital Equipment 19,658 1.64%
GRAND METROPOLITAN Consumer Goods 19,329 1.62%
BG Energy 19,289 1.61%
PRUDENTIAL CORP Finance 19,001 1.59%
ABBEY NATIONAL Finance 18,942 1.58%
GENERAL ELECTRIC PLC Capital Equipment 17,187 1.44%
REUTERS HOLDINGS Services 17,143 1.43%
GUINNESS Consumer Goods 17,115 1.43%
RIO TINTO PLC REG (RTZ) Materials 16,904 1.41%
VODAFONE GROUP Capital Equipment 15,732 1.32%
TESCO Services 14,450 1.21%
BTR Multi-Industry 14,443 1.21%
SAINSBURY (J) Services 12,895 1.08%
ROYAL & SUN ALLIANCE INS Finance 12,406 1.04%
BRITISH SKY BROADCASTING Services 12,128 1.01%
BASS Services 11,865 0.99%
BOOTS CO Services 11,783 0.99%
IMPERIAL CHEMICAL ICI Materials 11,740 0.98%
GRANADA GROUP Multi-Industry 11,582 0.97%
NATIONAL POWER Energy 11,166 0.93%
BRITISH AIRWAYS Services 10,807 0.90%
GREAT UNIVERSAL STORES Services 10,227 0.86%
REED INTERNATIONAL Services 10,119 0.85%
BRITISH AEROSPACE Capital Equipment 10,085 0.84%
CADBURY SCHWEPPES Consumer Goods 9,288 0.78%
LEGAL & GENERAL GROUP Finance 9,159 0.77%
BOC GROUP Materials 8,378 0.70%
SCOTTISH POWER Energy 8,306 0.69%
</TABLE>
A-30
<PAGE> 139
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
COMMERCIAL UNION Finance 8,249 0.69%
ROYAL BANK OF SCOTLAND Finance 8,066 0.67%
KINGFISHER Services 7,907 0.66%
ASSOCIATED BRITISH FOODS Consumer Goods 7,572 0.63%
LAND SECURITIES Finance 7,537 0.63%
NATIONAL GRID GROUP Energy 7,357 0.62%
SCOTTISH & NEWCASTLE Services 7,250 0.61%
EMI GROUP Consumer Goods 7,057 0.59%
GKN Capital Equipment 6,774 0.57%
PEARSON Services 6,718 0.56%
SAFEWAY PLC Services 6,623 0.55%
PEN & ORIENTAL STEAM Services 6,420 0.54%
CENTRICA Energy 6,341 0.53%
RAILTRACK GROUP Services 6,264 0.52%
SCHRODERS Finance 5,996 0.50%
UNITED UTILITIES Services 5,926 0.50%
BRITISH STEEL Materials 5,717 0.48%
ROLLS-ROYCE Capital Equipment 5,607 0.47%
LADBROKE GROUP Services 4,932 0.41%
THAMES WATER Services 4,782 0.40%
BLUE CIRCLE INDUSTRIES Materials 4,638 0.39%
CARLTON COMMUNICATIONS Services 4,624 0.39%
RANK GROUP Services 4,559 0.38%
TI GROUP Multi-Industry 4,553 0.38%
LUCASVARITY Materials 4,536 0.38%
NEXT Services 4,505 0.38%
BRITISH LAND CO Finance 4,420 0.37%
RMC GROUP Materials 4,216 0.35%
WOLSELEY Materials 4,101 0.34%
LASMO Energy 4,057 0.34%
SMITHS INDUSTRIES Capital Equipment 4,042 0.34%
GUARDIAN ROYAL EXCHANGE Finance 4,002 0.33%
MERCURY ASSET MGMT GROUP Finance 3,954 0.33%
SOUTHERN ELECTRIC Energy 3,602 0.30%
WILLIAMS Services 3,571 0.30%
BURMAH CASTROL Energy 3,531 0.30%
ANGLIAN WATER Services 3,409 0.29%
ELECTROCOMPONENTS Capital Equipment 3,189 0.27%
MEPC Finance 3,185 0.27%
HANSON Materials 3,125 0.26%
TATE & LYLE Consumer Goods 2,917 0.24%
ARGOS Services 2,881 0.24%
BPB Materials 2,825 0.24%
PROVIDENT FINANCIAL Finance 2,815 0.24%
</TABLE>
A-31
<PAGE> 140
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
BBA GROUP Materials 2,606 0.22%
REDLAND Materials 2,454 0.21%
PILKINGTON Materials 2,446 0.20%
REXAM Materials 2,433 0.20%
ARJO WIGGINS APPLETON Materials 2,345 0.20%
JOHNSON MATTHEY Multi-Industry 2,211 0.18%
HAMMERSON Finance 2,147 0.18%
COURTAULDS Materials 2,075 0.17%
UNIGATE Consumer Goods 2,042 0.17%
SLOUGH ESTATES Finance 2,015 0.17%
HYDER Services 1,938 0.16%
IMI Multi-Industry 1,924 0.16%
CARADON Materials 1,799 0.15%
TARMAC Materials 1,796 0.15%
UNITED BISCUITS Consumer Goods 1,776 0.15%
FKI Capital Equipment 1,737 0.15%
LONRHO Multi-Industry 1,569 0.13%
SEARS Services 1,560 0.13%
DE LA RUE Services 1,434 0.12%
OCEAN GROUP Services 1,419 0.12%
T & N Capital Equipment 1,386 0.12%
COATS VIYELLA Consumer Goods 1,351 0.11%
HARRISONS & CROSFIELD Multi-Industry 1,284 0.11%
GREAT PORTLAND ESTATES Finance 1,272 0.11%
RUGBY GROUP Materials 1,246 0.10%
TAYLOR WOODROW Capital Equipment 1,187 0.10%
ENGLISH CHINA CLAYS Materials 1,162 0.10%
COBHAM Capital Equipment 1,148 0.10%
BICC Capital Equipment 1,147 0.10%
BOWTHORPE Capital Equipment 1,137 0.10%
VICKERS Capital Equipment 1,080 0.09%
SEDGWICK GROUP Finance 1,071 0.09%
RACAL ELECTRONICS Capital Equipment 1,040 0.09%
THORN Consumer Goods 984 0.08%
BARRATT DEVELOPMENTS Capital Equipment 964 0.08%
ST JAMES'S PLACE CAP(NEW Finance 935 0.08%
LAIRD GROUP Capital Equipment 903 0.08%
MEYER INTERNATIONAL Materials 882 0.07%
WILLIS CORROON GROUP Finance 847 0.07%
HEPWORTH Materials 821 0.07%
LEX SERVICE Services 818 0.07%
WIMPEY (GEORGE) Capital Equipment 787 0.07%
DELTA Capital Equipment 701 0.06%
MARLEY Materials 608 0.05%
</TABLE>
A-32
<PAGE> 141
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ---------------
<S> <C> <C> <C>
WILSON (CONNOLLY) HLDGS Capital Equipment 555 0.05%
COURTAULDS TEXTILES Consumer Goods 552 0.05%
AMEC Capital Equipment 474 0.04%
TRANSPORT DEVELOPMENT Services 369 0.03%
</TABLE>
A-33
<PAGE> 142
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 WEBS 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 WEBS Index Series, in certain circumstances, during the
fourth quarter of 1997 and calendar year 1998. The holidays applicable to each
WEBS Index Series during such periods 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 WEBS Index
Series. The proclamation of new holidays, the treatment by market participants
of certain days as "informal holidays" (e.g., days on which no or limited
securities transactions occur, as a result of substantially shortened trading
hours), the elimination of existing holidays, or changes in local securities
delivery practices, could affect the information set forth herein at some time
in the future.
THE AUSTRALIA WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Australian holidays affecting
the relevant securities markets (and their respective dates in the forth
quarter of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Labour Day(1) - October 6, 1997
Melbourne Cup Day(2) - November 4, 1997
Christmas Day - December 25, 1997
Boxing Day - December 26, 1997
New Year's Day - January 1, 1998
Australia Day - January 26, 1998
Labour Day(2) - March 9, 1998
Good Friday - April 10, 1998
Easter Monday - April 13, 1998
Queens Birthday - June 8, 1998
Bank Holiday(1) - August 3, 1998
Labour Day - October 5, 1998
Melbourne Cup Day - November 10, 1998
Christmas Day - December 25, 1998
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over
any Australian holiday that would result in a settlement period that will
exceed 7 calendar days in the fourth quarter of 1997 and calendar year 1998.
1. NSW only.
2. Victoria only.
<PAGE> 143
THE AUSTRIA WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Austrian holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Immaculate Conception - December 8, 1997
Christmas Eve - December 24, 1997
Christmas Day - December 25, 1997
St. Stephen's Day - December 26, 1997
New Year's Day - January 1, 1998
Epiphany - January 6, 1998
Good Friday(1) - April 10, 1998
Easter Monday - April 13, 1998
Labour Day - May 1, 1998
Ascension Day - May 21, 1998
Whit Monday - June 1, 1998
Corpus Christi - June 11, 1998
National Holiday - October 26, 1998
Immaculate Conception - December 8, 1998
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
New Year's Eve(1) - December 31, 1998
</TABLE>
REDEMPTION. A redemption request over the following Austrian
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/97 Christmas Eve 12/19/97 12/29/97 R+10
12/25/97 Christmas Day 12/22/97 12/30/97 R+8
12/26/97 St. Stephen's Day 12/23/97 12/31/97 R+8
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Austria WEBS Index Series.
1. Exchange only.
<PAGE> 144
THE BELGIUM WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Belgian holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Bank Holiday - November 3, 1997
Remembrance Day - November 11, 1997
Christmas Day - December 25, 1997
Bridging Day - December 26, 1997
New Years Eve(1) - December 31, 1997
New Years Day - January 1, 1998
Good Friday(1) - April 10, 1998
Easter Monday - April 13, 1998
Labour Day - May 1, 1998
Ascension Day - May 21, 1998
Bank Holiday - May 22, 1998
Whit Monday - June 1, 1998
National Day - July 21, 1998
Bank Holiday - August 17, 1998
Bank Holiday - November 2, 1998
Remebrance Day - November 11, 1998
Christmas Day(1) - December 25, 1998
New Years Eve - December 31, 1998
</TABLE>
REDEMPTION. A redemption request over the following Belgian
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/25/97 Christmas Day 12/24/97 1/2/98 R+9
12/26/97 Bridging Day
12/31/97 New Year's Eve
1/1/98 New Year's Day
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+9
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Belgium WEBS Index Series.
1. Exchange only.
<PAGE> 145
THE CANADA WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Canadian holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Thanksgiving Day - October 13, 1997
Remembrance Day - November 11, 1997
Christmas Day - December 25, 1997
Boxing Day - December 26, 1997
New Year's Day - January 1, 1998
Good Friday - April 10, 1998
Victoria Day - May 18, 1998
St. Jean Baptiste(1) - June 24, 1998
Canada Day - July 1, 1998
Civic Holiday(2) - August 3, 1998
Labour Day - September 7, 1998
Thanksgiving Day - October 12, 1998
Remembrance Day(3) - November 11, 1998
Christmas Day - December 25, 1998
Observance of Boxing Day - December 28, 1998
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over
any Canadian holiday that would result in a settlement period that will exceed
7 calendar days in the fourth quarter of 1997 and calendar year 1998.
1. Montreal only.
2. Except Quebec.
3. Banks Only.
<PAGE> 146
THE FRANCE WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular French holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Eve of Armistice Day - November 10, 1997
Armistice Day - November 11 1997
Christmas Day - December 25, 1997
New Year's Day - January 1, 1998
Easter Monday - April 13, 1998
Labour Day - May 1, 1998
Armistice Day - May 8, 1998
Ascension Day - May 21, 1998
Whit Monday - June 1, 1998
Eve of Bastille Day - July 13, 1998
Bastille Day - July 14, 1998
Veteran's Day - November 11, 1998
Christmas Eve(1) - December 24, 1998
Christmas Day - December 25, 1998
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over
any French holiday that would result in a settlement period that will exceed 7
calendar days in the fourth quarter of 1997 and calendar year 1998.
