WORLD EQUITY BENCHMARK SHARES(SERVICE MARK)
WEBS INDEX FUND, INC.
[LOGO OMITTED]
WEBS
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 Inc.
("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(SERVICE MARK)" or "WEBS(SERVICE MARK)." 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 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.
UNTIL FURTHER NOTICE, THE FUND HAS SUSPENDED NEW CREATIONS OF CREATION
UNITS OF WEBS OF ITS MALAYSIA (FREE) WEBS INDEX SERIES. IN ADDITION, THE FUND IS
DISCOURAGING REDEMPTIONS OF CREATION UNITS OF WEBS OF THIS WEBS INDEX SERIES.
SEE "INVESTMENT CONSIDERATIONS AND RISKS - SPECIAL CONSIDERATIONS REGARDING THE
MALAYSIA (FREE) WEBS INDEX SERIES."
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 November 27, 1998
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 NOVEMBER 27, 1998
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND'S SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY SHARES IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------------
DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS.
------------------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary ........................................................ 3
Summary of Fund Expenses .................................................. 6
Financial Highlights ...................................................... 13
The Fund and its WEBS Index Series ........................................ 19
WEBS Index Fund, Inc. and its Investment Objective ..................... 19
World Equity Benchmark Shares: "WEBS" .................................. 20
Who Should Invest? ..................................................... 20
Investment Policies .................................................... 20
Implementation of Policies ............................................. 22
Investment Limitations ................................................. 25
The Benchmark MSCI Indices Utilized by the WEBS Index Series ........... 26
Management of the Fund ................................................. 34
Exchange Listing and Trading of WEBS ................................... 37
Investment Considerations and Risks .................................... 38
Determination of Net Asset Value ....................................... 41
Creation Units ......................................................... 42
Purchase and Issuance of WEBS in Creation Units ........................ 42
Redemption of WEBS in Creation Units ................................... 43
Dividends and Capital Gains Distributions .............................. 44
Tax Matters ............................................................ 44
Book-Entry Only System ................................................. 46
Performance ............................................................ 47
Year 2000 Compliance ................................................... 48
European Currency Unification .......................................... 48
General Information .................................................... 48
Available Information .................................................. 49
------------------------------
"World Equity Benchmark Shares" and "WEBS" are service marks of Morgan
Stanley, Dean Witter & 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>
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PROSPECTUS SUMMARY
The Fund and its WEBS
Index Series ................ WEBS Index Fund, Inc. (the "Fund") is an
index 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 Inc. ("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 forsecondary market
trading on the American Stock Exchange, Inc.
A "round lot" of WEBS is 100 shares. At
November 18, 1998, the closing price per
share of the WEBS of each WEBS Index Series
was between $25/8 (Malaysia (Free) WEBS Index
Series) and $2711/16 (Spain WEBS Index
Series) although there can be no assurance of
this price range or that an
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
active trading market will 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 AND SUB-ADMINISTRATOR. PFPC
Inc. is the Administrator of the Fund, and
performs certain clerical, fund accounting,
recordkeeping and bookkeeping services in
such capacity. Morgan Stanley & Co.
Incorporated serves as the Fund's
Sub-Administrator.
DISTRIBUTOR. Funds Distributor, Inc. is the
Distributor of WEBS in Creation Unit
aggregations.
CUSTODIAN AND LENDING AGENT. The Chase
Manhattan Bank ("Chase") serves as the
Custodian for the cash and portfolio
securities of each WEBS Index Series and as
Lending Agent of the portfolio securities of
each WEBS Index Series.
- --------------------------------------------------------------------------------
4
<PAGE>
MORGAN STANLEY CAPITAL INTERNATIONAL INC. ("MSCI") IS A COMPANY JOINTLY
OWNED BY MORGAN STANLEY DEAN WITTER & CO. ("MSDW"), AN INTERNATIONAL INVESTMENT
BANKING, ASSET MANAGEMENT AND BROKERAGE FIRM AND THE CAPITAL GROUP COMPANIES,
INC. ("CAPITAL"), AN INTERNATIONAL INVESTMENT MANAGEMENT COMPANY THAT IS NOT
AFFILIATED WITH MSDW. MSCI IS THE OWNER OF THE MSCI INDICES AND HAS FULL
RESPONSIBILITY FOR THE DESIGN, MAINTENANCE, PRODUCTION AND DISTRIBUTION OF THE
INDICES, INCLUDING ADDITIONS AND DELETIONS OF CONSTITUENTS WITHIN THE INDICES.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED BY
MSDW OR ANY OF ITS AFFILIATES. NEITHER MSDW NOR ANY OF ITS AFFILIATES MAKES ANY
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. 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 MSCI NOR EITHER OF ITS OWNERS 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, CALCULATING OR DISSEMINATING THE RESPECTIVE MSCI INDICES. NEITHER
MSCI NOR EITHER OF ITS OWNERS 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 MSCI
NOR EITHER OF ITS OWNERS 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 MSCI AND CAPITAL, WHICH IS PRIMARILY RESPONSIBLE FOR FORMULATING
THE MSCI INDICES, SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE
CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH THEY CONSIDER RELIABLE,
NEITHER MSCI NOR CAPITAL GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE
COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES. NEITHER MSCI
NOR CAPITAL 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 MSCI NOR
CAPITAL 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 MSCI OR CAPITAL 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>
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, 1998. 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, 1998, 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, $1,517,325; the Austria
WEBS Index Series, $1,039,133; the Belgium WEBS Index Series, $849,303; the
Canada WEBS Index Series, $1,031,561; the France WEBS Index Series, $3,817,926;
the Germany WEBS Index Series, $6,125,671; the Hong Kong WEBS Index Series,
$493,572; the Italy WEBS Index Series, $3,699,894; the Japan WEBS Index Series,
$5,019,697; the Malaysia (Free) WEBS Index Series, $146,588; the Mexico (Free)
WEBS Index Series, $841,329; the Netherlands WEBS Index Series, $1,238,077; the
Singapore (Free) WEBS Index Series, $323,167; the Spain WEBS Index Series,
$1,831,144; the Sweden WEBS Index Series, $1,433,620; the Switzerland WEBS Index
Series, $2,009,163; and the United Kingdom WEBS Index Series, $3,694,234. The
foregoing values are based on information available on August 31, 1998. 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 42 of this Prospectus.
6
<PAGE>
<TABLE>
<CAPTION>
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE
WEBS WEBS WEBS WEBS WEBS
INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases of
Creation Units of WEBS (as a percentage of
amount of investment) ......................... None None None None None
Maximum Transaction Fee (a) for Purchase of
one Creation Unit of WEBS:
In-kind and Cash Purchases (b) ................ $2,200 $1,700 $1,500 $3,600 $3,400
Additional Variable Charge for Cash
Purchases (NOTE - The Fund will not
ordinarily permit cash purchases.)(b) ....... .60% .67% .30% .30% .25%
Deferred Sales Load ............................. None None None None None
Maximum Redemption Transaction Fee (a) for
Redemption of one Creation Unit of WEBS:
In-kind and Cash Redemptions (c) ................ $2,200 $1,700 $1,500 $3,600 $3,400
Additional Variable Charge for Cash Redemptions
(NOTE - The Fund will not ordinarily permit
cash redemptions.) (c) ........................ .60% .67% .30% .30% .25%
B. Annual Series Operating Expenses (as a percentage
of average net assets)
Management Fees ................................. .27% .27% .27% .27% .27%
12b-1 Fees (d) .................................. .20% .20% .20% .20% .20%
Other Expenses .................................. .58% .94% .57% .67% .71%
------ ------ ------ ------ ------
Total Operating Expenses ........................ 1.05% 1.41% 1.04% 1.14% 1.18%
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
GERMANY HONG KONG ITALY JAPAN
WEBS WEBS WEBS WEBS
INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES
------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases of
Creation Units of WEBS (as a percentage of
amount of investment) ......................... None None None None
Maximum Transaction Fee (a) for Purchase of
one Creation Unit of WEBS:
In-kind and Cash Purchases (b) ................ $2,500 $4,000 $2,100 $7,600
Additional Variable Charge for Cash
Purchases (NOTE - The Fund will not
ordinarily permit cash purchases.)(b) ....... .25% .60% .30% .15%
Deferred Sales Load ............................. None None None None
Maximum Redemption Transaction Fee (a) for
Redemption of one Creation Unit of WEBS:
In-kind and Cash Redemptions (c) ................ $2,500 $4,000 $2,100 $7,600
Additional Variable Charge for Cash Redemptions
(NOTE - The Fund will not ordinarily permit
cash redemptions.) (c) ........................ .25% .60% .30% .40%
B. Annual Series Operating Expenses (as a percentage
of average net assets)
Management Fees ................................. .27% .27% .27% .27%
12b-1 Fees (d) .................................. .20% .20% .20% .20%
Other Expenses .................................. .61% .62% .55% .57%
------ ------ ------ ------
Total Operating Expenses ........................ 1.08% 1.09% 1.02% 1.04%
====== ====== ====== ======
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
MALAYSIA MEXICO SINGAPORE
(FREE) (FREE) NETHERLANDS (FREE)
WEBS WEBS WEBS WEBS
INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases of
Creation Units of WEBS (as a percentage of
amount of investment) ................................ None None None None
Maximum Transaction Fee (a) for Purchase of
one Creation Unit of WEBS:
In-kind and Cash Purchases (b) ....................... $4,600* $2,600 $1,900 $2,500
Additional Variable Charge for Cash Purchases
(NOTE - The Fund will not ordinarily permit
cash purchases.)(b) .................................. 1.07%* .50% .25% 1.30%
Deferred Sales Load .................................... None None None None
Maximum Redemption Transaction Fee (a) for
Redemption of one Creation Unit of WEBS:
In-kind and Cash Redemptions (c) ....................... $4,600* $2,600 $1,900 $2,500
Additional Variable Charge for Cash Redemptions
(NOTE - The Fund will not ordinarily permit
cash redemptions.) (c) ............................... 1.07%* .50% .25% 1.30%
B. Annual Series Operating Expenses (as a percentage
of average net assets)
Management Fees ........................................ .27% .27% .27% .27%
12b-1 Fees (d) ......................................... .20% .20% .20% .20%
Other Expenses ......................................... .62% .87% .65% .61%
------- ------ ------ ------
Total Operating Expenses ............................... 1.09% 1.34% 1.12% 1.08%
======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
UNITED
SPAIN SWEDEN SWITZERLAND KINGDOM
WEBS WEBS WEBS WEBS
INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases of
Creation Units of WEBS (as a percentage of
amount of investment) ................................ None None None None
Maximum Transaction Fee (a) for Purchase of
one Creation Unit of WEBS:
In-kind and Cash Purchases (b) ....................... $2,400 $2,700 $2,200 $5,300
Additional Variable Charge for Cash Purchases
(NOTE - The Fund will not ordinarily permit
cash purchases.)(b) .................................. .25% .30% .40% .25%
Deferred Sales Load .................................... None None None None
Maximum Redemption Transaction Fee (a) for
Redemption of one Creation Unit of WEBS:
In-kind and Cash Redemptions (c) ....................... $2,400 $2,700 $2,200 $5,300
Additional Variable Charge for Cash Redemptions
(NOTE - The Fund will not ordinarily permit
cash redemptions.) (c) ............................... .45% .30% .40% .75%
B. Annual Series Operating Expenses (as a percentage
of average net assets)
Management Fees ........................................ .27% .27% .27% .27%
12b-1 Fees (d) ......................................... .20% .20% .20% .20%
Other Expenses ......................................... .64% .70% .68% .56%
------ ------ ------ ------
Total Operating Expenses ............................... 1.11% 1.17% 1.15% 1.03%
====== ====== ====== ======
<FN>
* In light of the capital restrictions imposed by the government of Malaysia on
September 1, 1998, the Fund has suspended creations, and discourages
redemptions, of Creation Units of the Malaysia (Free) WEBS Index Series. See
"Investment Considerations and Risks - Special Considerations Regarding the
Malaysia (Free) WEBS Index Series."
</FN>
</TABLE>
8
<PAGE>
- -----------------
(a) In addition to Transaction Fees shown, an investor purchasing a Creation
Unit of WEBS will bear the costs of transferring the securities in the
Portfolio Deposit (defined herein) to the Fund and an investor redeeming
Creation Units will bear the costs of transferring securities in the
Portfolio Deposit from the Fund to the investor. In each case, such costs
will include settlement and custody charges, registration costs, transfer
taxes and similar charges. As some of such costs are fixed, the cost of
transferring Deposit Securities relating to multiple Creation Units of WEBS
of the same WEBS Index Series may be proportionally less than the cost of
transferring Deposit Securities relating to one Creation Unit. Such costs
would not be incurred in the case of cash creations and redemptions, should
they be permitted by the Fund. 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
9
<PAGE>
of the National Association of Securities Dealers, Inc. In addition, the
Distributor has 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, 1998. 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. 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>
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 $1,000 investment (payment with a
deposit of Deposit Securities), assuming (1) a 5% annual return and (2)
redemption (delivery of Deposit Securities), at the end of each indicated
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
($) ($) ($) ($)
------ ------- ------- --------
<S> <C> <C> <C> <C>
Australia WEBS Index Series ................. 13.53 36.17 60.62 130.57
Austria WEBS Index Series ................... 17.69 47.87 80.21 171.56
Belgium WEBS Index Series ................... 14.66 37.08 61.28 130.58
Canada WEBS Index Series .................... 18.85 43.33 69.72 144.97
France WEBS Index Series .................... 13.79 39.18 66.52 144.40
Germany WEBS Index Series ................... 11.83 35.13 60.27 132.12
Hong Kong WEBS Index Series. ................ 27.67 51.00 76.16 148.05
Italy WEBS Index Series ..................... 11.62 33.65 57.44 125.60
Japan WEBS Index Series. .................... 13.61 36.04 60.26 129.59
Malaysia (Free) WEBS Index Series ........... 69.01 91.85 116.48 186.87
Mexico (Free) WEBS Index Series ............. 20.01 48.69 79.46 166.61
Netherlands WEBS Index Series ............... 14.63 38.74 64.74 138.94
Singapore (Free) WEBS Index Series .......... 26.06 49.19 74.15 145.49
Spain WEBS Index Series ..................... 13.98 37.89 63.67 137.29
Sweden WEBS Index Series .................... 15.81 40.97 68.06 145.25
Switzerland WEBS Index Series ............... 13.97 38.73 65.40 141.45
United Kingdom WEBS Index Series ............ 13.35 35.58 59.58 128.30
</TABLE>
(b) Such an investor would pay the following expenses on the same investment,
assuming no redemptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
($) ($) ($) ($)
------ ------- ------- --------
<S> <C> <C> <C> <C>
Australia WEBS Index Series ................. 12.11 34.75 59.20 129.15
Austria WEBS Index Series ................... 16.01 46.18 78.52 169.87
Belgium WEBS Index Series ................... 12.62 35.04 59.25 128.54
Canada WEBS Index Series .................... 15.21 39.70 66.08 141.34
France WEBS Index Series .................... 12.90 38.29 65.64 143.51
Germany WEBS Index Series ................... 11.42 34.72 59.85 131.71
Hong Kong WEBS Index Series. ................ 19.34 42.67 67.83 139.72
Italy WEBS Index Series ..................... 11.01 33.03 56.83 124.99
Japan WEBS Index Series. .................... 12.10 34.53 58.75 128.08
Malaysia (Free) WEBS Index Series ........... 39.90 62.74 87.37 157.76
Mexico (Free) WEBS Index Series ............. 16.80 45.48 76.26 163.41
Netherlands WEBS Index Series ............... 13.01 37.13 63.12 137.32
Singapore (Free) WEBS Index Series .......... 18.49 41.63 66.58 137.93
Spain WEBS Index Series ..................... 12.64 36.55 62.33 135.95
Sweden WEBS Index Series .................... 13.86 39.01 66.10 143.29
Switzerland WEBS Index Series ............... 12.84 37.60 64.27 140.32
United Kingdom WEBS Index Series ............ 11.92 34.14 58.14 126.86
</TABLE>
11
<PAGE>
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, 1998 at between $158,001 and $6,076,689 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>
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 fiscal period
ended August 31, 1996 and the fiscal years ended August 31, 1997 and 1998 are 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 INDEX SERIES AUSTRIA WEBS INDEX SERIES
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 03/12/96*- ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96 08/31/98 08/31/97 08/31/96
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 10.35 $ 10.15 $ 9.95(1) $ 10.51 $ 10.40 $ 10.91(1)
------- ------- ------- ------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.23 0.17 0.10 0.06 (0.02) 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 ....................................... (2.60) 0.47 0.29 0.20 0.13 (0.41)
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations .............................. (2.37) 0.64 0.39 0.26 0.11 (0.37)
------- ------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income ............... (0.23) (0.16) (0.08) (0.04) -- (0.02)
Dividends in excess of net investment income ....... 0.00** (0.04) (0.05) (0.01) -- (0.01)
Distributions from net realized gains .............. -- (0.04) (0.02) (0.61) -- (0.03)
Distributions in excess of net realized gains ...... -- -- -- 0.00** -- --
Return of capital .................................. -- (0.20) (0.04) 0.00** -- (0.08)
------- ------- ------- ------- ------- -------
Total dividends and distributions .............. (0.23) (0.44) (0.19) (0.66) -- (0.14)
------- ------- ------- ------- ------- -------
Net asset value, end of period ..................... $ 7.75 $ 10.35 $ 10.15 $ 10.11 $ 10.51 $ 10.40
======= ======= ======= ======= ======= =======
Total Investment Return (2) .......................... (23.11)% 6.23% 3.88%(4) 2.16% 1.06% (3.39)%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) ............... $34,099 $41,406 $12,177 $ 8,085 $ 4,205 $13,520
Ratios of expenses to average net assets (5) ....... 1.05% 1.33% 1.59%(3) 1.41% 1.68% 1.56%(3)
Ratios of net investment income/(loss) to
average net assets (5) ........................... 2.38% 1.57% 2.18%(3) 0.51% (0.22)% 0.87%(3)
Portfolio turnover (6) ............................. 1.49% 5.30% 8.84%(4) 36.14% 28.47% 9.60%(4)
Average commission rate paid(7) .................... $0.0116 $0.0182 $0.0085 $0.1627 $0.1719 $0.2986
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets
before waivers ..................................... -- 1.33% 1.60%(3) -- 1.69% 1.57%(3)
Ratios of net investment income/(loss) to average
net assets before waivers .......................... -- 1.57% 2.17%(3) -- (0.22)% 0.86%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
<TABLE>
<CAPTION>
BELGIUM WEBS INDEX SERIES
------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96
-------- -------- ---------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 15.64 $ 14.99 $ 14.92(1)
------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.24 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 ....................................... 6.09 0.62 0.36
------- ------- -------
Net increase/(decrease) in net assets resulting
from operations .............................. 6.33 1.39 0.76
------- ------- -------
Less Distributions
Dividends from net investment income ............... (0.27) (0.33) (0.54)
Dividends in excess of net investment income ....... (1.21) (0.28) (0.09)
Distributions from net realized gains .............. (1.99) (0.12) (0.06)
Distributions in excess of net realized gains ...... -- -- --
Return of capital .................................. (0.10) (0.01) --
------- ------- -------
Total dividends and distributions .............. (3.57) (0.74) (0.69)
------- ------- -------
Net asset value, end of period ..................... $ 18.40 $ 15.64 $ 14.99
======= ======= =======
Total Investment Return (2) .......................... 39.42% 9.26% 5.01%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) ............... $25,765 $32,528 $ 1,800
Ratios of expenses to average net assets (5) ....... 1.04% 1.24% 2.29%(3)
Ratios of net investment income/(loss) to
average net assets (5) ........................... 1.28% 4.63% 5.67%(3)
Portfolio turnover (6) ............................. 50.46% 16.83% 6.25%(4)
Average commission rate paid(7) .................... $0.2648 $0.3379 $0.4327
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets
before waivers ..................................... -- 1.24% 2.30%(3)
Ratios of net investment income/(loss) to average
net assets before waivers .......................... -- 4.63% 5.66%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
CANADA WEBS INDEX SERIES FRANCE WEBS INDEX SERIES
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 03/12/96*- ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96 08/31/98 08/31/97 08/31/96
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 13.43 $ 10.60 $ 10.17(1) $ 14.50 $ 12.73 $ 12.42(1)
------- ------- ------- ------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.07 0.05 0.04 0.30 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 ...................................... (2.89) 2.97 0.43 4.76 1.95 0.45
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ............................. (2.82) 3.02 0.47 5.06 2.12 0.62
------- ------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income .............. (0.13) (0.05) (0.03) (0.19) (0.15) (0.09)
Dividends in excess of net investment income ...... (0.00)** (0.00)** (0.01) (0.03) -- (0.01)
Distributions from net realized gains ............. (0.58) (0.14) -- (0.13) (0.20) 0.00**
Distributions in excess of net realized gains ..... -- -- 0.00** (0.01) -- --
Return of capital ................................. -- -- 0.00** (0.07) -- (0.21)
------- ------- ------- ------- ------- -------
Total dividends and distributions ............. (0.71) (0.19) (0.04) (0.43) (0.35) (0.31)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................... $ 9.90 $ 13.43 $ 10.60 $ 19.13 $ 14.50 $ 12.73
======= ======= ======= ======= ======= =======
Total Investment Return (2) ......................... (21.69)% 28.50% 4.63%(4) 34.77% 16.60% 4.95%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $ 6,932 $24,168 $13,776 $45,922 $14,519 $22,930
Ratios of expenses to average net assets (5) ...... 1.14% 1.35% 1.44%(3) 1.18% 1.52% 1.84%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... 0.46% 0.39% 0.79%(3) 1.58% 1.17% 2.72%(3)
Portfolio turnover (6) ............................ 3.70% 11.02% 0.00%(4) 5.65% 7.13% 0.00%(4)
Average commission rate paid(7) ................... $0.0210 $0.0217 -- $0.0376 $0.0137 $0.3956
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.36% 1.45%(3) -- 1.52% 1.85%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- 0.39% 0.78%(3) -- 1.17% 2.71%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
<TABLE>
<CAPTION>
GERMANY WEBS INDEX SERIES
------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96
-------- -------- ---------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 16.31 $ 13.64 $ 13.23(1)
------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.29 0.03 0.06
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets
and liabilities denominated in foreign
currencies ...................................... 3.92 2.77 0.47
------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ............................. 4.21 2.80 0.53
------- ------- -------
Less Distributions
Dividends from net investment income .............. (0.17) (0.03) (0.03)
Dividends in excess of net investment income ...... (0.01) (0.01) (0.01)
Distributions from net realized gains ............. (0.01) (0.07) --
Distributions in excess of net realized gains ..... 0.00** -- (0.01)
Return of capital ................................. (0.08) (0.02) (0.07)
------- ------- -------
Total dividends and distributions ............. (0.27) (0.13) (0.12)
------- ------- -------
Net asset value, end of period .................... $ 20.25 $ 16.31 $ 13.64
======= ======= =======
Total Investment Return (2) ......................... 25.69% 20.51% 4.00%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $72,934 $24,486 $28,664
Ratios of expenses to average net assets (5) ...... 1.08% 1.37% 1.68%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... 1.43% 0.23% 1.00%(3)
Portfolio turnover (6) ............................ 0.64% 9.04% 0.00%(4)
Average commission rate paid(7) ................... $0.1392 $0.0236 --
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.37% 1.69%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- 0.22% 0.99%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
HONG KONG WEBS INDEX SERIES ITALY WEBS INDEX SERIES
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 03/12/96*- ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96 08/31/98 08/31/97 08/31/96
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 14.73 $ 13.05 $ 12.83(1) $ 16.66 $ 13.79 $ 13.62(1)
------- ------- ------- ------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.35 0.26 0.15 0.18 0.12 0.25
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets
and liabilities denominated in foreign
currencies ...................................... (8.27) 2.12 0.27 7.94 3.10 0.31
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ................................. (7.92) 2.38 0.42 8.12 3.22 0.56
------- ------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income .............. (0.28) (0.21) (0.13) (0.18) (0.11) (0.14)
Dividends in excess of net investment income ...... 0.00** (0.01) (0.02) (1.02) (0.24) (0.03)
Distributions from net realized gains ............. -- (0.34) (0.01) (0.69) -- (0.14)
Distributions in excess of net realized gains ..... -- 0.00** -- -- -- --
Return of capital ................................. (0.12) (0.14) (0.04) -- -- (0.08)
------- ------- ------- ------- ------- -------
Total dividends and distributions ............. (0.40) (0.70) (0.20) (1.89) (0.35) (0.39)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................... $ 6.41 $ 14.73 $ 13.05 $ 22.89 $ 16.66 $ 13.79
======= ======= ======= ======= ======= =======
Total Investment Return (2) ......................... (54.22)% 17.80% 3.22%(4) 47.66% 23.37% 4.11%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $49,973 $25,417 $ 7,845 $58,368 $32,495 $35,170
Ratios of expenses to average net assets (5) ...... 1.09% 1.43% 1.52%(3) 1.02% 1.33% 1.43%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... 3.76% 1.71% 2.37%(3) 0.76% 0.76% 3.69%(3)
Portfolio turnover (6) ............................ 21.50% 22.90% 0.00%(4) 8.16% 13.70% 19.80%(4)
Average commission rate paid(7) ................... $0.0061 $0.0058 $0.0007 $0.0082 $0.0045 $0.0046
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.43% 1.53%(3) -- 1.33% 1.44%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- 1.71% 2.36%(3) -- 0.76% 3.68%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
<TABLE>
<CAPTION>
JAPAN WEBS INDEX SERIES
------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96
-------- -------- ---------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 12.61 $ 14.33 $ 14.79(1)
------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... (0.02) (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 ...................................... (4.19) (1.65) (0.39)
------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ................................. (4.21) (1.71) (0.46)
------- ------- -------
Less Distributions
Dividends from net investment income .............. -- -- --
Dividends in excess of net investment income ...... -- -- --
Distributions from net realized gains ............. 0.00** -- --
Distributions in excess of net realized gains ..... -- (0.01) --
Return of capital ................................. (0.01) -- --
------- ------- -------
Total dividends and distributions ............. (0.01) (0.01) --
------- ------- -------
Net asset value, end of period .................... $ 8.39 $ 12.61 $ 14.33
======= ======= =======
Total Investment Return (2) ......................... (33.38)% (11.97)% (3.11)%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $201,485 $158,957 $103,164
Ratios of expenses to average net assets (5) ...... 1.04% 1.19% 1.37%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... (0.21)% (0.48)% (1.01)%(3)
Portfolio turnover (6) ............................ 0.00% 12.90% 21.54%(4)
Average commission rate paid(7) ................... $ 0.0016 $ 0.0162 $ 0.0152
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.19% 1.38%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- (0.48)% (1.02)%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
MALAYSIA (FREE) MEXICO (FREE)
WEBS INDEX SERIES WEBS INDEX SERIES
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 03/12/96*- ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96 08/31/98 08/31/97 08/31/96
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 8.23 $ 13.80 $ 13.24(1) $ 15.11 $ 11.52 $ 9.95(1)
------- ------- ------- ------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.06 0.01 (0.02) 0.09 0.02 0.00**
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets
and liabilities denominated in foreign
currencies ...................................... (6.10) (5.55) 0.59 (6.71) 4.07 1.59
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ................................. (6.04) (5.54) 0.57 (6.62) 4.09 1.59
------- ------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income .............. (0.05) 0.00** -- (0.09) (0.01) --
Dividends in excess of net investment income ...... -- (0.01) -- -- (0.01) (0.01)
Distributions from net realized gains ............. -- -- -- (0.29) (0.44) --
Distributions in excess of net realized gains ..... -- -- -- -- -- --
Return of capital ................................. (0.03) (0.02) (0.01) -- (0.04) (0.01)
------- ------- ------- ------- ------- -------
Total dividends and distributions ............. (0.08) (0.03) (0.01) (0.38) (0.50) (0.02)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................... $ 2.11 $ 8.23 $ 13.80 $ 8.11 $ 15.11 $ 11.52
======= ======= ======= ======= ======= =======
Total Investment Return (2) ......................... (73.57)% (40.20)% 4.28%(4) (44.18)% 35.21% 15.93%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $35,867 $12,339 $ 9,318 $ 7,296 $16,627 $ 5,759
Ratios of expenses to average net assets (5) ...... 1.09% 1.46% 1.58%(3) 1.34% 1.63% 1.75%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... 1.40% 0.04% (0.35)%(3) 0.60% 0.14% 0.01%(3)
Portfolio turnover (6) ............................ 2.11% 0.00% 0.00%(4) 14.05% 22.80% 0.00%(4)
Average commission rate paid(7) ................... $0.0012 -- -- $0.0065 $0.0066 --
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.47% 1.59%(3) -- 1.63% 1.76%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- 0.04% (0.36)%(3) -- 0.13% 0.00%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
<TABLE>
<CAPTION>
NETHERLANDS
WEBS INDEX SERIES
------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96
-------- -------- ---------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 21.42 $ 17.36 $ 15.91(1)
------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.25 0.11 0.24
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets
and liabilities denominated in foreign
currencies ...................................... 3.53 4.79 1.54
------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ................................. 3.78 4.90 1.78
------- ------- -------
Less Distributions
Dividends from net investment income .............. (0.16) (0.10) (0.14)
Dividends in excess of net investment income ...... -- (0.01) (0.01)
Distributions from net realized gains ............. (1.47) (0.71) (0.08)
Distributions in excess of net realized gains ..... -- -- (0.01)
Return of capital ................................. (0.07) (0.02) (0.09)
------- ------- -------
Total dividends and distributions ............. (1.70) (0.84) (0.33)
------- ------- -------
Net asset value, end of period .................... $ 23.50 $ 21.42 $ 17.36
======= ======= =======
Total Investment Return (2) ......................... 17.41% 28.04% 11.19%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $22,349 $ 9,661 $ 6,962
Ratios of expenses to average net assets (5) ...... 1.12% 1.46% 1.63%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... 1.00% 0.54% 2.93%(3)
Portfolio turnover (6) ............................ 15.81% 12.68% 4.32%(4)
Average commission rate paid(7) ................... $0.0464 $0.0354 $0.0651
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.46% 1.64%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- 0.53% 2.92%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SINGAPORE
(FREE) WEBS INDEX SERIES SPAIN WEBS INDEX SERIES
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 03/12/96*- ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96 08/31/98 08/31/97 08/31/96
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 8.66 $ 11.38 $ 12.24(1) $ 18.49 $ 14.09 $ 13.28(1)
------- ------- ------- ------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.07 0.00** 0.04 0.16 0.19 0.14
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other assets
and liabilities denominated in foreign
currencies ...................................... (5.37) (2.67) (0.86) 5.94 5.33 0.98
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ................................. (5.30) (2.67) (0.82) 6.10 5.52 1.12
------- ------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income .............. (0.04) 0.00** (0.03) (0.12) (0.12) (0.18)
Dividends in excess of net investment income ...... (0.01) (0.01) (0.01) (0.02) (0.05) --
Distributions from net realized gains ............. -- (0.02) -- (0.55) (0.86) (0.13)
Distributions in excess of net realized gains ..... -- -- -- -- -- --
Return of capital ................................. (0.01) (0.02) -- (0.06) (0.09) --
------- ------- ------- ------- ------- -------
Total dividends and distributions ............. (0.06) (0.05) (0.04) (0.75) (1.12) (0.31)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................... $ 3.30 $ 8.66 $ 11.38 $ 23.84 $ 18.49 $ 14.09
======= ======= ======= ======= ======= =======
Total Investment Return (2) ......................... (61.29)% (23.48)% (6.73)%(4) 32.58% 39.15% 8.45%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $47,248 $14,722 $ 9,107 $25,029 $ 8,321 $ 4,227
Ratios of expenses to average net assets (5) ...... 1.08% 1.43% 1.56%(3) 1.11% 1.67% 1.76%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... 1.17% 0.03% 0.69%(3) 0.61% 1.04% 2.04%(3)
Portfolio turnover (6) ............................ 67.17% 13.40% 26.29%(4) 9.10% 19.21% 4.73%(4)
Average commission rate paid(7) ................... $0.0030 $0.0076 $0.0118 $0.0348 $0.0344 $0.0723
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.43% 1.57%(3) -- 1.67% 1.77%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- 0.03% 0.68%(3) -- 1.04% 2.03%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
<TABLE>
<CAPTION>
SWEDEN WEBS INDEX SERIES
------------------------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96
-------- -------- ---------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 18.32 $ 14.67 $ 13.22(1)
------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... 0.10 (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 ...................................... 0.95 4.45 1.67
------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ................................. 1.05 4.42 1.87
------- ------- -------
Less Distributions
Dividends from net investment income .............. (0.08) -- (0.23)
Dividends in excess of net investment income ...... (0.01) -- (0.07)
Distributions from net realized gains ............. (0.86) (0.77) (0.12)
Distributions in excess of net realized gains ..... (0.01) -- --
Return of capital ................................. (0.02) -- --
------- ------- -------
Total dividends and distributions ............. (0.98) (0.77) (0.42)
------- ------- -------
Net asset value, end of period .................... $ 18.39 $ 18.32 $ 14.67
======= ======= =======
Total Investment Return (2) ......................... 5.48% 30.10% 14.13%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $13,791 $ 8,243 $ 4,400
Ratios of expenses to average net assets (5) ...... 1.17% 1.64% 1.75%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... 0.48% (0.19)% 3.05%(3)
Portfolio turnover (6) ............................ 10.88% 13.71% 5.87%(4)
Average commission rate paid(7) ................... $0.0342 $0.0229 $0.0561
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.64% 1.76%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- (0.19)% 3.04%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
UNITED KINGDOM
SWITZERLAND WEBS INDEX SERIES WEBS INDEX SERIES
------------------------------- ------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED 03/12/96*- ENDED ENDED 03/12/96*-
08/31/98 08/31/97 08/31/96 08/31/98 08/31/97 08/31/96
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period .............. $ 13.79 $ 12.29 $ 12.07(1) $ 16.50 $ 13.15 $ 12.14(1)
------- ------- ------- ------- ------- -------
Net investment income/(loss) ((DAGGER)) ........... (0.00)** (0.04) 0.08 0.37 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 ...................................... 3.01 2.11 0.24 2.12 3.62 1.06
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations ................................. 3.01 2.07 0.32 2.49 4.00 1.27
------- ------- ------- ------- ------- -------
Less Distributions
Dividends from net investment income .............. -- -- (0.10) (0.29) (0.32) (0.20)
Dividends in excess of net investment income ...... (0.01) -- -- (0.04) (0.06) (0.03)
Distributions from net realized gains ............. (1.21) (0.57) -- (0.11) (0.17) 0.00**
Distributions in excess of net realized gains ..... -- -- -- -- -- --
Return of capital ................................. (0.03) 0.00** -- (0.07) (0.10) (0.03)
------- ------- ------- ------- ------- -------
Total dividends and distributions ............. (1.25) (0.57) (0.10) (0.51) (0.65) (0.26)
------- ------- ------- ------- ------- -------
Net asset value, end of period .................... $ 15.55 $ 13.79 $ 12.29 $ 18.48 $ 16.50 $ 13.15
======= ======= ======= ======= ======= =======
Total Investment Return (2) ......................... 21.24% 16.69% 2.60%(4) 14.98% 30.48% 10.41%(4)
Ratios/ Supplemental Data
Net assets, end of period (in 000's) .............. $29,163 $13,805 $ 6,158 $62,846 $29,721 $15,790
Ratios of expenses to average net assets (5) ...... 1.15% 1.52% 1.82%(3) 1.03% 1.38% 1.61%(3)
Ratios of net investment income/(loss) to
average net assets (5) .......................... (0.03)% (0.29)% 1.39%(3) 1.90% 2.47% 3.62%(3)
Portfolio turnover (6) ............................ 43.09% 48.05% 17.06%(4) 2.83% 1.84% 0.00%(4)
Average commission rate paid(7) ................... $0.7980 $0.8788 $0.7852 $0.0356 $0.0314 --
<FN>
- ----------------------
* Commencement of operations.