1. Half day.
<PAGE> 147
THE GERMANY WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular German holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
National Holiday - October 3, 1997
Reformation Day(1) - October 31, 1997
All Saints Day - November 1, 1997
Christmas Eve - December 24, 1997
Christmas Day - December 25, 1997
St. Stephen's Day - December 26, 1997
New Year's Eve - December 31, 1997
New Year's Day - January 1, 1998
Epiphany(2) - January 6, 1998
Monday before Lent(2) - February 23, 1998
Shrove Tuesday(3) - February 24, 1998
Good Friday - April 10, 1998
Easter Monday - April 13, 1998
Labour Day - May 1, 1998
Ascension Day - May 21, 1998
Whit Monday - June 1, 1998
Corpus Christi(2) - June 11, 1998
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
New Year's Eve - December 31, 1998
</TABLE>
REDEMPTION. A redemption request over the following German
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/97 Christmas Eve 12/19/97 12/29/97 R+10
12/25/97 Christmas Day 12/22/97 12/30/97 R+8
12/26/97 St. Stephen's Day 12/23/97 1/2/98 R+10
12/31/97 New Year's Eve 12/30/97 1/7/98 R+8
1/1/98 New Year's Day
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Germany WEBS Index Series.
1. Banks only.
2. Parts of Germany.
3. Shortened trading hours.
<PAGE> 148
THE HONG KONG WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Hong Kong holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
National Day - October 1, 1997
National Day - October 2, 1997
Chung Yeung Festival - October 10, 1997
Christmas Day - December 25, 1997
Christmas Holiday - December 26, 1997
1st Weekday in January - January 1, 1998
Lunar New Year's Day - January 28, 1998
Lunar New Year's Day - January 29, 1998
Lunar New Year's Day - January 30, 1998
Day Following Ching Ming - April 6, 1998
Festival
Good Friday - April 10, 1998
Easter Monday - April 13, 1998
Tuen Ng Festival - May 30, 1998
SAR Establishment Day - July 1, 1998
Sino-Japanese War Victory Day - August 17, 1998
National Day - October 1, 1998
Day Following National Day - October 2, 1998
Day Following Mid-Autum - October 6, 1998
Festival
Chung Yeung Festival - October 28, 1998
Christmas Day - December 25, 1998
1st Weekday Following - December 28, 1998
Christmas Day
</TABLE>
REDEMPTION. A redemption request over the following Hong Kong
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
1/28/98 Lunar New Year's Day 1/23/98 2/2/98 R + 10
1/29/98 Lunar New Year's Day 1/26/98 2/3/98 R + 8
1/30/98 Lunar New Year's Day 1/27/98 2/4/98 R + 8
10/1/98 National Day 9/29/98 10/7/98 R + 8
10/2/98 Day Following National 9/30/98 10/8/98 R + 8
Day
10/6/98 Day Following Chinese
Mid-Autum Festival
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R + 10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Hong Kong WEBS Index Series.
<PAGE> 149
THE ITALY WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Italian holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Immaculate Conception - December 8, 1997
Christmas Eve(1) - December 24, 1997
Christmas Day - December 25, 1997
St. Stephen's Day - December 26, 1997
New Year's Day - January 1, 1998
Epiphany - January 6, 1998
Easter Monday - April 13, 1998
Labour Day - May 1, 1998
S. Ambrogio(2) - December 7, 1998
Immaculate Conception - December 8, 1998
Christmas Eve (1, 3) - December 24, 1998
Christmas Day - December 25, 1998
New Year's Eve(3) - December 31, 1998
</TABLE>
REDEMPTION. A redemption request over the following Italian
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/97 Christmas Eve 12/19/97 12/29/97 R+10
12/25/97 Christmas Day 12/22/97 12/30/97 R+8
12/26/97 St. Stephen's Day 12/23/97 12/31/97 R+8
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Italy WEBS Index Series.
1. Exchange only.
2. Milan only.
3. Half day.
<PAGE> 150
THE JAPAN WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Japanese holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Sports Day - October 10, 1997
Culture Day - November 3, 1997
Labour Thanksgiving Day - November 24, 1997
Observed
Emperor's Birthday - December 23, 1997
Exchange Holiday - December 31, 1997
New Year's Day - January 1, 1998
1st Weekday after New Year's - January 2, 1998
Day
Adult's Day - January 15, 1998
Founding of the Nation - February 11, 1998
Vernal Equinox Day - March 20, 1998
Greenery Day - April 29, 1998
Consitution Day Observance - May 4, 1998
Children's Day - May 5, 1998
Marine Day - July 20, 1998
Respect of the Aged Day - September 15, 1998
Autumnal Equinox Day - September 23, 1998
Culture Day - November 3, 1998
Labor Thanksgiving Day - November 23, 1998
Emperor's Birthday - December 23, 1998
</TABLE>
REDEMPTION. A redemption request over the following Japanese
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/31/97 Exchange Holiday 12/26/97 1/5/98 R+10
1/1/98 New Year's Day 12/29/97 1/6/98 R+8
1/2/98 First Weekday after 12/30/97 1/7/98 R+8
New Year's Day
4/29/98 Greenery Day 4/28/98 5/6/98 R+8
5/4/98 Constitution Day
Observance
5/5/98 Children's Day
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Japan WEBS Index Series.
<PAGE> 151
THE MALAYSIA (FREE) WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Malaysian holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Deepavali(1) - October 30, 1997
Christmas Day - December 25, 1997
New Year's Day - January 1, 1998
Chinese New Year - January 28, 1998
Chinese New Year - January 29, 1998
Hari Raya Puasa(1) - January 30, 1998
City Day Observance - February 2, 1998
Hari Raya Haji(1) - April 7, 1998
Maal Hijrah - April 28, 1998
Labour Day - May 1, 1998
Wesak Day Observance - May 11, 1998
Prophet Mohammed's Birthday - July 6, 1998
Independence Day(1) - August 31, 1998
Deepavali - October 19, 1998
Christmas Day - December 25, 1998
</TABLE>
REDEMPTION. A redemption request over the following Malaysian
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
1/28/98 Chinese New Year 1/23/98 2/3/98 R+11
1/29/98 Chinese New Year 1/26/98 2/4/98 R+9
1/30/98 Hari Raya Puasa 1/27/98 2/5/98 R+9
2/2/98 City Day Observance
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+11 calendar days
would be the maximum number of calendar days necessary to satisfy a redemption
request made on the Malaysia (Free) WEBS Index Series.
1. Subject to change.
<PAGE> 152
THE MEXICO (FREE) WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Mexican holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
All Saint's Day - November 2, 1997
Revolution Day - November 20, 1997
Our Lady of Guadalupe Day - December 12, 1997
Christmas Eve(1) - December 24, 1997
Christmas Day - December 25, 1997
Banking's Year End - December 30, 1997
Year End - December 31, 1997
New Year's Day - January 1, 1998
Constitution Day - February 5, 1998
Holy Wednesday(1) - April 8, 1998
Holy Thursday - April 9, 1998
Good Friday - April 10, 1998
Worker's Day - May 1, 1998
Puebla's Battle - May 5, 1998
State of the Union Address Day - September 1, 1998
Independence Day - September 16, 1998
All Saint's Day - November 2, 1998
Revolution Day - November 20, 1998
Christmas Eve(1) - December 24, 1998
Christmas Day - December 25, 1998
New Year's Eve - December 31, 1998
</TABLE>
REDEMPTION. A redemption request over the following Mexican
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/97 Christmas Eve 12/23/97 1/2/98 R+10
12/25/97 Christmas Day 12/26/97 1/5/98 R+10
12/30/97 Banking's Year End 12/29/97 1/6/98 R+8
12/31/97 Year End
4/8/98 Holy Wednesday 4/3/98 4/13/98 R+10
4/9/98 Holy Thursday 4/6/98 4/14/98 R+8
4/10/98 Good Friday 4/7/98 4/15/98 R+8
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Mexico (Free) WEBS Index Series.
1. Half day.
<PAGE> 153
THE NETHERLANDS WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Netherlands holidays affecting
the relevant securities markets (and their respective dates in the fourth
quarter of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Christmas Day - December 25, 1997
Boxing Day - December 26, 1997
Holiday - December 31, 1997
New Year's Day - January 1, 1998
Good Friday - April 10, 1998
Easter Monday - April 13, 1998
Queen's Birthday - April 30, 1998
Ascension Day - May 21, 1998
Whit Monday - June 1, 1998
Christmas Day - December 25, 1998
</TABLE>
REDEMPTION. A redemption request over the following Netherlands
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/25/97 Christmas Day 12/24/97 1/2/98 R+9
12/26/97 Boxing Day
12/31/97 Holiday
1/1/98 New Year's Day
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+9
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Netherlands WEBS Index Series.
<PAGE> 154
THE SINGAPORE (FREE) WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Singaporean holidays affecting
the relevant securities markets (and their respective dates in the fourth
quarter of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Deepavali - October 31, 1997
Christmas Day - December 25, 1997
New Year's Day - January 1, 1998
Chinese New Year - January 28, 1998
Chinese New Year - January 29, 1998
Hari Raya Puasa - January 30, 1998
Hari Raya Haji - April 7, 1998
Good Friday - April 10, 1998
Vesak Day Observance - May 11, 1998
National Day Observance - August 10, 1998
Deepavali(1) - October 19, 1998
Christmas Day - December 25, 1998
</TABLE>
REDEMPTION. A redemption request over the following Singaporean
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
1/28/98 Chinese New Year 1/23/98 2/2/98 R+10
1/29/98 Chinese New Year 1/26/98 2/3/98 R+8
1/30/98 Hari Raya Puasa 1/27/98 2/4/98 R+8
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Singapore (Free) WEBS Index Series.
1. Subject to change.
<PAGE> 155
THE SPAIN WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Spanish holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Immaculate Concepcion - December 8, 1997
Christmas Eve(1) - December 24, 1997
Christmas Day - December 25, 1997
New Year's Day - January 1, 1998
Epiphany - January 6, 1998
Holy Thursday - April 9, 1998
Good Friday - April 10, 1998
Labour Day - May 1, 1998
Independence Day(1,2) - May 4, 1998
San Isidro - May 15, 1998
St. James' Day(2) - July 27, 1998
Assumption Day(2) - August 17, 1998
Immaculate Concepcion - December 8, 1998
Christmas Day - December 25, 1998
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over
any Spanish holiday that would result in a settlement period that will exceed 7
calendar days in the fourth quarter of 1997 and calendar year 1998.
1. Madrid only.
2. Subject to change.
<PAGE> 156
THE SWEDEN WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Swedish holidays affecting the
relevant securities markets (and their respective dates in the fourth quarter
of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Christmas Eve - December 24, 1997
Christmas Day - December 25, 1997
Boxing Day - December 26, 1997
New Year's Eve - December 31, 1997
New Year's Day - January 1, 1998
Eve of Epiphany(1) - January 5, 1998
Epiphany - January 6, 1998
Good Friday - April 10, 1998
Easter Monday - April 13, 1998
Eve of Labour Day(1) - April 30, 1998
Labour Day - May 1, 1998
Eve of Ascension Day(1) - May 20, 1998
Ascension Day - May 21, 1998
Whit Monday - June 1, 1998
Midsummer Eve - June 19, 1998
Eve of All Saints' Day(1) - October 30, 1998
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
New Year's Eve - December 31, 1998
</TABLE>
REDEMPTION. A redemption request over the following Swedish
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/97 Christmas Eve 12/19/97 12/29/97 R+10
12/25/97 Christmas Day 12/22/97 12/30/97 R+8
12/26/97 Boxing Day 12/23/97 1/2/98 R+10
12/31/97 New Year's Eve 12/29/97 1/7/98 R+9
1/1/98 New Year's Day 12/30/97 1/8/98 R+9
1/5/98 Eve of Epiphany
1/6/98 Epiphany
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Sweden WEBS Index Series.
1. Banks open till 1 p.m.
<PAGE> 157
THE SWITZERLAND WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular Swiss (Zurich) holidays affecting
the relevant securities markets (and their respective dates in the fourth
quarter of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Christmas Eve(1) - December 24, 1997
Christmas Day - December 25, 1997
St. Stephen's Day - December 26, 1997
New Year's Day - January 1, 1998
Bank Holiday - January 2, 1998
Good Friday - April 10, 1998
Easter Monday - April 13, 1998
Sechselauten(2) - April 20, 1998
Labour Day - May 1, 1998
Ascension Day - May 21, 1998
Whit Monday - June 1, 1998
Knabenschiessen(2) - September 14
Christmas Day - December 25, 1998
</TABLE>
REDEMPTION. A redemption request over the following Swiss
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1997 and calendar year 1998):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/97 Christmas Eve 12/19/97 12/29/97 R+10
12/25/97 Christmas Day 12/22/97 12/30/97 R+8
12/26/97 St. Stephen's Day 12/23/97 12/31/97 R+8
</TABLE>
In the fourth quarter of 1997 and calendar year 1998, R+10
calendar days would be the maximum number of calendar days necessary to satisfy
a redemption request made on the Switzerland WEBS Index Series.
1. Banks close at 12PM.
2. Zurich only.
<PAGE> 158
THE UNITED KINGDOM WEBS INDEX SERIES
REGULAR HOLIDAYS. The regular United Kingdom holidays affecting
the relevant securities markets (and their respective dates in the fourth
quarter of 1997 and calendar year 1998) are as follows:
<TABLE>
<S> <C>
Christmas Day - December 25, 1997
Boxing day - December 26, 1997
New Year's Day - January 1, 1998
Good Friday - April 10, 1998
Easter Monday - April 13, 1998
May Day - May 4, 1998
Spring Bank Holiday - May 25, 1998
August Bank Holiday - August 31, 1998
Christmas Day - December 25, 1998
Boxing Day Observance - December 28, 1998
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over
any United Kingdom holiday that would result in a settlement period that will
exceed 7 calendar days in the fourth quarter of 1997 and calendar year 1998.
<PAGE> 159
WORLD
EQUITY
BENCHMARK
SHARES
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
INVESTMENT
HIGHLIGHTS
[ WEBS LOGO ]
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 are not:
- Closed-end mutual funds.
- ADRs or UITs.
- Derivatives.
WEBS do not:
- Use leverage to increase their net assets.
- Attempt to outperform an international market through stock
selection.
WEBS series initially issued for 17 countries:
<TABLE>
<CAPTION>
Country AMEX Symbol IOPV
<S> <C> <C>
Australia EWA WBJ
Austria EWO INY
Belgium EWK INK
Canada EWC WPB
France EWQ WBF
Germany EWG WDG
Hong Kong EWH INH
Italy EWI INE
Japan EWJ INJ
</TABLE>
<TABLE>
<CAPTION>
Country AMEX Symbol IOPV
<S> <C> <C>
Malaysia (Free) EWM INM
Mexico (Free) EWW INW
Netherlands EWN INN
Singapore (Free) EWS INR
Spain EWP INP
Sweden EWD WBQ
Switzerland EWL INL
United Kingdom EWU INU
</TABLE>
"Indicative Optimized Portfolio Values" (IOPV's) are calculated using real-time
prices and FX rates and are updated every 15 seconds by BLOOMBERG(R). See the
Statement of Additional Information of WEBS Index Fund, Inc. for more
information on IOPV.
In Malaysia, 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.
- - Increase 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> 160
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(R) 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 complete 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(R) 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
<PAGE> 161
WORLD
EQUITY
BENCHMARK
SHARES
[WEBS LOGO] (TM)
THE FACTS ABOUT 17 FOREIGN MARKETS
A simple trade.
A sophisticated investment.
<PAGE> 162
This information is provided to help you evaluate an investment in 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.
Real-time IOPVs* available on The BLOOMBERG WEBS {GO}
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.
*"Indicative Optimized Portfolio Values" (IOPVs) are calculated using real-time
prices and FX rates and are updated every 15 seconds by Bloomberg(R). See the
Statement of Additional Information of WEBS Index Fund, Inc. for more
information on IOPV.
<PAGE> 163
WHY INTERNATIONAL?
Staying at home means passing up 59% of the world's equity markets!
NON U.S. EQUITIES
58.9%
U.S. EQUITIES
41.1%
WORLD EQUITY CAPITALIZATION
1997
<TABLE>
<S> <C>
United States 41.1%
Japan 15.3%
Europe 25.4%
Pacific X Japan 5.6%
Canada 2.4%
Emerging Markets 10.2%
</TABLE>
SOURCE: MSCI 6/30/97
WHY INDEXING?
Since 1990, combined U.S. and international indexed mutual fund assets have
increased more than 2,551%.
Indexed assets in billions
<TABLE>
<S> <C>
1990 $4.5
1991 $8.8
1992 $13.6
1993 $19.9
1994 $23.3
1995 $40.9
1996 $92.5
1997 $119.3*
</TABLE>
* 1997 assets as of 6/30/97.
Source: Financial Research Corporation
<PAGE> 164
AUSTRALIA
AMEX PRICE TICKER--AUSTRALIA WEBS
EWA
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ----------------------------------------------------
<S> <C> <C>
Real GDP Growth 4.10%(1) 3.10%(2)
Inflation Rate 2.60%(3) 1.40%(3)
Unemployment Rate 8.60%(3) 8.50%(3)
10-Year Govt. Bond Rate* 7.28%(1) 6.79%(2)
Prime Lending Rate* 9.25%(1) 8.75%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--AUSTRALIA WEBS
WBJ
MARKET FACTS
<TABLE>
<S> <C>
Currency Australian $
Local Market Index All Ordinaries
Est. Market Cap (8/31/97)(1) $308 bn US
MSCI Correlation to Local Index+(1) 98.6%
(1/31/96-12/31/96)
MSCI Yield+(1) 3.30%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 1,190
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI AUSTRALIA INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 470.835
457.863
460.976
464.085
4/30/92 480.358
488.013
471.44
460.587
424.258
406.197
381.378
384.138
419.91
406.512
2/28/93 437.732
454.956
457.868
449.771
439.551
482.732
503.142
490.494
545.973
511.78
12/31/93 567.61
628.308
596.288
552.56
572.56
599.901
569.034
597.947
626.26
592.572
10/31/94 608.83
585.743
598.286
562.167
580.075
574.124
612.828
598.865
592.143
647.279
8/31/95 659.263
655.088
638.771
651.939
665.232
685.214
706.91
703.745
738.305
732.604
708.417
675.2
718.44
9/30/96 719.102
746
777
774
743
764
762
782
797
823
816
8/31/97 760
</TABLE>
SOURCE: MSCI
+ The above chart and market facts are intended to represent the historical
performance of the MSCI Australia Index. They do not represent any past or
future performance of WEBS. It is not possible to invest in an index.
The MSCI Australia Index ("MSCI Australia") consists primarily of stocks that
are traded on the Australia Stock Exchange. On August 31, 1997, there were 55
stocks held in the index, representing approximately $169.2 billion or 54.9% of
the aggregate capitalization of the Australia equity market. The MSCI Australia
reflects the reinvestment of net dividends. The MSCI Australia is unmanaged and
therefore does not bear management, administration or other expenses as do the
WEBS.
TOP 5 HOLDINGS-AUSTRALIA WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- ---------------------------------------------------
<S> <C>
1. Broken Hill Proprietary Company 15.03%
2. National Australia Bank Limited 12.76%
3. News Corporation 7.90%
4. Westpac Banking Corporation Limited 6.73%
5. Coca-Cola Amatil Limited 5.08%
</TABLE>
TOP 5 INDUSTRIES-AUSTRALIA WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- ---------------------------------------------------
<S> <C>
1. Appliances & Household Durables 19.50%
2. Energy Sources 16.82%
3. Metals--Non Ferrous 9.87%
4. Building Materials & Components 8.17%
5. Broadcast & Publishing 7.90%
</TABLE>
On August 31, 1997 there were 37 stocks held in the Australia WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 165
AUSTRIA
AMEX PRICE TICKER--AUSTRIA WEBS
EWO
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 1.00%(1) 1.80%(2)
Inflation Rate 1.80%(3) 1.90%(3)
Unemployment Rate 7.00%(3) 7.10%(3)
10-Year Govt. Bond Rate 6.34%(3) 6.08%(3)
Prime Lending Rate* 8.25%(1) 6.50%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--AUSTRIA WEBS
INY
MARKET FACTS
<TABLE>
<S> <C>
Currency Schilling
Local Market Index ATX
Est. Market Cap (8/31/97)(1) $35 bn US
MSCI Correlation to Local Index+(1) 86.4%
(1/31/96-12/31/96)
MSCI Yield+(1) 1.40%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 142
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI AUSTRIA INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 1558.89
1603.89
1707.66
1614.41
4/30/92 1552.17
1608.51
1636.02
1478.04
1442.66
1534.1
1447.84
1356.96
1392.89
1381.09
2/28/93 1460.49
1433.23
1417.58
1445.85
1442.12
1503.28
1664.71
1625.71
1744
1660.66
12/31/93 1784.17
1818.96
1795.64
1722.63
1702.65
1656.4
1781.72
1735.78
1800.96
1711.13
10/31/94 1654.92
1624.58
1672.2
1609.9
1690.18
1701.12
1691.92
1785.39
1808.82
1819.65
8/31/95 1681.86
1689.9
1610.7
1553.71
1593.23
1685.83
1679.27
1665.45
1676.27
1767.66
1659.71
1623.29
1638.62
9/30/96 1591.07
1602
1639
1665
1597
1602
1619
1552
1636
1620
1720
8/31/97 1615
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Austria Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Austria Index ("MSCI Austria") consists primarily of stocks that are
traded on the Austria Stock Exchange. On August 31, 1997, there were 24 stocks
held in the index, representing approximately $23.5 billion or 66.0% of the
aggregate capitalization of the Austria equity market. The MSCI Austria reflects
the reinvestment of net dividends. The MSCI Austria is unmanaged and therefore
does not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-AUSTRIA WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- -------------------------------------------------------
<S> <C>
1. Bank Austria/Creditanstalt Bankverein 24.89%
2. OMV 13.26%
3. VA Technologie 9.39%
4. Austrian Airlines 4.84%
5. Mayr Melnhof Karton 4.65%
</TABLE>
TOP 5 INDUSTRIES-AUSTRIA WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- ---------------------------------------------------------
<S> <C>
1. Banking 24.89%
2. Machinery & Engineering 14.39%
3. Energy Sources 13.26%
4. Miscellaneous Materials & 8.60%
Commodities
5. Construction & Housing 5.68%
</TABLE>
On August 31, 1997 there were 21 stocks held in the Austria WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 166
BELGIUM
AMEX PRICE TICKER--BELGIUM WEBS
EWK
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ----------------------------------------------------
<S> <C> <C>
Real GDP Growth 1.30%(1) 2.20%(2)
Inflation Rate 2.10%(3) 1.50%(3)
Unemployment Rate 13.80%(3) 13.70%(3)
10-Year Govt. Bond Rate* 5.51%(1) 5.72%(2)
Prime Lending Rate* 7.00%(1) 7.00%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--BELGIUM WEBS
INK
MARKET FACTS
<TABLE>
<S> <C>
Currency Franc
Local Market Index BELFOX
Est. Market Cap (8/31/97)(1) $126 bn US
MSCI Correlation to Local Index+(1) 89.3%
(1/31/96-12/31/96)
MSCI Yield+(1) 4.10%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 269
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI BELGIUM INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 1935.92
1933.52
1932.84
1896.96
4/30/92 1923.29
1978.1
2009.49
2064.26
2002.79
2081.02
1964.49
1929.11
1907.41
2008.96
2/28/93 2014.2
2189.17
2130.41
2097.86
2116.4
2069.16