** Less than one cent per share.
(DAGGER) Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the American Stock Exchange through December
31, 1996. If such waivers had not been made the ratios of expenses to
average net assets and ratios of net investment income/(loss) to average
net assets would have been as follows:
Ratios of expenses to average net assets before
waivers ........................................... -- 1.53% 1.83%(3) -- 1.38% 1.62%(3)
Ratios of net investment income/(loss) to average
net assets before waivers ......................... -- (0.29)% 1.38%(3) -- 2.47% 3.61%(3)
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
(7) Unaudited.
</FN>
</TABLE>
18
<PAGE>
THE FUND AND
ITS WEBS INDEX SERIES
WEBS INDEX FUND, INC. AND ITS INVESTMENT OBJECTIVE
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, 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
19
<PAGE>
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
benchmark
20
<PAGE>
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. As used herein, the
term "stocks" includes depository receipts for "stocks."
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 Australia, Austria, Belgium, Hong
Kong, Italy, Mexico (Free), Netherlands, Singapore (Free), 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 half 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 the following policy with respect to industry
concentration: With respect to the two most heavily weighted industries or
groups of industries in the benchmark index of the WEBS Index Series, the WEBS
Index Series will invest in portfolio securities (consistent with its investment
objective and other investment policies) such that the weighting of each such
industry or group of industries in the WEBS Index Series does not diverge by
more
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than 10 percentage points from the respective weighting of such industry or
group of industries in the benchmark index. An exception to the general policy
stated in the previous sentence is that if investment in the stock of a single
issuer would account for more than 25% of the WEBS Index Series, the WEBS Index
Series will invest less than 25% of its net assets in such stock and will
reallocate the excess to stock(s) in the same industry or group of industries,
and/or to stock(s) in another industry or group of industries, in the benchmark
index. Each WEBS Index Series will evaluate these industry weightings not less
frequently than weekly, and at the time of such an evaluation, will adjust its
portfolio composition to the extent necessary to maintain compliance with the
above-stated policy. A WEBS Index Series will not concentrate its investments
except as discussed above. As of October 31, 1998, as a result of this policy
with respect to industry concentration, the Italy WEBS Index Series concentrates
(that is, it invests 25% or more of the value of its assets) in the
Telecommunications industry, the Spain WEBS Index Series concentrates in the
Banking industry, the Sweden WEBS Index Series concentrates in the Electrical &
Electronics industry, and the Switzerland WEBS Index Series concentrates in the
Health & Personal Care industry.
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. Subject to the need to comply with the
diversification and other requirements of the Internal Revenue Code and other
applicable constraints on portfolio management (see discussion below), the
Adviser seeks 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
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WOULD AN INVESTMENT VEHICLE THAT INVESTED IN EVERY COMPONENT SECURITY OF THE
SUBJECT INDEX. The Adviser expects that, over time, the "expected tracking
error" of a WEBS Index Series relative to the performance of its benchmark index
will be less than 5% and that the tracking error will generally be greater for
WEBS Index Series that have benchmark indices with fewer rather than greater
numbers of component stocks. An expected tracking error of 5% means that there
is a 68% probability that the net asset value of the WEBS Index Series will be
within plus or minus 5% of the subject MSCI Index level after one year, without
rebalancing the portfolio composition. Thus, actual tracking error in a period
may exceed 5%, perhaps significantly, notwithstanding the fact the expected
tracking error is less than 5%. For the fiscal year ended August 31, 1998, the
following WEBS Index Series had a tracking error in excess of 5%: Austria
(-6.32%), Belgium (-11.78%), Singapore (Free) (-5.93%) and Switzerland (-8.86%).
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, if any, 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.
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A WEBS Index Series may enter into foreign currency forward and foreign
currency futures contracts to facilitate settlements in local markets, in
connection with stock index futures positions, and to protect against currency
exposure in connection with its distributions to shareholders, but may not enter
into such contracts for speculative purposes or as a way of protecting against
anticipated adverse changes in exchange rates between foreign currencies and the
U.S. dollar. A foreign currency forward contract is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract.
The Fund may lend securities from the portfolio of a WEBS Index Series to
brokers, dealers and other financial institutions desiring to borrow securities
to complete transactions and for other purposes. Because the government
securities or other assets that are pledged as collateral to the Fund in
connection with these loans generate income, securities lending enables a WEBS
Index Series to earn income that may partially offset the expenses of the WEBS
Index Series, and thereby reduce the effect that expenses have on a WEBS Index
Series' ability to provide investment results that correspond generally to the
price and yield performance of its benchmark index. These loans may not exceed
33% of a WEBS Index Series' total assets. The documentation for these loans will
provide that the WEBS Index Series will receive collateral equal to at least
100% of the current market value of the loaned securities, as marked to market
each day that the net asset value of the WEBS Index Series is determined,
consisting of government securities or other assets permitted by applicable
regulations and interpretations. A WEBS Index Series will pay reasonable
administrative and custodial fees in connection with the loan of securities. The
WEBS Index Series will invest collateral in Short-Term Investments, and the WEBS
Index Series will bear the risk of loss of the invested collateral. In 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. Chase 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 a benchmark 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.
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A WEBS Index Series may borrow money from a bank up to a limit of 33% of
the market value of its assets, but only for temporary or emergency purposes
(e.g., to facilitate distributions to shareholders or to meet redemption
requests (in connection with Creation Units of WEBS that the Fund agrees to
redeem for cash) prior to the settlement of securities already sold or in the
process of being sold by the WEBS Index Series). To the extent that a WEBS Index
Series borrows money prior to receiving distributions on its portfolio
securities or prior to selling securities in connection with a redemption, it
may be leveraged; at such times, the WEBS Index Series may appreciate or
depreciate in value more rapidly than its benchmark index. A WEBS Index Series
will not make cash purchases of securities when the amount of money borrowed
exceeds 5% of the market value of its total assets.
INVESTMENT LIMITATIONS
Each WEBS Index Series of the Fund intends to observe certain limitations
on its investment practices. Specifically, a WEBS Index Series may not:
(i) lend any funds or other assets except through the purchase of all
or a portion of an issue of securities or obligations of the type in which
it is permitted to invest (including participation interests in such
securities or obligations) and except that a WEBS Index Series may lend its
portfolio securities in an amount not to exceed 33% of the value of its
total assets;
(ii) issue senior securities or borrow money, except borrowings from
banks for temporary or emergency purposes in an amount up to 33% of the
value of the WEBS Index Series' total assets (including the amount
borrowed), valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing is made,
and the WEBS Index Series will not purchase securities while borrowings in
excess of 5% of the WEBS Index Series' total assets are outstanding,
provided, that for purposes of this restriction, short-term credits
necessary for the clearance of transactions are not considered borrowings;
(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.
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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 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. In November, 1998, Morgan Stanley transferred all rights to the MSCI
Indices to Morgan Stanley Capital International Inc. ("MSCI"), a Delaware
corporation of which MSDW is the majority owner. 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,
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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.
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, 1998, 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: National Australia Bank (10.78%),
Broken Hill Proprietary Company Ltd. (9.68%) and Telstra Corp. (8.57%) for a
total of approximately 29.03% of the MSCI Australia. As of August 31, 1998, the
ten largest constituents comprised approximately 66.47% of the market
capitalization of the MSCI Australia. As of August 31, 1998, the three most
highly represented industry sectors in the MSCI Australia, and the approximate
percentages of the MSCI Australia represented thereby, were Banking (17.11%),
Broadcasting & Publishing (13.77%) and Energy Sources (10.89%), for a total of
approximately 41.77% of the MSCI Australia. The MSCI Australia represented
approximately 61.87% of the aggregate capitalization of the Australian equity
markets at August 31, 1998.
THE MSCI AUSTRIA INDEX ("MSCI AUSTRIA"). The MSCI Austria consists
primarily of stocks that are traded on the Vienna Stock Exchange. On August 31,
1998, the MSCI Austria consisted of 20 stocks. The three largest constituents of
the MSCI Austria and the respective approximate percentages of the MSCI Austria
represented thereby were Bank Austria Stamm (22.31%), Verbund Oesterr Elek A
(21.36%) and OMV AG (11.50%), for a total of approximately 55.17% of the MSCI
Austria. As of August 31, 1998, the ten largest constituents comprised
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approximately 88.51% of the market capitalization of the MSCI Austria. As of
August 31, 1998, the three most highly represented industry sectors in the MSCI
Austria, and the approximate percentages of the MSCI Austria represented
thereby, were Banking (24.31%), Utilities - Electrical & Gas (21.36%) and Energy
Sources (11.50%) for a total of approximately 57.17% of the MSCI Austria. The
MSCI Austria represented approximately 63.31% of the aggregate capitalization of
the Austrian equity markets at August 31, 1998.
THE MSCI BELGIUM INDEX ("MSCI BELGIUM"). The MSCI Belgium consists
primarily of stocks that are traded on the Brussels Stock Exchange. On August
31, 1998, the MSCI Belgium consisted of 17 stocks. As of August 31, 1998, the
three largest constituents of the MSCI Belgium and the respective approximate
percentages of the MSCI Belgium represented thereby were KBC Bancassur
(Kredietbank) (18.13%), Fortis AG (17.16%) and Electrabel (15.47%), for a total
of approximately 50.76 % of the MSCI Belgium. As of August 31, 1998, the ten
largest constituents comprised approximately 90.27% of the market capitalization
of the MSCI Belgium. As of August 31, 1998, 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 (27.14%),
Banking (18.13%) and Insurance (17.16%), for a total of approximately 62.43% of
the MSCI Belgium. The MSCI Belgium represented approximately 57.88% of the
aggregate capitalization of the Belgian equity markets at August 31, 1998.
THE MSCI CANADA INDEX ("MSCI CANADA"). The MSCI Canada consists primarily
of stocks that are traded on the Toronto Stock Exchange. On August 31, 1998, the
MSCI Canada consisted of 78 stocks. The three largest constituents of the MSCI
Canada and the respective approximate percentages of the MSCI Canada represented
thereby were Northern Telecom (11.39%), BCE Inc. (8.09%) and Thomson Corp.
(5.48%), for a total of approximately 24.96% of the MSCI Canada. As of August
31, 1998, the ten largest constituents comprised approximately 50.89% of the
market capitalization of the MSCI Canada. As of August 31, 1998, the three most
highly represented industry sectors in the MSCI Canada, and the approximate
percentages of the MSCI Canada represented thereby, were Banking (16.68%),
Electrical & Electronics (12.70%), and Energy Sources (11.91%) and for a total
of approximately 41.29% of the MSCI Canada. The MSCI Canada represented
approximately 62.81% of the aggregate capitalization of the Canadian equity
markets at August 31, 1998.
THE MSCI FRANCE INDEX ("MSCI FRANCE"). The MSCI France consists primarily
of stocks that are traded on the Paris Stock Exchange. On August 31, 1998, the
MSCI France consisted of 67 stocks. The three largest constituents of the MSCI
France and the respective approximate percentages of the MSCI France represented
thereby were France Telecom (10.13%), L'Oreal (5.73%) and Vivendi (Generale
Eaux) (5.46%), for a total of approximately 21.32% of the MSCI France. As of
August 31, 1998, the ten largest constituents comprised approximately 52.11% of
the market capitalization of the MSCI France. As of August 31, 1998, the three
most highly represented industry sectors in the MSCI France, and the approximate
percentages of the MSCI France represented thereby, were Business & Public
Services (13.27%), Health & Personal Care (11.33%) and Merchandising (10.56%),
for a total of approximately 35.16% of the MSCI France. The MSCI France
represented approximately 76.21% of the aggregate capitalization of the French
equity markets at August 31, 1998.
THE MSCI GERMANY INDEX ("MSCI GERMANY"). The MSCI Germany consists
primarily of stocks that are traded on the Frankfurt Stock Exchange. On August
31, 1998, the MSCI Germany
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consisted of 61 stocks. The three largest constituents of the MSCI Germany and
the respective approximate percentages of the MSCI Germany represented thereby
were Allianz (10.08%), Deutsche Telekom (9.54%) and Daimler-Benz (7.30%), for a
total of approximately 26.92% of the MSCI Germany. As of August 31, 1998, the
ten largest constituents comprised approximately 60.11% of the market
capitalization of the MSCI Germany. As of August 31, 1998, the three most highly
represented industry sectors in the MSCI Germany, and the approximate
percentages of the MSCI Germany represented thereby, were Insurance (16.40%),
Telecommunications (15.01%) and Banking (12.03%), for a total of approximately
43.44% of the MSCI Germany. The MSCI Germany represented approximately 75.86% of
the aggregate capitalization of the German equity markets at August 31, 1998.
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, 1998, the MSCI Hong Kong consisted of 34 stocks. The three
largest constituents of the MSCI Hong Kong and the respective approximate
percentages of the MSCI Hong Kong represented thereby were Hongkong Telecom
(20.37%), Hutchinson Whampoa (16.45%) and Hang Seng Bank (10.16%), for a total
of approximately 46.98% of the MSCI Hong Kong. As of August 31, 1998, the ten
largest constituents comprised approximately 85.82% of the market capitalization
of the MSCI Hong Kong. As of August 31, 1998, 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 (23.37%), Multi-Industry
(20.95%) and Telecommunications (20.37%), for a total of approximately 64.69% of
the MSCI Hong Kong. The MSCI Hong Kong represented approximately 43.30% of the
aggregate capitalization of the Hong Kong equity markets at August 31, 1998.
THE MSCI ITALY INDEX ("MSCI ITALY"). The MSCI Italy consists primarily of
stocks that are traded on the Milan Stock Exchange. On August 31, 1998, the MSCI
Italy consisted of 52 stocks. The three largest constituents of the MSCI Italy
and the respective approximate percentages of the MSCI Italy represented thereby
were ENI (15.87%), Tim Ord (14.27%) and Assicurazioni Generali (11.10%), for a
total of approximately 41.24% of the MSCI Italy. As of August 31, 1998, the ten
largest constituents comprised approximately 70.39% of the market capitalization
of the MSCI Italy. As of August 31, 1998, the three most highly represented
industry sectors in the MSCI Italy, and the approximate percentages of the MSCI
Italy represented thereby, were Telecommunications (28.71%), Banking (18.59%)
and Insurance (16.95%), for a total of approximately 64.25% of the MSCI Italy.
The MSCI Italy represented approximately 70.24% of the aggregate capitalization
of the Italian equity markets at August 31, 1998.
THE MSCI JAPAN INDEX ("MSCI JAPAN"). The MSCI Japan consists primarily of
stocks that are traded on the Tokyo Stock Exchange. On August 31, 1998, the MSCI
Japan consisted of 308 stocks. The three largest constituents of the MSCI Japan
and the respective approximate percentages of the MSCI Japan represented thereby
were NTT Corp. (7.66%), Toyoto Motor Corp. (5.95%) and Bank Tokyo-Mitsubishi
(2.79%), for a total of approximately 16.40% of the MSCI Japan. As of August 31,
1998, the ten largest constituents comprised approximately 31.15% of the market
capitalization of the MSCI Japan. As of August 31, 1998, the three most highly
represented industry sectors in the MSCI Japan, and the approximate percentages
of the MSCI Japan represented thereby, were Banking (10.76%), Automobiles
(8.98%) and Telecommunications (7.66%), for a total of approximately 27.40% of
the MSCI Japan. The MSCI Japan represented approximately 71.71% of the aggregate
capitalization of the Japanese equity markets at August 31, 1998.
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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, 1998, the MSCI Malaysia (Free) consisted of 72 stocks.
As of August 31, 1998, the three largest constituents of the MSCI Malaysia
(Free) and the respective approximate percentages of the MSCI Malaysia (Free)
represented thereby were Telekom Malaysia (15.83%) Tenaga Nasional (9.82%), and
Malayan Banking (7.88%), for a total of approximately 33.53% of the MSCI
Malaysia (Free). As of August 31, 1998, the ten largest constituents comprised
approximately 59.38% of the market capitalization of the MSCI Malaysia (Free).
As of August 31, 1998, the three most highly represented industry sectors in the
MSCI Malaysia (Free), and the approximate percentages of the MSCI Malaysia
(Free) represented thereby, were Telecommunications (16.70%), Banking (13.86 %)
and Utilities-Electrical & Gas (9.82%), for a total of approximately 40.38% of
the MSCI Malaysia (Free). The MSCI Malaysia (Free) represented approximately
73.00% of the aggregate capitalization of the Malaysian equity markets at August
31, 1998.
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, 1998, the MSCI Mexico (Free) consisted of 39 stocks. As of August 31,
1998, the three largest constituents of the MSCI Mexico (Free) and the
respective approximate percentages of the MSCI Mexico (Free) represented thereby
were Telefonos Mexico L (18.72%), Grupo Modelo C (10.35%) and Telefonos Mexico A
(8.12%), for a total of approximately 37.18% of the MSCI Mexico (Free). As of
August 31, 1998, the ten largest constituents comprised approximately 71.07% of
the market capitalization of the MSCI Mexico (Free). As of August 31, 1998, 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 (26.84%), Beverages & Tobacco (20.04%) and Merchandising
(11.26%), for a total of approximately 58.14% of the MSCI Mexico (Free). The
MSCI Mexico (Free) represented approximately 72.69% of the aggregate
capitalization of the Mexican equity markets at August 31, 1998.
THE MSCI NETHERLANDS INDEX ("MSCI NETHERLANDS"). The MSCI Netherlands
consists primarily of stocks that are traded on the Amsterdam Stock Exchange. On
August 31, 1998, the MSCI Netherlands consisted of 23 stocks. The three largest
constituents of the MSCI Netherlands and the respective approximate percentages
of the MSCI Netherlands represented thereby were Royal Dutch Petroleum Co.
(29.38%), ING Groep N.V. (14.07%) and Unilever NV Cert (11.62%), for a total of
approximately 55.07% of the MSCI Netherlands. As of August 31, 1998, the ten
largest constituents comprised approximately 88.81% of the market capitalization
of the MSCI Netherlands. As of August 31, 1998, the three most highly
represented industry sectors in the MSCI Netherlands, and the approximate
percentages of the MSCI Netherlands represented thereby, were Energy Sources
(29.38%), Financial Services (14.07%) and Food & Household Products (11.62%),
for a total of approximately 55.07% of the MSCI Netherlands. The MSCI
Netherlands represented approximately 72.28% of the aggregate capitalization of
the Dutch equity markets at August 31, 1998.
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, 1998, the MSCI Singapore (Free) consisted of 30
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 (28.96%), Singapore Airlines (11.61%) and
Singapore Press Hldg (9.07%), for a total of approximately 49.63% of the MSCI
Singapore (Free).
30
<PAGE>
As of August 31, 1998, the ten largest constituents comprised approximately
84.10% of the market capitalization of the MSCI Singapore (Free). As of August
31, 1998, the three most highly represented industry sectors in the MSCI
Singapore (Free), and the approximate percentages of the MSCI Singapore (Free)
represented thereby, were Telecommunications (28.96%), Banking (18.25%), and
Transportation - Airlines (11.61%) for a total of approximately 58.82% of the
MSCI Singapore (Free). The MSCI Singapore (Free) represented approximately
57.98% of the aggregate capitalization of the Singaporean equity markets at
August 31, 1998.
THE MSCI SPAIN INDEX ("MSCI SPAIN"). The MSCI Spain consists primarily of
stocks that are traded on the Madrid Stock Exchange. On August 31, 1998, the
MSCI Spain consisted of 38 stocks. The three largest constituents of the MSCI
Spain and the respective approximate percentages of the MSCI Spain represented
thereby were Telefonica de Espana (17.63%), Banco Bilbao Vizcaya (11.40%) and
Endesa Empresa Nal Elec (10.97%), for a total of approximately 40.01% of the
MSCI Spain. As of August 31, 1998, the ten largest constituents comprised
approximately 81.78% of the market capitalization of the MSCI Spain. As of
August 31, 1998, the three most highly represented industry sectors in the MSCI
Spain, and the approximate percentages of the MSCI Spain represented thereby,
were Banking (30.77%), Utilities - Electrical & Gas (26.14%) and
Telecommunications (17.63%), for a total of approximately 74.54% of the MSCI
Spain. The MSCI Spain represented approximately 70.85% of the aggregate
capitalization of the Spanish equity markets at August 31, 1998.
THE MSCI SWEDEN INDEX ("MSCI SWEDEN"). The MSCI Sweden consists primarily
of stocks that are traded on the Stockholm Stock Exchange. On August 31, 1998,
the MSCI Sweden consisted of 38 stocks. As of August 31, 1998, the three largest
constituents of the MSCI Sweden and the respective approximate percentages of
the MSCI Sweden represented thereby were Ericsson (LM) B (23.76%), Astra A
(11.66%) and Hennes & Mauritz B (8.27%), for a total of approximately 43.68% of
the MSCI Sweden. As of August 31, 1998, the ten largest constituents comprised
approximately 70.34% of the market capitalization of the MSCI Sweden. As of
August 31, 1998, the three most highly represented industry sectors in the MSCI
Sweden, and the approximate percentages of the MSCI Sweden represented thereby,
were Electrical & Electronics (29.04%), Health & Personal Care (14.23%) and
Banking (12.78%), for a total of approximately 56.05% of the MSCI Sweden. The
MSCI Sweden represented approximately 68.28% of the aggregate capitalization of
the Swedish equity markets at August 31, 1998.
THE MSCI SWITZERLAND INDEX ("MSCI SWITZERLAND"). The MSCI Switzerland
consists primarily of stocks that are traded on the Zurich Stock Exchange. On
August 31, 1998, the MSCI Switzerland consisted of 32 stocks. The three largest
constituents of the MSCI Switzerland and the respective approximate percentages
of the MSCI Switzerland represented thereby were Novartis Namen (20.35%), Roche
Holding Genuss (15.65%) and Nestle (14.76%), for a total of approximately 50.76%
of the MSCI Switzerland. As of August 31, 1998, the ten largest constituents
comprised approximately 91.85% of the market capitalization of the MSCI
Switzerland. As of August 31, 1998, 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 (43.42%), Banking
(20.54%) and Food & Household Products (14.76%), for a total of approximately
78.72% of the MSCI Switzerland. The MSCI Switzerland represented approximately
85.68% of the aggregate capitalization of the Swiss equity markets at August 31,
1998.
31
<PAGE>
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, 1998, the
MSCI UK consisted of 136 stocks. The three largest constituents of the MSCI UK
and the respective approximate percentages of the MSCI UK represented thereby
were Glaxo Wellcome (7.55%) British Telecom (6.03%) and British Petroleum
(5.61%), for a total of approximately 19.18% of the MSCI UK. As of August 31,
1998, the ten largest constituents comprised approximately 40.71% of the market
capitalization of the MSCI UK. As of August 31, 1998, the three most highly
represented industry sectors in the MSCI UK, and the approximate percentages of
the MSCI UK represented thereby, were Health & Personal Care (14.69%), Banking
(10.69%), and Telecommunications (10.49%), for a total of approximately 35.87%
of the MSCI UK. The MSCI UK represented approximately 65.60% of the aggregate
capitalization of the United Kingdom equity markets at August 31, 1998.
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 represent calendar year performance for the
MSCI Indices for each year except for 1998 which represents performance for the
period January 1, 1998 to August 31, 1998.
MSCI AUSTRALIA INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 36.40% 1994 5.40%
1989 9.30% 1995 11.19%
1990 (17.54%) 1996 16.49%
1991 33.64% 1997 (10.44%)
1992 (10.82%) 1998 (13.03%)
1993 35.17%
MSCI AUSTRIA INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 0.57% 1994 (6.28%)
1989 103.91% 1995 (4.72%)
1990 6.33% 1996 4.51%
1991 (12.23%) 1997 1.57%
1992 (10.65%) 1998 3.60%
1993 28.09%
32
<PAGE>
MSCI BELGIUM INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 53.63% 1994 8.24%
1989 17.29% 1995 25.88%
1990 (10.98%) 1996 12.03%
1991 13.77% 1997 13.55%
1992 (1.47%) 1998 39.25%
1993 23.51%
MSCI CANADA INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 17.07% 1994 (3.04%)
1989 24.30% 1995 18.31%
1990 (13.00%) 1996 28.54%
1991 11.08% 1997 12.80%
1992 (12.15%) 1998 (20.73%)
1993 17.58%
MSCI FRANCE INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 37.87% 1994 (5.18%)
1989 36.15 1995 14.12%
1990 (13.83%) 1996 21.20%
1991 17.83% 1997 11.94%
1992 2.81% 1998 24.05%
1993 20.91%
MSCI GERMANY INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 20.60% 1994 4.66%
1989 46.26% 1995 16.41%
1990 (9.36%) 1996 13.58%
1991 8.16% 1997 24.57%
1992 (10.27%) 1998 16.79%
1993 35.64%
MSCI HONG KONG INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 28.12% 1994 (28.90%)
1989 8.39% 1995 22.57%
1990 9.17% 1996 33.08%
1991 49.52% 1997 (23.29%)
1992 32.29% 1998 (36.19%)
1993 116.70%
MSCI ITALY INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 11.46% 1994 11.56%
1989 19.42% 1995 1.05%
1990 (19.19%) 1996 12.59%
1991 (1.82%) 1997 35.48%
1992 (22.22%) 1998 25.75%
1993 28.53%
MSCI JAPAN INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 35.39% 1994 21.44%
1989 1.71% 1995 0.69%
1990 (36.10%) 1996 (15.50%)
1991 8.92% 1997 (23.67%)
1992 (21.45%) 1998 (14.85%)
1993 25.48%
MSCI MALAYSIA (FREE) INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 26.54% 1994 (19.94%)
1989 55.76% 1995 5.16%
1990 (7.91%) 1996 25.89%
1991 4.95% 1997 (68.11%)
1992 17.76% 1998 (37.40%)
1993 110.00%
33
<PAGE>
MSCI MEXICO (FREE) INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 71.98% 1994 (40.55%)
1989 89.20% 1995 (20.37%)
1990 62.65% 1996 18.70%
1991 126.04% 1997 53.92%
1992 24.98% 1998 (49.50%)
1993 49.35%
MSCI NETHERLANDS INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 14.19% 1994 11.70%
1989 35.79% 1995 27.71%
1990 (3.19%) 1996 27.51%
1991 17.80% 1997 23.77%
1992 2.30% 1998 8.37%
1993 35.28%
MSCI SINGAPORE (FREE) INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 34.18% 1994 5.81%
1989 44.88% 1995 12.19%
1990 (14.59%) 1996 0.33%
1991 43.61% 1997 (40.46%)
1992 4.49% 1998 (45.53%)
1993 73.41%
MSCI SPAIN INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 13.53% 1994 (4.80)%
1989 9.76% 1995 29.83%
1990 (13.85%) 1996 40.05%
1991 15.63% 1997 25.41%
1992 (21.87%) 1998 19.17%
1993 29.78%
MSCI SWEDEN INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 48.33% 1994 18.34%
1989 31.79% 1995 33.36%
1990 (20.99%) 1996 37.21%
1991 14.42% 1997 12.92%
1992 (14.41%) 1998 8.83%
1993 36.99%
MSCI SWITZERLAND INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 6.18% 1994 3.54%
1989 26.21% 1995 44.12%
1990 (6.23%) 1996 2.28%
1991 15.77% 1997 44.25%
1992 17.23% 1998 9.04%
1993 45.79%
MSCI UNITED KINGDOM INDEX
[GRAPHIC OMITTED]
Plot points follow:
1988 5.95% 1994 (1.63%)
1989 21.87% 1995 21.27%
1990 10.29% 1996 27.42%
1991 16.02% 1997 22.62%
1992 (3.65%) 1998 5.17%
1993 24.44%
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."
34
<PAGE>
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, 1998, the Adviser
and its parent, Barclays Global Investors, N.A., manage, administer or advise
assets aggregating in excess of $501 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 The Chase Manhattan Bank 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 & Co. Incorporated a fee of .05% of the average daily net assets of the
Fund for sub-administration services as described under "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.
SUB-ADMINISTRATOR. Morgan Stanley & Co. Incorporated 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.
35
<PAGE>
DISTRIBUTOR. Funds Distributor, Inc. (the "Distributor") is the distributor
of WEBS. Its address is 60 State Street, Suite 1300, Boston, MA 02109. Investor
information can be obtained by calling 1-800-810-WEBS(9327). WEBS are sold by
the Fund and distributed only in Creation Units, as described below under
"Purchase and Issuance of WEBS in Creation Units." WEBS in less than Creation
Units will not be distributed by the Distributor. The Distributor is a
registered broker-dealer under the Securities Exchange Act of 1934 (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 AND LENDING AGENT. The Chase Manhattan Bank ("Chase") serves as
the Custodian for the cash and portfolio securities of each WEBS Index Series of
the Fund and as Lending Agent for each WEBS Index Series. As Lending Agent,
Chase 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 pays Chase, in respect of
36
<PAGE>
each WEBS Index Series, 50% of the net investment income earned on the
collateral for securities loaned. Chase may from time to time reimburse expenses
to one or more WEBS Index Series. Chase, as Custodian and Lending Agent, has no
role in determining the investment policies of the Fund or which securities are
to be purchased or sold by the Fund. The principal business address of Chase 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. The Fund also pays a license fee to MSCI equal to 0.03%
per annum of the average daily net assets of each WEBS Index Series.
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, to the extent 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 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.
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
37
<PAGE>
once a day, because the IOPV may not be computed in a manner consistent with
such net asset value. For example, as of the date of this Prospectus, the IOPV
for the Malaysia (Free) WEBS Index Series is computed using an exchange rate
that differs significantly from the exchange rate used by the Fund in
calculating the net asset value of such WEBS Index Series. 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 broad-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; the imposition of restrictions on the expatriation
of funds or other assets of a WEBS Index Series; higher transaction and custody
costs; delays and risks 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 30, 1993 to October 30, 1998, the
average price volatility of the Standard and Poor's 500 Index, a broad measure
of the U.S. equity market, was 13.6%. In contrast, during the same period, the
average price volatility of the respective MSCI Indices was as follows: the MSCI
Australia (17.8%), the MSCI Austria (18.3%), the MSCI Belgium (11.9%), the MSCI
Canada (18.1%), the MSCI France (17.5%), the MSCI Germany (16.5%), the MSCI Hong
Kong (35.1%), the MSCI Italy (25.8%), the MSCI Japan (22.3%), the MSCI Malaysia
(Free) (41.8%), the MSCI Mexico (Free) (40.4%), the MSCI Netherlands (15.2%),
the MSCI Singapore (Free) (34.0%), the MSCI Spain (22.7%), the MSCI Sweden
(22.1%), the MSCI Switzerland (18.0%), and the MSCI United Kingdom (12.9%).
Short-term volatility in these markets can be significantly greater.
FOREIGN CURRENCY FLUCTUATIONS
Because each WEBS Index Series' assets are generally invested in non-U.S.
securities, and because a substantial portion of the revenues and income of each
WEBS Index Series are received in a foreign currency, while WEBS Index Series
dividends and other distributions are paid in U.S. dollars, the dollar value of
a WEBS Index Series' net assets are adversely affected by reductions in the
value of subject foreign currency relative to the dollar and are positively
affected by increases in the value of such currency relative to the dollar.
Also, government or
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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 be
maintained. The Distributor does not maintain a secondary market in WEBS.
Trading in WEBS on the AMEX may be halted due to market conditions or for
reasons that, in the view of the AMEX, make trading in WEBS inadvisable. In
addition, trading in WEBS on the AMEX is subject to trading halts caused by
extraordinary market volatility pursuant to AMEX "circuit breaker" rules that
require trading in securities on the AMEX to be halted in the event of specified
market moves. There can be no assurance that the requirements of the AMEX
necessary to maintain the listing of any WEBS Index Series will continue to be
met or will remain unchanged. See "Exchange Listing and Trading 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.
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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, to the extent 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. In the event
the Fund must suspend or discourage creations and/or redemptions of Creation
Unit aggregations of WEBS of a WEBS Index Series, larger discounts or premiums
are expected to occur. See "Investment Considerations and RisksSpecial
Considerations Regarding the Malaysia (Free) WEBS Index Series" below.
SPECIAL CONSIDERATIONS REGARDING THE MALAYSIA (FREE) WEBS INDEX SERIES
In light of the capital restrictions imposed by the government of Malaysia
on September 1, 1998, the Fund has suspended creations of Creation Units of WEBS
of the Malaysia (Free) WEBS Index Series. The Fund is concerned that such
capital restrictions severely impede the ability of the Fund to transfer
redemption proceeds of Creation Units of WEBS of the Malaysia (Free) WEBS Index
Series, and, accordingly, the Fund currently discourages redemptions of Creation
Units of such series. See "Special Factors Regarding the Malaysia (Free) WEBS
Index Series" in the Statement of Additional Information. Since the Fund
announced that it was suspending creations and discouraging redemptions in
September 1998, the WEBS of the Malaysia (Free) WEBS Index Series have traded on
the AMEX at substantially wider spreads to net asset value than those WEBS had
traded prior to the Fund's announcement. Although there can be no assurance, the
Fund expects such spreads to continue so long as there remain impediments to
creations and/or redemptions of Creation Units of Malaysia (Free) WEBS Index
Series. Also, Malaysian securities settlement procedures require the Malaysia
(Free) WEBS Index Series to bear one day's credit exposure to local brokers when
it buys or sells Malaysian securities, which could result in losses to the
Malaysia (Free) WEBS Index Series in the event of a broker's insolvency.
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
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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 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. Except in the
case of the Malaysia (Free) WEBS Index Series, 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. ("NYSE") (ordinarily 4:00 p.m., New York City
time) on each day that the NYSE is open. The net asset value of the Malaysia
(Free) WEBS Index Series is determined as of 8:30 a.m. (New York City time) on
each day that the NYSE 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. Currency values are generally
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). However, the Fund may use a
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different rate from the rate used by MSCI in the event the Adviser concludes
that such rate is more appropriate and, as of the date of this Prospectus, is
using a different rate than MSCI in computing the net asset value of the
Malaysia (Free) WEBS Index Series. Any such use of a different rate than MSCI
may adversely affect a WEBS Index Series' ability to track its benchmark MSCI
Index.
CREATION UNITS
The Fund issues and redeems WEBS of each WEBS Index Series only in
aggregations of WEBS specified for each WEBS Index Series. The following table
sets forth the number of WEBS of a WEBS Index Series that constitute a Creation
Unit for such WEBS Index Series and the value of such Creation Unit at August
31, 1998:
VALUE PER
WEBS INDEX SERIES WEBS PER CREATION UNIT CREATION UNIT
- ----------------- ---------------------- -------------
(IN DOLLARS)
Australia WEBS Index Series ............ 200,000 1,549,950
Austria WEBS Index Series. ............. 100,000 1,010,604
Belgium WEBS Index Series. ............. 40,000 736,117
Canada WEBS Index Series. .............. 100,000 990,180
France WEBS Index Series. .............. 200,000 3,825,739
Germany WEBS Index Series. ............. 300,000 6,076,689
Hong Kong WEBS Index Series. ........... 75,000 480,379
Italy WEBS Index Series ................ 150,000 3,433,401
Japan WEBS Index Series ................ 600,000 5,036,759
Malaysia (Free)WEBS Index Series. ...... 75,000 158,001
Mexico (Free) WEBS Index Series. ....... 100,000 810,617
Netherlands WEBS Index Series. ......... 50,000 1,175,440
Singapore (Free) WEBS Index Series. .... 100,000 330,404
Spain WEBS Index Series. ............... 75,000 1,787,780
Sweden WEBS Index Series. .............. 75,000 1,379,089
Switzerland WEBS Index Series. ......... 125,000 1,943,319
United Kingdom WEBS Index Series. ...... 200,000 3,696,064
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 or a consolidation 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 (or declines) to an amount that falls outside 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. Until further notice, the Fund has suspended new creations of
Creation Units of WEBS of its Malaysia (Free) WEBS Index Series. 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
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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 may issue Creation Units of WEBS 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. In light of the capital
restrictions imposed in Malaysia on September 1, 1998, the Fund discourages
redemptions of its Malaysia (Free) WEBS Index Series.
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Investors may purchase WEBS in the secondary market and aggregate such
purchases into a Creation Unit for redemption. There can be no assurance,
however, that there always will be sufficient liquidity in the public trading
market to permit assembly of a Creation Unit of WEBS. Investors should expect to
incur brokerage and other costs in connection with assembling a sufficient
number of WEBS to constitute a redeemable Creation Unit. The approximate cost of
a Creation Unit of each WEBS Index Series is indicated under the heading
"Creation Units."
A redemption transaction fee payable to the Fund is imposed to offset
transaction costs that may be incurred by a WEBS Index Series in connection with
redemption of Creation Units of WEBS. The redemption transaction fee for
redemptions in kind and for cash (when available) are listed in the Shareholder
Transaction Expenses table in "Summary of Fund Expenses." 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
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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 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 twelve months, and
otherwise as a short-term capital gain or loss. However, if WEBS on which an
adjusted net long-term capital gain distribution has been received are
subsequently sold or redeemed and such WEBS have been held for six months or
less, any loss realized will be treated as an adjusted net long-term capital
loss to the extent that it offsets the corresponding adjusted net long-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
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be eligible (and intends) to file an election with the U.S. 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 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,
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records maintained by DTC (with respect to DTC Participants) and on the records
of DTC Participants (with respect to Indirect Participants and Beneficial Owners
that are not DTC Participants). Beneficial Owners receive from or through the
DTC Participant a written confirmation relating to their purchase of WEBS. The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability of certain investors to acquire beneficial interests in WEBS.
Beneficial Owners of WEBS are not entitled to have WEBS registered in their
names, will not receive or are not entitled to receive physical delivery of
certificates in definitive form and are not considered the registered holders
thereof. Accordingly, each Beneficial Owner must rely on the procedures of DTC,
the DTC Participant and any Indirect Participant through which such Beneficial
Owner holds its interests, to exercise any rights of a holder of WEBS.
WEBS distributions are made to DTC or its nominee, Cede & Co., as the
registered holder of all WEBS. DTC or its nominee, upon receipt of any such
distributions, will immediately credit DTC 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.
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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.
YEAR 2000 COMPLIANCE
Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000 because of the way dates
are encoded and calculated. That failure could have a negative impact on the
Fund's operations, including the handling of securities trades, pricing and
shareholder transactions. The Fund has no computer systems of its own, but
relies on those of its service providers. In response to an inquiry from the
Fund's Board of Directors, the Fund's Adviser, Administrator and Transfer Agent,
Custodian and Lending Agent, Sub-Administrator and Distributor have advised the
Board that they are reviewing all of the computer systems used by them, and
making inquiries of persons whose systems they rely on, in an effort to confirm
that all such systems will be appropriately adapted in advance of the Year 2000.
The Board has requested that each of the Fund's service providers report on the
status of preparations for the Year 2000 at each Board meeting prior to the Year
2001. There can be no assurance that these steps will be sufficient to prevent
an adverse impact on the Fund or any WEBS Index Series thereof.
EUROPEAN CURRENCY UNIFICATION
Many European countries are about to adopt a single European currency, the
"Euro." The Euro will become legal tender in the countries participating in
European Monetary Union ("EMU") on January 1, 1999. The countries currently
participating in the EMU are Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The notable
countries missing from the new unified currency are the United Kingdom, Denmark
and Sweden. On May 2, 1998, a new European Central Bank was created to manage
the monetary policy of the new unified region. On the same day, the exchange
rates were irrevocably fixed between the EMU member countries. National
currencies will continue to circulate until they are replaced by Euro coins and
bank notes by the middle of 2002. This change is likely to significantly impact
the European capital markets in which several WEBS Index Series invest.
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 Articles of Incorporation provide that the shares of each series
of common stock of the Fund are redeemable, at net asset value, at the option of
the Fund, in whole or any part, on such terms as the Board of Directors
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may by resolution approve, without the consent of the holders thereof. 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, or on the SEC's
Internet website (www.sec.gov). Such documents and other information concerning
the Fund may also be inspected at the offices of the American Stock Exchange,
Inc., 86 Trinity Place, New York, New York 10006.
Statements contained in this Prospectus as to the contents of any agreement
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the copy of such agreement or other document
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, each such statement being qualified in all respects by such reference.
Shareholder inquiries may be directed to the Fund in writing, to c/o PFPC
Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809.
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[GRAPHIC OMITTED]
WEBS(TRADEMARK)
<PAGE>
WEBS INDEX FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 27, 1998
This Statement of Additional Information is not a Prospectus, and
should be read in conjunction with the Prospectus dated November 27, 1998 (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>
TABLE OF CONTENTS
PAGE
----
General Description of the Fund........................................... 1
Investment Policies and Restrictions .................................... 1
Special Considerations and Risks.......................................... 13
The MSCI Indices.......................................................... 27
Exchange Listing and Trading.............................................. 43
Management of the Fund ................................................... 44
Investment Advisory, Management, Administrative and
Distribution Services................................................... 46
Brokerage Transactions ................................................... 50
Book Entry Only System ................................................... 51
Purchase and Issuance of WEBS in Creation Units........................... 52
Redemption of WEBS in Creation Units .................................... 56
Special Factors Regarding the Malaysia (Free) WEBS Index Series........... 58
Determining Net Asset Value............................................... 58
Dividends and Distributions............................................... 59
Taxes .................................................................... 59
Capital Stock and Shareholder Reports ................................... 60
Performance Information ................................................. 62
Counsel and Independent Auditors.......................................... 65
Financial Statements...................................................... 65
Appendices
APPENDIX A: MSCI Indices as of August 31, 1998
APPENDIX B: Holidays Applicable to Each WEBS Index Series
APPENDIX C: Supplemental Educational Information on WEBS
- WEBS Investment Highlights
- Frequently Asked Questions (Q & A)
- MSCI Index Performance Charts
- ---------------------------
MORGAN STANLEY CAPITAL INTERNATIONAL INC. ("MSCI") IS A COMPANY JOINTLY
OWNED BY MORGAN STANLEY DEAN WITTER & CO. ("MSDW"), AN INTERNATIONAL INVESTMENT
BANKING, ASSET MANAGEMENT AND BROKERAGE FIRM AND THE CAPITAL GROUP COMPANIES,
INC. ("CAPITAL"), AN INTERNATIONAL INVESTMENT MANAGEMENT COMPANY THAT IS NOT
AFFILIATED WITH MSDW. MSCI IS THE OWNER OF THE MSCI INDICES AND HAS FULL
RESPONSIBILITY FOR THE DESIGN, MAINTENANCE, PRODUCTION AND DISTRIBUTION OF THE
INDICES, INCLUDING ADDITIONS AND DELETIONS OF CONSTITUENTS WITHIN THE INDICES.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED
BY MSDW OR ANY OF ITS AFFILIATES. NEITHER MSDW NOR ANY OF ITS AFFILIATES MAKE
ANY 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. 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 MSCI NOR EITHER OF ITS OWNERS 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, CALCULATING OR DISSEMINATING THE RESPECTIVE MSCI INDICES. NEITHER
MSCI NOR EITHER OF ITS OWNERS 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 MSCI
NOR EITHER OF ITS OWNERS 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.
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ALTHOUGH MSCI AND CAPITAL, WHICH ARE PRIMARILY RESPONSIBLE FOR
FORMULATING THE MSCI INDICES, SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR
USE IN THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH THEY CONSIDER
RELIABLE, NEITHER MSCI NOR CAPITAL GUARANTEES THE ACCURACY AND/OR THE
COMPLETENESS OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT
SOURCES. NEITHER MSCI NOR CAPITAL 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 MSCI NOR CAPITAL 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 MSCI OR
CAPITAL 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," "_" or "L" are to British Pounds Sterling. On August 31, 1998, 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 1.74734, ATS 12.4088,
BEF 36.372, CAD 1.5642, FRF 5.91, DEM 1.7635, HKD 7.7492, ITL 1,742.85, JPY
141.19, MYR 4.1853, MXN 10.09, NLG 1.9901, SGD 1.776, ESP 149.765, SEK 8.0883,
CHF 1.4463 and GBP 0.59719. Some numbers in this Statement of Additional
Information have been rounded. All US Dollar equivalents provided in this
Statement of Additional Information are calculated at the exchange rate
prevailing on the date to which the corresponding foreign currency amount
refers.
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GENERAL DESCRIPTION OF THE FUND
WEBS Index Fund, Inc. (the "Fund") is a management investment company
organized as a series fund. The Fund 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 United States 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 Australia,
Austria, Belgium, Hong Kong, Italy, Mexico (Free), Netherlands, Singapore
(Free), 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 half 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
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protect against fluctuations in exchange rates.
INVESTMENTS IN SUBJECT EQUITY MARKETS
Brief descriptions of the equity markets in which the respective WEBS
Index Series are invested are provided below.
THE AUSTRALIAN EQUITY MARKETS
GENERAL BACKGROUND. Trading shares has taken place in Australia since
1828, but did not become significant until the latter half of the nineteenth
century when there was strong demand for equity capital to support the growth of
mining activities. A stock market was first formed in Melbourne in 1865. In
1885, the Melbourne market became The Stock Exchange of Melbourne, in which form
it has remained until recently. Other stock exchanges were also established in
Sydney (1871), Brisbane (1884), Adelaide (1887), Hobart (1891) and Perth (1891).
In 1937, the six capital city stock exchanges established the Australian
Associated Stock Exchanges (AASE) to represent them at a national level. In
1987, the regional exchanges merged to create the single entity -- The
Australian Stock Exchange (ASX). Trading is done via a computer link-up called
"SEATS." SEATS enables all exchanges to quote uniform prices. All the exchanges
are members of the ASX and are subject to the Securities Industry Act, which
regulates the major aspects of stock exchange operations. Although there are
stock exchanges in all six states, the Melbourne and Sydney Stock Exchanges are
the major centers, covering 90% of all trades.
REPORTING, ACCOUNTING AND AUDITING. Australian reporting, accounting
and auditing standards differ substantially from U.S. standards. In general
Australian corporations do not provide all of the disclosure required by U.S.
law and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of August 31, 1998, the total market
capitalization of the Australian equity markets was approximately AUD 449.8
billion or US$257.3 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).
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, 1998, the total market
capitalization of the Austrian equity markets was approximately ATS 457.0
billion or US$ 36.8 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,
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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, 1998, the total market
capitalization of the Belgian equity markets was approximately BEF 7,866.6
billion or US$216.3 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 organized securities
exchange in North America and among the ten largest in the world.
REPORTING, ACCOUNTING AND AUDITING. According to the SEC 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, 1998, the total market
capitalization of the Canadian markets was approximately CAD 665.8 billion or
US$425.6 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
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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, 1998, the total market
capitalization of the French equity markets was approximately FRF 5,000.6
billion or US$846.1 billion.
THE GERMAN EQUITY MARKETS
GENERAL BACKGROUND. The history of Frankfurt as a financial center can
be traced back to the early Middle Ages. Frankfurt had the right to issue coins
as early as 1180; the first exchange office was opened in 1402. Germany has been
without a central stock exchange, the position formerly held by the Berlin
exchange, since 1945. Today there are eight independent stock exchanges, of
which Dusseldorf and Frankfurt account for over three-quarters of the total
volume. Frankfurt is the main exchange in Germany. Exchange securities are
denominated in German Marks, the official currency of Germany. Equities may be
traded in Germany in one of three markets: (i) the official market, comprised of
trading in shares which have been formally admitted to official listing by the
admissions committee of the relevant stock exchange, based on disclosure in the
listing application; (ii) the "semi-official" unlisted market, comprised of
trading in shares not in the official listing; and (iii) the unofficial,
over-the-counter market, which is governed by the provisions of the Civil Code
and the Merchant Code and not by the provisions of any stock exchange. There is
no stamp duty in Germany, but a nonresident capital gains tax may apply in
certain circumstances.
REPORTING, ACCOUNTING AND AUDITING. German reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, German
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of August 31, 1998, the total market
capitalization of the Germany equity markets was approximately DEM 1,679.9
billion or US$952.6 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, 1998, the total market
capitalization of the Hong Kong equity markets was approximately HKD 2,019.0
billion or US$260.5 billion.
THE ITALIAN EQUITY MARKETS
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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, 1998, the total market
capitalization of the Italian equity markets was approximately ITL 764,882.8
billion or US$438.9 billion.
THE JAPANESE EQUITY MARKETS
GENERAL BACKGROUND. The Japanese stock market has a history of over 100
years beginning with the establishment of the Tokyo Stock Exchange Company Ltd.
in 1878. Stock exchanges are located in eight cities in Japan (Tokyo, Osaka,
Nagoya, Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo). There is also an
over-the-counter market. There are three distinct sections on the main Japanese
stock exchanges. The First Section trades in over 1,100 of the largest and most
active stocks, which 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, 1998, the total market
capitalization of the Japanese equity markets was approximately JPY 260,637.7
billion or US$1,846.0 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
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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 companies. The New
Straits Times Industrial Index is an average of 30 industrial stocks.
On September 1, 1998, the Malaysian government imposed capital
restrictions that fixed the exchange rate of its currency, the ringgit, and
adopted stringent controls over currency and stock trading which had the effect
of forcing all offshore holdings of Malaysian currency and securities back into
the country. In addition, the Malaysian government suspended foreign investors'
ability to convert proceeds from the sale of Malaysian securities into foreign
currency for one year from the date of initial purchase, for all Malaysian
securities held at September 1, 1998.
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, 1998, the total market
capitalization of the Malaysian equity markets was approximately MYR 183.0
billion or US$43.7 billion.
THE MEXICAN EQUITY MARKETS
GENERAL BACKGROUND. There is only one stock exchange in Mexico, the
Bolsa Mexicana de Valores (BMV), which was established in 1894 and is located in
Mexico City. The stock exchange is a private corporation whose shares are owned
solely by its authorized members and operates under the stock market laws passed
by the government. The National Banking and Securities Commission (CNV)
supervises the stock exchange. The Mexican exchange operates primarily via the
open outcry method. However, firm orders in writing can supersede this system,
provided there is a perfect match of the details of a buy and sell order.
Executions on the exchange can be done by members only. Membership of the stock
exchange is restricted to Casas de Bolsa brokerage houses and Especialistas
Bursatiles (stock exchange specialists).
REPORTING, ACCOUNTING AND AUDITING. Mexican reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Mexican
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of August 31, 1998, the total market
capitalization of the Mexican equity markets was approximately MXN 769.1 billion
or US$ 75.8 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 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, 1998, the total market
capitalization of the Dutch equity markets was approximately NLG 1,018.7 billion
or US$511.9 billion.
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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, 1998, the total market
capitalization of the Singaporean markets was approximately SGD 103.6 billion or
US$58.3 billion.
THE SPANISH EQUITY MARKETS
GENERAL BACKGROUND. The trading of shares in Spain dates back to 1831
when the Madrid Stock Exchange was founded. Since that time other exchanges have
been established in Barcelona, Bilbao and Valencia, although the latter remains
purely a local market. Madrid is by far the most active and the most
international market exchange, accounting for nearly 50% of total market
capitalization of both bonds and stocks. The next largest exchange is Barcelona,
founded in 1915. Membership at each stock exchange in Spain is restricted to
stockbrokers nominated by the Ministry of Finance. In order to practice their
profession, a broker must belong to the Association of Brokers. In November
1986, the Madrid Stock Exchange opened the new second market, or unlisted
securities market, as part of an effort to expand the range of Spanish companies
whose shares are publicly quoted. The second market provides small and
medium-sized companies with access to the trading market of the Madrid Stock
Exchange.
REPORTING, ACCOUNTING AND AUDITING. Spanish reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Spanish
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
SIZE OF EQUITY MARKETS. As of August 31, 1998, the total market
capitalization of the Spanish equity markets was approximately ESP 41,453.3
billion or US$ 276.8 billion.
THE SWEDISH EQUITY MARKETS
GENERAL BACKGROUND. Organized trading of securities in Sweden can be
traced back to 1776. Although the Stockholm Stock Exchange was founded in 1864,
the real formation of a stock exchange in an international sense took place in
1901. The statutes of the stock exchange were modified in 1906 and, from the
beginning of 1907, commercial banks were admitted as members. During the 1970's
the Stockholm market was characterized by limited turnover and dull trading
conditions. In 1980 the market started to climb and for several years Stockholm
was one of the best performing stock markets in both price and volume growth.
This regeneration of a market for risk capital was reflected in the large number
of companies introduced in the early 1980's. The Stockholm Stock Exchange is
structured on a membership basis, with the Bank Inspection Board being the
supervising authority. The board consists of 11 directors and one chief
executive. The directors of the board are elected by the Swedish government, and
the Association of the Swedish Chamber of Commerce, the Federation of Swedish
Industries and the member companies of the Stock Exchange. There are three
different markets for trading shares in Sweden. The dominant market is the A1
list, for the largest and most heavily traded companies. The second distinct
market is the Over-the-Counter Market, which is more loosely regulated than the
official market and caters to small and medium sized companies. The other market
is the unofficial parallel market which deals in unlisted shares, both on and
off the exchange floor. The shares most frequently
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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, 1998, the total market
capitalization of the Swedish equity markets was approximately SEK 2,234.2
billion or US$276.2 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, 1998, the total market
capitalization of the Swiss equity markets was approximately CHF 878.9 billion
or US$607.7 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, 1998, the total market
capitalization of the United Kingdom equity markets was approximately GBP
1,299.1 billion or US$2,175.3 billion.
OTHER FUND INVESTMENTS
Although the policy of each WEBS Index Series of the Fund is to remain
substantially fully invested in equity securities, a WEBS Index Series may also
invest in combinations of certain stock index futures contracts, options on such
futures contracts, stock index options, stock index swaps, 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
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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 on
the same basis as 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. The Chase
Manhattan Bank ("Chase") 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
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
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value of the collateral held by the Fund). In addition, each WEBS Index Series
bears the risk of loss of any cash collateral that it invests in Short-Term
Investments.
CURRENCY TRANSACTIONS
The investment policy of each WEBS Index Series is to remain as fully
invested as practicable in the equity securities of the relevant market. Hence,
no WEBS Index Series of the Fund expects to engage in currency transactions for
the purpose of hedging against declines in the value of the WEBS Index Series'
currency. A WEBS Index Series may enter into foreign currency forward and
foreign currency futures contracts to facilitate local securities settlement 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
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Adviser believes to be representative of the relevant benchmark index.
Although futures contracts (other than cash settled futures contracts
including most stock index futures contracts) by their terms call for actual
delivery or acceptance of the underlying commodity, in most cases the contracts
are closed out before the settlement date without the making or taking of
delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold," or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract position is
opened or closed.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
commodity or payment of the cash settlement amount) if it is not terminated
prior to the specified delivery date. Relatively low initial margin requirements
are established by the futures exchanges and may be changed. Brokers may
establish deposit requirements which are higher than the exchange minimums.
Futures contracts are customarily purchased and sold on margin deposits which
may range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.
Each WEBS Index Series may use futures contracts and options thereon,
together with positions in cash and Short-Term Investments, to simulate full
investment in the underlying index. As noted above, liquid futures contracts are
not currently available for the benchmark indices of many WEBS Index Series. In
addition, the Fund is not permitted to utilize certain stock index futures under
applicable law. Under such circumstances, the Adviser may seek to utilize other
instruments that it believes to be correlated to the underlying index.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
A WEBS Index Series will not enter into futures contract transactions
for purposes other than hedging to the extent that, immediately thereafter, the
sum of its initial margin deposits on open contracts exceeds 5% of the market
value of a WEBS Index Series' total assets. Assets committed to initial margin
deposits for futures and options on futures 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
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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;
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
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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 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
broad-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; the imposition of restrictions on the
expatriation of funds or other assets of a WEBS Index Series; higher transaction
and custody costs; delays and risks 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.
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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, 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 Index Series has an open position in the
futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.
FEDERAL TAX TREATMENT OF FUTURES CONTRACTS
Each WEBS Index Series is required for federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses on
certain futures contracts as of the end of the year as well as those actually
realized during the year. In most cases, any gain or loss recognized with
respect to the futures contract is considered to be 60% long-term capital gain
or loss and 40% short-term capital
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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 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 Union (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.
On January 1, 1999, the third and final stage of EMU will begin with
the establishment of a
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currency union encompassing 11 of the 15 Member States of the European Union
(EU) - Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, and Spain. On that date, these countries will lock
their exchange rates and adopt the euro as their common currency, with monetary
and exchange rate policy determined by area-wide institutions. Thus, each
country will give up the possibility of independent monetary and exchange rate
policy.
EMU does not change the locus of responsibility for policies other than
monetary and exchange rate policies. Policies affecting external trade and the
integration of internal markets are already a matter of EU competence. Fiscal
and labor market policies will continue to be decided mostly at the national
level, albeit subject to closer surveillance by EU institutions. The Stability
and Growth Pact (SGP), agreed in June 1997, set out the procedures for
surveillance of national fiscal policies, strengthening the framework provided
in the Maastricht Treaty. Also, the Treaty of Amsterdam, signed in October 1997,
explicitly recognized labor market policies as a matter of common concern and
set out procedures for their surveillance. Except for monetary and exchange rate
policies, area-wide decision making and surveillance are the responsibility of
institutions of the EU as a whole. It has been agreed that ministers of
euro-area countries can meet (as the Euro-11 Group), to discuss issues related
to the single currency, but that formal surveillance and coordination decisions
will be the prerogative of the full EU Council of Ministers (ECOFIN). The
prospective euro-area rivals the United States in terms of output and trade. The
delineation of monetary, fiscal, and structural policy responsibility between
the euro-area institutions and national governments helps assign responsibility
for these policies, but also complicates their coordination.
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. The Austrian
government cut the general government deficit from 5.2% of GDP in 1995 to 2.5%
in 1997 and thus achieved its announced policy goal of securing Austria's
membership in EMU. The government has indicated that it is planning fiscal
measures aimed at raising families' disposable incomes.
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,
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. In spite of a
reading of 2.1% of GDP for the public deficit in 1997, fiscal policy was
tightened in 1998. The reason for this is the very high level reached by the
debt/GDP ratio (122.2% of GDP in 1997).
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.
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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 French GDP grew by 2.3% in 1997, while inflation was
1.2%, the lowest level seen since the 1950's. The government deficit was 3% of
GDP in 1997.
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. Analysis of the strong
GDP growth of 2.9% over the first half of 1998 indicated a worrying build-up of
inventories. The different sectors of the economy have been affected by the
emerging-market crisis to different degrees. The economic conditions for a solid
recovery in domestic demand are the best in many years: employment has
stabilized and real interest rates are at historical lows. 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. The Italian
economy would appear on the way to a moderate recovery, due to regained
financial stability and falling interest rates. During 1998, the country
experienced recovery in construction investment, lower interest rates and a more
relaxed fiscal stance.
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
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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.
With real GDP growth of 3.6%, the Netherlands outpaced most of its
European neighbors in 1997. GDP has expanded at a broadly unchanged pace this
year. The Dutch economy has grown by at least 3% for each of the past four
calendar years (including 1998). Although the exposure of the Dutch economy to
the emerging-market crisis via international trade is fairly limited, the
strengthening of the Dutch guilder VIS-A-VIS the dollar have dampened the export
prospects for Dutch companies. Unemployment, at 4.5%, is half the European
average.
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 20.8% in
1997.
Spain's real GDP has grown at close to 4% in the first half of 1998. On
the demand side, the positive trend in retail sales and a rise in consumer
confidence suggest that private consumption growth has accelerated. Construction
activity appears to be buoyant and the most dynamic component of GDP at the
moment, while investment in plant and equipment remained strong until recently.
With more than 50% of Spanish foreign direct investment going to Latin America,
and with Spanish banks more exposed to the region than others in Europe,
business confidence and capital spending may be dampened, at least temporarily
in the near future.
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. The consumer backdrop in Sweden remains strong. The Swedish financial
system has very little exposure to emerging markets and the public finances are
sufficiently strong, so that automatic stabilizers could play their
counter-cyclical role in the case of a slowdown, without endangering the
strength of public finances.
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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 equipment),
engineering, food, financial services and 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. Swiss GDP grew by 1.3% on a quarterly annualized basis
in the second quarter of 1998, after a revised pace of expansion of 4.0% in the
middle of 1997. It confirmed the ongoing sharp slowdown of the Swiss economy. So
far in 1998, domestic demand has been performing satisfactorily, but there are
signs of a slowdown.
The Asian impact has led to a steady slowdown, and exports grew only
2.6% on the same basis in the second quarter of 1998. As a consequence, overall
demand is slowing sharply from a quarterly annualized expansion rate of 7.0% in
the middle of 1997 to 2.4% in the second quarter of 1998. Domestic demand's
contribution to GDP growth is also falling from 2.8% in the third quarter of
1997 to 1.2% this quarter. Business investment, which picked up strongly in late
1997 (up by an annualized 10%, on average) in response to the strong demand
growth that producers had to face, is now slowing (up 4.0% annualized in the
first two quarters of 1998). Last, but not least, the current pace of GDP
expansion should halt labour-market improvements, probably towards the end of
the third quarter.
THE UNITED KINGDOM. The UK economy was set to slow markedly as the
lagged effects of sterling's sharp rise -- and of the 175 bp cumulative rise in
official interest rates -- made itself felt. Capital spending plans, as well as
exports, are increasingly at risk. Recent business surveys have pointed to
the decrease in manufacturing orders and confidence spreading to the much bigger
services sector. The balance sheet is strong; the saving ratio is in line with
its long-term average, showing no sign of recent excesses, in marked contrast to
the situation in the U.S.
Almost alone in the G7, the UK has exhibited clear-cut inflation risk
during the current business cycle. RPIX inflation has only just dropped to the
target 2.5%, after a massive appreciation of the currency, 175 bp of tightening
and a modest hike in taxes. The labour market remains tight: average earnings
are slowing, but, at an annual rate of 4.7%, are still growing too fast for the
Bank of England's comfort.
As growth forecasts have fallen, the Chancellor of the Exchequer has
presented his new spending plans for 1999/00 onwards. The UK's fiscal accounts
remain amongst the strongest in the G7.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
- -------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Austria............................. 2.5 1.6 1.8 3.0 0.4
Belgium............................. 2.9 1.5 1.9 2.3 1.3
France.............................. 2.3 1.6 2.2 2.8 1.3
Germany............................. 2.2 1.3 1.9 2.9 1.1
Italy............................... 1.5 0.7 3.0 2.2 1.2
Netherlands......................... 3.6 3.1 2.4 2.7 0.2
Spain............................... 3.4 2.3 2.8 2.1 1.2
Sweden.............................. 1.8 1.3 3.6 3.3 2.2
Switzerland......................... 1.7 -0.0 0.1 1.0 0.8
United Kingdom...................... 3.4 2.2 2.5 3.8 2.1
Source: World Economic Outlook, October 1998 (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-
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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 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 the fourth quarter 1997, the Southeast Asian currency markets came
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.
Among the countries at the center of the Asian crisis, Korea and
Thailand have made encouraging advances toward restoring confidence and
initiating recovery, although their turnarounds remain at risk, including from
the external environment. The situation in Indonesia, however, remains very
difficult. Malaysia has resorted to external payments controls in an effort to
insulate its economy from the regional crisis. In Japan, despite substantial
fiscal stimulus and new initiatives to deal with banking sector problems,
significant downside risks remain. Growth in China appears to be slowing, and
both the renminbi and the Hong Kong dollar have been under considerable
pressure.
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
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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. 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 occur. Hong Kong's property, bond, equity and
currency markets have all recently experienced downside pressure, partly as a
result of devaluation fears.
Hong Kong's restructuring process is taking place rapidly. The economy
contracted 2.8% in the first quarter of 1998 and 5.0% in the second quarter of
1998. Wealth destruction has been equivalent to five times GDP as a result of
the recent slowdown. At the same time, high real interest rates are seriously
impeding investment.
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 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
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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. Japan's real GDP for the first
six months of 1998 was 2.7% less than the level achieved in the first half of
1997.
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.
Until September 1, 1998 Bank Negara Malaysia (the central bank) managed
the exchange value of the ringgit against a basket of foreign currencies. During
the first nine months of 1998, investors sold ringgit together with other East
Asian currencies because of fundamental concerns over the economic conditions
within the region as reflected in the sharp contractions in some economies,
including Malaysia, as well as a general deterioration in sentiment toward
emerging markets, particularly following the Russian debt moratorium.
On September 1, 1998, the Malaysian government imposed capital
restrictions which prevented a foreign holder of ringgits from exchanging
ringgit for other currencies or freely transferring ringgit or
ringgit-denominated securities outside or inside Malaysia. The controls also
fixed the trading value of the ringgit. These measures were designed to halt
capital flight and speculation against the ringgit.