2083.56
2105.57
2186.68
2220.83
12/31/93 2355.86
2460.8
2448.56
2414.98
2550.3
2495.92
2458.58
2573.76
2609.84
2465.98
10/31/94 2558.72
2514.89
2550.02
2537.31
2614.03
2775.04
2955.19
2947.11
2952.16
3049.19
8/31/95 2878.13
2982.12
2989.51
3039.8
3209.92
3280.6
3244.86
3167.42
3248.98
3301.08
3316.18
3353.31
3384.69
9/30/96 3427.63
3477
3581
3596
3682
3739
3793
3831
3924
4006
4063
8/31/97 3760
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Belgium Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Belgium Index ("MSCI Belgium") consists primarily of stocks that are
traded on the Belgium Stock Exchange. On August 31, 1997, there were 17 stocks
held in the index, representing approximately $70.9 billion or 56.0% of the
aggregate capitalization of the Belgium equity market. The MSCI Belgium reflects
the reinvestment of net dividends. The MSCI Belgium is unmanaged and therefore
does not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-BELGIUM WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- -------------------------------------------------
<S> <C>
1. Electrabel 15.15%
2. Fortis 12.60%
3. Petrofina 11.89%
4. Generale de Banque 8.32%
5. Solvay 5.04%
</TABLE>
TOP 5 INDUSTRIES-BELGIUM WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -------------------------------------------------
<S> <C>
1. Utilities--Electrical & Gas 20.08%
2. Insurance 17.57%
3. Banking 12.80%
4. Energy Sources 11.89%
5. Multi-Industry 9.77%
</TABLE>
On August 31, 1997 there were 16 stocks held in the Belgium WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 167
CANADA
AMEX PRICE TICKER--CANADA WEBS
EWC
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- -----------------------------------------------------
<S> <C> <C>
Real GDP Growth 1.40%(1) 3.30%(2)
Inflation Rate 1.60%(3) 1.90%(3)
Unemployment Rate 9.70%(3) 9.40%(3)
10-Year Govt. Bond Rate* 6.19%(1) 6.06%(2)
Prime Lending Rate* 4.75%(1) 4.75%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--CANADA WEBS
WPB
MARKET FACTS
<TABLE>
<S> <C>
Currency Canadian $
Local Market Index Toronto 35
Est. Market Cap (8/31/97)(1) $478 bn US
MSCI Correlation to Local Index+(1) 97.3%
(1/31/96-12/31/96)
MSCI Yield+(1) 2.50%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 1,379
</TABLE>
Sources: (1) MSCI
(2)International Federation of Stock Exchanges, 12/96
MSCI CANADA INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 722.903
732.502
726.434
686.463
4/30/92 677.164
680.653
682.853
698.224
682.93
632.391
648.131
618.876
635.06
622.793
2/28/93 657.396
674.937
698.564
708.537
703.411
698.217
703.286
668.634
731.131
714.297
12/31/93 746.687
793.76
754.991
722.208
714.088
722.656
675.784
706.859
746.768
763.333
10/31/94 753.731
711.869
723.952
686.919
724.664
755.401
768.513
800.416
814.071
828.461
8/31/95 828.978
825.103
818.109
848.529
856.507
900.935
892.904
910.373
947.87
962.84
936.432
907.769
948.294
9/30/96 985.871
1063
1140
1100
1155
1145
1088
1113
1206
1228
1307
8/31/97 1238
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Canada Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Canada Index ("MSCI Canada") consists primarily of stocks that are
traded on the Canada Stock Exchange. On August 31, 1997, there were 84 stocks
held in the index, representing approximately $305.9 billion or 64.0% of the
aggregate capitalization of the Canada equity market. The MSCI Canada reflects
the reinvestment of net dividends. The MSCI Canada is unmanaged and therefore
does not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-CANADA WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. Northern Telecom Limited 8.81%
2. BCE Incorporated 5.87%
3. Thomson Corporation 4.89%
4. Royal Bank of Canada 4.86%
5. Seagram Company 4.65%
</TABLE>
TOP 5 INDUSTRIES-CANADA WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -------------------------------------------------
<S> <C>
1. Banking 15.28%
2. Energy Sources 13.86%
3. Electrical & Electronics 11.51%
4. Metals--Non Ferrous 8.67%
5. Telecommunications 6.90%
</TABLE>
On August 31, 1997 there were 66 stocks held in the Canada WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 168
FRANCE
AMEX PRICE TICKER--FRANCE WEBS
EWQ
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 1.20%(1) 2.20%(2)
Inflation Rate 2.00%(3) 1.20%(3)
Unemployment Rate 12.40%(3) 12.70%(3)
10-Year Govt. Bond Rate* 5.21%(1) 5.53%(2)
Prime Lending Rate* 6.30%(1) 6.30%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--FRANCE WEBS
WBF
MARKET FACTS
<TABLE>
<S> <C>
Currency Franc
Local Market Index CAC
Est. Market Cap (8/31/97)(1) $578 bn US
MSCI Correlation to Local Index+(1) 99.5%
(1/31/96-12/31/96)
MSCI Yield+(1) 3.00%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 891
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI FRANCE INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 1059.77
1062.99
1105.8
1092.8
4/30/92 1149.35
1198
1180.95
1131.54
1142
1178.1
1080.41
1062.23
1089.54
1061.5
2/28/93 1153.68
1206.61
1189.3
1158.51
1141.26
1155.3
1255.76
1244.6
1255.41
1216.28
12/31/93 1317.41
1368.8
1342.84
1281.67
1338.38
1275.41
1226.09
1347.19
1354.21
1262.53
10/31/94 1307.51
1293.48
1249.1
1219.84
1240.22
1403.56
1417.69
1433.49
1409.37
1473.64
8/31/95 1379.8
1353.74
1374.48
1367.69
1425.42
1483.31
1500.65
1545.38
1573.31
1555.84
1583.8
1539.64
1507.84
9/30/96 1590.95
1624
1710
1727
1766
1775
1830
1755
1741
1885
1918
8/31/97 1772
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI France Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI France Index ("MSCI France") consists primarily of stocks that are
traded on the France Stock Exchange. On August 31, 1997, there were 68 stocks
held in the index, representing approximately $406.9 billion or 70.4% of the
aggregate capitalization of the France equity market. The MSCI France reflects
the reinvestment of net dividends. The MSCI France is unmanaged and therefore
does not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-FRANCE WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- ------------------------------------------------
<S> <C>
1. Elf Acquitaine 7.27%
2. L'Oreal 5.64%
3. Carrefour 5.63%
4. Axa-UAP 4.44%
5. Alcatel Alsthom 4.21%
</TABLE>
TOP 5 INDUSTRIES-FRANCE WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -------------------------------------------------
<S> <C>
1. Energy Sources 12.39%
2. Health & Personal Care 11.99%
3. Merchandising 11.57%
4. Business & Public Services 9.23%
5. Electrical & Electronics 7.93%
</TABLE>
On August 31, 1997 there were 58 stocks held in the France WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 169
GERMANY
AMEX PRICE TICKER--GERMANY WEBS
EWG
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 1.40%(1) 2.40%(2)
Inflation Rate 1.50%(3) 1.60%(3)
Unemployment Rate 10.40%(3) 11.40%(3)
10-Year Govt. Bond Rate* 5.44%(1) 5.63%(2)
Prime Lending Rate* 4.80%(1) 4.60%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--GERMANY WEBS
WDG
MARKET FACTS
<TABLE>
<S> <C>
Currency Mark
Local Market Index DAX
Est. Market Cap (8/31/97)(1) $700 bn US
MSCI Correlation to Local Index+(1) 96.5%
(1/31/96-12/31/96)
MSCI Yield+(1) 2.70%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 1,971
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI GERMANY INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 988.634
995.286
1020.01
997.615
4/30/92 993.006
1055.88
1074.27
1015.42
1014.67
975.183
907.344
901.59
887.096
916.062
2/28/93 963.23
990.42
976.723
974.039
941.801
972.932
1081.32
1099.44
1164.83
1137.2
12/31/93 1203.22
1168.05
1146.12
1185.8
1256.87
1184.24
1187.72
1246.16
1291.91
1215.24
10/31/94 1283.02
1215.6
1259.35
1235.44
1340.14
1309.38
1364.83
1376.16
1415.05
1498.81
8/31/95 1417.77
1437.29
1419.74
1422.52
1466.02
1529.26
1542.81
1536.87
1480.77
1501.91
1532.46
1536.74
1572.09
9/30/96 1582.27
1596
1659
1665
1657
1726
1853
1786
1861
1943
2133
8/31/97 1922
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Germany Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Germany Index ("MSCI Germany") consists primarily of stocks that are
traded on the Germany Stock Exchange. On August 31, 1997, there were 67 stocks
held in the index, representing approximately $541.7 billion or 77.3% of the
aggregate capitalization of the Germany equity market. The MSCI Germany reflects
the reinvestment of net dividends. The MSCI Germany is unmanaged and therefore
does not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-GERMANY WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- -------------------------------------------------
<S> <C>
1. Allianz 9.20%
2. Deutsche Telecom 8.19%
3. Daimler-Benz 7.39%
4. Siemens 6.70%
5. Veba 5.19%
</TABLE>
TOP 5 INDUSTRIES-GERMANY WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -------------------------------------------------
<S> <C>
1. Insurance 13.60%
2. Banking 13.48%
3. Telecommunications 12.04%
4. Automobiles 11.68%
5. Utilities--Electrical & Gas 10.91%
</TABLE>
On August 31, 1997 there were 43 stocks held in the Germany WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 170
HONG KONG
AMEX PRICE TICKER--HONG KONG WEBS
EWH
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ----------------------------------------------------
<S> <C> <C>
Real GDP Growth 4.90%(1) 4.80%(1)
Inflation Rate 7.00%(1) 7.80%**(1)
Unemployment Rate 3.30%(1) 3.50% (1)
Short Term Interest Rate* 5.65%(3) 7.36%(2)
</TABLE>
Sources: (1) DRI/McGraw-Hill, 8/30/97
(2) The Economist, 8/30/97
(3) The Economist, 2/22/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
**Represents % change year over year as of July 1997.
IOPV SYMBOL--HONG KONG WEBS
INH
MARKET FACTS
<TABLE>
<CAPTION>
<S> <C>
Currency Hong Kong $
Local Market Index Hang Seng
Est. Market Cap (8/31/97)(1) $423 bn US
MSCI Correlation to Local Index+(1) 99.0%
(1/31/96-12/31/96)
MSCI Yield+(1) 3.10%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 583
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI HONG KONG INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 5164.18
5644.31
6109.99
6112.92
4/30/92 6597.1
7556.18
7662.89
7318.6
6991.37
6942.83
7824.08
7237.93
6831.44
7123.27
2/28/93 7856.73
7883.54
8486.44
9217.53
8889.83
8725.31
9361.35
9556.78
11777.2
11611.3
12/31/93 14803.5
14249
12757
11383.1
11431.1
12221.5
11231
12127.6
12815.4
12269.8
10/31/94 12362.4
10860.8
10525.3
9288.48
10713
10986.9
10676.9
12083.1
11888.4
12129.6
8/31/95 11728.6
12430.7
12457.6
12491.8
12900.6
14563.3
14401
14414.3
14447.6
14881.3
14536.3
13874.5
14328.8
9/30/96 15306.6
15590
17256
17167
16789
16771
15659
15915
17926
18843
20021
8/31/97 17396
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Hong Kong Index. They do not represent any past or
future performance of WEBS. It is not possible to invest in an index.
The MSCI Hong Kong Index ("MSCI Hong Kong") consists primarily of stocks that
are traded on the Hong Kong Stock Exchange. On August 31, 1997, there were 35
stocks held in the index, representing approximately $222.4 billion or 52.6% of
the aggregate capitalization of the Hong Kong equity market. The MSCI Hong Kong
reflects the reinvestment of net dividends. The MSCI Hong Kong is unmanaged and
therefore does not bear management, administration or other expenses as do the
WEBS.