Tight monetary policy led to a sharp contraction in GDP in the second
quarter of 1998. In September 1998, the authorities shifted towards a more
expansionary monetary and fiscal policy in an effort to halt the slide in GDP.
On a net basis, GDP is expected to contract in 1998, but not to the extent that
otherwise might have been expected, a result attributable in part to September's
shift toward expansionary policies.
Because of the economic downturn Malaysian banks have experienced an
increase in non-performing loans during 1998. Also, export demand has been weak
throughout much of 1998.
Monetary easing implemented in the Third Quarter of 1998 has not thus
far resulted in a drastic increase in Malaysia's inflation rate. Quarterly
inflation in October 1998 was only 3.1% (seasonally adjusted annual rate)
compared with 2.1% in July 1998.
SINGAPORE. Singapore has become a high-income, highly industrialized
country though rapid growth in its 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
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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.
Since August 1997, Singapore's financial markets have come under
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.
Singapore is the wealthiest country in non-Japan Asia with a per capita
income level of nearly U.S.$29,000. It is an open economy, with exports
equivalent to 130% of GDP. Rapid export growth in the 1990s fueled growth of
10%-plus in 1993 and 1994. Growth faltered in 1996 as export expansion slowed.
Strong growth was sustained through 1997 despite the regional turmoil, based on
strong service sector growth. On a sector basis, manufacturing growth has been
slowed in 1998 by weak export demand, financial sector growth has been slowed by
lower lending to the property sector, and the commerce sector is weighed down by
lower tourist arrivals and lower throughput at Singapore's port.
The main target of monetary policy in Singapore is inflation and the
second consideration is maintaining competitiveness. The trade-weighted exchange
rate index is the main instrument of monetary policy. Inflation in Singapore has
been in the low single digits throughout the 1990s. The Monetary Authority of
Singapore, the country's central bank, tightened monetary policy early in 1998
to provide an anchor for regional currency stability. The MAS has since moved to
ease policy and the currency has depreciated on a trade-weighted basis.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
- -------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Australia............................ 3.3 3.7 3.2 5.2 3.4
Hong Kong............................ 5.3 4.6 4.8 5.3 6.1
Japan................................ 0.8 3.9 1.4 0.6 0.1
Malaysia............................. 7.8 8.6 9.5 9.2 8.3
Singapore............................ 7.8 6.9 8.8 10.1 10.4
Source: World Economic Outlook, October 1998 (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.
The fiscal restructuring across all levels of government
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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.
After growing at nearly a 4% rate in 1997, the Canadian economy slowed
to about a 3% rate in 1998. For 1999, we expect a further slowing - to 2.5%.
There is some room for upside revisions to our 1999 forecast, though this
depends crucially on the contribution of net exports. The undervalued Canadian
dollar and continued strong demand from a labor-short U.S. economy (the
destination for 85% of Canada's exports) should remain supportive for Canada's
external sector and overall growth. A recovery in Asian demand or in the prices
of Canada's commodities could push 1999 growth toward 3%.
Canadian monetary policy has been limited by weakness in the Canadian
dollar, which slid to record lows against the U.S. dollar in August. The Bank of
Canada has been willing to follow the U.S. Federal Reserve's lead in reducing
rates in the first half of 1998. However, many analysts doubt that the
authorities will cut rates on their own. Although the Canadian economy was
operating with a 1.5% output gap in mid-1998 and had relatively high real
interest rates (3.9% in October, compared to 3% for the U.S.), the Bank of
Canada emphasized financial market stability as a key consideration in future
policy moves.
Canada's fiscal situation remains sound and continues to improve. In
early 1998, the Government of Canada recorded its first budget surplus in 28
years. For the 1998/99 fiscal period which ends 31-March 1999, another, more
sizeable surplus appears likely (C$8 bn to $10 bn, up from $3.5 bn in 1997/98).
Progress is also being made at the provincial level, where only Quebec and
Ontario still operate in the red. Both have made considerable headway in
reducing their deficits, and both have tabled balanced budgets for 1999/2000. As
a result of the progress at both levels of government, Canada's public
debt-to-GDP ratio has fallen by eight percentage points over the past three
years (from 97.6% in 1995 to 89.2%) according to the OECD.
Quebec politics have returned to center stage after three relatively
quiet years. The separatist Parti Quebecois government, led by Premier Lucien
Bouchard, is expected to win reelection on November 30, 1998. The size of the
victory for the PQ may be a determining factor in how soon Mr. Bouchard calls
another sovereignty referendum. Although the polls show the two parties almost
even in the popular vote, the seat count favors the incumbent party (because the
Liberal's support is concentrated in Montreal and its suburbs).
CANADIAN REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1997 3.7
1996 1.2
1995 2.2
1994 3.9
1993 2.5
1992 0.9
- ------------------
Source: World Economic Outlook, October 1998 (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.
Mexican inflation is sensitive to monetary and exchange rate policy.
After the 1994 devaluation and a post-devaluation surge in 1995, management of
inflation through tight monetary controls cut inflation to 16% in 1997. In 1998
peso volatility, hikes in the government-controlled price of tortillas (a food
staple), and strong domestic demand have kept inflation high.
MEXICO REAL GDP RATE OF GROWTH (ANNUAL % CHANGE)
1997 7.0
1996 5.2
1995 -6.2
1994 4.5
1993 2.0
1992 3.6
1991 4.2
- ----------------
Source: World Economic Outlook, October 1998 (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. In November, 1998, Morgan Stanley transferred all rights to the MSCI
Indices to Morgan Stanley Capital International Inc. ("MSCI"), a Delaware
corporation of which MSDW is the majority owner. 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,
24
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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 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
25
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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.
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
26
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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:
(BULLET) In the period between the ex date and the date of dividend
reinvestment, a dividend receivable is a component of the
index return.
(BULLET) Dividends are deemed received on the payment date.
(BULLET) 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.
(BULLET) 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 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
27
<PAGE>
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, 1998, the MSCI Australia Index (with net dividends
reinvested) (the "MSCI Australia") consisted of 55 stocks with an aggregate
market capitalization of approximately AUD278.1 billion or US$159.2 billion. In
percentage terms, the MSCI Australia represented approximately 61.87% of the
total market capitalization of Australia on August 31, 1998.
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, 1998 were, in order:
1. National Australia Bank..................................10.78%
2. Broken Hill Prop Co...................................... 9.68%
3. Telstra Corp..............................................8.57%
4. AMP Ltd...................................................8.41%
5. News Corp.................................................7.72%
6. Westpac Banking...........................................6.33%
7 News Corp Plvo............................................6.05%
8. Lend Lease................................................3.21%
9. Coles Myer................................................2.94%
10. Bramble Industries........................................2.78%
As of August 31, 1998, the largest five constituents together comprised
approximately 45.16% of the market capitalization of the MSCI Australia; the
largest ten constituents comprised approximately 66.47% of the market
capitalization of the MSCI Australia; and the largest 20 constituents comprised
approximately 82.70% of the market capitalization of the MSCI Australia.
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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, 1998 were:
1. Banking...................................................17.11%
2. Broadcasting & Publishing................................13.17%
3. Energy Sources............................................10.89%
4. Insurance.................................................10.40%
5 Telecommunications........................................8.57%
6 Real Estate...............................................6.97%
7. Metals - Non Ferrous......................................5.82%
8. Beverages & Tobacco.......................................4.40%
9. Building Materials & Components...........................3.89%
10. Merchandising.............................................3.17%
Appendix A hereto contains a complete list of the securities in the MSCI
Australia Index as of August 31, 1998.
THE MSCI AUSTRIA INDEX
On August 31, 1998, the MSCI Austria Index (with net dividends
reinvested) (the "MSCI Austria") consisted of 20 stocks with an aggregate market
capitalization of approximately ATS289.0 billion or US$23.3 billion. In
percentage terms, the MSCI Austria represented approximately 63.31% of the total
market capitalization of Austria on August 31, 1998.
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, 1998 were, in order:
1. Bank Austria Stamm........................................22.31%
2. Verbund Oesterr Elek A....................................21.36%
3. OMV AG....................................................11.50%
4. Wienerberger Baustoff.....................................7.68%
5. Va Technologie............................................6.66%
6. Ea-generali Stamm.........................................6.16%
7. Flughafen Wien............................................3.79%
8. Austrian Airlines.........................................3.63%
9. Mayr-Melnhof Karton.......................................2.97%
10. Boehler-Uddeholm..........................................2.44%
As of August 31, 1998, the largest five constituents together comprised
approximately 69.52% of the market capitalization of the MSCI Austria; the
largest ten constituents comprised approximately 88.51% of the market
capitalization of the MSCI Austria; and the largest 20 constituents comprised
approximately 100% 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, 1998 were:
1. Banking..................................................24.31%
2. Utilities - Electrical & Gas.............................21.36%
3. Energy Sources...........................................11.50%
4. Machinery & Engineering..................................7.87%
5. Building Materials & Components..........................7.68%
6. Insurance................................................6.59%
7. Misc. Materials & Commodities............................5.36%
8. Business & Public Services...............................3.79%
9. Transportation - Airlines................................3.63%
10. Metals - Steel...........................................2.44%
Appendix A hereto contains a complete list of the securities in the MSCI Austria
Index as of August 31, 1998.
THE MSCI BELGIUM INDEX
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On August 31, 1998, the MSCI Belgium Index (with net dividends
reinvested) (the "MSCI Belgium") consisted of 17 stocks with an aggregate market
capitalization of approximately BEF4,554.7 billion or US$125.2 billion. In
percentage terms, the MSCI Belgium represented approximately 57.88% of the total
market capitalization of Belgium on August 31, 1998.
On August 31, 1998, 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, 1998 were, in order:
1. KBC Bancassur (Kredietbank)...........................18.13%
2. Fortis Ag.............................................17.16%
3. Electrabel............................................15.47%
4. Tractebel.............................................11.66%
5. Petrofina.............................................6.85%
6. UCB (Groupe)..........................................6.57%
7. Solvay................................................4.70%
8. Groupe Bruxelles Lambert .............................3.58%
9. Delhaize - Le Lion....................................3.54%
10. Barco.................................................2.61%
As of August 31, 1998, the largest five constituents together comprised
approximately 69.28% of the market capitalization of the MSCI Belgium; the
largest ten constituents comprised approximately 90.27% of the market
capitalization of the MSCI Belgium; and the largest 15 constituents comprised
approximately 98.77% 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, 1998 were:
1. Utilities - Electrical & Gas...........................27.14%
2. Banking................................................18.13%
3. Insurance..............................................17.16%
4. Energy Sources.........................................6.85%
5. Food & Household Products..............................6.57%
6. Merchandising..........................................6.08%
7. Chemicals..............................................4.70%
8. Multi-Industry.........................................3.58%
9. Electronic Components, Instruments.....................2.61%
10. Automobiles............................................2.04%
Appendix A hereto contains a complete list of the securities in the MSCI Belgium
Index as of August 31, 1998.
THE MSCI CANADA INDEX
On August 31, 1998, the MSCI Canada Index (with net dividends
reinvested) (the "MSCI Canada") consisted of 78 stocks with an aggregate market
capitalization of approximately CAD418.1 billion or US$267.3 billion. In
percentage terms, the MSCI Canada represented approximately 62.81% of the total
market capitalization in Canada on August 31, 1998.
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, 1998 were, in order:
1. Northern Telecom......................................11.39%
2. BCE Inc ..............................................8.09%
3. Thomson Corp..........................................5.48%
4. Royal Bank of Canada..................................5.05%
5. Seagram Co............................................4.11%
6. Bank Montreal.........................................3.99%
7. Canadian Imperial Bank................................3.39%
8. Bank Nova Scotia......................................3.31%
9. Bombardier B..........................................3.08%
10. IMASCO................................................3.00%
As of August 31, 1998, the largest five constituents together comprised
approximately 34.12% of
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the market capitalization of the MSCI Canada; the largest ten constituents
comprised approximately 50.89% of the market capitalization of the MSCI Canada;
and the largest 20 constituents comprised approximately 70.48% 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, 1998 were:
1. Banking.....................................................16.68%
2. Electrical & Electronics....................................12.70%
3. Energy Sources..............................................11.91%
4. Telecommunications..........................................9.17%
5. Broadcasting & Publishing..................................6.87%
6. Multi-Industry..............................................6.53%
7. Metals - Non Ferrous........................................5.24%
8. Beverages & Tobacco.........................................4.57%
9. Utilities - Electrical & Gas................................4.29%
10. Gold Mines..................................................3.93%
Appendix A hereto contains a complete list of the securities in the MSCI Canada
Index as of August 31, 1998.
THE MSCI FRANCE INDEX
On August 31, 1998, the MSCI France Index (with net dividends
reinvested) (the "MSCI France") consisted of 67 stocks with an aggregate market
capitalization of approximately FRF 3,810.9 billion or US$644.8 billion. In
percentage terms, the MSCI France represented approximately 76.21% of the total
market capitalization in France on August 31, 1998.
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, 1998 were, in order:
1. France Telecom.......................................10.13%
2. L'Oreal..............................................5.73%
3. Vivendi (Generale Eaux)..............................5.46%
4. AXA-UAP..............................................5.42%
5. Elf Aquitaine........................................5.16%
6. Alcatel..............................................4.65%
7. Total Sa.............................................4.44%
8. Suez Lyonnaise des Eaux..............................4.24%
9. Carrefour............................................3.62%
10. Pinault-Print-Redoute................................3.27%
As of August 31, 1998, the largest five constituents together comprised
approximately 31.89% of the market capitalization of the MSCI France; the
largest ten constituents comprised approximately 52.11% of the market
capitalization of the MSCI France; and the largest 20 constituents comprised
approximately 74.21% 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, 1998 were:
1. Business & Public Services.............................13.27%
2. Health & Personal Care.................................11.33%
3. Merchandising..........................................10.56%
4. Telecommunications.....................................10.13%
5. Energy Sources.........................................9.60%
6. Electrical & Electronics...............................7.49%
7. Banking................................................6.15%
8. Insurance..............................................5.42%
9. Food & Household Products..............................4.26%
10. Building Materials & Components........................3.46%
Appendix A hereto contains a complete list of the securities in the MSCI France
Index as of August 31, 1998.
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THE MSCI GERMANY INDEX
On August 31, 1998, the MSCI Germany Index (with net dividends
reinvested) (the "MSCI Germany") consisted of 61 stocks with an aggregate market
capitalization of approximately DEM 1,274.2 billion or US$722.6 billion. In
percentage terms, the MSCI Germany represented approximately 75.86% of the total
market capitalization in Germany on August 31, 1998.
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, 1998 were, in order:
1. Allianz..................................................10.08%
2. Deutsche Telekom.........................................9.54%
3. Daimler-Benz.............................................7.30%
4. Mannesmann...............................................5.47%
5. Siemens Stamm............................................5.28%
6. SAP Stamm................................................4.71%
7. Muenchener Rueck Nam.....................................4.66%
8. Bayer....................................................4.58%
9. Deutsche Bank............................................4.51%
10. Veba.....................................................3.98%
As of August 31, 1998, the largest five constituents together comprised
approximately 37.67% of the market capitalization of the MSCI Germany; the
largest ten constituents comprised approximately 60.11% of the market
capitalization of the MSCI Germany; and the largest 20 constituents comprised
approximately 87.46% 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, 1998 were:
1. Insurance..............................................16.40%
2. Telecommunications.....................................15.01%
3. Banking................................................12.03%
4. Automobiles............................................11.10%
5. Utilities - Electrical & Gas...........................10.82%
6. Business & Public Services.............................8.34%
7. Chemicals..............................................7.85%
8. Electrical & Electronics...............................5.28%
9. Merchandising..........................................2.75%
10. Health & Personal Care.................................2.73%
Appendix A hereto contains a complete list of the securities in the MSCI Germany
Index as of August 31, 1998.
THE MSCI HONG KONG INDEX
On August 31, 1998, the MSCI Hong Kong Index (with net dividends
reinvested) (the "MSCI Hong Kong") consisted of 34 stocks with an aggregate
market capitalization of approximately HKD 874.3 billion or US$112.8 billion. In
percentage terms, the MSCI Hong Kong represented approximately 43.30% of the
total market capitalization in Hong Kong on August 31, 1998.
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, 1998 were, in order:
1. Hongkong Telecom.......................................20.37%
2. Hutchison Whampoa......................................16.45%
3. Hang Seng Bank.........................................10.16%
4. CLP Holdings...........................................9.76%
5. Cheung Kong Holdings...................................8.73%
6. Sun Hung Kai Properties................................7.01%
7. Hongkong China Gas.....................................4.46%
8. Swire Pacific A........................................4.05%
9. Cathay Pacific Airways.................................2.48%
10. Wharf Holdings.........................................2.35%
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As of August 31, 1998, the largest five constituents together comprised
approximately 65.48% of the market capitalization of the MSCI Hong Kong; the
largest ten constituents comprised approximately 85.82% of the market
capitalization of the MSCI Hong Kong; and the largest 20 constituents comprised
approximately 96.65% of the market capitalization of MSCI Hong Kong.
The ten most highly represented industry sectors in the MSCI Hong Kong,
and the approximate percentages of the MSCI Hong Kong represented thereby as of
August 31, 1998 were:
1. Real Estate............................................23.37%
2. Multi-Industry.........................................20.95%
3. Telecommunications.....................................20.37%
4. Utilities - Electrical & Gas...........................14.22%
5. Banking................................................12.22%
6. Transportation - Airlines..............................2.48%
7. Leisure & Tourism......................................1.89%
8. Broadcasting & Publishing.............................1.61%
9. Electrical & Electronics...............................1.58%
10. Misc. Materials & Commodities..........................0.52%
Appendix A hereto contains a complete list of the securities in the MSCI Hong
Kong Index as of August 31, 1998.
THE MSCI ITALY INDEX
On August 31, 1998, the MSCI Italy Index (with net dividends
reinvested) (the "MSCI Italy") consisted of 52 stocks with an aggregate market
capitalization of approximately ITL537,380.6 billion or US$308.3 billion. In
percentage terms, the MSCI Italy represented approximately 70.24% of the total
market capitalization of Italy on August 31, 1998.
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, 1998 were, in order:
1. ENI....................................................15.87%
2. Tim Ord................................................14.27%
3. Assicurazioni Generali.................................11.10%
4. Telecom Italia Ord.....................................9.13%
5. Credito Italiano Ord...................................4.02%
6. Fiat Ord...............................................3.59%
7. INA....................................................3.33%
8. San Paolo Di Torino Ord................................3.23%
9. Banca Commerciale Ord..................................3.19%
10. Banca Intesa Ord.......................................2.67%
As of August 31, 1998, the largest five constituents together comprised
approximately 54.38% of the market capitalization of the MSCI Italy; the largest
ten constituents comprised approximately 70.39% of the market capitalization of
the MSCI Italy; and the largest 20 constituents comprised approximately 89.50%
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, 1998 were:
1. Telecommunications...................................28.71%
2. Banking..............................................18.59%
3. Insurance............................................16.95%
4. Energy Sources.......................................15.87%
5. Automobiles..........................................4.65%
6. Utilities - Electrical & Gas.........................3.04%
7. Broadcasting & Publishing...........................2.86%
8. Industrial Components................................2.21%
9. Multi-Industry.......................................2.10%
10. Textiles & Apparel...................................1.22%
Appendix A hereto contains a complete list of the securities constituting the
MSCI Italy Index as of August 31, 1998.
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THE MSCI JAPAN INDEX
On August 31, 1998, the MSCI Japan Index (with net dividends
reinvested) (the "MSCI Japan") consisted of 308 stocks with an aggregate market
capitalization of approximately JPY186,910.9 billion or US$1,323.8 billion. In
percentage terms, the MSCI Japan represented approximately 71.71% of the total
market capitalization in Japan on August 31, 1998.
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, 1998 were, in order:
1. NTT Corp...............................................7.66%
2. Toyota Motor Corp......................................5.95%
3. Bank Tokyo-Mitsubishi..................................2.79%
4. Honda Motor Co.........................................2.43%
5. Matsushita Elect Ind'l.................................2.43%
6. Sony Corp..............................................2.32%
7. Tokyo Electric Power Co................................2.10%
8. Sumitomo Bank..........................................1.98%
9. Takeda Chemical Inc....................................1.88%
10. East Japan Railways....................................1.61%
As of August 31, 1998, the largest five constituents together comprised
approximately 21.26% of the market capitalization of the MSCI Japan; the largest
ten constituents comprised approximately 31.15% of the market capitalization of
the MSCI Japan; and the largest 20 constituents comprised approximately 44.10%
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, 1998 were:
1. Banking..................................................10.76%
2. Automobiles..............................................8.98%
3. Telecommunications.......................................7.66%
4. Appliances & Household Durables..........................6.08%
5. Health & Personal Care...................................5.56%
6. Utilities - Electrical & Gas.............................5.03%
7. Electronic Components, Instruments.......................4.57%
8. Industrial Components....................................4.43%
9. Transportation - Road & Rail.............................4.19%
10. Machinery & Engineering..................................3.77%
Appendix A hereto contains a complete list of the securities constituting the
MSCI Japan Index as of August 31, 1998.
THE MSCI MALAYSIA (FREE) INDEX
On August 31, 1998, the MSCI Malaysia (Free) Index (with net dividends
reinvested) (the "MSCI Malaysia (Free)") consisted of 72 stocks with an
aggregate market capitalization of approximately MYR133.5 billion or US$31.9
billion. In percentage terms, the MSCI Malaysia (Free) represented approximately
73.00% of the total market capitalization of Malaysia on August 31, 1998.
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, 1998 were, in order:
1. Telekom Malaysia.........................................15.83%
2. Tenaga Nasional..........................................9.82%
3. Malayan Banking..........................................7.88%
4. Sime Darby...............................................4.80%
5. Malaysia Int'l Shipping..................................4.37%
6. Rothmans Pall Mall (Mal).................................4.07%
7. Resorts World............................................3.53%
8. YTL Corp.................................................3.45%
9. Nestle (Malaysia)........................................2.88%
34
<PAGE>
10. Kuala Lumpur Kepong......................................2.75%
As of August 31, 1998, the largest five constituents together comprised
approximately 42.70% of the market capitalization of the MSCI Malaysia (Free);
the largest ten constituents comprised approximately 59.38% of the market
capitalization of the MSCI Malaysia (Free) and the largest 20 constituents
comprised approximately 75.58% of the market capitalization of the MSCI Malaysia
(Free).
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, 1998 were:
1. Telecommunications.......................................16.70%
2. Banking..................................................13.86%
3. Utilities - Electrical & Gas.............................9.82%
4. Multi-Industry...........................................9.81%
5. Misc. Materials & Commodities............................7.53%
6. Leisure & Tourism........................................6.26%
7. Beverages & Tobacco......................................5.48%
8. Transportation - Shipping................................4.37%
9. Food & Household Products................................4.07%
10. Automobiles..............................................3.93%
Appendix A hereto contains a complete list of the securities constituting the
MSCI Malaysia (Free) Index as of August 31, 1998.
THE MSCI MEXICO (FREE) INDEX
On August 31, 1998, the MSCI Mexico (Free) Index (with gross dividends
reinvested) (the "MSCI Mexico (Free)") consisted of 39 stocks with an aggregate
market capitalization of approximately MXN 559.3 billion or US$55.1 billion. In
percentage terms, the MSCI Mexico (Free) represented approximately 72.69% of the
total market capitalization of Mexico on August 31, 1998.
On August 31,1998, 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, 1998 were, in order:
1. Telefonos Mexico L.......................................18.72%
2. Grupo Modelo C...........................................10.35%
3. Telefonos Mexico A.......................................8.12%
4. Cifra B..................................................7.76%
5. Kimberly-Clark Mexico A..................................5.40%
6. Empresas La Moderna A....................................4.93%
7. Grupo Televisa CPO.......................................4.70%
8. Grupo Carso..............................................4.00%
9. Grupo Industrial Bimbo A.................................3.84%
10. FEMSA Unit...............................................3.25%
As of August 31, 1998, the largest five constituents together comprised
approximately 50.35% of the market capitalization of the MSCI Mexico (Free); the
largest ten constituents comprised approximately 71.07% of the market
capitalization of the MSCI Mexico (Free); and the largest 20 constituents
comprised approximately 88.89% 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, 1998 were:
1. Telecommunications.....................................26.84%
2. Beverages & Tobacco....................................20.04%
3. Merchandising..........................................11.26%
4. Multi-Industry.........................................8.34%
5. Building Materials & Components........................6.42%
6. Health & Personal Care.................................5.40%
7. Broadcasting & Publishing.............................4.70%
8. Food & Household Products..............................4.65%
9. Banking................................................4.17%
10. Metals - Non Ferrous...................................3.93%
35
<PAGE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Mexico (Free) Index as of August 31, 1998.
THE MSCI NETHERLANDS INDEX
On August 31, 1998, the MSCI Netherlands Index (with net dividends
reinvested) (the "MSCI Netherlands") consisted of 23 stocks with an aggregate
market capitalization of approximately NLG 736.4 billion or US$370.0 billion. In
percentage terms, the MSCI Netherlands represented approximately 72.28% of the
total market capitalization of the Netherlands on August 31, 1998.
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, 1998 were, in order:
1. Royal Dutch Petroleum Co...............................29.38%
2. ING Groep N.V..........................................14.07%
3. Unilever NV Cert.......................................11.62%
4. ABN Amro Holding.......................................7.55%
5. Philips Electronics....................................6.00%
6. Ahold (Kon.)...........................................4.89%
7. KPN (Kon.) PTT Nederland...............................4.55%
8. Heineken N.V...........................................3.89%
9. Wolters Kluwer.........................................3.42%
10. TNT Post Groep.........................................3.34%
As of August 31, 1998, the largest five constituents together comprised
approximately 68.63% of the market capitalization of the MSCI Netherlands; the
largest ten constituents comprised approximately 88.81% of the market
capitalization of the MSCI Netherlands; and the largest 20 constituents
comprised approximately 99.53% 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, 1998 were:
1. Energy Sources......................................29.38%
2. Financial Services..................................14.07%
3. Food & Household Products...........................11.62%
4. Banking.............................................7.55%
5. Broadcasting & Publishing..........................6.07%
6. Appliances & Household Durables.....................6.00%
7. Merchandising.......................................4.89%
8. Telecommunications..................................4.55%
9. Business & Public Services..........................4.53%
10. Beverages & Tobacco.................................3.98%
Appendix A hereto contains a complete list of the securities in the MSCI
Netherlands as of August 31, 1998.
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, 1998, the
MSCI Singapore (Free) consisted of 30 stocks with an aggregate market
capitalization of approximately SGD 60.0 billion or US$33.8 billion. In
percentage terms, the MSCI Singapore (Free) represented approximately 57.98% of
the total market capitalization of Singapore on August 31, 1998.
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, 1998 were in order:
1. Singapore Telecom....................................28.96%
2. Singapore Airlines...................................11.61%
3. Singapore Press Hldg.................................9.07%
4. Singapore Tech Engineering...........................7.41%
5. OCBC Bank Fgn........................................7.15%
6. Development Bk Sing Fgn..............................5.87%
36
<PAGE>
7. United Overseas Bank Fgn.............................5.23%
8. City Developments....................................4.19%
9. Creative Technology..................................2.67%
10. Keppel Corp..........................................1.95%
As of August 31, 1998, the largest five constituents together comprised
approximately 64.19% of the market capitalization of the MSCI Singapore (Free);
the largest ten constituents comprised approximately 84.10% of the market
capitalization of the MSCI Singapore (Free); and the largest 20 constituents
comprised approximately 96.06% of the market capitalization of the MSCI
Singapore (Free).
The ten most highly represented industry sectors in the MSCI Singapore
(Free), and the approximate percentages of the MSCI Singapore (Free) represented
thereby as of August 31, 1998 were:
1. Telecommunications.....................................28.96%
2. Banking................................................18.25%
3. Transportation - Airlines..............................11.61%
4. Broadcasting & Publishing.............................9.07%
5. Machinery & Engineering................................8.32%
6. Real Estate............................................8.08%
7. Multi-industry.........................................4.41%
8. Electronic Components, Instruments.....................4.32%
9. Beverages & Tobacco....................................1.53%
10. Leisure & Tourism......................................1.43%
Appendix A hereto contains a complete list of the securities in the MSCI
Singapore (Free) as of August 31, 1998.
THE MSCI SPAIN INDEX
On August 31, 1998, the MSCI Spain Index (with net dividends
reinvested) (the "MSCI Spain") consisted of 38 stocks with an aggregate market
capitalization of approximately ESP 29,375.5 billion or US$196.1 billion. In
percentage terms, the MSCI Spain represented approximately 70.85% of the total
market capitalization of Spain on August 31, 1998.
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, 1998 were, in order:
1. Telefonica de Espana....................................17.63%
2. Banco Bilbao Vizcaya....................................11.40%
3. Endesa Empresa Nal Elec.................................10.97%
4. Banco Santander.........................................9.24%
5. Iberdrola...............................................7.71%
6. Repsol..................................................7.08%
7. Gas Natural SDG.........................................5.37%
8. Banco Central Hispano...................................5.30%
9. Argentaria Corp Bancaria................................4.83%
10. Tabacalera..............................................2.25%
As of August 31, 1998, the largest five constituents together comprised
approximately 56.95% of the market capitalization of the MSCI Spain; the largest
ten constituents comprised approximately 81.78% of the market capitalization of
the MSCI Spain; and the largest 20 constituents comprised approximately 93.51%
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, 1998 were:
1. Banking..................................................30.77%
2. Utilities - Electrical & Gas.............................26.14%
3. Telecommunications.......................................17.63%
4. Energy Sources...........................................7.08%
5. Business & Public Services...............................3.55%
6. Construction & Housing...................................2.77%
7. Beverages & Tobacco......................................2.40%
37
<PAGE>
8. Real Estate..............................................1.61%
9. Leisure & Tourism........................................1.57%
10. Food & Household Products................................1.21%
Appendix A hereto contains a complete list of the securities in the MSCI Spain
as of August 31, 1998.
THE MSCI SWEDEN INDEX
On August 31, 1998, the MSCI Sweden Index (with net dividends
reinvested) (the "MSCI Sweden") consisted of 38 stocks with an aggregate market
capitalization of approximately SEK 1,525.7 billion or US$188.6 billion. In
percentage terms, the MSCI Sweden represented approximately 68.28%of the total
market capitalization of Sweden on August 31, 1998.
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, 1998 were, in order:
1. Ericsson (LM) B..........................................23.76%
2. Astra A..................................................11.66%
3. Hennes & Mauritz B.......................................8.27%
4. Foerreningssparbanken....................................4.62%
5. Svenska Handelsbk A......................................4.47%
6. Volvo B..................................................4.18%
7. ABB AB A.................................................3.76%
8. Skandia Forsakring.......................................3.39%
9. Skand.Enskilda Banken A..................................3.29%
10. Electrolux B.............................................2.96%
As of August 31, 1998, the largest five constituents together comprised
approximately 52.77% of the market capitalization of the MSCI Sweden; the
largest ten constituents comprised approximately 70.34% of the market
capitalization of the MSCI Sweden; and the largest 20 constituents comprised
approximately 90.16% 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, 1998 were:
1. Electrical & Electronics.................................29.04%
2. Health & Personal Care...................................14.23%
3. Banking..................................................12.78%
4. Merchandising............................................8.27%
5. Automobiles..............................................6.03%
6. Machinery & Engineering..................................4.98%
7. Forest Products & Paper..................................4.17%
8. Business & Public Services...............................3.67%
9. Insurance................................................3.39%
10 Appliances & Household Durables..........................2.96%
Appendix A hereto contains a complete list of the securities in the MSCI Sweden
as of August 31, 1998.
THE MSCI SWITZERLAND INDEX
On August 31, 1998, the MSCI Switzerland Index (with net dividends
reinvested) (the "MSCI Switzerland") consisted of 32 stocks with an aggregate
market capitalization of approximately CHF 753.0 billion or US$520.7 billion. In
percentage terms, the MSCI Switzerland represented approximately 85.68% of the
total market capitalization in Switzerland on August 31, 1998.
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, 1998 were, in order:
1. Novartis Namen........................................20.35%
2. Roche Holding Genuss..................................15.65%
3. Nestle................................................14.76%
4. UBS (New).............................................12.72%
5. Credit Suisse.........................................7.81%
6. Schweiz Rueckvers.....................................6.17%
38
<PAGE>
7. Roche Holding Inhaber.................................5.25%
8. Zurich Allied.........................................5.14%
9. Novartis Inhaber......................................2.16%
10. ABB Ag Inhaber........................................1.83%
As of August 31, 1998, the largest five constituents together comprised
approximately 71.30% of the market capitalization of the MSCI Switzerland; the
largest ten constituents comprised approximately 91.85% of the market
capitalization of the MSCI Switzerland; and the largest 20 constituents
comprised approximately 98.38% 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, 1998 were:
1. Health & Personal Care..................................43.42%
2. Banking.................................................20.54%
3. Food & Household Products...............................14.76%
4. Insurance...............................................11.31%
5. Electrical & Electronics................................2.08%
6. Business & Public Services..............................1.82%
7. Building Materials & Components.........................1.61%
8. Multi-Industry..........................................1.36%
9. Machinery & Engineering.................................0.87%
10. Recreation, Other Consumer Goods........................0.85%
Appendix A hereto contains a complete list of the securities in the MSCI
Switzerland as of August 31, 1998.