TOP 5 HOLDINGS-HONG KONG WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- -------------------------------------------------
<S> <C>
1. Hutchinson Whampoa 13.57%
2. Sun Hung Kai Properties Limited 11.31%
3. Hong Kong Telecommunications 10.86%
4. Cheung Kong Holdings 10.54%
5. Hang Seng Bank 4.59%
</TABLE>
TOP 5 INDUSTRIES-HONG KONG WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- ------------------------------------------------
<S> <C>
1. Real Estate 38.60%
2. Multi-Industry 19.72%
3. Telecommunications 10.86%
4. Banking 9.66%
5. Utilities--Electrical & Gas 8.78%
</TABLE>
On August 31, 1997 there were 30 stocks held in the Hong Kong WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 171
ITALY
AMEX PRICE TICKER--ITALY WEBS
EWI
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 0.90%(1) 0.90%(2)
Inflation Rate 4.00%(3) 2.00%(3)
Unemployment Rate 12.10%(3) 12.20%(3)
10-Year Govt. Bond Rate* 7.28%(1) 6.74%(2)
Prime Lending Rate* 9.50%(1) 9.00%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--ITALY WEBS
INE
MARKET FACTS
<TABLE>
<S> <C>
Currency Lira
Local Market Index BCI
Est. Market Cap (8/31/97)(1) $284 bn US
MSCI Correlation to Local Index+(1) 98.5%
(1/31/96-12/31/96)
MSCI Yield+(1) 2.10%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 248
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI ITALY INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- --Returns USD
<TABLE>
<S> <C>
12/31/91 300.943
308.79
304.466
287.005
4/30/92 290.492
296.019
286.274
263.086
265.291
215.582
252.986
238.077
234.085
255.546
2/28/93 258.029
236.739
287.833
295.512
288.721
293.322
329.311
309.323
298.253
266.989
12/31/93 300.881
330.091
327.457
380.414
419.88
387.241
361.772
381.072
373.443
373.584
10/31/94 353.856
329.371
335.672
358.403
326.151
307.503
339.019
340.177
330.141
357.894
8/31/95 347.589
344.216
327.816
309.547
339.196
354.592
351.165
337.324
383.368
381.175
382.604
354.259
351.452
9/30/96 373.936
353.23
381.11
381
422
377
386
392
388
424
449
8/31/97 437
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Italy Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Italy Index ("MSCI Italy") consists primarily of stocks that are traded
on the Italy Stock Exchange. On August 31, 1997, there were 55 stocks held in
the index, representing approximately $200.8 billion or 70.6% of the aggregate
capitalization of the Italy equity market. The MSCI Italy reflects the
reinvestment of net dividends. The MSCI Italy is unmanaged and therefore does
not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-ITALY WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- ----------------------------------------------------
<S> <C>
1. ENI 20.69%
2. Telecom Italia Mobile 12.35%
3. Telecom Italia 11.67%
4. Fiat 4.60%
5. Istituto Nazionale delle Assicurazioni 4.39%
</TABLE>
TOP 5 INDUSTRIES-ITALY WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -----------------------------------------------
<S> <C>
1. Telecommunications 24.01%
2. Energy Sources 20.69%
3. Banking 18.38%
4. Insurance 10.79%
5. Automobiles 4.60%
</TABLE>
On August 31, 1997 there were 34 stocks held in the Italy WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 172
JAPAN
AMEX PRICE TICKER--JAPAN WEBS
EWJ
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 3.50%(1) 2.10%(2)
Inflation Rate 0.10%(3) 1.60%(3)
Unemployment Rate 3.40%(3) 3.20%(3)
10-Year Govt. Bond Rate* 2.54%(1) 2.28%(2)
Prime Lending Rate* 1.63%(1) 1.63%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--JAPAN WEBS
INJ
MARKET FACTS
<TABLE>
<S> <C>
Currency Yen
Local Market Index Nikkei 225
Est. Market Cap (8/31/97)(1) $2,907 bn US
MSCI Correlation to Local Index+(1) 95.6%
(1/31/96-12/31/96)
MSCI Yield+(1) 0.80%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 1,833
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI JAPAN INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 3966.56
3782.78
3466.92
3091.08
4/30/92 2900.78
3132.83
2846.39
2813.81
3312.3
3232.9
3082.77
3162.41
3115.66
3105.5
2/28/93 3239.95
3695.73
4352.62
4472.5
4410.47
4689.79
4792.08
4564.28
4543.5
3789.42
12/31/93 3909.59
4540.8
4748.41
4545.27
4739.01
4842.75
5081.59
4899.09
4932.45
4810.69
10/31/94 4942.59
4693.87
4747.75
4470.85
4254.93
4646.45
4873.2
4570.96
4352.54
4698.95
8/31/95 4510.05
4548.31
4293.92
4548.07
4780.59
4717.77
4633.77
4797.31
5070.06
4809.13
4834.58
4618.08
4411.68
9/30/96 4564.53
4258
4339
4039
3599
3683
3562
3691
4099
4405
4271
8/31/97 3901
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Japan Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Japan Index ("MSCI Japan") consists primarily of stocks that are traded
on the Japan Stock Exchange. On August 31, 1997, there were 310 stocks held in
the index, representing approximately $1,895.4 billion or 65.2% of the aggregate
capitalization of the Japan equity market. The MSCI Japan reflects the
reinvestment of net dividends. The MSCI Japan is unmanaged and therefore does
not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-JAPAN WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. Nippon Telegraph & Telephone 6.36%
2. Toyota Motor Corporation 5.21%
3. Bank of Tokyo-Mitsubishi 4.35%
4. Sumitomo Bank 2.36%
5. Sony Corporation 2.32%
</TABLE>
TOP 5 INDUSTRIES-JAPAN WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -----------------------------------------------
<S> <C>
1. Banking 17.57%
2. Automobiles 7.80%
3. Telecommunications 6.36%
4. Appliances & Household Durables 5.88%
5. Industrial Components 4.31%
</TABLE>
On August 31, 1997 there were 190 stocks held in the Japan WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 173
MALAYSIA (FREE)
AMEX PRICE TICKER--MALAYSIA (FREE) WEBS
EWM
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ------------------------------------------------------
<S> <C> <C>
Real GDP Growth 8.30%(1) 8.00%(1)
Inflation Rate 3.50%(1) 3.40%**(1)
Unemployment Rate 2.60%(1) 2.30%(1)
10-Year Govt. Bond Rate 7.22%(1) 7.71%***(1)
Short Term Interest Rate* 7.40%(3) 7.60%(2)
</TABLE>
Sources: (1) DRI/McGraw-Hill, 8/30/97
(2) The Economist, 8/30/97
(3) The Economist, 2/22/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
**Represents % change year over year as of July, 1997.
***Year end estimate.
IOPV SYMBOL--MALAYSIA (FREE) WEBS
INM
MARKET FACTS
<TABLE>
<S> <C>
Currency Ringgit
Local Market Index KLSE
Est. Market Cap (8/31/97)(1) $162 bn US
MSCI Correlation to Local Index+(1) 99.1%
(1/31/96-12/31/96)
MSCI Yield+(1) 1.40%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 618
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI MALAYSIA (FREE) INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 190.484
201.467
216.465
210.455
4/30/92 211.32
207.725
209.17
210.333
201.628
216.102
232.964
234.294
224.319
218.858
2/28/93 229.923
237.344
276.558
286.58
275.606
289.58
317.74
341.72
396.52
389.77
12/31/93 471.07
397.76
413.86
353.053
388.998
376.257
382.72
392.899
437.104
435.168
10/31/94 432.1
395.656
377.141
339.124
385.298
386.476
381.945
424.944
417.973
427.218
8/31/95 403.023
395.603
373.979
374.842
396.605
411.161
426.769
454.372
478.558
459.238
461.382
433.313
457.071
9/30/96 464.768
474
494
499
506
529
499
443
452
440
397
8/31/97 277
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Malaysia (Free) Index. They do not represent any past or
future performance of WEBS. It is not possible to invest in an index.
The MSCI Malaysia (Free) Index ("MSCI Malaysia (Free)") consists primarily of
stocks that are traded on the Malaysia Stock Exchange. On August 31, 1997, there
were 76 stocks held in the index, representing approximately $85.9 billion or
52.9% of the aggregate capitalization of the Malaysia equity market. The MSCI
Malaysia (Free) reflects the reinvestment of net dividends. The MSCI Malaysia
(Free) is unmanaged and therefore does not bear management, administration or
other expenses as do the WEBS.
TOP 5 HOLDINGS-MALAYSIA (FREE) WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. Telekom Malaysia 11.96%
2. Tenaga Nasional 11.69%
3. Malayan Banking 8.69%
4. Sime Darby 6.57%
5. Rothmans of Pall Mall 3.95%
</TABLE>
TOP 5 INDUSTRIES-MALAYSIA (FREE) WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- ------------------------------------------------
<S> <C>
1. Telecommunications 13.20%
2. Multi-Industry 12.70%
3. Banking 12.59%
4. Utilities--Electrical & Gas 11.69%
5. Miscellaneous Materials & 6.91%
Commodities
</TABLE>
On August 31, 1997 there were 46 stocks held in the Malaysia (Free) WEBS Index
Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 174
MEXICO (FREE)
AMEX PRICE TICKER--MEXICO (FREE) WEBS
EWW
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 Est. 1997
- ----------------------------------------------------
<S> <C> <C>
Real GDP Growth 5.10%(1) 4.90%(1)
Inflation Rate 34.40%(1) 23.10%**(1)
Unemployment Rate 5.50%(1) 4.30%(1)
Short Term Interest Rate* 19.46%(3) 19.58%(2)
</TABLE>
Sources: (1) DRI/McGraw-Hill, 8/30/97
(2) The Economist, 8/30/97
(3) The Economist, 2/22/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
**Represents % change year over year as of July, 1997.
IOPV SYMBOL--MEXICO (FREE) WEBS
INW
MARKET FACTS
<TABLE>
<S> <C>
Currency Peso
Local Market Index IPC
Est. Market Cap (8/31/97)(1) $143 bn US
MSCI Correlation to Local Index+(1) 98.2%
(1/31/96-12/31/96)
MSCI Yield+(1) 1.40%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 193
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI MEXICO (FREE) INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 1196.3
1330
1535.22
1546.53
4/30/92 1483.81
1505.21
1260.09
1274.55
1190.48
1134.91
1344.76
1452.78
1495.13
1411.23
2/28/93 1328.13
1508.28
1403.79
1387.3
1406.58
1485.29
1627.27
1570.07
1732.02
1912.28
12/31/93 2232.99
2409.7
2193.96
1943.39
1890.13
2036.94
1822.12
1979.1
2124.32
2159.89
10/31/94 1983.76
2003.77
1327.46
1037.23
789.934
804.288
957.164
929.584
1028.81
1123.16
8/31/95 1161.57
1091.49
947.652
1029.61
1057.03
1184.1
1075.75
1162.02
1228.79
1237.07
1223.06
1143.96
1249.65
9/30/96 1247.85
1173
1223
1254
1362
1411
1383
1389
1471
1640
1890
8/31/97 1737
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Mexico (Free) Index. They do not represent any past or
future performance of WEBS. It is not possible to invest in an index.