THE MSCI UNITED KINGDOM INDEX
On August 31, 1998, the MSCI United Kingdom Index (with net dividends
reinvested) (the "MSCI UK") consisted of 136 stocks with an aggregate market
capitalization of approximately GPB 825.2 billion or US$1,427.0 billion. In
percentage terms, the MSCI UK represented approximately 65.60% of the aggregate
capitalization of the United Kingdom markets on August 31, 1998.
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, 1998 were, in order:
1. Glaxo Wellcome.........................................7.55%
2. British Telecom........................................6.03%
3. British Petroleum......................................5.61%
4. Smithkline Beecham.....................................4.57%
5. Lloyds TSB Group.......................................4.28%
6. Vodafone Group.........................................2.92%
7. Zeneca Group...........................................2.57%
8. Diageo.................................................2.49%
9. HSBC Holdings (HKD 10).................................2.42%
10. Halifax................................................2.27%
As of August 31, 1998, the largest five constituents together comprised
approximately 28.04% of the market capitalization of the MSCI UK; the largest
ten constituents comprised approximately 40.71% of the market capitalization of
the MSCI UK; and the largest 20 constituents comprised approximately 57.79% 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,
1998 were:
1. Health & Personal Care.................................14.69%
2. Banking................................................10.69%
3. Telecommunications.....................................10.49%
4. Merchandising..........................................7.65%
5. Insurance..............................................6.83%
6. Business & Public Services.............................6.52%
7. Energy Sources.........................................6.03%
8. Utilities - Electrical & Gas...........................5.02%
39
<PAGE>
9. Financial Services.....................................4.98%
10. Beverages & Tobacco....................................4.36%
Appendix A hereto contains a complete list of the securities in the MSCI UK as
of August 31, 1998.
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 (Free) Index - covering European, Australasian and the Far
Eastern markets - is comprised of a weighted allocation of the MSCI Indices for
Japan (22.05%), the United Kingdom (21.65%), Germany (10.30%), France (9.43%),
Switzerland (8.19%), Netherlands (5.48%), Italy (4.78%), Spain (3.38%), Sweden
(2.77%), Australia (2.70%), Hong Kong (2.32%), Belgium (1.90%), Singapore Free
(0.76%), Austria (0.35%), New Zealand (0.20%), Norway (0.47%), Denmark (0.92%),
Portugal (0.73%), Finland (1.16%) and Ireland (0.47%). The weightings shown
parenthetically are based on the EAFE (Free) Index as of November 3, 1998.
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
(Free) Index by investing in the numbers of WEBS specified for the following 14
WEBS Index Series, in order to achieve the basket weightings listed below:
% of
WEBS Number of Value of
Index Series WEBS Basket
------------ --------- --------
Japan 219,900 22.95%
United Kingdom 115,600 22.54%
Germany 51,000 10.72%
France 48,600 9.82%
Switzerland 51,500 8.52%
Netherlands 23,200 5.71%
Italy 20,800 4.98%
Spain 12,600 3.52%
Sweden 15,600 2.89%
Australia 30,200 2.81%
Hong Kong 24,100 2.41%
Belgium 10,200 1.97%
Singapore (Free) 14,100 0.79%
Austria 3,500 0.36%
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 six countries
included in the MSCI EAFE (Free) Index, representing 2.91% of the value of such
index on November 3, 1998.
EXCHANGE LISTING AND TRADING
40
<PAGE>
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 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. In addition, the
foreign exchange rate used by the Fund in computing net asset value of a WEBS
Index Series may differ materially from that used by Bloomberg. See "Determining
Net Asset Value" below.
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
41
<PAGE>
1940 Act, by reason of his position as President of the Fund.
<TABLE>
<CAPTION>
POSITION WITH THE PRINCIPAL OCCUPATIONS
NAME AND ADDRESS FUND DURING PAST FIVE YEARS
- ---------------- ----------------- ----------------------
<S> <C> <C>
Nathan Most Director, President Senior Vice President (retired) (from 1992 to
P.O. Box 193 and Chairman of the 1996) and Vice President (from 1980 to 1992)
Burlingame, CA 94011-0193 Board of the American Stock Exchange, Inc.;
Age 84 President and CEO (retired) (from 1982 to
1996) of AMEX Commodities Corporation.
John B. Carroll Director Vice President of Investment Management (since
Vice President, Investment 1984) of GTE Corporation; Advisory Board member
Management of Ibbotson Assoc. (since 1998); former Trustee
GTE Corporation and Member of the Executive Committee (since
One Stamford Forum 1991) of The Common Fund, a non-profit
Stamford, CT 06904 organization; Member of the Investment Committee
Age 62 (since 1988) of the TWA Pilots Annuity Trust
Fund; former Vice Chairman and Executive Committee
Member (since 1992) of the Committee on Investment
of Employee Benefit Assets of the Financial
Executive Institute; and Member (since 1986) of
the Pension Advisory Committee of the New York
Stock Exchange.
Timothy A. Hultquist Director Advisory Director (since 1995 and Managing
Advisory Director Director (from 1985 to 1995) of Morgan Stanley &
Morgan Stanley & Co., Co., Incorporated; Chairman (since
Incorporated 1994) and Trustee (since 1885) of the Board
1221 Avenue of the Americas of Trustees of Macalester College; Treasurer and
30th Floor Trustee (since 1995) of Russell Sage Foundation;
New York, NY 10020 Member (since 1994) of Wilmer Eye Institute
Age 48 Advisory Counsel at John Hopkins University
Hospital; President (since 1992) of the Hultquist
Foundation; Chairman, Council of Board Chairmen of
Independent Colleges.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Lloyd N. Morrisett Director President (retired) of The John and Mary R.
Children's Television Markle Foundation (from 1969 to 1998); Chairman
Workshop (since 1970) of the Children's Television
One Lincoln Plaza, 4th Floor Workshop; Chairman (since 1998) and Director
New York, NY 10023 (since 1994) of Infonautics Corporation; Trustee
Age 68 (from 1985 to 1995, and since 1996) of RAND;
Director (since 1976) of Haskins Laboratories, Inc.;
Director (1990-January, 1997) of the Multimedia
Corporation; Director (since 1992) of Classroom,
Inc.; Director (since 1995) of Smith College Center
for the Study of Social and Political Change; Director
(since 1998) of Public Agenda Foundation; Member
of Board of Overseers (from 1995 to 1998) of
Dartmouth School of Medicine; Member (since 1968) of the
Council on Foreign Relations; and Member (since 1970)
of the American Association for the Advancement of
Science.
W. Allen Reed Director President and CEO and Director (since 1994) of
President General Motors Investment Management
General Motors Investment Corporation; Vice President and Treasurer (from
Management Corp. 1991 to 1994) of Hughes Electronics; President
767 Fifth Avenue (from 1984 to 1991) of Hughes Investment
New York, NY 10153 Management Company; Director (from 1995 to 1998)
Age 51 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 (from
1994 to 1998) 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.
Stephen M. Wynne Treasurer Chairman of PFPC Trustee & Custodial Services
Executive Vice President Ltd. (since 1995); Executive Vice President and
PFPC Inc. Chief Accounting Officer (since 1993) and Senior
400 Bellevue Parkway Vice President and Chief Accounting Officer (from
Wilmington, DE 19809 1991 to 1993) of PFPC Inc.; Executive Vice
Age 43 President (from 1993 to 1995) of PFPC
International.
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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
</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, 1998.
<TABLE>
<CAPTION>
PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
NAME OF PERSON, AGGREGATE BENEFITS ACCRUED AS BENEFITS UPON FROM REGISTRANT
POSITION COMPENSATION FROM PART OF FUND EXPENSES RETIREMENT AND FUND COMPLEX
REGISTRANT PAID TO DIRECTORS
- ----------------- ----------------- ---------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Nathan Most, 55,000 None None 55,000
Director, President
and Chairman of the
Board
John B. Carroll, 40,000 None None 40,000
Director
Timothy A. Hultquist, 40,000 None None 40,000
Director
Lloyd N. Morrisett, 40,000 None None 40,000
Director
W. Allen Reed, 40,000 None None 40,000
Director
</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,
1998, the Adviser and its parent, Barclays Global Investors, N.A., manage,
administer or advise assets aggregating in excess of $501 billion as of August
31, 1998.
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
44
<PAGE>
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 years ended August 31, 1997 and 1998, respectively, the
Fund paid fees to the Adviser for its advisory service as follows: Australia
WEBS Index Series $10,350, $49,326 and $113,929; Austria WEBS Index Series
$9,748, $8,459 and $17,769; Belgium WEBS Index Series $2,045, $38,995 and
$80,997; Canada WEBS Index Series $13,800, $59,093 and $56,716; France WEBS
Index Series $14,503, $35,574 and $74,578; Germany WEBS Index Series $16,309,
$49,546 and $118,054; Hong Kong WEBS Index Series $7,597, $40,743 and $124,506;
Italy WEBS Index Series $25,345, $78,513 and $162,294; Japan WEBS Index Series
$105,230, $318,796 and $433,508; Malaysia (Free) WEBS Index Series $7,550,
$44,814 and $132,902; Mexico (Free) WEBS Index Series $5,552, $26,482 and
$38,055; Netherlands WEBS Index Series $5,510, $22,577 and $44,756; Singapore
(Free) WEBS Index Series $8,578, $34,141 and $119,392; Spain WEBS Index Series
$6,162, $14,044 and $53,561; Sweden WEBS Index Series $4,522, $15,088 and
$35,809; Switzerland WEBS Index Series $8,392, $24,197 and $64,666; and United
Kingdom WEBS Index Series $14,599, $57,283 and $137,019.
THE ADMINISTRATOR
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 Chase 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 & Co.
Incorporated a fee of .05% of the average daily net assets of the Fund for
sub-administration services as described under "The Sub-Administrator" below.
The current fee arrangements with the Administrator, and the sub-administration
arrangements, became
45
<PAGE>
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 years ended August 31, 1997 and 1998, respectively, the Fund paid
fees to the Administrator for its administrative services as follows: Australia
WEBS Index Series $6,524, $31,057 and $89,377; Austria WEBS Index Series $6,123,
$5,326 and $14,128; Belgium WEBS Index Series $1,289, $24,552 and $63,121;
Canada WEBS Index Series $8,682, $37,207 and $44,201; France WEBS Index Series
$9,081, $22,398 and $59,529; Germany WEBS Index Series $10,284, $31,196 and
$94,141; Hong Kong WEBS Index Series $4,793, $25,653 and $98,932; Italy WEBS
Index Series $15,927, $49,434 and $128,961; Japan WEBS Index Series $66,484,
$200,723 and $340,915; Malaysia (Free) WEBS Index Series $4,761, $28,216 and
$106,617; Mexico (Free) WEBS Index Series $3,503, $16,674 and $29,580;
Netherlands WEBS Index Series $3,475, $14,215 and $35,512; Singapore (Free) WEBS
Index Series $5,412, $21,496 and $95,590; Spain WEBS Index Series $3,858, $8,842
and $42,795; Sweden WEBS Index Series $2,878, $9,500 and $29,928; Switzerland
WEBS Index Series $5,251, $15,235 and $51,205; and United Kingdom WEBS Index
Series $9,200, $36,067 and $108,935.
THE SUB-ADMINISTRATOR
Morgan Stanley & Co. Incorporated 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. Morgan Stanley & Co. Incorporated may
from time to time reimburse expenses to one or more WEBS Index Series. Morgan
Stanley & Co. Incorporated, as 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 Morgan Stanley & Co. Incorporated
is 1585 Broadway, New York, New York, 10036.
For the period from the commencement of the sub-administration
arrangements on October 29, 1997 to August 31, 1998, the Administrator paid
sub-administration fees to a prior sub-administrator (a former affiliate of the
Sub-Administrator) for its services as follows: Australia WEBS Index Series -
$17,644; Austria WEBS Index Series - $2,940; Belgium WEBS Index Series -
$12,122; Canada WEBS Index Series - $8,491; France WEBS Index Series - $12,573;
Germany WEBS Index Series - $19,811; Hong Kong WEBS Index Series - $20,539;
Italy WEBS Index Series - $26,776; Japan WEBS Index Series - $67,965; Malaysia
(Free) WEBS Index Series - $22,936; Mexico (Free) WEBS Index Series - $5,620;
Netherlands WEBS Index Series - $7,332; Singapore (Free) WEBS Index Series -
$20,417; Spain WEBS Index Series - $9,072; Sweden WEBS Index Series - $5,789;
Switzerland WEBS Index Series - $10,490; and United Kingdom WEBS Index Series -
$22,664.
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.
46
<PAGE>
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.
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 years ended August 31, 1997 and 1998, respectively, the Distributor
received the following amounts pursuant to the Plan with respect to each WEBS
Index Series: Australia WEBS Index Series, $9,583, $45,672 and $87,845; Austria
WEBS Index Series, $9,026, $7,833 and $13,513; Belgium WEBS Index Series,
$1,894, $36,106 and $62,876; Canada WEBS Index Series, $12,780, $54,716 and
$44,024; France WEBS Index Series, $13,429, $32,938 and $56,481; Germany WEBS
Index Series, $15,100, $45,876 and $89,498; Hong Kong WEBS Index Series, $7,034,
$37,724 and $94,745; Italy WEBS Index Series, $23,467, $72,698 and $123,496;
Japan WEBS Index Series, $97,436, $295,181 and $333,432; Malaysia (Free) WEBS
Index Series, $6,990, $41,495 and $100,121; Mexico (Free) WEBS Index Series,
$5,141, $24,521 and $29,617; Netherlands WEBS Index Series, $5,102, $20,904 and
$34,109; Singapore (Free) WEBS Index Series, $7,943, $31,612 and $90,132; Spain
WEBS Index Series, $5,706, $13,003 and $40,521; Sweden WEBS Index Series,
$4,187, $13,971 and $25,775; Switzerland WEBS Index Series, $7,770, $22,405 and
$49,386; and United Kingdom WEBS Index Series, $13,517, $53,040 and $104,206.
In the aggregate, the Distributor received $246,107, $849,695 and
$1,379,777 for the period from commencement of operations to August 31, 1996 and
for the fiscal years ended August 31, 1997 and 1998, respectively, from the WEBS
Index Series pursuant to the Plan, retaining $19,689, $67,976 and $133,964,
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
47
<PAGE>
Units." During the period from commencement of operations to August 31, 1996 and
during the fiscal years ended August 31, 1997 and 1998, the Distributor paid
$184,746, $494,970 and $885,446; $26,779, $342,394 and $248,720; and $14,893,
$35,841 and $111,647, 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 AND LENDING AGENT
Chase serves as the Custodian for the cash and portfolio securities of each
WEBS Index Series of the Fund pursuant to a Custodian Agreement between Chase
and the Fund and as Lending Agent for each WEBS Index Series. As Lending Agent,
Chase 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. Chase may from time to time
reimburse expenses to one or more WEBS Index Series. Chase, as Custodian and
Lending Agent, has no role in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund. The principal business
address of Chase is One Pierrepont Plaza, Brooklyn, New York, 11201.
For its custody services to each WEBS Index Series, Chase will be paid per
annum fees based on the aggregate net assets of the WEBS Index Series as
follows: Australia WEBS Index Series (.09%); Austria WEBS Index Series (.09%);
Belgium WEBS Index Series (.09%); Canada WEBS Index Series (.065%); France WEBS
Index Series (.09%); Germany WEBS Index Series (.09%); Hong Kong WEBS Index
Series (.11%); Italy WEBS Index Series (.08%); Japan WEBS Index Series (.055%);
Malaysia (Free) WEBS Index Series (.11%); Mexico (Free) WEBS Index Series
(.23%); Netherlands WEBS Index Series (.09%); Singapore (Free) WEBS Index Series
(.09%); Spain WEBS Index Series (.09%); Sweden WEBS Index Series (.09%);
Switzerland WEBS Index Series (.09%); and United Kingdom WEBS Index Series
(.065%). As remuneration for its services in connection with lending portfolio
securities of the WEBS Index Series, Chase 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
48
<PAGE>
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.
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
49
<PAGE>
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 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."
In light of the capital restrictions imposed by the government on Malaysia
on September 1, 1998, the Fund has suspended new creations of Creation Units of
WEBS of its Malaysia (Free) WEBS Index Series until further notice, and
discourages redemptions of such Creation Units. See "Special Factors Regarding
the Malaysia (Free) WEBS Index Series."
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, Dr. Martin Luther King, Jr. 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
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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.
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
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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 after 9:00 a.m. but 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 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
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<PAGE>
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 125% 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 141.19 per US$1.
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UNIT CREATION DAILY NAV
UNIT CREATION CALCULATION CALCULATION
CALCULATION IN UNITED IN UNITED
IN JAPANESE YEN STATES DOLLARS STATES DOLLARS
--------------- -------------- --------------
Execution............... 708,731,019 5,019,697 5,019,697
Commissions............. 708,731 5,020 N/A
Stamp Taxes............. 0 0 N/A
Risk Premium............ 0 0 N/A
Accrued Income.......... 2,408,984 17,062 17,062
Creation Charge......... 1,073,044 7,600 N/A
WEBS Unit Value......... 712,921,778 5,049,379 5,036,759
Per WEBS................ 8.42 8.39
Shares.................. 600,000
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."
IN LIGHT OF THE CAPITAL RESTRICTIONS IMPOSED BY THE GOVERNMENT ON
MALAYSIA ON SEPTEMBER 1, 1998, THE FUND HAS SUSPENDED NEW CREATIONS OF CREATION
UNITS OF WEBS OF ITS MALAYSIA (FREE) WEBS INDEX SERIES UNTIL FURTHER NOTICE, AND
DISCOURAGES REDEMPTIONS OF SUCH CREATION UNITS. SEE "SPECIAL FACTORS REGARDING
THE MALAYSIA (FREE) WEBS INDEX SERIES."
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.
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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, between the hours of
9:00 a.m and 4:00 p.m., New York City time. 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
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 after 9:00 a.m. and not later than 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
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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.
SPECIAL FACTORS REGARDING THE MALAYSIA (FREE) WEBS INDEX SERIES
In light of the capital restrictions imposed by the government of
Malaysia on September 1, 1998, the Fund has suspended creations, and is
concerned about its ability to honor redemptions, of Creation Units of WEBS of
the Malaysia (Free) WEBS Index Series. To the extent the Fund is presented with
requests for the redemption of Creation Units of WEBS of the Malaysia (Free)
WEBS Index Series, the Fund will seek to honor such requests consistent with the
Malaysian capital restrictions. Based on the information available to date, the
Fund believes that (i) it cannot currently make in-kind redemptions of WEBS of
the Malaysia (Free) WEBS Index Series and (ii) it may only be able to honor
redemption requests through the delivery of Malaysian ringgits in Malaysia,
subject to receipt of Malaysian Central Bank approval on a case by case basis.
The Fund understands that a non-Malaysian investor cannot freely exchange
holdings of Malaysian ringgits for other currencies at this time and cannot
freely transfer ringgits outside or inside Malaysia. There can be no assurance
that the Malaysian Central Bank would issue such approval and, if an approval is
not received, the Fund would not be able to effect the redemption. In the
circumstances, the Fund suggests that requests for the redemption of Creation
Units of WEBS of the Malaysia (Free) WEBS Index Series should not be made and
urges investors contemplating such redemptions to consult with Malaysian
counsel. Any updates relating to the specific mechanics of redeeming WEBS of the
Malaysia (Free) WEBS Index Series are expected to be announced in future
Supplements to this Statement of Additional Information. Also, Malaysian
securities settlement procedures require the Malaysia (Free) WEBS Index Series
to bear one day's credit exposure to local brokers when it buys or sells
Malaysian securities, which could result in losses to the Malaysia (Free) WEBS
Index Series in the event of a broker's insolvency.
DETERMINING NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Determination of Net Asset Value."
Net asset value per share for each 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)
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<PAGE>
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. Except in the case of the Malaysia (Free) WEBS Index Series, 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. ("NYSE")
(ordinarily 4:00 p.m., New York City time) on each day that the NYSE is open.
The net asset value of Malaysia (Free) WEBS Index Series is determined as of
8:30 a.m. (New York City time) on each day that the NYSE 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. Currency
values generally 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). However, the Fund may use a different rate from
the rate used by MSCI in the event the Adviser concludes that such rate is more
appropriate and, as of the date of this Statement of Additional Information, is
using a different rate than the MSCI in computing the net asset value of the
Malaysia (Free) WEBS Index Series. Any such use of a different rate than MSCI
may adversely affect a WEBS Index Series ability to track its benchmark MSCI
index.
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,
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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 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
settlement date and for at least fourteen 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.
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CAPITAL STOCK AND SHAREHOLDER REPORTS
The Fund currently is comprised of seventeen series of shares of common
stock, par value $.001 per share, referred to herein as WEBS: the Australia WEBS
Index Series, the Austria WEBS Index Series, the Belgium WEBS Index Series, the
Canada WEBS Index Series, the France WEBS Index Series, the Germany WEBS Index
Series, the Hong Kong WEBS Index Series, the Italy WEBS Index Series, the Japan
WEBS Index Series, the Malaysia (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. The Articles of
Incorporation provide that the shares of each series of common stock of the Fund
are redeemable, at net asset value, at the option of the Fund, in whole or any
part, on such terms as the Board of Directors may by resolution approve, without
the consent of the holders thereof.
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,
943.2 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. The Articles of Incorporation confers upon the Board of
Directors the power, by resolution, to alter the number of shares constituting a
Creation Unit or to specify that shares of common stock of the Fund may be
individually redeemable.
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 October 30, 1998, 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: (1) The Bank of New York, One Wall
Street, New York, NY 10286, Austria WEBS Index Series, 14.56%, Canada WEBS Index
Series, 5.79%, France WEBS Index Series, 9.04%, Germany WEBS Index Series,
5.60%, Italy WEBS Index Series, 14.79%, Mexico (Free) WEBS Index Series, 15.35%,
Netherlands WEBS Index Series, 12.07%, Spain WEBS Index Series, 13.70%, Sweden
WEBS Index Series, 18.32%, Switzerland WEBS Index Series, 6.60% and United
Kingdom WEBS Index Series, 13.93%; (2) Bear, Stearns Securities Corp., One
Metrotech Center North, Brooklyn, NY 11201-3859, Malaysia (Free) WEBS Index
Series, 5.05% and Mexico (Free) WEBS Index Series, 6.70%; (3) Brown Bros.
Harriman & Co., 59 Wall Street, New York, NY 10005, Australia WEBS Index Series,
5.71%, Canada WEBS Index Series, 11.02%, France WEBS Index Series, 6.14%, Italy
WEBS Index Series, 15.21%, Netherlands WEBS Index Series, 7.94%, Spain WEBS
Index Series, 8.59%, Sweden WEBS Index Series, 12.78%, Switzerland WEBS Index
Series, 17.68% and United Kingdom WEBS Index Series, 11.46%; (4) Charles Schwab
& Co., Inc., Newport Financial Center, 111 Pavonia Avenue East, 3rd Floor,
Jersey City, NJ 07310, Austria WEBS Index Series, 6.54%, Canada WEBS Index
Series, 12.18%, Hong Kong WEBS Index Series, 8.72%, Japan WEBS Index Series,
5.08%, Malaysia (Free) WEBS Index Series, 8.27% and Singapore (Free) WEBS Index
Series, 9.92%; (5) The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, NY 10081, Australia WEBS Index Series, 66.14%; (6) Citibank, N.A., 1410
Westshore Blvd., Tampa, FL 33607, Canada WEBS Index Series, 9.86%, France WEBS
Index Series, 11.47%, Germany WEBS Index Series, 9.87%, Italy WEBS Index Series,
8.58%, Spain WEBS Index
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Series, 6.68%, Sweden WEBS Index Series, 8.85%, Switzerland WEBS Index Series,
13.85% and United Kingdom WEBS Index Series, 8.42%; (7) Goldman, Sachs & Co., 1
New York Plaza, New York, NY 10004, Canada WEBS Index Series, 7.95%; (8) Merrill
Lynch Pierce Fenner & Smith Safekeeping, 101 Hudson Street, Jersey City, NJ
07302, Hong Kong WEBS Index Series, 5.72%, Japan WEBS Index Series, 9.60%,
Malaysia (Free) WEBS Index Series, 7.20% and Singapore (Free) WEBS Index Series,
6.46%; (9) Morgan Stanley & Co. Incorporated, One Pierrepont Plaza, Brooklyn, NY
11201, Austria WEBS Index Series, 32.24%, Belgium WEBS Index Series, 19.69%,
France WEBS Index Series, 25.08%, Germany WEBS Index Series, 19.71%, Hong Kong
WEBS Index Series, 10.48%, Italy WEBS Index Series, 7.97%, Japan WEBS Index
Series, 5.47%, Mexico (Free) WEBS Index Series, 17.65%, Netherlands WEBS Index
Series, 8.99%, Spain WEBS Index Series, 14.82%, Sweden WEBS Index Series, 9.59%,
Switzerland WEBS Index Series, 11.68% and United Kingdom WEBS Index Series,
12.84%; (10) National Financial Services Corporation, 1 World Financial Center,
Tower A, New York, NY 10281, Austria WEBS Index Series, 8.50% and Singapore
(Free) WEBS Index Series, 6.40%; (11) Northern Trust Company, 801 S. Canal
Street, Chicago, IL 60607, Japan WEBS Index Series, 13.51%; (12) PaineWebber
Incorporated, 1000 Harbor Blvd., Weehawken, NJ 07086, Canada WEBS Index Series,
6.01%, Malaysia (Free) WEBS Index Series, 6.15%, Mexico (Free) WEBS Index
Series, 8.96% and Netherlands WEBS Index Series, 5.15%; (13) Prudential
Securities Incorporated, 1 New York Plaza, 9th Floor, New York, NY 10292, Canada
WEBS Index Series, 7.20%, France WEBS Index Series, 5.49%, Germany WEBS Index
Series, 5.74%, Hong Kong WEBS Index Series, 7.78%, Mexico (Free) WEBS Index
Series, 5.76%, Netherlands WEBS Index Series, 8.09%, Spain WEBS Index Series,
5.75% and United Kingdom WEBS Index Series, 9.94%; (14) Salomon Smith Barney
Inc., 333 West 34th Street, 3rd Floor, New York, NY 10001, Austria WEBS Index
Series, 10.45%, Belgium EBS Index Series, 34.10%, Hong Kong WEBS Index Series,
8.42%, Japan WEBS Index Series, 6.99%, Malaysia (Free) WEBS Index Series,
11.66%, Netherlands WEBS Index Series, 6.07%, Singapore (Free) WEBS Index
Series, 13.93% and Sweden WEBS Index Series, 7.47%; (15) State Street Bank &
Trust Company, 1776 Heritage Drive, Quincy, MA 02171, Canada WEBS Index Series,
6.64%, France WEBS Index Series, 5.58%, Italy WEBS Index Series, 5.53%, Japan
WEBS Index Series, 6.28%, Malaysia (Free) WEBS Index Series, 6.71%, Netherlands
WEBS Index Series, 10.57%, Sweden WEBS Index Series, 14.54%, Switzerland WEBS
Index Series, 8.62% and United Kingdom WEBS Index Series, 9.24%; and (16) Wells
Fargo Bank, N.A., 464 California Street, San Francisco, CA 94104, Germany WEBS
Index Series, 15.12%.
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 (not annualized) and for the fiscal years ended August 31, 1997
and 1998, respectively, for each of the WEBS Index Series was: Australia WEBS
Index Series 3.88%, 6.23% and (23.11)%; Austria WEBS Index Series (3.39)%, 1.06%
and 2.16%; Belgium WEBS Index Series 5.01%, 9.26% and 39.42%; Canada WEBS Index
Series 4.63%, 28.50% and (21.69)%; France WEBS Index Series 4.95%, 16.60% and
34.77%; Germany WEBS Index Series 4.00%, 20.51%, and 25.69%; Hong Kong WEBS
Index Series 3.22%, 17.80% and (54.22)%; Italy WEBS Index Series 4.11%, 23.37%
and 47.66%; Japan WEBS Index Series (3.11)%, (11.97)% and (33.38)%; Malaysia
(Free) WEBS Index Series 4.28%,
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(40.20)% and (73.57)%; Mexico (Free) WEBS Index Series 15.93%, 35.21% and
(44.18)%; Netherlands WEBS Index Series 11.19%, 28.04% and 17.41%; Singapore
(Free) WEBS Index Series (6.73)%, (23.48)% and (61.29)%; Spain WEBS Index Series
8.45%, 39.15% and 32.58%; Sweden WEBS Index Series 14.13%, 30.10% and 5.48%;
Switzerland WEBS Index Series 2.60%, 16.69% and 21.24%; and United Kingdom WEBS
Index Series 10.41%, 30.48% and 14.98%.
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 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
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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
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
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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.
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, 1998 (the "1998
Annual Report") are incorporated
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in this Statement of Additional Information by reference. No other parts of the
1998 Annual Report are incorporated by reference herein. The financial
statements included in the 1998 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 1998 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.
64
<PAGE>
APPENDIX A-1
MSCI AUSTRALIA INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
NATIONAL AUSTRALIA BANK Banking 17,156 10.78%
BROKEN HILL PROP CO Energy Sources 15,414 9.68%
TELSTRA CORP Telecommunications 13,642 8.57%
AMP LTD Insurance 13,387 8.41%
NEWS CORP Broadcasting & Publishing 12,285 7.72%
WESTPAC BANKING Banking 10,073 6.33%
NEWS CORP PLVO Broadcasting & Publishing 9,631 6.05%
LEND LEASE Real Estate 5,105 3.21%
COLES MYER Merchandising 4,674 2.94%
BRAMBLES INDUSTRIES Business & Public Services 4,421 2.78%
FOSTERS BREWING GROUP Beverages & Tobacco 3,872 2.43%
RIO TINTO LTD Metals--Non Ferrous 3,522 2.21%
WMC Metals--Non Ferrous 3,311 2.08%
COCA-COLA AMATIL Beverages & Tobacco 2,360 1.48%
WESTFIELD TRUST Real Estate 2,349 1.48%
AMCOR Forest Products & Paper 2,275 1.43%
GENERAL PROPERTY TRUST Real Estate 2,217 1.39%
AUSTRALIAN GAS LIGHT CO Utilities--Electrical & Gas 2,075 1.30%
CSR Building Material & Components 2,027 1.27%
PACIFIC DUNLOP Multi-Industry 1,831 1.15%
GIO AUSTRALIA HLDGS Insurance 1,826 1.15%
PIONEER INTERNATIONAL Building Material & Components 1,727 1.09%
SOUTHCORP HOLDINGS Multi-Industry 1,670 1.05%
BORAL Building Material & Components 1,624 1.02%
TABCORP HOLDINGS Leisure & Tourism 1,590 1.00%
GOODMAN FIELDER Food & Household Products 1,565 0.98%
SANTOS Energy Sources 1,487 0.93%
QBE INSURANCE GROUP Insurance 1,345 0.84%
NORMANDY MINING Gold Mines 1,342 0.84%
NORTH Metals--Non Ferrous 1,327 0.83%
ORICA Chemicals 1,324 0.83%
SMITH (HOWARD) Multi-Industry 1,038 0.65%
LEIGHTON HOLDINGS Construction & Housing 827 0.52%
MIM HOLDINGS Metals--Non Ferrous 820 0.52%
HARDIE (JAMES) IND Building Material & Components 816 0.51%
STOCKLAND TRUST Real Estate 784 0.49%
ROTHMANS (AUSTRALIA) Beverages & Tobacco 772 0.49%
SCHRODERS PROPERTY FUND Real Estate 632 0.40%
FAULDING (F.H.) & CO Health & Personal Care 585 0.37%
FUTURIS CORP Misc. Materials & Commodities 437 0.27%
QCT RESOURCES Energy Sources 427 0.27%
EMAIL Appliances & Household Durables 403 0.25%
JONES (DAVID) Merchandising 364 0.23%
AUSTRALIAN NATIONAL IND Metals--Steel 361 0.23%
STAR CITY (SYDNEY HBR CA Leisure & Tourism 313 0.20%
SONS OF GWALIA Gold Mines 312 0.20%
CROWN Leisure & Tourism 284 0.18%
RGC Metals--Non Ferrous 279 0.18%
NEWCREST MINING Gold Mines 265 0.17%
DELTA GOLD Gold Mines 264 0.17%
GREAT CENTRAL MINES Gold Mines 209 0.13%
METAL MANUFACTURES Industrial Components 164 0.10%
RESOLUTE Gold Mines 152 0.10%
ASHTON MINING Misc. Materials & Commodities 147 0.09%
BURNS, PHILP & CO Food & Household Products 52 0.03%
</TABLE>
<PAGE>
APPENDIX A-2
MSCI AUSTRIA INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
BANK AUSTRIA STAMM Banking 5,197 22.31%
VERBUND OESTERR ELEK A Utilities--Electrical & Gas 4,974 21.36%
OMV AG Energy Sources 2,679 11.50%
WIENERBERGER BAUSTOFF Building Material & Components 1,790 7.68%
VA TECHNOLOGIE Machinery & Engineering 1,552 6.66%
EA-GENERALI STAMM Insurance 1,434 6.16%
FLUGHAFEN WIEN Business & Public Services 883 3.79%
AUSTRIAN AIRLINES Transportation--Airlines 846 3.63%
MAYR-MELNHOF KARTON Misc. Materials & Commodities 691 2.97%
BOEHLER-UDDEHOLM Metals--Steel 569 2.44%
RHI Misc. Materials & Commodities 558 2.39%
BBAG OESTERR BRAU STAMM Beverages & Tobacco 505 2.17%
BANK AUSTRIA PART Banking 465 2.00%
BWT STAMM Machinery & Engineering 281 1.21%
BAU HOLDING STAMM Construction & Housing 248 1.06%
LENZING Chemicals 184 0.79%
AUSTRIA MIKRO SYSTEME Electronic Components, Instruments 126 0.54%
UNIVERSALE-BAU Construction & Housing 126 0.54%
EA-GENERALI VORZUG Insurance 101 0.43%
BAU HOLDING VORZUG Construction & Housing 82 0.35%
</TABLE>
A-2
<PAGE>
APPENDIX A-3
MSCI BELGIUM INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
KBC BANCASSUR.(KREDIETBK Banking 22,698 18.13%
FORTIS AG Insurance 21,493 17.16%
ELECTRABEL Utilities--Electrical & Gas 19,377 15.47%
TRACTEBEL Utilities--Electrical & Gas 14,605 11.66%
PETROFINA Energy Sources 8,581 6.85%
UCB (GROUPE) Health & Personal Care 8,221 6.57%
SOLVAY Chemicals 5,887 4.70%
GROUPE BRUXELLES LAMBERT Multi-Industry 4,481 3.58%
DELHAIZE-LE LION Merchandising 4,439 3.54%
BARCO Electronic Components, Instruments 3,264 2.61%
COLRUYT Merchandising 3,169 2.53%
D'IETEREN Automobiles 2,557 2.04%
CBR (CIMENTERIES) Building Material & Components 2,223 1.77%
BEKAERT Industrial Components 1,457 1.16%
UNION MINIERE Metals--Non Ferrous 1,239 0.99%
GLAVERBEL (GROUPE) Misc. Materials & Commodities 937 0.75%
CMB Transportation--Shipping 597 0.48%
</TABLE>
A-3
<PAGE>
APPENDIX A-4
MSCI CANADA INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
NORTHERN TELECOM Electrical & Electronics 30,431 11.39%
BCE INC Telecommunications 21,634 8.09%
THOMSON CORP Broadcasting & Publishing 14,655 5.48%
ROYAL BANK OF CANADA Banking 13,502 5.05%
SEAGRAM CO Beverages & Tobacco 10,982 4.11%
BANK MONTREAL Banking 10,671 3.99%
CANADIAN IMPERIAL BANK Banking 9,058 3.39%
BANK NOVA SCOTIA Banking 8,841 3.31%
BOMBARDIER B Aerospace & Military Technology 8,239 3.08%
IMASCO Multi-Industry 8,015 3.00%
CANADIAN PACIFIC Multi-Industry 7,324 2.74%
TRANSCANADA PIPELINES Utilities--Electrical & Gas 7,127 2.67%
IMPERIAL OIL Energy Sources 6,758 2.53%
BARRICK GOLD CORP Gold Mines 6,625 2.48%
ALCAN ALUMINIUM Metals--Non Ferrous 5,248 1.96%
MAGNA INTERNATIONAL A Industrial Components 4,572 1.71%
WESTON (GEORGE) Merchandising 3,959 1.48%
POWER CORP OF CANADA Financial Services 3,656 1.37%
SUNCOR ENERGY Energy Sources 3,578 1.34%
NEWBRIDGE NETWORKS CORP Electrical & Electronics 3,508 1.31%
FAIRFAX FINANCIAL HLDGS Insurance 3,453 1.29%
PETRO-CANADA Energy Sources 3,443 1.29%
NORANDA Metals--Non Ferrous 3,379 1.26%
IPL ENERGY Energy Sources 3,089 1.16%
LAIDLAW Business & Public Services 3,073 1.15%
PLACER DOME Gold Mines 3,003 1.12%
POTASH CORP SASKATCHEWAN Chemicals 2,889 1.08%
TELUS CORP Telecommunications 2,877 1.08%
NATIONAL BANK OF CANADA Banking 2,505 0.94%
ALBERTA ENERGY CO Energy Sources 2,498 0.93%
TRANSALTA CORP Utilities--Electrical & Gas 2,371 0.89%
TALISMAN ENERGY Energy Sources 2,285 0.85%
CANADIAN OCCIDENTAL Energy Sources 2,214 0.83%
EDPERBRASCAN CORP A Multi-Industry 2,108 0.79%
WESTCOAST ENERGY Utilities--Electrical & Gas 1,974 0.74%
RENAISSANCE ENERGY Energy Sources 1,921 0.72%
CANADIAN TIRE CORP A Merchandising 1,899 0.71%
ABITIBI-CONSOLIDATED Forest Products & Paper 1,842 0.69%
INCO COMMON Metals--Non Ferrous 1,661 0.62%
CANADIAN NAT RESOURCES Energy Sources 1,484 0.56%
SOUTHAM Broadcasting & Publishing 1,441 0.54%
GULF CANADA RESOURCES Energy Sources 1,324 0.50%
POCO PETROLEUMS Energy Sources 1,257 0.47%
MACMILLAN BLOEDEL Forest Products & Paper 1,240 0.46%
QUEBECOR B Broadcasting & Publishing 1,220 0.46%
ANDERSON EXPLORATION Energy Sources 1,204 0.45%
AGRIUM Chemicals 1,143 0.43%
MDS B Health & Personal Care 1,105 0.41%
LOEWEN GROUP Business & Public Services 1,098 0.41%
DOFASCO Metals--Steel 1,070 0.40%
ROGERS COMMUNICATIONS B Broadcasting & Publishing 1,037 0.39%
CAMECO CORP Metals--Non Ferrous 1,026 0.38%
METHANEX CORP Chemicals 1,021 0.38%
UNITED DOMINION IND Machinery & Engineering 987 0.37%
HUDSON'S BAY CO Merchandising 980 0.37%
COMINCO Metals--Non Ferrous 972 0.36%
MOORE CORP Business & Public Services 911 0.34%
TECK CORP B Metals--Non Ferrous 867 0.32%
MOLSON COS A Beverages & Tobacco 817 0.31%
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
AIR CANADA COMMON Transportation--Airlines 797 0.30%
RANGER OIL Energy Sources 790 0.30%
RIO ALGOM Metals--Non Ferrous 722 0.27%
DOMTAR Forest Products & Paper 704 0.26%
CAE Aerospace & Military Technology 660 0.25%
OSHAWA GROUP A Merchandising 633 0.24%
PROVIGO Merchandising 543 0.20%
STELCO A Metals--Steel 532 0.20%
EXTENDICARE SV Business & Public Services 501 0.19%
COTT CORP Beverages & Tobacco 407 0.15%
CAMBIOR Gold Mines 390 0.15%
CCL INDUSTRIES B Misc. Materials & Commodities 376 0.14%
CO-STEEL Metals--Steel 306 0.11%
ECHO BAY MINES Gold Mines 292 0.11%
AGNICO-EAGLE MINES Gold Mines 191 0.07%
INCO VBN Metals--Non Ferrous 122 0.05%
COREL CORP Business & Public Services 94 0.04%
SPAR AEROSPACE Aerospace & Military Technology 79 0.03%
INT'L FOREST PRODUCTS A Forest Products & Paper 65 0.02%
</TABLE>
A-5
<PAGE>
APPENDIX A-5
MSCI FRANCE INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
FRANCE TELECOM Telecommunications 65,289 10.13%
LOREAL Health & Personal Care 36,941 5.73%
VIVENDI (GENERALE EAUX) Business & Public Services 35,217 5.46%
AXA-UAP Insurance 34,951 5.42%
ELF AQUITAINE Energy Sources 33,269 5.16%
ALCATEL Electrical & Electronics 29,985 4.65%
TOTAL SA Energy Sources 28,628 4.44%
SUEZ LYONNAISE DES EAUX Business & Public Services 27,354 4.24%
CARREFOUR Merchandising 23,321 3.62%
PINAULT-PRINT.-REDOUTE Merchandising 21,081 3.27%
DANONE (GROUPE) Food & Household Products 20,875 3.24%
RHONE-POULENC ORD A Health & Personal Care 17,528 2.72%
SANOFI Health & Personal Care 14,573 2.26%
SOCIETE GENERALE Banking 14,302 2.22%
LVMH Recreation, Other Consumer Goods 13,540 2.10%
SAINT-GOBAIN Building Material & Components 13,354 2.07%
BNP BANQUE NTLE PARIS Banking 13,196 2.05%
AIR LIQUIDE Chemicals 12,224 1.90%
CAP GEMINI SA Business & Public Services 11,447 1.78%
PROMODES Merchandising 11,429 1.77%
PARIBAS Banking 11,352 1.76%
LAFARGE (FRANCE) Building Material & Components 8,973 1.39%
PEUGEOT SA Automobiles 8,917 1.38%
SCHNEIDER Electrical & Electronics 8,418 1.31%
ACCOR Leisure & Tourism 8,414 1.30%
CASINO ORD Merchandising 7,385 1.15%
CANAL + Broadcasting & Publishing 7,296 1.13%
LEGRAND ORD Electrical & Electronics 6,899 1.07%
VALEO Industrial Components 6,782 1.05%
SODEXHO ALLIANCE Business & Public Services 6,723 1.04%
MICHELIN B Industrial Components 6,657 1.03%
THOMSON-CSF Aerospace & Military Technology 5,875 0.91%
ERIDANIA BEGHIN-SAY Food & Household Products 5,538 0.86%
BOUYGUES ORD Construction & Housing 5,156 0.80%
DASSAULT SYSTEMES Business & Public Services 4,826 0.75%
LAGARDERE Multi-Industry 4,619 0.72%
ESSILOR INTERNATIONAL Health & Personal Care 4,000 0.62%
PERNOD RICARD Beverages & Tobacco 3,803 0.59%
COMPTOIRS MODERNES Merchandising 3,702 0.57%
BIC Recreation, Other Consumer Goods 3,119 0.48%
SAGEM Electrical & Electronics 2,991 0.46%
SEITA Beverages & Tobacco 2,665 0.41%
SIDEL Machinery & Engineering 2,580 0.40%
USINOR Metals--Steel 2,577 0.40%
PECHINEY ORD A Metals--Non Ferrous 2,455 0.38%
EURAFRANCE Financial Services 2,119 0.33%
PRIMAGAZ Utilities--Electrical & Gas 1,675 0.26%
IMETAL Misc. Materials & Commodities 1,578 0.24%
PATHE Leisure & Tourism 1,546 0.24%
SIMCO Real Estate 1,526 0.24%
TECHNIP Machinery & Engineering 1,518 0.24%
GROUPE GTM Construction & Housing 1,405 0.22%
SEB Appliances & Household Durables 1,353 0.21%
COFLEXIP Energy Equipment & Services 1,305 0.20%
UNIBAIL Real Estate 1,295 0.20%
CLUB MEDITERRANEE Leisure & Tourism 1,233 0.19%
CASINO ADP Merchandising 1,157 0.18%
ZODIAC Aerospace & Military Technology 1,094 0.17%
SEFIMEG Real Estate 1,075 0.17%
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
BONGRAIN Food & Household Products 1,066 0.17%
SOMMER-ALLIBERT Industrial Components 860 0.13%
NATEXIS Banking 823 0.13%
CPR Financial Services 641 0.10%
CHARGEURS Textiles & Apparel 478 0.07%
GENERALE GEOPHYSIQUE Energy Equipment & Services 363 0.06%
NORD-EST Misc. Materials & Commodities 279 0.04%
SKIS ROSSIGNOL Recreation, Other Consumer Goods 211 0.03%
</TABLE>
A-7
<PAGE>
APPENDIX A-6
MSCI GERMANY INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
ALLIANZ Insurance 72,847 10.08%
DEUTSCHE TELEKOM Telecommunications 68,953 9.54%
DAIMLER-BENZ Automobiles 52,735 7.30%
MANNESMANN Telecommunications 39,532 5.47%
SIEMENS STAMM Electrical & Electronics 38,124 5.28%
SAP STAMM Business & Public Services 34,025 4.71%
MUENCHENER RUECK NAM Insurance 33,649 4.66%
BAYER. HYPO-&VEREINSBANK Banking 33,114 4.58%
DEUTSCHE BANK Banking 32,610 4.51%
VEBA Utilities--Electrical & Gas 28,728 3.98%
BAYER Chemicals 28,518 3.95%
SAP VORZUG Business & Public Services 26,090 3.61%
RWE STAMM Utilities--Electrical & Gas 25,747 3.56%
BASF Chemicals 23,852 3.30%
VOLKSWAGEN STAMM Automobiles 22,786 3.15%
DRESDNER BANK Banking 21,219 2.94%
VIAG Utilities--Electrical & Gas 20,660 2.86%
METRO STAMM Merchandising 13,238 1.83%
LUFTHANSA Transportation--Airlines 8,257 1.14%
SCHERING Health & Personal Care 7,263 1.01%
MERCK KGAA Health & Personal Care 7,171 0.99%
THYSSEN Metals--Steel 6,626 0.92%
AACHEN & MUNCH BET NAMEN Insurance 6,316 0.87%
PREUSSAG Multi-Industry 5,420 0.75%
BEIERSDORF Health & Personal Care 5,278 0.73%
LINDE Machinery & Engineering 5,069 0.70%
ADIDAS-SALOMON Recreation, Other Consumer Goods 4,918 0.68%
VOLKSWAGEN VORZUG Automobiles 4,695 0.65%
DEGUSSA Chemicals 4,351 0.60%
HEIDELBERGER ZEMENT STAM Building Material & Components 3,897 0.54%
KARSTADT Merchandising 3,857 0.53%
MAN STAMM Machinery & Engineering 3,646 0.50%
AXA COLONIA KONZ STAMM Insurance 3,157 0.44%
CONTINENTAL Industrial Components 3,093 0.43%
RWE VORZUG Utilities--Electrical & Gas 3,044 0.42%
HOCHTIEF Construction & Housing 2,528 0.35%
DOUGLAS HOLDING Merchandising 1,884 0.26%
SGL CARBON Misc. Materials & Commodities 1,851 0.26%
AACHEN & MUNCH BET INH Insurance 1,331 0.18%
BUDERUS Building Material & Components 1,192 0.16%
DYCKERHOFF VORZUG Building Material & Components 1,168 0.16%
AGIV AG IND & VERKEHR Multi-Industry 982 0.14%
MAN VORZUG Machinery & Engineering 980 0.14%
METRO VORZUG Merchandising 878 0.12%
BILFINGER + BERGER Construction & Housing 848 0.12%
GROHE (FRIEDRICH) VORZUG Building Material & Components 828 0.11%
FAG KUGELFISCHER Industrial Components 785 0.11%
MUENCHENER RUECK INH Insurance 775 0.11%
DEUTZ Machinery & Engineering 675 0.09%
BRAU & BRUNNEN Beverages & Tobacco 505 0.07%
RHEINMETALL STAMM Aerospace & Military Technology 486 0.07%
IWKA Machinery & Engineering 474 0.07%
AXA COLONIA KONZ VORZUG Insurance 440 0.06%
RHEINMETALL VORZUG Aerospace & Military Technology 354 0.05%
SALAMANDER Textiles & Apparel 329 0.05%
HOLSTEN-BRAUEREI Beverages & Tobacco 236 0.03%
STRABAG Construction & Housing 183 0.03%
ESCADA STAMM Textiles & Apparel 115 0.02%
ESCADA VORZUG Textiles & Apparel 92 0.01%
</TABLE>
A-8
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
HERLITZ STAMM Business & Public Services 91 0.01%
HERLITZ VORZUG Business & Public Services 65 0.01%
</TABLE>
A-9
<PAGE>
APPENDIX A-7
MSCI HONG KONG INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
HONGKONG TELECOM Telecommunications 22,987 20.37%
HUTCHISON WHAMPOA Multi-Industry 18,564 16.45%
HANG SENG BANK Banking 11,461 10.16%
CLP HOLDINGS Utilities--Electrical & Gas 11,015 9.76%
CHEUNG KONG HOLDINGS Real Estate 9,848 8.73%
SUN HUNG KAI PROPERTIES Real Estate 7,904 7.01%
HONGKONG CHINA GAS Utilities--Electrical & Gas 5,033 4.46%
SWIRE PACIFIC A Multi-Industry 4,568 4.05%
CATHAY PACIFIC AIRWAYS Transportation--Airlines 2,796 2.48%
WHARF HOLDINGS Real Estate 2,652 2.35%
NEW WORLD DEVELOPMENT Real Estate 2,345 2.08%
BANK EAST ASIA Banking 1,844 1.63%
JOHNSON ELECTRIC HLDGS Electrical & Electronics 1,779 1.58%
HANG LUNG DEVELOPMENT CO Real Estate 1,192 1.06%
SHANGRI-LA ASIA Leisure & Tourism 1,159 1.03%
TELEVISION BROADCASTS Broadcasting & Publishing 933 0.83%
SINO LAND Real Estate 888 0.79%
HYSAN DEVELOPMENT Real Estate 762 0.68%
SOUTH CHINA MORNING POST Broadcasting & Publishing 704 0.62%
HONGKONG SHANGHAI HOTEL Leisure & Tourism 616 0.55%
VARITRONIX INTERNATIONAL Misc. Materials & Commodities 586 0.52%
HOPEWELL HOLDINGS Multi-Industry 503 0.45%
WING LUNG BANK Banking 483 0.43%
MIRAMAR HOTEL & INVEST. Real Estate 380 0.34%
REGAL HOTELS INT'L Leisure & Tourism 360 0.32%
CHINESE ESTATES HOLDINGS Real Estate 262 0.23%
HONGKONG AIRCRAFT HAECO Aerospace & Military Technology 203 0.18%
DICKSON CONCEPTS INT'L Merchandising 201 0.18%
ORIENTAL PRESS GROUP Broadcasting & Publishing 176 0.16%
ELEC & ELTEK INT'L HLDGS Electronic Components, Instruments 157 0.14%
TAI CHEUNG HOLDINGS Real Estate 137 0.12%
KUMAGAI GUMI (HK) Construction & Housing 128 0.11%
SHUN TAK HOLDINGS Transportation--Shipping 121 0.11%
GIORDANO INTERNATIONAL Merchandising 82 0.07%
</TABLE>
A-10
<PAGE>
APPENDIX A-8
MSCI ITALY INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
ENI Energy Sources 48,938 15.87%
TIM ORD Telecommunications 43,992 14.27%
ASSICURAZIONI GENERALI Insurance 34,220 11.10%
TELECOM ITALIA ORD Telecommunications 28,141 9.13%
CREDITO ITALIANO ORD Banking 12,387 4.02%
FIAT ORD Automobiles 11,074 3.59%
INA Insurance 10,265 3.33%
SAN PAOLO DI TORINO ORD Banking 9,946 3.23%
BANCA COMMERCIALE ORD Banking 9,844 3.19%
BANCA INTESA ORD Banking 8,228 2.67%
IMI ISTITUTO MOBILIARE Banking 7,575 2.46%
MEDIASET Broadcasting & Publishing 7,483 2.43%
OLIVETTI ORD Telecommunications 6,410 2.08%
EDISON ORD Utilities--Electrical & Gas 6,036 1.96%
MEDIOBANCA Banking 5,861 1.90%
PIRELLI SPA ORD Industrial Components 5,746 1.86%
TIM RNC Telecommunications 5,563 1.80%
MONTEDISON ORD Multi-Industry 5,008 1.62%
RAS ORD Insurance 4,817 1.56%
TELECOM ITALIA RNC Telecommunications 4,411 1.43%
ITALGAS Utilities--Electrical & Gas 3,322 1.08%
BENETTON GROUP Textiles & Apparel 2,958 0.96%
RINASCENTE ORD Merchandising 2,171 0.70%
PARMALAT FINANZIARIA Food & Household Products 2,121 0.69%
BANCA POPOLARE MILANO Banking 1,839 0.60%
FIAT PRIV Automobiles 1,837 0.60%
BANCA INTESA RNC Banking 1,636 0.53%
FIAT RNC Automobiles 1,441 0.47%
ITALCEMENTI ORD Building Material & Components 1,417 0.46%
RAS RNC Insurance 1,401 0.45%
MONDADORI ORD Broadcasting & Publishing 1,347 0.44%
BULGARI Recreation, Other Consumer Goods 1,307 0.42%
SAI ORD Insurance 1,250 0.41%
SIRTI Construction & Housing 1,046 0.34%
MAGNETI MARELLI ORD Industrial Components 897 0.29%
FALCK ORD Metals--Steel 868 0.28%
SNIA BPD ORD Multi-Industry 844 0.27%
CARTIERE BURGO ORD Forest Products & Paper 720 0.23%
LANE G.MARZOTTO ORD Textiles & Apparel 660 0.21%
MONTEDISON RNC Multi-Industry 542 0.18%
IMPREGILO ORD Construction & Housing 444 0.14%
ITALCEMENTI RNC Building Material & Components 377 0.12%
SAI RNC Insurance 295 0.10%
RENO MEDICI A ORD Forest Products & Paper 263 0.09%
DANIELI & CO ORD Machinery & Engineering 259 0.08%
CEMENTIR Building Material & Components 245 0.08%
RINASCENTE RNC Merchandising 230 0.07%
PIRELLI SPA RNC Industrial Components 164 0.05%
RINASCENTE PRIV Merchandising 148 0.05%
LANE G.MARZOTTO RISP Textiles & Apparel 142 0.05%
DANIELI & CO RNC Machinery & Engineering 122 0.04%
SNIA BPD RNC Multi-Industry 75 0.02%
</TABLE>
A-11
<PAGE>
APPENDIX A-9
MSCI JAPAN INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
NTT CORP Telecommunications 101,412 7.66%
TOYOTA MOTOR CORP Automobiles 78,768 5.95%
BANK TOKYO-MITSUBISHI Banking 36,967 2.79%
HONDA MOTOR CO Automobiles 32,150 2.43%
MATSUSHITA ELECT IND'L Appliances & Household Durables 32,148 2.43%
SONY CORP Appliances & Household Durables 30,769 2.32%
TOKYO ELECTRIC POWER CO Utilities--Electrical & Gas 27,860 2.10%
SUMITOMO BANK Banking 26,157 1.98%
TAKEDA CHEMICAL IND Health & Personal Care 24,912 1.88%
EAST JAPAN RAILWAY CO Transportation--Road & Rail 21,254 1.61%
ITO-YOKADO CO Merchandising 20,335 1.54%
BRIDGESTONE CORP Industrial Components 18,531 1.40%
FUJI PHOTO FILM CO Recreation, Other Consumer Goods 18,411 1.39%
CANON INC Data Processing & Reproduction 18,087 1.37%
KANSAI ELECTRIC POWER CO Utilities--Electrical & Gas 17,689 1.34%
NOMURA SECURITIES CO Financial Services 17,556 1.33%
FUJITSU Data Processing & Reproduction 16,937 1.28%
HITACHI Electrical & Electronics 15,202 1.15%
DENSO CORP Industrial Components 14,908 1.13%
TOKIO MARINE & FIRE Insurance 13,743 1.04%
MITSUBISHI HEAVY IND Machinery & Engineering 12,142 0.92%
ROHM CO Electronic Components, Instruments 11,145 0.84%
DAI NIPPON PRINTING CO Business & Public Services 10,988 0.83%
NEC CORP Electrical & Electronics 10,884 0.82%
SANKYO CO Health & Personal Care 10,862 0.82%
NIPPON STEEL CORP Metals--Steel 10,771 0.81%
INDUSTRIAL BANK OF JAPAN Banking 10,612 0.80%
MITSUBISHI ESTATE CO Real Estate 10,008 0.76%
KAO CORP Food & Household Products 9,642 0.73%
TOKAI BANK Banking 8,692 0.66%
KIRIN BREWERY CO Beverages & Tobacco 8,590 0.65%
MITSUBISHI CORP Wholesale & International Trade 8,539 0.65%
KYOCERA CORP Electronic Components, Instruments 8,539 0.65%
MURATA MANUFACTURING CO Electronic Components, Instruments 8,427 0.64%
SHIZUOKA BANK Banking 8,190 0.62%
FUJI BANK Banking 8,101 0.61%
NISSAN MOTOR CO Automobiles 7,914 0.60%
YAMANOUCHI PHARM. Health & Personal Care 7,717 0.58%
MITSUI & CO Wholesale & International Trade 7,701 0.58%
TOHOKU ELECTRIC POWER CO Utilities--Electrical & Gas 7,672 0.58%
TOPPAN PRINTING CO Business & Public Services 7,606 0.57%
ASAHI BANK Banking 7,560 0.57%
ACOM CO Financial Services 7,538 0.57%
KINKI NIPPON RAILWAY CO Transportation--Road & Rail 7,332 0.55%
SHARP CORP Appliances & Household Durables 7,239 0.55%
SECOM CO Business & Public Services 7,237 0.55%
MITSUBISHI TRUST Banking 7,096 0.54%
SAKURA BANK Banking 7,069 0.53%
FANUC Electronic Components, Instruments 7,020 0.53%
TAISHO PHARMACEUTICAL CO Health & Personal Care 6,998 0.53%
SUMITOMO ELECTRIC IND Industrial Components 6,983 0.53%
OSAKA GAS CO Utilities--Electrical & Gas 6,821 0.52%
ASAHI GLASS CO Misc. Materials & Commodities 6,448 0.49%
SHIN-ETSU CHEMICAL CO Chemicals 6,300 0.48%
TORAY INDUSTRIES Chemicals 6,204 0.47%
ASAHI BREWERIES Beverages & Tobacco 6,128 0.46%
TOKYO GAS CO Utilities--Electrical & Gas 6,103 0.46%
AJINOMOTO CO Food & Household Products 5,579 0.42%
MARUI CO Merchandising 5,541 0.42%
</TABLE>
A-12
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
SANYO ELECTRIC CO Appliances & Household Durables 5,455 0.41%
MITSUI FUDOSAN CO Real Estate 5,411 0.41%
SEKISUI HOUSE Construction & Housing 5,334 0.40%
NIPPON EXPRESS CO Transportation--Road & Rail 5,280 0.40%
SUMITOMO CHEMICAL CO Chemicals 5,095 0.38%
TOYODA AUTOMATIC LOOM Machinery & Engineering 4,910 0.37%
SMC CORP Machinery & Engineering 4,865 0.37%
JUSCO CO Merchandising 4,826 0.36%
DAIWA HOUSE IND CO Construction & Housing 4,737 0.36%
YAMATO TRANSPORT CO Transportation--Road & Rail 4,657 0.35%
JAPAN AIRLINES CO Transportation--Airlines 4,653 0.35%
ASAHI CHEMICAL IND CO Chemicals 4,586 0.35%
SUMITOMO CORP Wholesale & International Trade 4,584 0.35%
KAWASAKI STEEL CORP Metals--Steel 4,497 0.34%
KOMATSU Machinery & Engineering 4,464 0.34%
ORIX CORP Financial Services 4,290 0.32%
HOYA CORP Electronic Components, Instruments 4,259 0.32%
TOKYO ELECTRON Electronic Components, Instruments 4,198 0.32%
ADVANTEST CORP Electronic Components, Instruments 4,178 0.32%
MITSUBISHI CHEMICAL CORP Chemicals 4,149 0.31%
MITSUBISHI ELECTRIC CORP Electrical & Electronics 4,115 0.31%
SHISEIDO CO Health & Personal Care 4,073 0.31%
DAIWA SECURITIES CO Financial Services 4,044 0.31%
EISAI CO Health & Personal Care 3,965 0.30%
DAIICHI PHARMACEUTICAL Health & Personal Care 3,878 0.29%
OJI PAPER CO Forest Products & Paper 3,813 0.29%
SUMITOMO METAL IND Metals--Steel 3,759 0.28%
NIPPON YUSEN K.K Transportation--Shipping 3,741 0.28%
GUNMA BANK Banking 3,615 0.27%
NGK INSULATORS Industrial Components 3,601 0.27%
MINEBEA CO Industrial Components 3,525 0.27%
SHIMANO Recreation, Other Consumer Goods 3,496 0.26%
NIPPON OIL CO Energy Sources 3,429 0.26%
SUMITOMO MARINE & FIRE Insurance 3,424 0.26%
MITSUI MARINE & FIRE Insurance 3,355 0.25%
CREDIT SAISON CO Financial Services 3,338 0.25%
KURARAY CO Chemicals 3,337 0.25%
KINDEN CORP Construction & Housing 3,271 0.25%
PIONEER ELECTRONIC CORP Appliances & Household Durables 3,239 0.24%
JOYO BANK Banking 3,225 0.24%
HANKYU CORP Transportation--Road & Rail 3,176 0.24%
NIPPON PAPER IND CO Forest Products & Paper 3,173 0.24%
KAWASAKI HEAVY IND Machinery & Engineering 3,135 0.24%
SEVENTY-SEVEN BANK Banking 3,111 0.23%
TOSTEM CORP Building Material & Components 3,096 0.23%
KUBOTA CORP Machinery & Engineering 3,072 0.23%
OBAYASHI CORP Construction & Housing 2,968 0.22%
TOYO SEIKAN KAISHA Misc. Materials & Commodities 2,933 0.22%
OLYMPUS OPTICAL CO Electronic Components, Instruments 2,922 0.22%
UNY CO Merchandising 2,874 0.22%
UNI-CHARM CORP Health & Personal Care 2,864 0.22%
OMRON CORP Electrical & Electronics 2,768 0.21%
NIPPON MEAT PACKERS Food & Household Products 2,677 0.20%
KAJIMA CORP Construction & Housing 2,659 0.20%
TOKYU CORP Transportation--Road & Rail 2,617 0.20%
NIKON CORP Electronic Components, Instruments 2,555 0.19%
NAGOYA RAILROAD CO Transportation--Road & Rail 2,515 0.19%
CHIBA BANK Banking 2,508 0.19%
MARUBENI CORP Wholesale & International Trade 2,448 0.18%
TEIJIN Chemicals 2,443 0.18%
NKK CORP Metals--Steel 2,410 0.18%
ITOCHU CORP Wholesale & International Trade 2,357 0.18%
SHIMIZU CORP Construction & Housing 2,353 0.18%
</TABLE>
A-13
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
ALPS ELECTRIC CO Electronic Components, Instruments 2,329 0.18%
MITSUI MINING & SMELTING Metals--Non Ferrous 2,327 0.18%
SEKISUI CHEMICAL CO Building Material & Components 2,319 0.18%
TOTO Building Material & Components 2,232 0.17%
ODAKYU ELECTRIC RAILWAY Transportation--Road & Rail 2,216 0.17%
CITIZEN WATCH CO Recreation, Other Consumer Goods 2,212 0.17%
MITSUBISHI MATERIALS Metals--Non Ferrous 2,199 0.17%
EBARA CORP Machinery & Engineering 2,186 0.17%
SHIONOGI & CO Health & Personal Care 2,182 0.16%
TOBU RAILWAY CO Transportation--Road & Rail 2,175 0.16%
ONWARD KASHIYAMA CO Textiles & Apparel 2,156 0.16%
YAMAGUCHI BANK Banking 2,151 0.16%
NANKAI ELECTRIC RAILWAY Transportation--Road & Rail 2,129 0.16%
NSK Industrial Components 2,119 0.16%
BANK YOKOHAMA Banking 2,113 0.16%
YAMAZAKI BAKING CO Food & Household Products 2,104 0.16%
NISSIN FOOD PRODUCTS CO Food & Household Products 2,095 0.16%
NICHIDO FIRE & MARINE Insurance 2,094 0.16%
FURUKAWA ELECTRIC CO Industrial Components 2,081 0.16%
HIROSE ELECTRIC CO Electronic Components, Instruments 2,029 0.15%
SUMITOMO METAL MINING CO Metals--Non Ferrous 2,011 0.15%
CASIO COMPUTER CO Recreation, Other Consumer Goods 1,992 0.15%
NITTO DENKO CORP Misc. Materials & Commodities 1,991 0.15%
NGK SPARK PLUG CO Industrial Components 1,990 0.15%
MYCAL CORP Merchandising 1,976 0.15%
TAKASHIMAYA CO Merchandising 1,969 0.15%
ISETAN CO Merchandising 1,936 0.15%
KANEKA CORP Chemicals 1,920 0.15%
TOHO CO Leisure & Tourism 1,896 0.14%
YAMAHA CORP Recreation, Other Consumer Goods 1,886 0.14%
KYOWA HAKKO KOGYO CO Health & Personal Care 1,868 0.14%
MAKITA CORP Electrical & Electronics 1,866 0.14%
KOKUYO CO Business & Public Services 1,865 0.14%
NIPPON FIRE & MARINE Insurance 1,833 0.14%
DAIEI Merchandising 1,824 0.14%
TBS TOKYO BROADCASTING Broadcasting & Publishing 1,735 0.13%
AOYAMA TRADING CO Merchandising 1,733 0.13%
CHUGAI PHARMACEUTICAL CO Health & Personal Care 1,723 0.13%
DAINIPPON INK Chemicals 1,704 0.13%
TAISEI CORP Construction & Housing 1,690 0.13%
DAIKIN INDUSTRIES Machinery & Engineering 1,671 0.13%
SEGA ENTREPRISES Recreation, Other Consumer Goods 1,664 0.13%
MITSUBISHI RAYON CO Chemicals 1,650 0.12%
MITSUI OSK LINES Transportation--Shipping 1,649 0.12%
KOMORI CORP Machinery & Engineering 1,585 0.12%
FUJIKURA Industrial Components 1,525 0.12%
MITSUI TRUST & BANK CO Banking 1,513 0.11%
MITSUBISHI LOGISTICS Business & Public Services 1,481 0.11%
KONICA CORP Recreation, Other Consumer Goods 1,476 0.11%
HOUSE FOODS(HOUSE FD IND Food & Household Products 1,473 0.11%
WACOAL CORP Textiles & Apparel 1,436 0.11%
KURITA WATER INDUSTRIES Machinery & Engineering 1,417 0.11%
KEIHIN ELECTRIC EXPRESS Transportation--Road & Rail 1,395 0.11%
HITACHI ZOSEN CORP Machinery & Engineering 1,378 0.10%
NIPPON COMSYS CORP Construction & Housing 1,374 0.10%
AMADA CO Machinery & Engineering 1,355 0.10%
YOKOGAWA ELECTRIC CORP Electronic Components, Instruments 1,321 0.10%
NTN CORP Industrial Components 1,302 0.10%