The MSCI Mexico (Free) Index ("MSCI Mexico (Free)") consists primarily of stocks
that are traded on the Mexico Stock Exchange. On August 31, 1997, there were 40
stocks held in the index, representing approximately $95.0 billion or 66.1% of
the aggregate capitalization of the Mexico equity market. The MSCI Mexico (Free)
reflects gross dividends. The MSCI Mexico (Free) is unmanaged and therefore does
not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-MEXICO (FREE) WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- -------------------------------------------------
<S> <C>
1. Telefonos de Mexico 22.49%
2. Grupo Modelo 7.87%
3. Kimberly-Clark de Mexico 7.33%
4. Grupo Carso 7.31%
5. Cifra 4.63%
</TABLE>
TOP 5 INDUSTRIES-MEXICO (FREE) WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -------------------------------------------------
<S> <C>
1. Telecommunications 22.49%
2. Beverages & Tobacco 15.72%
3. Multi-Industry 14.15%
4. Merchandising 7.85%
5. Health & Personal Care 7.33%
</TABLE>
On August 31, 1997 there were 32 stocks held in the Mexico (Free) WEBS Index
Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 175
NETHERLANDS
AMEX PRICE TICKER--NETHERLANDS WEBS
EWN
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- -----------------------------------------------------
<S> <C> <C>
Real GDP Growth 2.50%(1) 2.90%(2)
Inflation Rate 2.10%(3) 2.30%(3)
Unemployment Rate 6.70%(3) 6.40%(3)
10-Year Govt. Bond Rate* 5.32%(1) 5.61%(2)
Prime Lending Rate* 4.25%(1) 4.75%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--NETHERLANDS WEBS
INN
MARKET FACTS
<TABLE>
<CAPTION>
<S> <C>
Currency Guilder
Local Market Index EOE
Est. Market Cap (8/31/97)(1) $449 bn US
MSCI Correlation to Local Index+(1) 92.3%
(1/31/96-12/31/96)
MSCI Yield+(1) 3.40%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 343
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI NETHERLANDS INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 1738.59
1735.18
1740.1
1713.43
4/30/92 1791.14
1867.37
1883.98
1887.44
1937.66
1979.87
1789.43
1758.54
1778.54
1818.07
2/28/93 1875.7
1995.38
1986.59
2027.17
2011.17
2013.33
2216.84
2225.9
2357.1
2284.42
12/31/93 2405.94
2516.44
2468.2
2386.73
2520.13
2441.53
2419.28
2567.09
2658.58
2584.42
10/31/94 2757.87
2617.48
2687.52
2719.34
2796.29
2937.74
3036.86
3075.19
3107.34
3283.74
8/31/95 3086.96
3236.22
3188.74
3289.77
3432.37
3452.85
3528.56
3632.63
3648.61
3817.53
3826.25
3765.45
3828.79
9/30/96 3926.19
4024
4275
4376
4341
4517
4626
4579
4870
5252
5682
8/31/97 5121
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Netherlands Index. They do not represent any past or
future performance of WEBS. It is not possible to invest in an index.
The MSCI Netherlands Index ("MSCI Netherlands") consists primarily of stocks
that are traded on the Netherlands Stock Exchange. On August 31, 1997, there
were 22 stocks held in the index, representing approximately $315.3 billion or
70.1% of the aggregate capitalization of the Netherlands equity market. The MSCI
Netherlands reflects the reinvestment of net dividends. The MSCI Netherlands is
unmanaged and therefore does not bear management, administration or other
expenses as do the WEBS.
TOP 5 HOLDINGS-NETHERLANDS WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- ---------------------------------------------------
<S> <C>
1. Royal Dutch Petroleum 23.49%
2. Ing Groep 12.02%
3. Unilever 11.94%
4. Akzo Nobel 4.59%
5. Philips Electronics 4.45%
</TABLE>
TOP 5 INDUSTRIES-NETHERLANDS WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- ------------------------------------------------
<S> <C>
1. Energy Sources 23.49%
2. Financial Services 12.02%
3. Food & Household Products 11.94%
4. Broadcast & Publishing 7.54%
5. Chemicals 4.59%
</TABLE>
On August 31, 1997 there were 22 stocks held in the Netherlands WEBS Index
Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 176
SINGAPORE (FREE)
AMEX PRICE TICKER--SINGAPORE (FREE) WEBS
EWS
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 Est. 1997
- -----------------------------------------------------
<S> <C> <C>
Real GDP Growth 7.00%(1) 7.20%(1)
Inflation Rate 1.40%(1) 1.80%**(1)
Short Term Interest Rate* 2.94%(3) 3.95%(2)
</TABLE>
Sources: (1) DRI/McGraw-Hill, 8/30/97
(2) The Economist, 8/30/97
(3) The Economist, 2/22/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
** Represents % change year over year as of July, 1987.
IOPV SYMBOL--SINGAPORE (FREE) WEBS
INR
MARKET FACTS
<TABLE>
<S> <C>
Currency Singapore $
Local Market Index Straights Times
Est. Market Cap (8/31/97)(1) $119 bn US
MSCI Correlation to Local Index+(1) 89.8%
(1/31/96-12/31/96)
MSCI Yield+(1) 0.90%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 296
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI SINGAPORE (FREE) INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 238.451
241.923
233.354
226.17
4/30/92 235.723
252.422
250.174
239.562
222.526
211.038
216.873
236.715
249.165
251.697
2/28/93 254.189
255.929
273.867
290.261
279.711
281.74
326.955
339.54
374.464
351.479
12/31/93 432.071
408.035
390.601
352.707
404.787
414.225
399.155
418.205
443.103
456.821
10/31/94 483.656
458.339
457.18
416.527
441.197
451.673
460.461
504.112
478.074
486.986
8/31/95 458.873
469.494
472.776
484.455
512.894
567.34
566.484
553.516
552.245
520.436
513.968
474.045
493.803
9/30/96 494.422
471
502
514
533
519
468
451
482
480
477
8/31/97 373
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Singapore (Free) Index. They do not represent any past
or future performance of WEBS. It is not possible to invest in an index.
The MSCI Singapore (Free) Index ("MSCI Singapore (Free)") consists primarily of
stocks that are traded on the Singapore Stock Exchange. On August 31, 1997,
there were 37 stocks held in the index, representing approximately $63.4 billion
or 52.9% of the aggregate capitalization of the Singapore equity market. The
MSCI Singapore (Free) reflects the reinvestment of net dividends. The MSCI
Singapore (Free) is unmanaged and therefore does not bear management,
administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-SINGAPORE (FREE) WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. Singapore Airlines 11.10%
2. Oversea-Chinese Banking Corporation 9.72%
3. United Overseas Bank 9.08%
4. Developmental Bank of Singapore 8.70%
5. Singapore Telecommunications 8.24%
</TABLE>
TOP 5 INDUSTRIES-SINGAPORE (FREE) WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- ------------------------------------------------
<S> <C>
1. Banking 27.50%
2. Real Estate 17.65%
3. Transportation--Airlines 11.10%
4. Multi-Industry 9.98%
5. Telecommunications 8.24%
</TABLE>
On August 31, 1997 there were 31 stocks held in the Singapore (Free) WEBS Index
Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 177
SPAIN
AMEX PRICE TICKER--SPAIN WEBS
EWP
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 2.10%(1) 2.90%(2)
Inflation Rate 3.60%(3) 2.80%(3)
Unemployment Rate 22.20%(3) 21.20%(3)
10-Year Govt. Bond Rate* 6.63%(1) 6.24%(2)
Prime Lending Rate* 8.25%(1) 7.25%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--SPAIN WEBS
INP
MARKET FACTS
<TABLE>
<S> <C>
Currency Peseta
Local Market Index IBEX
Est. Market Cap (8/31/97)(1) $202 bn US
MSCI Correlation to Local Index+(1) 99.3%
(1/31/96-12/31/96)
MSCI Yield+(1) 3.80%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 361
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI SPAIN INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Return USD
<TABLE>
<S> <C>
12/31/91 501.786
499.363
517.979
494.074
4/30/92 483.432
531.429
497.958
460.169
445.08
389.868
366.835
389.532
392.052
425.905
2/28/93 422.346
448.787
451.486
442.337
440.538
413.233
502.773
488.853
519.032
470.713
12/31/93 508.824
571.435
544.202
519.46
531.903
531.273
501.907
531.998
526.043
510.812
10/31/94 525.794
516.722
484.391
480.087
491.992
481.9
521.828
546.457
554.562
595.212
8/31/95 575.309
576.304
558.285
600.889
628.903
634.185
676.481
666.755
692.506
687.154
716.051
683.334
697.975
9/30/96 715.16
737
799
880
866
835
869
919
990
1063
1003
8/31/97 983
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Spain Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Spain Index ("MSCI Spain") consists primarily of stocks that are traded
on the Spain Stock Exchange. On August 31, 1997, there were 31 stocks held in
the index, representing approximately $141.8 billion or 70.1% of the aggregate
capitalization of the Spain equity market. The MSCI Spain reflects the
reinvestment of net dividends. The MSCI Spain is unmanaged and therefore does
not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-SPAIN WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. Telefonica de Espana 14.36%
2. Empresa Nacional de Electricidad 14.06%
3. Banco Bilbao Vizcaya 10.33%
4. Banco Santander 8.01%
5. Repsol 4.55%
</TABLE>
TOP 5 INDUSTRIES-SPAIN WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- ------------------------------------------------
<S> <C>
1. Banking 27.32%
2. Utilities--Electrical & Gas 26.82%
3. Telecommunications 14.36%
4. Business & Public Services 5.86%
5. Energy Sources 4.55%
</TABLE>
On August 31, 1997 there were 29 stocks held in the Spain WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 178
SWEDEN
AMEX PRICE TICKER--SWEDEN WEBS
EWD
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 1.50%(1) 2.20%(2)
Inflation Rate 0.50%(3) 0.70%(3)
Unemployment Rate 8.00%(3) 8.50%(3)
10-Year Govt. Bond Rate* 6.52%(1) 6.49%(2)
Prime Lending Rate* 5.30%(1) 5.60%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--SWEDEN WEBS
WBQ
MARKET FACTS
<TABLE>
<S> <C>
Currency Krona
Local Market Index OMX
Est. Market Cap (8/31/97)(1) $259 bn US
MSCI Correlation to Local Index+(1) 99.0%
(1/31/96-12/31/96)
MSCI Yield+(1) 1.80%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 229
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI SWEDEN INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 1842.52
1841.87
1794.89
1876.65
4/30/92 1859.64
1975.36
1908.08
1857.16
1745.48
1551.61
1412.44
1611.09
1577.02
1505.22
2/28/93 1560.83
1576.59
1731.93
1913.69
1780.87
1829.29
1999.72
2030.66
2221.1
1955.96
12/31/93 2160.32
2532.25
2412.74
2263.35
2448.67
2414.97
2289.02
2441.3
2429.64
2437.32
10/31/94 2670.2
2597.07
2556.45
2570.91
2614.76
2572.87
2806.67
2847.65
2974.07
3180.68
8/31/95 3095.63
3522.96
3372.46
3487.71
3409.29
3326.41
3651.41
3736.03
3695.25
3859.42
3910.92
3750.15
4000.52
9/30/96 4166.29
4347
4639
4677
4786
4766
4991
4573
4931
5360
5610
8/31/97 5306
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Sweden Index. They do not represent any past or future
performance of WEBS. It is not possible to invest in an index.
The MSCI Sweden Index ("MSCI Sweden") consists primarily of stocks that are
traded on the Sweden Stock Exchange. On August 31, 1997, there were 29 stocks
held in the index, representing approximately $154.9 billion or 59.7% of the
aggregate capitalization of the Sweden equity market. The MSCI Sweden reflects
the reinvestment of net dividends. The MSCI Sweden is unmanaged and therefore
does not bear management, administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-SWEDEN WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. Ericsson LM 22.39%
2. Astra AB 15.70%
3. ABB AB 7.40%
4. Atlas Copco AB 4.53%
5. Skanska AB 4.41%
</TABLE>
TOP 5 INDUSTRIES-SWEDEN WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -----------------------------------------------
<S> <C>
1. Electrical & Electronics 29.79%
2. Health & Personal Care 15.70%
3. Banking 8.56%
4. Forest Products & Paper 6.24%
5. Machinery & Engineering 4.53%
</TABLE>
On August 31, 1997 there were 28 stocks held in the Sweden WEBS Index Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 179
SWITZERLAND
AMEX PRICE TICKER--SWITZERLAND WEBS
EWL
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth (0.50%)(1) 0.50%(2)
Inflation Rate 0.80%(3) 1.20%(3)
Unemployment Rate 4.70%(3) 5.70%(3)
10-Year Govt. Bond Rate 3.95%(3) 3.87%(3)
Prime Lending Rate* 3.63%(1) 3.13%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--SWITZERLAND WEBS
INL
MARKET FACTS
<TABLE>
<S> <C>
Currency Swiss Franc
Local Market Index SMI
Est. Market Cap (8/31/97)(1) $485 bn US
MSCI Correlation to Local Index+(1) 99.4%
(1/31/96-12/31/96)
MSCI Yield+(1) 1.70%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 436
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI SWITZERLAND INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 722.903
732.502
726.434
686.463
4/30/92 677.164
680.653
682.853
698.224
682.93
632.391
648.131
618.876
635.06
622.793
2/28/93 657.396
674.937
698.564
708.537
703.411
698.217
703.286
668.634
731.131
714.297
12/31/93 746.687
793.76
754.991
722.208
714.088
722.656
675.784
706.859
746.768
763.333
10/31/94 753.731
711.869
723.952
686.919
724.664
755.401
768.513
800.416
814.071
828.461
8/31/95 828.978
825.103
818.109
848.529
856.507
900.935
892.904
910.373
947.87
962.84
936.432
907.769
948.294
9/30/96 985.871
1063
1140
1100
1155
1145
1088
1113
1206
1228
1307
8/31/97 1238
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI Switzerland Index. They do not represent any past or
future performance of WEBS. It is not possible to invest in an index.
The MSCI Switzerland Index ("MSCI Switzerland") consists primarily of stocks
that are traded on the Switzerland Stock Exchange. On August 31, 1997, there
were 36 stocks held in the index, representing approximately $382.2 billion or
78.8% of the aggregate capitalization of the Switzerland equity market. The MSCI
Switzerland reflects the reinvestment of net dividends. The MSCI Switzerland is
unmanaged and therefore does not bear management, administration or other
expenses as do the WEBS.
TOP 5 HOLDINGS-SWITZERLAND WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. Roche Holding 23.97%
2. Novartis 22.05%
3. Holderbank Financiere 4.81%
4. ABB 4.59%
5. Nestle 4.36%
</TABLE>
TOP 5 INDUSTRIES-SWITZERLAND WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -----------------------------------------------
<S> <C>
1. Health & Personal Care 46.02%
2. Banking 12.80%
3. Insurance 8.39%
4. Machinery & Engineering 7.11%
5. Building Materials & Components 6.72%
</TABLE>
On August 31, 1997 there were 22 stocks held in the Switzerland WEBS Index
Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 180
UNITED KINGDOM
AMEX PRICE TICKER--UNITED KINGDOM WEBS
EWU
ECONOMIC FACTS
<TABLE>
<CAPTION>
1996 EST. 1997
- ---------------------------------------------------
<S> <C> <C>
Real GDP Growth 2.40%(1) 3.50%(2)
Inflation Rate 2.40%(3) 3.10%(3)
Unemployment Rate 7.50%(3) 5.70%(3)
10-Year Govt. Bond Rate* 7.12%(1) 7.15%(2)
Prime Lending Rate* 7.00%(1) 8.00%(2)
</TABLE>
Sources: (1) The Economist, 2/22/97
(2) The Economist, 8/30/97
(3) DRI/McGraw-Hill, 8/30/97
*1996 rate as of February 19, 1997. 1997 rate as of August 27, 1997.
IOPV SYMBOL--UNITED KINGDOM WEBS
INU
MARKET FACTS
<TABLE>
<S> <C>
Currency Pound Sterling
Local Market Index FTSE
Est. Market Cap (8/31/97)(1) $1,931 bn US
MSCI Correlation to Local Index+(1) 99.2%
(1/31/96-12/31/96)
MSCI Yield+(1) 3.90%
(5yr. avg.--12/91 to 12/96)
Listed Companies(2) 2,623
</TABLE>
Sources: (1) MSCI
(2) International Federation of Stock Exchanges, 12/96
MSCI UNITED KINGDOM INDEX PERFORMANCE IN US DOLLARS AS OF 8/31/97+
- -- Returns USD
<TABLE>
<S> <C>
12/31/91 1238.17
1225.84
1212.15
1143.54
4/30/92 1280.34
1353.47
1302.26
1253.44
1250.46
1228.09
1130.11
1144.5
1192.93
1166.93
2/28/93 1138.47
1221.85
1257.99
1267.08
1254.03
1250.43
1338.33
1323.01
1374.94
1381.12
12/31/93 1484.46
1551.07
1474.37
1375.7
1425.71
1351.16
1355.86
1428.76
1510.57
1440.86
10/31/94 1524.72
1458.55
1460.28
1438.15
1446.45
1555.55
1577.4
1614.12
1615.94
1706.31
8/31/95 1666.07
1716.52
1714.72
1725.1
1770.83
1768.18
1782.63
1772.83
1807.36
1828.5
1817.83
1830.51
1925.35
9/30/96 1969.91
2063
2180
2256
2190
2258
2282
2324
2430
2464
2579
8/31/97 2537
</TABLE>
SOURCE: MSCI
+The above chart and market facts are intended to represent the historical
performance of the MSCI United Kingdom Index. They do not represent any past or
future performance of WEBS. It is not possible to invest in an index.
The MSCI United Kingdom Index ("MSCI United Kingdom") consists primarily of
stocks that are traded on the United Kingdom Stock Exchange. On August 31, 1997,
there were 132 stocks held in the index, representing approximately $1,195.8
billion or 61.9% of the aggregate capitalization of the United Kingdom equity
market. The MSCI United Kingdom reflects the reinvestment of net dividends. The
MSCI United Kingdom is unmanaged and therefore does not bear management,
administration or other expenses as do the WEBS.
TOP 5 HOLDINGS-UNITED KINGDOM WEBS INDEX SERIES
<TABLE>
<CAPTION>
STOCK NAME % OF WEBS
- --------------------------------------------------
<S> <C>
1. British Petroleum 6.77%
2. HSBC Holdings 6.70%
3. Glaxo Wellcome 6.06%
4. Lloyds TSB Group 4.52%
5. Smithkline Beecham 4.07%
</TABLE>
TOP 5 INDUSTRIES-UNITED KINGDOM WEBS INDEX SERIES
<TABLE>
<CAPTION>
INDUSTRY % OF WEBS
- -------------------------------------------------
<S> <C>
1. Banking 14.82%
2. Health & Personal Care 12.73%
3. Merchandising 8.85%
4. Energy Sources 7.54%
5. Telecommunications 6.79%
</TABLE>
On August 31, 1997 there were 95 stocks held in the United Kingdom WEBS Index
Series.
Source: PFPC Inc. As of 8/31/97
<PAGE> 181
N O T E S
- --------------------------------------------------------------------------------
<PAGE> 182
N O T E S
- --------------------------------------------------------------------------------
<PAGE> 183
ALL ABOUT WEBS
AN INTERNATIONAL INVESTING SOLUTION
WHAT ARE WEBS?
"WEBS" stands for "World Equity Benchmark Shares." 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 performance of a specific
Morgan Stanley Capital International (MSCI) country index.
WHO SHOULD BUY WEBS?
Any investor looking for easy access to specific international equity
markets - without the complexity or costs encountered in the typical
foreign share investment.
HOW DO WEBS DIFFER FROM CLOSED-END MUTUAL FUNDS?
Although WEBS trade on an exchange like Closed-End funds, the significant
difference between the two is that WEBS Index Series can be redeemed, and
new ones created, every business day in Creation size units. This unique
structure allows large institutional investors to arbitrage any significant
discounts or premiums that may develop, unlike what happens with Closed-End
funds and their limited share issue. This ability to create and redeem at
will, tends to keep the net asset value of the WEBS very close to their
trading price.
HOW DO WEBS DIFFER FROM OPEN-END MUTUAL FUNDS?
WEBS can be traded during normal market hours on the AMEX. Investors can
accurately determine the settlement price of their trade, unlike Open-End
mutual funds where the purchase or sale price NAV is only determined at the
end of the trading day. In addition, WEBS can be shorted, even on a
down-tick, unlike Open-End funds which can't be sold short.
WHAT BENEFITS CAN WEBS OFFER?
Broad foreign country exposure with a single trade, ease of access,
affordability, flexibility, and index tracking.
<PAGE> 184
FOR MORE INFORMATION ABOUT WEBS
TOLL-FREE PHONE: CALL 1-800-810-WEBS TO SPEAK WITH A PRODUCT
SPECIALIST, LEARN MORE ABOUT WEBS OR RECEIVE A CURRENT
PROSPECTUS AND OTHER INFORMATIONAL MATERIAL ABOUT WEBS.
INTERNET: HTTP://WEBSONTHEWEB.COM
MAILING ADDRESS: WEBS C/O FUNDS DISTRIBUTOR INC.
60 STATE STREET, SUITE 1300
BOSTON, MA 02109
DISTRIBUTOR: FUNDS DISTRIBUTOR INC.
DESIGN: FUNDS DISTRIBUTOR INC.
MARKETING COMMUNICATIONS CFACT BOOK
<PAGE> 185
CONTENTS: Questions investors may have about WEBS
Introduction
Features
Benefits
Structure
Pricing
Creation and Redemption: for Institutional Investors
Indexed Performance
Income Via Dividends and Capital Gains
Who to Contact
<PAGE> 186
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> 187
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 AMEX AMEX
TRADING TRADING 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
</TABLE>
More WEBS Index Series may be added in the future.
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).
<PAGE> 188
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 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> 189
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.
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.
<PAGE> 190
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 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.
<PAGE> 191
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
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.
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.
<PAGE> 192
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.
For more information, see "Investment Policies" in the
Prospectus.
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 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).
<PAGE> 193
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.
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> 194
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> 195
[ WEBS LOGO ]
World
Equity
Benchmark
Shares
AVERAGE ANNUAL PERFORMANCE OF MSCI INDICES AND THE S&P 500 - periods ending
9/30/97 In US Dollars - (Reinvestment of Net Dividends, except for Mexico (Free)
and S&P 500.)*
<TABLE>
<CAPTION>
TOTAL CUMULATIVE RETURN
$10,000 INVESTMENT
YTD 1YR 3YR 5 YR 10 YR 9/30/87-9/30/97
--- --- --- ---- ----- ---------------
<S> <C> <C> <C> <C> <C> <C>
AUSTRALIA 2.83 10.81 10.38 14.43 5.78 $17,541
AUSTRIA 4.16 9.01 0.45 2.48 7.65 $20,893
BELGIUM 10.66 16.09 17.29 13.84 11.96 $30,952
CANADA 19.09 33.00 19.76 15.70 7.61 $20,825
FRANCE 13.49 23.23 15.80 10.72 10.92 $28,193
GERMANY 24.32 30.83 19.43 16.25 10.64 $27,482
HONG KONG 7.75 20.85 14.67 21.65 17.10 $48,498
ITALY 31.13 33.92 10.26 18.36 4.20 $15,090
JAPAN -4.88 -15.82 -7.22 3.51 -1.00 $9,046
MALAYSIA (FREE) -48.43 -44.66 -15.29 4.13 10.49** $26,457**
MEXICO (FREE) 59.30 60.18 -2.55 11.99 35.96** $199,878**
NETHERLANDS 27.30 41.91 29.18 22.99 16.65 $46,666
SINGAPORE (FREE) -25.01 -21.95 -5.47 12.83 14.85** $38,589**
SPAIN 27.65 57.22 30.08 23.59 9.60 $25,006
SWEDEN 26.99 42.58 34.58 30.80 15.98 $44,037
SWITZERLAND 33.28 31.34 25.75 22.52 14.90 $40,090
UNITED KINGDOM 22.22 40.00 24.16 17.56 11.95 $30,931
- ---------------------------------------------------------------------------------------------------------------------------
EAFE 10.42 12.18 8.83 12.33 5.92 $17,782
- ---------------------------------------------------------------------------------------------------------------------------
EAFE EX JAPAN 18.12 29.22 19.41 17.40 11.28 $29,132
- ---------------------------------------------------------------------------------------------------------------------------
EUROPE 23.71 35.58 22.51 18.04 11.78 $30,444
- ---------------------------------------------------------------------------------------------------------------------------
S&P 500 29.64 40.44 29.92 20.77 14.75 $39,589
</TABLE>
MSCI: Morgan Stanley Capital International
EAFE: Europe, Australasia and Far East.