NISHIMATSU CONSTRUCTION Construction & Housing 1,301 0.10%
NAMCO Leisure & Tourism 1,257 0.09%
MITSUKOSHI Merchandising 1,244 0.09%
MITSUBISHI GAS CHEMICAL Chemicals 1,240 0.09%
SAPPORO BREWERIES Beverages & Tobacco 1,225 0.09%
</TABLE>
A-14
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
CHICHIBU ONODA CEMENT Building Material & Components 1,206 0.09%
MEIJI SEIKA KAISHA Food & Household Products 1,197 0.09%
TAIYO YUDEN CO Electronic Components, Instruments 1,136 0.09%
KANDENKO CO Construction & Housing 1,134 0.09%
JAPAN ENERGY CORP Energy Sources 1,126 0.09%
UBE INDUSTRIES Misc. Materials & Commodities 1,121 0.08%
CSK CORP Business & Public Services 1,116 0.08%
DAITO TRUST CONSTRUCTION Construction & Housing 1,087 0.08%
KAMIGUMI CO Business & Public Services 1,082 0.08%
KOYO SEIKO CO Industrial Components 1,067 0.08%
KIKKOMAN CORP Food & Household Products 1,067 0.08%
FUJITA KANKO Leisure & Tourism 1,054 0.08%
LION CORP Health & Personal Care 1,049 0.08%
AUTOBACS SEVEN CO Merchandising 1,037 0.08%
SUMITOMO HEAVY IND Machinery & Engineering 1,018 0.08%
HANKYU DEPARTMENT STORES Merchandising 1,012 0.08%
Q. P. CORP Food & Household Products 1,003 0.08%
YASUDA TRUST & BANK CO Banking 1,002 0.08%
SKYLARK CO Leisure & Tourism 986 0.07%
MORI SEIKI CO Machinery & Engineering 983 0.07%
HIGO BANK Banking 982 0.07%
SHOWA DENKO K.K Chemicals 960 0.07%
TAKARA SHUZO CO Beverages & Tobacco 958 0.07%
SNOW BRAND MILK PRODUCTS Food & Household Products 957 0.07%
TOSOH CORP Chemicals 953 0.07%
SANDEN CORP Industrial Components 952 0.07%
SANRIO CO Recreation, Other Consumer Goods 939 0.07%
TAKARA STANDARD CO Appliances & Household Durables 935 0.07%
TOKYO STYLE CO Textiles & Apparel 932 0.07%
INAX CORP Building Material & Components 924 0.07%
ASHIKAGA BANK Banking 916 0.07%
KONAMI CO Business & Public Services 915 0.07%
SANWA SHUTTER CORP Building Material & Components 911 0.07%
KAWASAKI KISEN KAISHA Transportation--Shipping 893 0.07%
HOKURIKU BANK Banking 887 0.07%
KISSEI PHARMACEUTICAL CO Health & Personal Care 869 0.07%
SUMITOMO FORESTRY CO Building Material & Components 867 0.07%
COSMO OIL CO Energy Sources 864 0.07%
NISSHINBO INDUSTRIES Textiles & Apparel 860 0.06%
TOKYO DOME CORP Leisure & Tourism 839 0.06%
OKUMURA CORP Construction & Housing 839 0.06%
NIPPON SHOKUBAI CO Chemicals 821 0.06%
TOYOBO CO Textiles & Apparel 810 0.06%
EZAKI GLICO CO Food & Household Products 799 0.06%
SHIMACHU CO Merchandising 793 0.06%
NIPPON SHEET GLASS CO Misc. Materials & Commodities 783 0.06%
NIHON CEMENT CO Building Material & Components 756 0.06%
DENKI KAGAKU KOGYO K.K Chemicals 750 0.06%
MEIJI MILK PRODUCTS CO Food & Household Products 747 0.06%
ARABIAN OIL CO Energy Sources 745 0.06%
ITOHAM FOODS Food & Household Products 744 0.06%
NORITAKE CO Recreation, Other Consumer Goods 741 0.06%
SEINO TRANSPORTATION CO Transportation--Road & Rail 741 0.06%
BROTHER INDUSTRIES Appliances & Household Durables 729 0.06%
TEIKOKU OIL CO Energy Sources 726 0.05%
SUMITOMO OSAKA CEMENT CO Building Material & Components 724 0.05%
AMANO CORP Machinery & Engineering 723 0.05%
PENTA-OCEAN CONSTRUCTION Construction & Housing 713 0.05%
ORIENT CORP Financial Services 701 0.05%
KATOKICHI CO Food & Household Products 674 0.05%
DAIMARU Merchandising 672 0.05%
OKUMA CORP Machinery & Engineering 652 0.05%
DAICEL CHEMICAL IND Chemicals 641 0.05%
</TABLE>
A-15
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
TOKYO STEEL MFG CO Metals--Steel 628 0.05%
MITSUI ENGINEERING&SHIP. Machinery & Engineering 618 0.05%
MITSUBISHI OIL CO Energy Sources 596 0.05%
SEIYU Merchandising 595 0.04%
NICHIREI CORP Food & Household Products 582 0.04%
MAKINO MILLING MACHINE Machinery & Engineering 577 0.04%
GUNZE Textiles & Apparel 560 0.04%
TAKUMA CO Machinery & Engineering 552 0.04%
MITSUBISHI PAPER MILLS Forest Products & Paper 551 0.04%
NAGASE & CO Chemicals 541 0.04%
DAIWA KOSHO LEASE CO Real Estate 530 0.04%
MAEDA ROAD CONSTRUCTION Construction & Housing 525 0.04%
NIPPON LIGHT METAL CO Metals--Non Ferrous 524 0.04%
JACCS CO Financial Services 516 0.04%
DAIDO STEEL CO Metals--Steel 504 0.04%
KANSAI PAINT CO Chemicals 497 0.04%
TOYO EXTERIOR CO Building Material & Components 479 0.04%
NIPPON SHINPAN CO Financial Services 474 0.04%
ISHIHARA SANGYO KAISHA Chemicals 470 0.04%
UNIDEN CORP Electrical & Electronics 464 0.04%
TRANS COSMOS Business & Public Services 464 0.04%
KYUDENKO CORP Construction & Housing 459 0.03%
KANEBO Health & Personal Care 451 0.03%
KUREHA CHEMICAL IND CO Chemicals 450 0.03%
TSUBAKIMOTO CHAIN CO Machinery & Engineering 448 0.03%
OYO CORP Business & Public Services 446 0.03%
DAIFUKU CO Machinery & Engineering 444 0.03%
DAINIPPON SCREEN MFG CO Electronic Components, Instruments 438 0.03%
KUMAGAI GUMI CO Construction & Housing 430 0.03%
TOEI CO Leisure & Tourism 415 0.03%
IWATANI INTERNATIONAL Utilities--Electrical & Gas 406 0.03%
JAPAN STEEL WORKS Machinery & Engineering 399 0.03%
NOF CORP Chemicals 388 0.03%
TOKYOTOKEIBA CO Leisure & Tourism 370 0.03%
MITSUI-SOKO CO Business & Public Services 369 0.03%
JGC CORP Machinery & Engineering 359 0.03%
NIPPON SHARYO Machinery & Engineering 345 0.03%
NIPPON SUISAN KAISHA Food & Household Products 333 0.03%
MISAWA HOMES CO Construction & Housing 333 0.03%
UNITIKA Chemicals 315 0.02%
KURABO INDUSTRIES Textiles & Apparel 312 0.02%
TOKYO TATEMONO CO Real Estate 307 0.02%
OKAMOTO INDUSTRIES Multi-Industry 293 0.02%
MARUHA CORP Food & Household Products 282 0.02%
TOA CORP Construction & Housing 282 0.02%
FUJITA CORP Construction & Housing 253 0.02%
NIIGATA ENGINEERING CO Machinery & Engineering 226 0.02%
SANKYO ALUMINIUM IND CO Building Material & Components 215 0.02%
CHIYODA CORP Machinery & Engineering 214 0.02%
KAKEN PHARMACEUTICAL CO Health & Personal Care 209 0.02%
NIPPON BEET SUGAR MFG CO Food & Household Products 205 0.02%
DAIKYO Real Estate 195 0.01%
SATO KOGYO CO Construction & Housing 181 0.01%
JAPAN METALS & CHEMICALS Metals--Steel 179 0.01%
TOYO ENGINEERING CORP Machinery & Engineering 177 0.01%
HAZAMA CORP Construction & Housing 176 0.01%
HASEKO CORP Construction & Housing 174 0.01%
AOKI CORP Construction & Housing 173 0.01%
RENOWN Textiles & Apparel 142 0.01%
GAKKEN CO Broadcasting & Publishing 135 0.01%
</TABLE>
A-16
<PAGE>
APPENDIX A-10
MSCI MALAYSIA INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
TELEKOM MALAYSIA Telecommunications 5,051 15.83%
TENAGA NASIONAL Utilities--Electrical & Gas 3,133 9.82%
MALAYAN BANKING Banking 2,516 7.88%
SIME DARBY Multi-Industry 1,530 4.80%
MALAYSIA INT'L SHIPPING Transportation--Shipping 1,395 4.37%
ROTHMANS PALL MALL (MAL) Beverages & Tobacco 1,300 4.07%
RESORTS WORLD Leisure & Tourism 1,126 3.53%
YTL CORP Construction & Housing 1,100 3.45%
NESTLE (MALAYSIA) Food & Household Products 919 2.88%
KUALA LUMPUR KEPONG Misc. Materials & Commodities 878 2.75%
RHB CAPITAL Banking 781 2.45%
PUBLIC BANK Banking 767 2.41%
GOLDEN HOPE PLANTATIONS Misc. Materials & Commodities 737 2.31%
UNITED ENGINEERS (MAL) Multi-Industry 488 1.53%
MAGNUM CORP Leisure & Tourism 470 1.47%
PROTON Automobiles 457 1.43%
PERLIS PLANTATIONS Food & Household Products 378 1.18%
ORIENTAL HOLDINGS Automobiles 374 1.17%
COMMERCE ASSET-HOLDING Banking 359 1.13%
MALAYSIAN AIRLINE SYSTEM Transportation--Airlines 355 1.11%
BERJAYA LAND Leisure & Tourism 343 1.07%
HIGHLANDS & LOWLANDS Misc. Materials & Commodities 334 1.05%
IOI CORP Misc. Materials & Commodities 320 1.00%
SHELL REFINING CO (FOM) Energy Sources 319 1.00%
TECHNOLOGY RESOURCES IND Telecommunications 278 0.87%
EDARAN OTOMOBIL NASIONAL Automobiles 275 0.86%
MALAYSIAN RESOURCES CORP Real Estate 266 0.83%
AMMB HOLDINGS Financial Services 255 0.80%
GUINNESS ANCHOR Beverages & Tobacco 245 0.77%
MALAYAN UNITED IND Multi-Industry 230 0.72%
RASHID HUSSAIN Financial Services 225 0.71%
JAYA TIASA HOLDINGS Forest Products & Paper 222 0.69%
MALAYSIA MINING CORP Multi-Industry 218 0.68%
RJ REYNOLDS Beverages & Tobacco 203 0.64%
TIME ENGINEERING Electrical & Electronics 198 0.62%
MALAYSIAN OXYGEN Chemicals 197 0.62%
MALAYSIAN PACIFIC IND Electronic Components, Instruments 182 0.57%
BERJAYA GROUP Multi-Industry 176 0.55%
KEDAH CEMENT HOLDINGS Building Material & Components 175 0.55%
TA ENTERPRISE Financial Services 154 0.48%
MBF CAPITAL Financial Services 150 0.47%
MULTI-PURPOSE HOLDINGS Multi-Industry 149 0.47%
TAN CHONG MOTOR HOLDINGS Automobiles 147 0.46%
AMSTEEL CORP Metals--Steel 146 0.46%
HUME INDUSTRIES MALAYSIA Building Material & Components 138 0.43%
SELANGOR PROPERTIES Real Estate 137 0.43%
UMW HOLDINGS Machinery & Engineering 136 0.43%
PAN MALAYSIA CEMENT WRKS Building Material & Components 132 0.41%
MALAYAN CEMENT Building Material & Components 131 0.41%
HONG LEONG INDUSTRIES Multi-Industry 129 0.40%
MULPHA INTERNATIONAL Multi-Industry 124 0.39%
EKRAN Construction & Housing 108 0.34%
PETALING GARDEN Real Estate 103 0.32%
IGB CORP Real Estate 101 0.32%
NEW STRAITS TIMES PRESS Broadcasting & Publishing 100 0.31%
METROPLEX Real Estate 99 0.31%
HONG LEONG PROPERTIES Real Estate 99 0.31%
KIAN JOO CAN FACTORY Misc. Materials & Commodities 98 0.31%
SUNGEI WAY HOLDINGS Building Material & Components 93 0.29%
</TABLE>
A-17
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
LEADER UNIVERSAL HLDGS Industrial Components 87 0.27%
IDRIS HYDRAULIC MALAYSIA Financial Services 76 0.24%
LAND & GENERAL Multi-Industry 75 0.24%
MALAYSIAN MOSAICS Wholesale & International Trade 65 0.20%
LANDMARKS Leisure & Tourism 58 0.18%
ANTAH HOLDINGS Financial Services 49 0.15%
PROMET Machinery & Engineering 45 0.14%
MYCOM Real Estate 41 0.13%
PILECON ENGINEERING Construction & Housing 41 0.13%
MALAYAWATA STEEL Metals--Steel 38 0.12%
JOHAN HOLDINGS Industrial Components 36 0.11%
KEMAYAN CORP Misc. Materials & Commodities 35 0.11%
KELANAMAS INDUSTRIES Multi-Industry 13 0.04%
</TABLE>
A-18
<PAGE>
APPENDIX A-11
MSCI MEXICO (FREE) INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
GRUPO MODELO C Beverages & Tobacco 5,703 10.35%
TELEFONOS MEXICO A Telecommunications 4,473 8.12%
CIFRA V Merchandising 4,279 7.76%
KIMBERLY-CLARK MEXICO A Health & Personal Care 2,977 5.40%
EMPRESAS LA MODERNA A Beverages & Tobacco 2,716 4.93%
GRUPO TELEVISA CPO Broadcasting & Publishing 2,588 4.70%
GRUPO CARSO Multi-Industry 2,206 4.00%
GRUPO INDUSTRIAL BIMBO A Food & Household Products 2,115 3.84%
FEMSA UNIT Beverages & Tobacco 1,792 3.25%
ALFA Multi-Industry 1,330 2.41%
GRUPO MEXICO B Metals--Non Ferrous 1,215 2.21%
CEMEX A Building Material & Components 1,123 2.04%
CONSTITUENT NAME B Multi-Industry 1,058 1.92%
CEMEX B Building Material & Components 1,048 1.90%
INDUSTRIAS PENOLES CP Metals--Non Ferrous 952 1.73%
CIFRA C Merchandising 854 1.55%
GRUPO CONTINENTAL Beverages & Tobacco 831 1.51%
APASCO Building Material & Components 809 1.47%
BANACCI B Banking 599 1.09%
CONTROLADORA COM MEX UBC Merchandising 591 1.07%
BANACCI A Banking 579 1.05%
EMPRESAS ICA Construction & Housing 561 1.02%
CEMEX CPO Building Material & Components 554 1.01%
GRUPO ELEKTRA CPO Merchandising 480 0.87%
VITRO A Misc. Materials & Commodities 444 0.81%
GRUPO IND'L MASECA B2 Food & Household Products 376 0.68%
GRUPO FIN BANCOMER A Banking 368 0.67%
TUBOS ACERO DE MEXICO Energy Equipment & Services 323 0.59%
GRUPO FIN BANCOMER B Banking 312 0.57%
GRUPO FIN BBV-PROBURSA B Financial Services 309 0.56%
EMPAQUES PONDEROSA Misc. Materials & Commodities 253 0.46%
CORPORACION GEO B Construction & Housing 246 0.45%
GRUPO FIN BANORTE A Banking 180 0.33%
BANACCI L Banking 142 0.26%
CYDSA Chemicals 122 0.22%
GRUPO FIN BANORTE B Banking 115 0.21%
CONSORCIO G GRUPO DINA Machinery & Engineering 94 0.17%
HERDEZ (GRUPO) B Food & Household Products 73 0.13%
</TABLE>
A-19
<PAGE>
APPENDIX A-12
MSCI NETHERLANDS INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
ROYAL DUTCH PETROLEUM CO Energy Sources 108,727 29.38%
ING GROEP Financial Services 52,068 14.07%
UNILEVER NV CERT Food & Household Products 42,991 11.62%
ABN AMRO HOLDING Banking 27,943 7.55%
PHILIPS ELECTRONICS Appliances & Household Durables 22,218 6.00%
AHOLD (KON.) Merchandising 18,091 4.89%
KPN (KON. PTT NEDERLAND Telecommunications 16,821 4.55%
HEINEKEN NV Beverages & Tobacco 14,741 3.98%
WOLTERS KLUWER Broadcasting & Publishing 12,673 3.42%
TNT POST GROEP Business & Public Services 12,369 3.34%
AKZO NOBEL Chemicals 11,764 3.18%
ELSEVIER Broadcasting & Publishing 9,794 2.65%
GETRONICS Business & Public Services 4,389 1.19%
ASR VERZEKERINGSGROEP Insurance 3,209 0.87%
OCE Data Processing & Reproduction 2,820 0.76%
KLM Transportation--Airlines 2,473 0.67%
BUHRMANN (KON. KNP BT) Forest Products & Paper 1,661 0.45%
IHC CALAND Construction & Housing 1,448 0.39%
HOOGOVENS (KON.) Metals--Steel 1,253 0.34%
PAKHOED (KON.) Energy Equipment & Services 868 0.23%
STORK (VER MACHINE.) Machinery & Engineering 862 0.23%
HOLLANDSCHE BETON GROEP Construction & Housing 508 0.14%
NEDLLOYD (KON.) Transportation--Road & Rail 352 0.10%
</TABLE>
A-20
<PAGE>
APPENDIX A-13
MSCI SINGAPORE INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
SINGAPORE TELECOM Telecommunications 9,780 28.96%
SINGAPORE AIRLINES Transportation--Airlines 3,920 11.61%
SINGAPORE PRESS HLDG Broadcasting & Publishing 3,063 9.07%
SINGAPORE TECH ENGR. Machinery & Engineering 2,503 7.41%
OCBC BANK Banking 2,415 7.15%
DEVELOPMENT BK SINGAPORE Banking 1,982 5.87%
UNITED OVERSEAS BANK Banking 1,767 5.23%
CITY DEVELOPMENTS Real Estate 1,414 4.19%
CREATIVE TECHNOLOGY Electronic Components, Instruments 902 2.67%
KEPPEL CORP Multi-Industry 658 1.95%
DBS LAND Real Estate 641 1.90%
VENTURE MANUFACTURING Electronic Components, Instruments 558 1.65%
SINGAPORE TECH IND'L Multi-Industry 549 1.62%
FRASER & NEAVE Beverages & Tobacco 516 1.53%
UIC UNITED INDUSTRIAL Real Estate 370 1.10%
PARKWAY HOLDINGS Business & Public Services 327 0.97%
SEMBAWANG CORP Machinery & Engineering 307 0.91%
CYCLE & CARRIAGE Automobiles 303 0.90%
NATSTEEL Metals--Steel 236 0.70%
UNITED OVERSEAS LAND Real Estate 232 0.69%
OVERSEAS UNION ENT. Leisure & Tourism 225 0.67%
NEPTUNE ORIENT LINES NOL Transportation--Shipping 171 0.51%
ROBINSON AND CO Merchandising 165 0.49%
SHANGRI-LA HOTEL Leisure & Tourism 155 0.46%
STRAITS TRADING Multi-Industry 151 0.45%
HAW PAR CORP Multi-Industry 133 0.39%
HOTEL PROPERTIES Leisure & Tourism 102 0.30%
COMFORT GROUP Transportation--Road & Rail 84 0.25%
INCHCAPE MOTORS Automobiles 74 0.22%
FIRST CAPITAL CORP Real Estate 73 0.22%
</TABLE>
A-21
<PAGE>
APPENDIX A-14
MSCI SPAIN INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
TELEFONICA Telecommunications 34,578 17.63%
BANCO BILBAO VIZCAYA Banking 22,369 11.40%
ENDESA Utilities--Electrical & Gas 21,520 10.97%
BANCO SANTANDER Banking 18,126 9.24%
IBERDROLA Utilities--Electrical & Gas 15,115 7.71%
REPSOL Energy Sources 13,897 7.08%
GAS NATURAL SDG Utilities--Electrical & Gas 10,526 5.37%
BANCO CENTRAL HISPANO Banking 10,397 5.30%
ARGENTARIA CORP BANCARIA Banking 9,469 4.83%
TABACALERA Beverages & Tobacco 4,404 2.25%
UNION ELECTRICA FENOSA Utilities--Electrical & Gas 4,105 2.09%
AUTOPISTAS CESA (ACESA) Business & Public Services 3,961 2.02%
FOMENTO CONST Y CONTR Construction & Housing 2,553 1.30%
AGUAS DE BARCELONA Business & Public Services 2,296 1.17%
TELEPIZZA Leisure & Tourism 1,885 0.96%
AZUCARERA EBRO AGRICOLAS Food & Household Products 1,880 0.96%
ZARDOYA OTIS Machinery & Engineering 1,812 0.92%
ALBA (CORP FINANCIERA) Multi-Industry 1,651 0.84%
DRAGADOS Y CONSTRUCCION Construction & Housing 1,439 0.73%
ACS ACTIV. CONST. Y SVCS Construction & Housing 1,431 0.73%
VALLEHERMOSO Real Estate 1,343 0.68%
MAPFRE (CORPORACION) Insurance 1,322 0.67%
METROVACESA Real Estate 1,285 0.66%
SOL MELIA Leisure & Tourism 1,187 0.61%
ACERINOX Metals--Steel 1,132 0.58%
CORTEFIEL Merchandising 892 0.45%
VISCOFAN Misc. Materials & Commodities 844 0.43%
PORTLAND VALDERRIVAS Building Material & Components 798 0.41%
PROSEGUR Business & Public Services 703 0.36%
URBIS (INMOBILIARIA) Real Estate 523 0.27%
PULEVA Food & Household Products 491 0.25%
URALITA Building Material & Components 485 0.25%
FAES Health & Personal Care 416 0.21%
ASTURIANA DE ZINC Metals--Non Ferrous 344 0.18%
AGUILA (EL) Beverages & Tobacco 306 0.16%
ENCE EMPR NAC CELULOSAS Forest Products & Paper 297 0.15%
SARRIO Forest Products & Paper 185 0.09%
ERCROS Chemicals 174 0.09%
</TABLE>
A-22
<PAGE>
APPENDIX A-15
MSCI SWEDEN INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
ERICSSON (LM) B Electrical & Electronics 44,814 23.76%
ASTRA A Health & Personal Care 21,989 11.66%
HENNES & MAURITZ B Merchandising 15,601 8.27%
FOERENINGSSPARBANKEN Banking 8,711 4.62%
SVENSKA HANDELSBK A Banking 8,430 4.47%
VOLVO B Automobiles 7,884 4.18%
ABB AB A Electrical & Electronics 7,083 3.76%
SKANDIA FORSAKRING Insurance 6,400 3.39%
SKAND.ENSKILDA BANKEN A Banking 6,199 3.29%
ELECTROLUX B Appliances & Household Durables 5,578 2.96%
ASTRA B Health & Personal Care 4,852 2.57%
SKANSKA B Construction & Housing 4,712 2.50%
SCA SV CELLULOSA B Forest Products & Paper 4,123 2.19%
NETCOM SYSTEMS B Telecommunications 3,992 2.12%
SANDVIK A Machinery & Engineering 3,920 2.08%
SECURITAS B Business & Public Services 3,679 1.95%
VOLVO A Automobiles 3,484 1.85%
STORA KOPPARBERG A Forest Products & Paper 3,041 1.61%
ABB AB B Electrical & Electronics 2,876 1.52%
ATLAS COPCO A Machinery & Engineering 2,706 1.43%
WM-DATA B Business & Public Services 2,687 1.42%
AGA A Chemicals 1,849 0.98%
AGA B Chemicals 1,576 0.84%
OM GRUPPEN Financial Services 1,466 0.78%
SANDVIK B Machinery & Engineering 1,433 0.76%
ATLAS COPCO B Machinery & Engineering 1,336 0.71%
SWEDISH MATCH Beverages & Tobacco 1,303 0.69%
TRELLEBORG B Multi-Industry 1,065 0.56%
SSAB SVENSKT STAL A Metals--Steel 946 0.50%
SKF B Industrial Components 906 0.48%
SVENSKA HANDELSBK B Banking 772 0.41%
STORA KOPPARBERG B Forest Products & Paper 697 0.37%
SKF A Industrial Components 688 0.36%
DILIGENTIA Real Estate 494 0.26%
GRAENGES Metals--Non Ferrous 444 0.24%
SSAB SVENSKT STAL B Metals--Steel 345 0.18%
ESSELTE A Business & Public Services 296 0.16%
ESSELTE B Business & Public Services 253 0.13%
</TABLE>
A-23
<PAGE>
APPENDIX A-16
MSCI SWITZERLAND INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
NOVARTIS NAMEN Health & Personal Care 105,974 20.35%
ROCHE HOLDING GENUSS Health & Personal Care 81,498 15.65%
NESTLE Food & Household Products 76,822 14.76%
UBS (NEW) Banking 66,238 12.72%
CREDIT SUISSE Banking 40,687 7.81%
SCHWEIZ RUECKVERS Insurance 32,128 6.17%
ROCHE HOLDING INHABER Health & Personal Care 27,345 5.25%
ZURICH ALLIED Insurance 26,765 5.14%
NOVARTIS INHABER Health & Personal Care 11,240 2.16%
ABB AG INHABER Electrical & Electronics 9,529 1.83%
ADECCO PORTEUR Business & Public Services 7,357 1.41%
ALUSUISSE-LONZA GROUP Multi-Industry 7,100 1.36%
HOLDERBANK INHABER Building Material & Components 5,533 1.06%
SAIRGROUP Transportation--Airlines 2,923 0.56%
SWATCH GROUP NOM (SMH) Recreation, Other Consumer Goods 2,248 0.43%
HOLDERBANK NAMEN Building Material & Components 2,240 0.43%
SWATCH GROUP PORT (SMH) Recreation, Other Consumer Goods 2,191 0.42%
SULZER Machinery & Engineering 1,966 0.38%
ABB AG NAMEN Electrical & Electronics 1,289 0.25%
VALORA HOLDING NAMEN Merchandising 1,157 0.22%
KUONI REISEN NAMEN B Leisure & Tourism 944 0.18%
FISCHER (GEORG) NAMEN Machinery & Engineering 929 0.18%
SCHINDLER NAMEN Machinery & Engineering 924 0.18%
SGS SURVEILLANCE PORT Business & Public Services 859 0.16%
SIKA FINANZ INHABER Chemicals 730 0.14%
SCHINDLER PART Machinery & Engineering 698 0.13%
DANZAS HOLDING Business & Public Services 690 0.13%
FORBO HOLDING Building Material & Components 612 0.12%
SGS SURVEILLANCE NOM Business & Public Services 564 0.11%
JELMOLI HOLDING INHABER Merchandising 558 0.11%
MOEVENPICK INHABER Leisure & Tourism 550 0.11%
JELMOLI HOLDING NAMEN Merchandising 357 0.07%
</TABLE>
A-24
<PAGE>
APPENDIX A-17
MSCI UNITED KINGDOM INDEX AS OF AUGUST 31, 1998
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
GLAXO WELLCOME Health & Personal Care 107,718 7.55%
BRITISH TELECOM Telecommunications 86,003 6.03%
BRITISH PETROLEUM Energy Sources 80,026 5.61%
SMITHKLINE BEECHAM Health & Personal Care 65,261 4.57%
LLOYDS TSB GROUP Banking 61,079 4.28%
VODAFONE GROUP Telecommunications 41,653 2.92%
ZENECA GROUP Health & Personal Care 36,602 2.57%
DIAGEO Beverages & Tobacco 35,555 2.49%
HSBC HOLDINGS (HKD 10) Banking 34,590 2.42%
HALIFAX Financial Services 32,446 2.27%
UNILEVER PLC Food & Household Products 30,071 2.11%
BARCLAYS Banking 28,613 2.01%
ABBEY NATIONAL Financial Services 27,833 1.95%
PRUDENTIAL CORP Insurance 26,726 1.87%
BG Utilities--Electrical & Gas 25,054 1.76%
MARKS & SPENCER Merchandising 23,038 1.61%
CABLE & WIRELESS Telecommunications 22,051 1.55%
GENERAL ELECTRIC PLC Electrical & Electronics 21,583 1.51%
CGU (COMMERCIAL UNION) Insurance 19,698 1.38%
TESCO Merchandising 19,000 1.33%
ALLIED ZURICH Insurance 17,980 1.26%
SAINSBURY (J) Merchandising 17,814 1.25%
HSBC HOLDINGS (GBP 0.75) Banking 17,149 1.20%
RENTOKIL INITIAL Business & Public Services 16,515 1.16%
BOOTS CO Merchandising 15,308 1.07%
CADBURY SCHWEPPES Beverages & Tobacco 15,073 1.06%
LEGAL & GENERAL GROUP Insurance 14,901 1.04%
BRITISH SKY BROADCASTING Broadcasting & Publishing 14,046 0.98%
RAILTRACK GROUP Business & Public Services 13,366 0.94%
GREAT UNIVERSAL STORES Merchandising 12,868 0.90%
ROYAL & SUN ALLIANCE INS Insurance 12,617 0.88%
GRANADA GROUP Leisure & Tourism 12,110 0.85%
KINGFISHER Merchandising 12,088 0.85%
BRITISH AEROSPACE Aerospace & Military Technology 11,980 0.84%
REUTERS GROUP Business & Public Services 11,754 0.82%
RIO TINTO PLC REG Metals--Non Ferrous 11,639 0.82%
SCOTTISH POWER Utilities--Electrical & Gas 11,599 0.81%
BRITISH AMERICAN TOBACCO Beverages & Tobacco 11,596 0.81%
ROYAL BANK OF SCOTLAND Banking 11,165 0.78%
PEARSON Broadcasting & Publishing 11,077 0.78%
NATIONAL POWER Utilities--Electrical & Gas 10,879 0.76%
BASS Leisure & Tourism 10,866 0.76%
NATIONAL GRID GROUP Utilities--Electrical & Gas 10,805 0.76%
BAA Business & Public Services 10,266 0.72%
REED INTERNATIONAL Broadcasting & Publishing 9,819 0.69%
LAND SECURITIES Real Estate 8,467 0.59%
SCOTTISH & NEWCASTLE Leisure & Tourism 8,322 0.58%
UNITED UTILITIES Business & Public Services 8,245 0.58%
GKN Machinery & Engineering 8,204 0.57%
CENTRICA Utilities--Electrical & Gas 8,108 0.57%
ASSOCIATED BRITISH FOODS Food & Household Products 8,086 0.57%
SIEBE Electronic Components, Instruments 7,610 0.53%
PEN & ORIENTAL STEAM Transportation--Shipping 7,066 0.50%
THAMES WATER Business & Public Services 6,992 0.49%
BRITISH AIRWAYS Transportation--Airlines 6,973 0.49%
COMPASS GROUP Business & Public Services 6,960 0.49%
BTR Multi-Industry 6,898 0.48%
IMPERIAL CHEMICAL ICI Chemicals 6,766 0.47%
BOC GROUP Chemicals 6,534 0.46%
</TABLE>
A-25
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
SAFEWAY PLC Merchandising 5,851 0.41%
EMI GROUP Recreation, Other Consumer Goods 5,646 0.40%
SOUTHERN ELECTRIC Utilities--Electrical & Gas 5,168 0.36%
STAGECOACH HOLDINGS Transportation--Road & Rail 5,046 0.35%
BRITISH LAND CO Real Estate 5,029 0.35%
SCHRODERS Financial Services 5,021 0.35%
ROLLS-ROYCE Aerospace & Military Technology 5,017 0.35%
MISYS Business & Public Services 4,780 0.33%
LADBROKE GROUP Leisure & Tourism 4,778 0.33%
LUCASVARITY Industrial Components 4,701 0.33%
ANGLIAN WATER Business & Public Services 4,417 0.31%
CARLTON COMMUNICATIONS Leisure & Tourism 4,313 0.30%
WILLIAMS Business & Public Services 4,094 0.29%
SMITHS INDUSTRIES Machinery & Engineering 3,994 0.28%
PROVIDENT FINANCIAL Financial Services 3,890 0.27%
HANSON Building Material & Components 3,637 0.25%
BLUE CIRCLE INDUSTRIES Building Material & Components 3,558 0.25%
GUARDIAN ROYAL EXCHANGE Insurance 3,523 0.25%
TI GROUP Multi-Industry 3,458 0.24%
RMC GROUP Building Material & Components 3,449 0.24%
BRITISH STEEL Metals--Steel 3,439 0.24%
RANK GROUP Leisure & Tourism 3,310 0.23%
BURMAH CASTROL Energy Sources 3,253 0.23%
TATE & LYLE Food & Household Products 2,955 0.21%
MEPC Real Estate 2,751 0.19%
NEXT Merchandising 2,737 0.19%
LASMO Energy Sources 2,721 0.19%
WOLSELEY Building Material & Components 2,643 0.19%
ELECTROCOMPONENTS Electronic Components, Instruments 2,624 0.18%
BPB Building Material & Components 2,528 0.18%
HYDER Business & Public Services 2,503 0.18%
BBA GROUP Industrial Components 2,361 0.17%
SLOUGH ESTATES Real Estate 1,973 0.14%
SEDGWICK GROUP Insurance 1,959 0.14%
UNIGATE Food & Household Products 1,938 0.14%
HAMMERSON Real Estate 1,937 0.14%
ST JAMES'S PLACE CAPITAL Financial Services 1,927 0.14%
BUNZL Misc. Materials & Commodities 1,777 0.12%
UNITED BISCUITS Food & Household Products 1,740 0.12%
IMI Multi-Industry 1,738 0.12%
REXAM Misc. Materials & Commodities 1,727 0.12%
RACAL ELECTRONICS Electrical & Electronics 1,714 0.12%
OCEAN GROUP Business & Public Services 1,597 0.11%
ARJO WIGGINS APPLETON Forest Products & Paper 1,570 0.11%
THORN Appliances & Household Durables 1,540 0.11%
BOWTHORPE Electronic Components, Instruments 1,329 0.09%
COBHAM Aerospace & Military Technology 1,291 0.09%
GREAT PORTLAND ESTATES Real Estate 1,282 0.09%
TARMAC Building Material & Components 1,248 0.09%
JOHNSON MATTHEY Multi-Industry 1,236 0.09%
FKI Electrical & Electronics 1,228 0.09%
CARADON Building Material & Components 1,172 0.08%
JARVIS Construction & Housing 1,149 0.08%
PILKINGTON Misc. Materials & Commodities 1,130 0.08%
TAYLOR WOODROW Construction & Housing 1,079 0.08%
BERKELEY GROUP (THE) Construction & Housing 1,072 0.08%
LONRHO Gold Mines 871 0.06%
RUGBY GROUP Building Material & Components 865 0.06%
ENGLISH CHINA CLAYS Misc. Materials & Commodities 846 0.06%
LEX SERVICE Business & Public Services 816 0.06%
DE LA RUE Business & Public Services 769 0.05%
MEYER INTERNATIONAL Building Material & Components 729 0.05%
BARRATT DEVELOPMENTS Construction & Housing 680 0.05%
</TABLE>
A-26
<PAGE>
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ----------------- ----------
<S> <C> <C> <C>
HEPWORTH Building Material & Components 637 0.04%
WIMPEY (GEORGE) Construction & Housing 628 0.04%
ELEMENTIS 98 Chemicals 621 0.04%
VICKERS Machinery & Engineering 580 0.04%
BICC Industrial Components 558 0.04%
AMEC Construction & Housing 524 0.04%
SEARS Merchandising 506 0.04%
MARLEY Building Material & Components 466 0.03%
COATS VIYELLA Textiles & Apparel 454 0.03%
LAIRD GROUP Machinery & Engineering 443 0.03%
WILSON (CONNOLLY) HLDGS Construction & Housing 389 0.03%
DELTA Industrial Components 337 0.02%
TRANSPORT DEVELOPMENT Transportation--Road & Rail 313 0.02%
COURTAULDS TEXTILES Textiles & Apparel 282 0.02%
</TABLE>
A-27
<PAGE>
APPENDIX B
The Fund intends to effect deliveries of Portfolio Securities on a
basis of "T" plus three New York business days (i.e., days on which the New York
Stock Exchange is open) in the relevant foreign market of each 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
1998 and calendar year 1999. 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
1998 and calendar year 1999) are as follows:
Labour Day 1 - October 5, 1998
Melbourne Cup Day 2 - November 3, 1998
Christmas Day - December 25, 1998
Boxing Day (observed) - December 28, 1998
New Year's Day - January 1, 1999
Australia Day - January 26, 1999
Labour Day 2 - March 8, 1999
Good Friday - April 2, 1999
Easter Monday - April 5, 1999
Anzac Day - April 26, 1999
Queens Birthday - June 14, 1999
Bank Holiday 1 - August 2, 1999
Labour Day - October 4, 1999
Melbourne Cup Day 2 - November 2, 1999
Christmas Day (observed) - December 27, 1999
Boxing Day (observed) - December 28, 1999
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 1998 and calendar year 1999.