*Assumes reinvestment of net dividends except for the Mexico (Free) and
the S&P 500 Indices. Net dividends means dividends after reduction for taxes
withheld at source. The Mexico (Free) and S&P 500 Indices reflect gross
dividends since Mexican and U.S. 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. residents in the case of the following WEBS Index Series: Australia (30%
vs. 15%), Austria (15% vs. 11%) and Germany (15% vs. 10%).
**Return calculated since 12/31/87 (inception of indices). On June 2, 1997 the
Malaysia WEBS Index Series commenced using the MSCI Malaysia (Free) Index as its
benchmark index.
Past performance is no guarantee of future results, nor do index results
represent any past or expected future performance of WEBS. IT IS NOT POSSIBLE TO
INVEST IN AN INDEX. Indices are unmanaged, and do not bear expenses, unlike
WEBS. Foreign markets may be volatile and performance is subject to market
fluctuations, political risks and currency risks.
<TABLE>
<S> <C>
Funds Distributor Inc., Distributor. For more information on WEBS, including a prospectus which details charges and
expenses, please call 800-810-WEBS.
- ------------------------------------------------------------------------------------------------------------------------------------
Source: Morgan Stanley Capital International and Please read the prospectus carefully before you invest.
Standard and Poor's Corporation 10/97
</TABLE>
<PAGE> 196
[ WEBS LOGO ]
World
Equity
Benchmark
Shares
ANNUAL MARKET PERFORMANCE AND RANKING FOR 17 MSCI INDICES AND S&P 500-periods
ending 12/31 In US Dollars - (Reinvestment of Net Dividends, except for Mexico
(Free) and S&P 500.)
<TABLE>
<CAPTION>
1996 1995 1994 1993
RANKING
------------------------- ------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Spain 40.05% Switzerland 44.12% Japan 21.44% Hong Kong 116.70%
2. Sweden 37.21% S&P 500 37.58% Sweden 18.34% Malaysia (Free) 110.00%
3. Hong Kong 33.08% Sweden 33.36% Netherlands 11.70% Singapore (Free) 73.41%
4. Canada 28.54% Spain 29.83% Italy 11.56% Mexico (Free) 49.35%
5. Netherlands 27.51% Netherlands 27.71% Belgium 8.24% Switzerland 45.79%
6. United Kingdom 27.42% Belgium 25.88% Singapore (Free) 5.81% Sweden 36.99%
7. S&P 500 22.96% Hong Kong 22.57% Australia 5.40% Germany 35.64%
8. France 21.20% United Kingdom 21.27% Germany 4.66% Netherlands 35.28%
9. Malaysia (Free) 19.60% Canada 18.31% Switzerland 3.54% Australia 35.17%
10. Mexico (Free) 18.70% Germany 16.41% S&P 500 1.32% Spain 29.78%
11. Australia 16.49% France 14.12% United Kingdom -1.63% Italy 28.53%
12. Germany 13.58% Singapore (Free) 12.19% Canada -3.04% Austria 28.09%
13. Italy 12.59% Australia 11.19% Spain -4.80% Japan 25.48%
14. Belgium 12.03% Malaysia (Free) 5.16% France -5.18% United Kingdom 24.44%
15. Austria 4.51% Italy 1.05% Austria -6.28% Belgium 23.51%
16. Switzerland 2.28% Japan 0.69% Malaysia (Free) -19.94% France 20.91%
17. Singapore (Free) -8.13% Austria -4.72% Hong Kong -28.90% Canada 17.58%
18. Japan -15.50% Mexico (Free) -20.37% Mexico (Free) -40.55% S&P 500 10.08%
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990
RANKING
----------------------------- ----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
1. Hong Kong 32.29% Mexico (Free) 126.05% Mexico (Free) 62.65%
2. Mexico (Free) 24.98% Hong Kong 49.52% United Kingdom 10.29%
3. Malaysia (Free) 17.76% Singapore (Free) 43.61% Hong Kong 9.17%
4. Switzerland 17.23% Australia 33.64% Austria 6.33%
5. S&P 500 7.62% S&P 500 30.47% S&P 500 -3.10%
6. Singapore (Free) 4.49% France 17.83% Netherlands -3.19%
7. France 2.81% Netherlands 17.80% Switzerland -6.23%
8. Netherlands 2.30% United Kingdom 16.02% Malaysia (Free) -7.91%
9. Belgium -1.47% Switzerland 15.77% Germany -9.36%
10. United Kingdom -3.65% Spain 15.63% Belgium -10.98%
11. Germany -10.27% Sweden 14.42% Canada -13.00%
12. Austria -10.65% Belgium 13.77% France -13.83%
13. Australia -10.82% Canada 11.08% Spain -13.85%
14. Canada -12.15% Japan 8.92% Singapore (Free) -14.59%
15. Sweden -14.41% Germany 8.16% Australia -17.54%
16. Japan -21.45% Malaysia (Free) 4.95% Italy -19.19%
17. Spain -21.87% Italy -1.82% Sweden -20.99%
18. Italy -22.22% Austria -12.23% Japan -36.10%
</TABLE>
MSCI: Morgan Stanley Capital International
*Assumes reinvestment of net dividends except for the Mexico (Free) and the S&P
500 Indices. Net dividends means dividends after reduction for taxes withheld at
source. The Mexico (Free) and S&P 500 Indices reflect gross dividends since
Mexican and U.S. companies do not withhold tax from U.S. investors. U.S. 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 the case of the following WEBS Index
Series: Australia (30% vs. 15%), Austria (15% vs. 11%) and Germany (15%
vs. 10%).
Past performance is no guarantee of future results, nor do index results
represent any past or expected future performance of WEBS. IT IS NOT POSSIBLE TO
INVEST IN AN INDEX. Indices are unmanaged, and do not bear expenses, unlike
WEBS. Foreign markets may be volatile and performance is subject to market
fluctuations, political risks and currency risks.
Annual total return in U.S. $ 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.
On June 2, 1997 the Malaysia WEBS Index Series commenced using the MSCI Malaysia
(Free) Index as its benchmark index.
<TABLE>
<S> <C>
Funds Distributor Inc., Distributor. For more information on WEBS, including a prospectus which details charges and
expenses, please call 800-810-WEBS.
- ------------------------------------------------------------------------------------------------------------------------------------
Sources: Lipper Analytical Services, Morgan Stanley Please read the prospectus carefully before you invest.
Capital International, and Standard and 10/97
Poor's Corporation
</TABLE>
<PAGE> 197
[ WEBS LOGO ]
World
Equity
Benchmark
Shares
MSCI Indices vs. S&P 500 - periods ending 6/30/97
In US Dollars - (Reinvestment of Net Dividends except for Mexico (Free) and the
S&P 500)*
<TABLE>
<CAPTION>
Ten Year Growth of $10,000 Seven Year Growth of $10,000 Five Year Growth of $10,000
6/30/87 - 6/30/97 6/30/90 - 6/30/97 6/30/92 - 6/30/97
<S> <C> <C> <C> <C> <C>
Mexico (Free)** $164,013 Hong Kong $ 49,852 Switzerland $ 30,566
Hong Kong $ 61,148 Netherlands $ 34,613 Sweden $ 28,096
Singapore (Free) $ 48,026 Mexico (Free) $ 34,040 Netherlands $ 27,879
Sweden $ 45,503 Switzerland $ 32,975 S&P 500 $ 24,656
Malaysia (Free)** $ 45,313 S&P 500 $ 30,032 Hong Kong $ 24,594
Netherlands $ 44,190 Sweden $ 23,530 Spain $ 21,350
Switzerland $ 44,038 United Kingdom $ 23,510 Malaysia (Free) $ 20,931
S&P 500 $ 39,275 Singapore (Free) $ 23,194 Belgium $ 19,939
Belgium $ 32,850 Malaysia (Free) $ 21,566 Singapore (Free) $ 19,195
Spain $ 30,837 Belgium $ 21,528 United Kingdom $ 18,927
United Kingdom $ 29,040 Australia $ 20,132 Germany $ 18,093
France $ 27,313 Spain $ 20,105 Canada $ 17,980
Germany $ 26,750 Canada $ 18,103 Australia $ 17,459
Austria $ 23,414 Germany $ 17,740 France $ 15,966
Australia $ 22,861 France $ 17,243 Japan $ 15,478
Canada $ 20,842 Japan $ 10,314 Italy $ 14,837
Italy $ 12,107 Italy $ 10,214 Mexico (Free) $ 13,014
Japan $ 10,862 Austria $ 7,198 Austria $ 9,900
</TABLE>
MSCI: Morgan Stanley Capital International
*Assumes reinvestment of net dividends except for the Mexico (Free) and the S&P
500 Indices. Net dividends means dividends after reduction for taxes withheld at
source. The Mexico (Free) and S&P 500 Indices reflect gross dividends since
Mexican and U.S. 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. residents in the case of
the following WEBS Index Series: Australia (30% vs. 15%), Austria (15% vs. 11%)
and Germany (15% vs. 10%).
**Return calculated since 12/31/87 (inception of indices). On June 2, 1997 the
Malaysia WEBS Index Series commenced using the MSCI Malaysia (Free) Index as its
benchmark index.
Past performance is no guarantee of future results, nor do index results
represent any past or expected future performance of WEBS. It is not possible to
invest in an index. Indices are unmanaged and do not bear expenses, unlike WEBS.
Foreign markets may be volatile and performance is subject to market
fluctuations, political risks and currency risks.
Funds Distributor Inc., Distributor.
For more information on WEBS, including a prospectus which details charges and
expenses, please call 800-810-WEBS.
Sources: Morgan Stanley Capital International and Standard and Poor's
Corporation.
Please read the prospectus carefully before you invest.
07/97
<PAGE> 198
[ WEBS LOGO ]
World
Equity
Benchmark
Shares
MSCI Indices and S&P 500 Total Cumulative Return -- $10,000 Investment for the
ten years ended 6/30/97
In US Dollars (Reinvestment of Net Dividends except for Mexico (Free) and the
S&P 500)*
[BAR GRAPH]
<TABLE>
<CAPTION>
Average
Annual
Return Total Cumulative Return
<S> <C> <C>
Mexico (Free)** 34.24% $164,013
Hong Kong 19.85% $ 61,148
Singapore (Free) 17.96% $ 48,026
Sweden 16.36% $ 45,503
Malaysia (Free)** 17.24% $ 45,313
Netherlands 16.02% $ 44,190
Switzerland 15.98% $ 44,038
S&P 500 14.66% $ 39,275
Belgium 12.63% $ 32,850
Spain 11.92% $ 30,837
United Kingdom 11.25% $ 29,040
France 10.57% $ 27,313
Germany 10.34% $ 26,750
Austria 8.88% $ 23,414
Australia 8.62% $ 22,861
Canada 7.62% $ 20,842
Italy 1.93% $ 12,107
Japan 0.83% $ 10,862
</TABLE>
MSCI: Morgan Stanley Capital International
*Assumes reinvestment of net dividends except for the Mexico (Free) and the S&P
500 Indices. Net dividends means dividends after reduction for taxes withheld at
source. The Mexico (Free) and S&P 500 Indices reflect gross dividends since
Mexican and U.S. 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. residents in the case of
the following WEBS Index Series: Australia (30% vs. 15%), Austria (15% vs. 11%)
and Germany (15% vs. 10%).
**Return calculated since 12/31/87 (inception of indices). On June 2, 1997 the
Malaysia WEBS Index Series commenced using the MSCI Malaysia (Free) Index as its
benchmark index.
Past performance is no guarantee of future results, nor do index results
represent any past or expected future performance of WEBS. It is not possible to
invest in an index. Indices are unmanaged and do not bear expenses, unlike WEBS.
Foreign markets may be volatile and performance is subject to market
fluctuations, political risks and currency risks.
Funds Distributor Inc., Distributor.
For more information on WEBS, including a prospectus which details charges and
expenses, please call 800-810-WEBS.
Sources: Morgan Stanley Capital International and Standard and Poor's
Corporation.
Please read the prospectus carefully before you invest.
07/97