1. NSW only.
2. Victoria only.
<PAGE>
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 1998 and
calendar year 1999) are as follows:
Immaculate Conception - December 8, 1998
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day (observed) - December 28, 1998
New Year's Eve 1 - December 31, 1998
New Year's Day - January 1, 1999
Epiphany - January 6, 1999
Good Friday 1 - April 2, 1999
Easter Monday - April 5, 1999
Labour Day - May 1, 1999
Ascension Day - May 13, 1999
Whit Monday - May 24, 1999
Corpus Christi - June 11, 1999
National Day - October 26, 1999
All Saints Day - November 1, 1999
Immaculate Conception - December 8, 1999
Christmas Eve - December 24, 1999
Christmas Day (observed) - December 27, 1999
St. Stephen's Day (observed) - December 28, 1999
New Year's Eve 1 - December 31, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/98 Christmas Eve 12/21/98 12/29/98 R+8
12/25/98 Christmas Day 12/22/98 12/30/98 R+8
12/28/98 St. Stephen's Day 12/23/98 1/4/99 R+12
(observed)
12/24/99 Christmas Eve 12/21/99 12/29/99 R+8
12/27/99 Christmas Day (observed) 12/22/99 12/30/99 R+8
St. Stephen's Day
12/28/99 (observed) 12/23/99 1/3/00 R+11
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+11 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>
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 1998 and
calendar year 1999) are as follows:
Bank Holiday - November 3, 1998
Remembrance Day - November 11, 1998
Christmas Day - December 25, 1998
Bridging Day (observed) - December 28, 1998
New Years Eve 1 - December 31, 1998
New Years Day - January 1, 1999
Good Friday1 - April 2, 1999
Easter Monday - April 5, 1999
Labour Day - May 1, 1999
Ascension Day - May 13, 1999
Whit Monday - May 24, 1999
National Day - July 21, 1999
Bank Holiday - August 16, 1999
Bank Holiday - November 2, 1999
Remembrance Day - November 11, 1999
Christmas Day (observed) - December 27, 1999
Bridging Day (observed) - December 28, 1999
New Years Eve 1 - December 31, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/25/98 Christmas Day 12/24/98 1/4/99 R+11
12/27/99 Christmas Day (observed) 12/24/99 1/4/00 R+11
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+11 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>
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 1998 and
calendar year 1999) are as follows:
Thanksgiving Day - October 13, 1998
Remembrance Day - November 11, 1998
Christmas Day - December 25, 1998
Boxing Day (observed) - December 28, 1998
New Year's Day - January 1, 1999
Traditional Holiday - January 4, 1999
Good Friday - April 2, 1999
Victoria Day - May 24, 1999
St. Jean Baptiste 1 - June 24, 1999
Canada Day - July 1, 1999
Civic Holiday 2 - August 2, 1999
Labour Day - September 6, 1999
Thanksgiving Day - October 11, 1999
Remembrance Day - November 11, 1999
Christmas Day (observed) - December 27, 1999
Boxing Day (observed) - December 28, 1999
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 1998 and calendar year 1999.
1. Quebec only.
2. Except Quebec.
<PAGE>
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 1998 and
calendar year 1999) are as follows:
Eve of Armistice Day - November 10, 1998
Armistice Day - November 11 1998
Christmas Day - December 25, 1998
New Year's Day - January 1, 1999
Easter Monday - April 5, 1999
Labour Day - May 1, 1999
Victory Day - May 8, 1999
Ascension Day - May 21, 1999
Whit Monday - June 1, 1999
Eve of Bastille Day - July 13, 1999
Bastille Day - July 14, 1999
Eve of Armistice Day - November 10, 1999
Armistice Day - November 11, 1999
Christmas Eve 1 - December 24, 1999
Christmas Day (observed) - December 27, 1999
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 1998 and calendar year 1999.
1. Half day.
<PAGE>
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 1998 and
calendar year 1999) are as follows:
National Holiday - October 3, 1998
Reformation Day 2 - October 31, 1998
All Saints Day 2 - November 1, 1998
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day (observed) - December 28, 1998
New Year's Eve - December 31, 1998
New Year's Day - January 1, 1999
Epiphany 2 - January 6, 1999
Monday before Lent 2 - February 23, 1999
Shrove Tuesday 3 - February 24, 1999
Good Friday - April 10, 1999
Easter Monday - April 13, 1999
Labour Day - May 1, 1999
Ascension Day - May 21, 1999
Whit Monday - June 1, 1999
Corpus Christi 2 - June 11, 1999
Reformation Day 2 - October 31, 1999
All Saints Day 2 - November 1, 1999
Christmas Eve - December 24, 1999
Christmas Day (observed) - December 27, 1999
St. Stephen's Day (observed) - December 28, 1999
New Year's Eve - December 31, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/98 Christmas Eve 12/21/98 12/29/98 R+8
12/25/98 Christmas Day 12/22/98 12/30/98 R+8
12/28/98 St. Stephen's Day 12/23/98 1/4/99 R+12
(observed)
12/24/99 Christmas Eve 12/21/99 12/29/99 R+8
12/27/99 Christmas Day (observed) 12/22/99 12/30/99 R+8
12/28/99 St. Stephen's Day 12/23/99 1/4/00 R+12
(observed)
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+12 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>
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 1998 and
calendar year 1999) are as follows:
National Day - October 1, 1998
National Day - October 2, 1998
Chung Yeung Festival - October 28, 1998
Christmas Day - December 25, 1998
Christmas Holiday - December 28, 1998
New Year's Day - January 1, 1999
Lunar New Year's Day - February 16, 1999
Lunar New Year's Day - February 17, 1999
Lunar New Year's Day - February 18, 1999
Good Friday - April 2, 1999
Easter Monday - April 5, 1999
Ching Ming Festival - April 6, 1999
Tuen Ng Festival - May 30, 1999
SAR Establishment Day - July 1, 1999
Sino-Japanese War Victory Day - August 17, 1999
Mid-Autumn Festival - September 25, 1999
National Day - October 1, 1999
National Day - October 2, 1999
Chung Yeung Festival - October 17, 1999
Christmas Day (observed) - December 27, 1999
Christmas Holiday - December 28, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
2/16/99 Lunar New Year 2/11/99 2/19/99 R+8
2/17/99 Lunar New Year 2/12/99 2/22/99 R+10
2/18/99 Lunar New Year 2/15/99 2/23/99 R+8
4/2/99 Good Friday 3/30/99 4/7/99 R+8
4/5/99 Easter Monday 3/31/99 4/8/99 R+8
4/6/99 Ching Ming Festival 4/1/99 4/9/99 R+8
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, 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>
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 1998 and
calendar year 1999) are as follows:
Immaculate Conception - December 8, 1998
Christmas Eve 1,3 - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day (observed) - December 28, 1998
New Year's Eve 3 - December 31, 1998
New Year's Day - January 1, 1999
Epiphany - January 6, 1999
Easter Monday - April 5, 1999
Liberation Day - April 25, 1999
Labour Day - May 1, 1999
All Saints Day - November 1, 1999
S. Ambrogio 2 - December 7, 1999
Immaculate Conception - December 8, 1999
Christmas Eve 1, 3 - December 24, 1999
Christmas Day (observed) - December 27, 1999
St. Stephen's Day (observed) - December 28, 1999
New Year's Eve 3 - December 31, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/98 Christmas Eve 12/21/98 12/29/98 R+8
12/25/98 Christmas Day 12/22/98 12/30/98 R+8
12/28/98 St. Stephen's Day 12/23/98 12/31/98 R+8
12/24/99 Christmas Eve 12/21/99 12/29/99 R+8
12/27/99 Christmas Day (observed) 12/22/99 12/30/99 R+8
12/28/99 St. Stephen's Day 12/23/99 12/31/99 R+8
(observed)
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+8 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>
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 1998 and
calendar year 1999) are as follows:
Sports Day - October 10, 1998
Culture Day - November 3, 1998
Labour Thanksgiving Day - November 23, 1998
Emperor's Birthday - December 23, 1998
Exchange Holiday - December 31, 1998
New Year's Day - January 1, 1999
1st Weekday after New Year's Day - January 4, 1999
Adult's Day - January 15, 1999
Foundation Day - February 11, 1999
Vernal Equinox Day - March 20, 1999
Greenery Day - April 29, 1999
Constitution Day - May 3, 1999
National Holiday - May 4, 1999
Children's Day - May 5, 1999
Marine Day - July 20, 1999
Respect for the Aged Day - September 15, 1999
Autumnal Equinox Day - September 23, 1999
Sports Day - October 10, 1999
Culture Day - November 3, 1999
Labor Thanksgiving Day - November 23, 1999
Emperor's Birthday - December 23, 1999
Exchange Holiday - December 31, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/31/98 Exchange Holiday 12/28/98 1/5/99 R+8
1/1/99 New Year's Day 12/29/98 1/6/99 R+8
1/4/99 1st Weekday after New 12/30/98 1/7/99 R+8
Year's Day
5/3/99 Constitution Day 4/28/99 5/6/99 R+8
5/4/99 National Holiday 4/29/99 5/7/99 R+8
5/5/99 Children's Day 4/30/99 5/8/99 R+8
12/31/99 Exchange Holiday 12/28/99 1/5/00 R+8
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+8 calendar days
would be the maximum number of calendar days necessary to satisfy a redemption
request made on the Japan WEBS Index Series.
<PAGE>
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 1998 and
calendar year 1999) are as follows:
Deepavali 1 - October 19, 1998
Christmas Day - December 25, 1998
New Year's Day - January 1, 1999
Hari Raya Puasa 1 - January 20, 1999
City Day - February 1, 1999
Chinese New Year - February 16, 1999
Chinese New Year - February 17, 1999
Hari Raya Haji 1 - March 29, 1999
Maal Hijrah - April 19, 1999
Labour Day - May 1, 1999
Wesak Day Observance - May 31, 1999
Prophet Mohammed's Birthday - June 25, 1999
Independence Day 1 - August 31, 1999
Deepavali - November 7, 1999
Christmas Day (observed) - December 27, 1999
REDEMPTIONS. In light of the Malaysian capital restrictions imposed in
September 1998, the Fund is concerned about its ability to honor redemptions of
Creation Units of WEBS of the Malaysia (Free) WEBS Index Series. To the extent
the Fund is presented with requests for the redemption of Creation Units of WEBS
of the Malaysia (Free) WEBS Index Series, the Fund will seek to honor such
requests consistent with the Malaysian capital restrictions. Based on the
information available to date, the Fund believes that (i) it cannot currently
make in-kind redemptions of WEBS of the Malaysia (Free) WEBS Index Series and
(ii) it may only be able to honor redemption requests through the delivery of
Malaysian ringgits in Malaysia, subject to receipt of Malaysian Central Bank
approval on a case by case basis. In the current circumstances, the Fund
suggests that requests for the redemption of Creation Units of Malaysia Series
WEBS should not be made and urges investors contemplating such redemptions to
consult with Malaysian counsel. See "Special Factors Regarding the Malaysia
(Free) WEBS Index Series" in the Statement of Additional Information.
Assuming the Fund were able to make in-kind redemptions of WEBS of the
Malaysia (Free) WEBS Index Series in the manner it had done so prior to
September 1998, the Fund is not aware of a redemption request over any Malaysian
holiday that would result in a settlement period that will exceed 7 calendar
days in the fourth quarter 1998 and calendar year 1999.
1. Subject to change.
<PAGE>
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 1998 and
calendar year 1999) are as follows:
All Saints Day - November 1, 1998
All Souls Day - November 2, 1998
Revolution Day - November 20, 1998
Our Lady of Guadeloupe Day - December 12, 1998
Christmas Eve 1 - December 24, 1998
Christmas Day - December 25, 1998
Banking's Year End - December 30, 1998
Year End - December 31, 1998
New Year's Day - January 1, 1999
Constitution Day - February 5, 1999
Holy Thursday - April 1, 1999
Good Friday - April 2, 1999
Easter Monday - April 5, 1999
Worker's Day (observed) - May 3, 1999
Battle of Puebla Day - May 5, 1999
State of the Union Address Day - September 1, 1999
Independence Day - September 16, 1999
All Saints Day - November 1, 1999
All Souls Day - November 2, 1999
Revolution Day (observed) - November 22, 1999
Christmas Eve 1 - December 24, 1999
Christmas Day (observed) - December 27, 1999
Banking's Year End - December 30, 1999
New Year's Eve - December 31, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/98 Christmas Eve 12/23/98 1/4/99 R+11
12/25/98 Christmas Day 12/28/98 1/5/99 R+8
12/30/98 Banking's Year End 12/29/98 1/6/99 R+8
4/1/99 Holy Thursday 3/29/99 4/6/99 R+8
4/2/99 Good Friday 3/30/99 4/7/99 R+8
4/3/99 Easter Monday 3/31/99 4/8/99 R+8
12/24/99 Christmas Eve 12/23/99 1/4/00 R+11
12/27/99 Christmas Day (observed) 12/28/99 1/5/00 R+8
12/30/99 Banking's Year End 12/29/99 1/6/00 R+8
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+11 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>
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
1998 and calendar year 1999) are as follows:
Christmas Day - December 25, 1998
Boxing Day (observed) - December 27, 1998
Holiday - December 31, 1998
New Year's Day - January 1, 1999
Good Friday - April 2, 1999
Easter Monday - April 5, 1999
Queen's Birthday - April 30, 1999
Ascension Day - May 13, 1999
Whit Monday - May 24, 1999
Christmas Day (observed) - December 27, 1999
Boxing Day (observed) - December 28, 1999
Holiday - December 31, 1999
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 1998 and calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/25/98 Christmas Day 12/24/98 1/4/99 R+11
12/25/99 Christmas Day 12/24/99 1/4/00 R+11
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+11 calendar
days would be the maximum number of calendar days necessary to satisfy a
redemption request made on the Netherlands WEBS Index Series.
<PAGE>
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
1998 and calendar year 1999) are as follows:
Deepavali - October 19, 1998
Christmas Day - December 25, 1998
New Year's Day - January 1, 1999
Hari Raya Puasa - January 19, 1999
Chinese New Year - February 16, 1999
Chinese New Year - February 17, 1999
Hari Raya Haji - March 29, 1999
Good Friday - April 2, 1999
Vesak Day Observance - May 31, 1999
National Day - August 9, 1999
Deepavali 1 - November 7, 1999
Christmas Day - December 25, 1999
REDEMPTION. The Fund is not aware of a redemption request over any
Singaporean holiday that would result in a settlement period that will exceed 7
calendar days in the fourth quarter of 1998 and calendar year 1999.
1. Subject to change.
<PAGE>
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 1998 and
calendar year 1999) are as follows:
Immaculate Concepcion - December 8, 1998
Christmas Eve 1 - December 24, 1998
Christmas Day - December 25, 1998
New Year's Day - January 1, 1999
Epiphany - January 6, 1999
Holy Thursday - April 1, 1999
Good Friday - April 2, 1999
Labour Day - May 1, 1999
Independence Day 1,2 - May 4, 1999
St. Isidore - May 15, 1999
St. James' Day 2 - July 26, 1999
Assumption Day 2 - August 16, 1999
Immaculate Concepcion - December 8, 1999
Christmas Day - December 25, 1999
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 1998 and calendar year 1999.
1.Madrid only.
2. Subject to change.
<PAGE>
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 1998 and
calendar year 1999) are as follows:
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
Boxing Day (observed) - December 28, 1998
New Year's Eve - December 31, 1998
New Year's Day - January 1, 1999
Epiphany - January 6, 1999
Good Friday - April 2, 1999
Easter Monday - April 5, 1999
Labour Day - May 1, 1999
Ascension Day - May 13, 1999
Whit Monday - May 24, 1999
Midsummer Eve - June 19, 1999
Christmas Eve - December 24, 1999
Christmas Day (observed) - December 27, 1999
Boxing Day (observed) - December 28, 1999
New Year's Eve - December 31, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/98 Christmas Eve 12/21/98 12/29/98 R+8
12/25/98 Christmas Day 12/22/98 12/30/98 R+8
12/28/98 Boxing Day (observed) 12/23/98 1/4/99 R+12
12/24/99 Christmas Eve 12/21/99 12/29/99 R+8
12/27/99 Christmas Day (observed) 12/22/99 12/28/99 R+8
12/28/99 Boxing Day (observed) 12/23/99 1/4/00 R+12
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+12 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>
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
1998 and calendar year 1999) are as follows:
Christmas Eve 1 - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day (observed) - December 28, 1998
New Year's Day - January 1, 1999
Bank Holiday - January 4, 1999
Good Friday - April 2, 1999
Easter Monday - April 5, 1999
Sechselauten 2 - April 20, 1999
Labour Day - May 1, 1999
Ascension Day - May 13, 1999
Whit Monday - June 1, 1999
Knabenschiessen 2 - September 14
Christmas Eve 1 - December 24, 1999
Christmas Day (observed) - December 27, 1999
St. Stephen's Day (observed) - December 28, 1999
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 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (REGISTRATION MARK) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- -------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
12/24/98 Christmas Eve 12/21/98 12/29/98 R+8
12/25/98 Christmas Day 12/22/98 12/30/98 R+8
12/28/98 Boxing Day (observed) 12/23/98 12/31/98 R+8
12/24/99 Christmas Eve 12/21/99 12/29/99 R+8
12/27/99 Christmas Day 12/22/99 12/30/99 R+8
12/28/99 Boxing Day (observed) 12/23/99 12/31/99 R+8
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+8 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>
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
1998 and calendar year 1999) are as follows:
Christmas Day - December 25, 1998
Boxing Day (observed) - December 28, 1998
New Year's Day - January 1, 1999
Good Friday - April 2, 1999
Easter Monday - April 5, 1999
May Day - May 3, 1999
Spring Bank Holiday - May 31, 1999
August Bank Holiday - August 31, 1999
Christmas Day (observed) - December 27, 1999
Boxing Day (observed) - December 28, 1999
New Year's Eve - December 31, 1999
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 1998 and calendar year 1999.
<PAGE>
World
Equity
Benchmark
Shares
A SIMPLE TRADE.
A SOPHISTICATED
INVESTMENT.
INVESTMENT
HIGHLIGHTS
WEBS(TRADEMARK)
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
WORLD EQUITY BENCHMARK SHARES
What are WEBS?
(BULLET) WEBS are 17 country-specific series of securities that are listed and
traded on the American Stock Exchange (AMEX).
(BULLET) 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.
<TABLE>
<CAPTION>
<S> <C>
WEBS are not: WEBS do not:
(BULLET) Closed-end mutual funds. (BULLET) Use leverage to increase their net assets.
(BULLET) ADRs or UITs. (BULLET) Attempt to outperform an international market
(BULLET) Derivatives. through stock selection.
</TABLE>
What is the purpose of WEBS?
(BULLET) WEBS are designed to give US investors exposure to specific
international equity markets through a diversified portfolio of stocks
for each foreign country selected.
(BULLET) These sophisticated investments are purchased through a simple stock
trade and are free from the complexities, but not the risks, of foreign
investing.
WEBS series issued for 17 countries:
COUNTRY AMEX SYMBOL IOPV COUNTRY AMEX SYMBOL IOPV
---------------------------------- ------------------------------------
Australia EWA WBJ Malaysia (Free) EWM INM
Austria EWO INY Mexico (Free) EWW INW
Belgium EWK INK Netherlands EWN INN
Canada EWC WPB Singapore (Free) EWS INR
France EWQ WBF Spain EWP INP
Germany EWG WDG Sweden EWD WBQ
Hong Kong EWH INH Switzerland EWL INL
Italy EWI INE United Kingdom EWU INU
Japan EWJ INJ
"INDICATIVE OPTIMIZED PORTFOLIO VALUES" (IOPV'S) ARE CALCULATED USING REAL-TIME
PRICES AND FX RATES AND ARE UPDATED EVERY 15 SECONDS BY BLOOMBERG(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) INDEXES IN THOSE COUNTRIES WHICH ONLY INCLUDE
STOCKS IN WHICH FOREIGNERS MAY INVEST.
Fund adviser:
(BULLET) 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:
(BULLET) WEBS provide investors immediate access to international markets.
(BULLET) At $1-$31 per share, it is a relatively low cost, simplified approach
to foreign investing.*
(BULLET) WEBS seek to produce investment results that correspond generally to
the price and yield performance of a particular MSCI Index.
(BULLET) 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.
(BULLET) Pricing is anticipated to be near NAV, due to WEBS' unique structure.
(BULLET) Daily liquidity on the AMEX in US dollars.
(BULLET) Increase potential to enhance returns and reduce portfolio risk through
international diversification.
- --------------------------------------------------------------------------------
*FOR THE TWELVE MONTH PERIOD ENDED 11/30/98 THE WEBS INDEX SERIES HAD MAINTAINED
A PRICE RANGE OF $1-$31 PER SHARE. THERE IS NO GUARANTEE THAT PRICES WILL
REMAIN WITHIN THIS RANGE.
<PAGE>
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily prices and valuations
HTTP://WEBSONTHEWEB.COM
Real-time IOPVs available on
THE BLOOMBERG(REGISTRATION MARK) 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:
(BULLET) They are large aggregations of a specified number of WEBS shares that
are created and redeemed through an "Authorized Participant"
(Broker/Dealer).
(BULLET) 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.
(BULLET) The process of creating or redeeming shares in Creation Units at their
net asset value should enable WEBS to trade close to their NAV.
(BULLET) 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:
(BULLET) 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.
(BULLET) WEBS are subject to foreign currency risk since they do not hedge
currencies.
(BULLET) 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:
(BULLET) All 17 WEBS are traded in US dollars on the AMEX and settle T+3.
(BULLET) WEBS are marginable.
(BULLET) Can be sold short, even on a downtick.
(BULLET) WEBS are fully invested in stocks--generally, at least 95%.
(BULLET) Anticipated low portfolio turnover, since WEBS are "passively" managed.
(BULLET) WEBS are tax efficient; capital gains should be modest and are due
mostly to corporate actions and rebalancing.
(BULLET) Dividends and capital gains, if any, distributed in US dollars, at
least annually.
(BULLET) 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.
(BULLET) Real-time IOPV updated every 15 seconds by Bloomberg(R) and available
on all quote systems.
WEBS possible applications:
(BULLET) Alternative or complement to traditional closed-end and open-end funds.
(BULLET) Use as a country overweighting investment strategy.
(BULLET) Obtain index exposure to a single country or a specific region.
(BULLET) Use as a hedge.
(BULLET) Combine WEBS to create a customized portfolio of multiple or regional
international markets.
(BULLET) Replicate MSCI EAFE Index through the purchase of a portfolio of WEBS.
(BULLET) Gain access to the foreign countries that do not have country specific
funds available in the United States.
(BULLET) Use as the international component in an asset allocation account.
- --------------------------------------------------------------------------------
INVHTRET-B 2/98
<PAGE>
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>
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>
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 (Free) 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.
<PAGE>
MSCI Indices have covered the world's developed markets
since 1969, and the emerging markets since 1988. They are
notable for the depth and breadth of their coverage.
Q CAN WEBS PROVIDE INTERNATIONAL AND REGIONAL EXPOSURE?
A Yes. Shares in different WEBS Index Series can be
purchased in different weightings to achieve desired
international exposure, specifically or regionally,
including most of the components of the MSCI EAFE Index
(Europe, Australasia and Far East Index).
Q HOW ARE WEBS DIFFERENT FROM MUTUAL FUND SHARES?
A There are a number of important differences. WEBS shares
trade continuously on a secondary market, the AMEX,
during regular AMEX trading hours, like any other
publicly traded U.S. stocks listed on this Exchange. In
contrast, mutual fund shares do not trade in the
secondary market, and are normally bought and sold from
the issuing mutual fund at prices determined only at the
end of the day. WEBS may be bought and sold on the AMEX
in any amount, but may be purchased from, and redeemed
by, the Fund only in very large "Creation Unit"
aggregations. Mutual fund shares are normally available
from the issuing fund in much smaller amounts, and are
redeemable in units of as little as one share.
Q HOW ARE WEBS DIFFERENT FROM CLOSED-END FUNDS?
A Closed-end funds, including other country or region-
specific funds, which also trade on U.S. exchanges,
frequently trade at discounts or premiums to their net
asset value (NAV). This is because the price of their
shares reflects the forces of supply and demand. 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.
<PAGE>
Q WHAT IS THE EXPECTED PRICE RANGE FOR WEBS?
A The price per WEBS share of each Index Series has ranged
between $5 and $23 as of 12/31/97, 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:
(BULLET) WEBS give investors broad market exposure for a
specific country, in one trade.
(BULLET) WEBS give investors a way to gain exposure
internationally yet trade locally, on the AMEX.
(BULLET) WEBS' index investing approach frees investors from
the process of stock selection and the many complexities
associated with direct foreign stock ownership.
(BULLET) WEBS trade and settle in U.S. Dollars three business
days after the trade date.
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.
<PAGE>
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 The Chase Manhattan Bank 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 4:00 p.m. New
York time, on each day such Exchange is open.
In computing a WEBS Index Series' NAV, the WEBS Index
Series' portfolio securities are valued based on their
last-quoted current price. Price information on listed
securities is taken from the exchange where the security
is primarily traded. Securities regularly traded in the
over-the-counter market are valued at the latest quoted
bid price. Other portfolio securities and assets for
which market quotations are not readily available are
valued based on fair value, as determined in good faith
by the Adviser, in accordance with procedures adopted by
the Fund's board of directors.
<PAGE>
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>
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 4:00 p.m. New York time, when the
AMEX is open for business.
<PAGE>
Q ARE THERE COSTS INVOLVED IN CREATING AND REDEEMING
CREATION UNITS?
A Yes. A redeeming investor must pay a fee to the Fund to
offset transfer and other transaction costs that may be
incurred by the relevant WEBS Index Series. Investors
will also bear the costs of transferring the deposited
securities to or from the Fund to their account.
INDEXED PERFORMANCE
Q WHAT IS THE PERFORMANCE OBJECTIVE OF EACH WEBS INDEX
SERIES?
A Each WEBS Index Series intends to remain as fully
invested as practicable in a pool of equity securities,
the performance of which will, in the Adviser's
judgement, approximate the performance of the relevant
MSCI Index taken in its entirety. 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 investment 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.
<PAGE>
Q WHAT IF THE PERFORMANCE OF THE UNDERLYING EQUITY
PORTFOLIO EXCEEDS OR UNDERPERFORMS THE RELEVANT INDEX?
A Over time, the portfolio composition of a WEBS Index
Series may be rebalanced, to reflect changes in the
subject MSCI Index, or with a view to bringing the
performance and characteristics of the WEBS Index Series
more in line with that of the relevant MSCI Index. Any
such rebalancing would require the WEBS Index Series to
incur transaction costs and other expenses.
Q DO THE WEBS INDEX SERIES TRACK THE PERFORMANCE OF THE
MSCI INDICES WITH OR WITHOUT DIVIDENDS REINVESTED?
A The MSCI Indices utilized by the WEBS Index Series
reflect the reinvestment of net dividends (except for the
Mexico (Free) WEBS Index Series, which uses an MSCI Index
that reflects reinvestment of gross dividends).
INCOME VIA DIVIDENDS AND CAPITAL GAINS
Q WHEN ARE DIVIDENDS AND CAPITAL GAINS PAID ON WEBS?
A Dividends and capital gain distributions will be payable
at least annually, and will be distributed to investors
in U.S. Dollars. Dividends may be more frequent than
annually for certain WEBS Index Series.
Q CAN WEBS DIVIDENDS BE REINVESTED?
A Dividends may not be automatically reinvested in WEBS
shares of a WEBS Index Series at this time, although
investors may always purchase additional WEBS in the
secondary market with distributions received on their
existing WEBS.
Q WHAT IS INCLUDED IN WEBS' ACCRUED INCOME?
A Net investment income from dividends, interest income,
securities lending income and net gains from currency
transactions, less WEBS Index Series operating expenses,
plus net short-term capital gains.
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.
<PAGE>
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.
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
(BULLET) To buy WEBS shares on the AMEX, contact your broker.
<PAGE>
(BULLET) 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.
(BULLET) To redeem WEBS Creation Units, contact Funds Distributor,
Inc. at the above toll-free number.
(BULLET) To get current WEBS prices, consult your broker, or any
service that carries current trading information for
AMEX-listed securities.
(BULLET) 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.
<PAGE>
WEBS
[GRAPHIC OMITTED]
World
Equity
Benchmark
Shares
- --------------------------------------------------------------------------------
MSCI Indices vs. S&P 500 - periods ending 6/30/98
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
6/30/88 - 6/30/98 6/30/91 - 6/30/98 6/30/93 - 6/30/98
<S> <C> <C> <C> <C> <C>
MEXICO (FREE) $91,462 SWITZERLAND $51,817 SWEDEN $38,282
SWITZERLAND $69,129 NETHERLANDS $45,070 SPAIN $36,079
NETHERLANDS $65,318 S&P 500 $36,359 SWITZERLAND $33,568
S&P 500 $54,787 SWEDEN $35,934 NETHERLANDS $33,081
SWEDEN $53,374 BELGIUM $35,916 GERMANY $30,058
GERMANY $49,975 SPAIN $34,347 S&P 500 $28,225
FRANCE $42,749 GERMANY $32,599 BELGIUM $27,650
UNITED KINGDOM $42,686 UNITED KINGDOM $30,998 UNITED KINGDOM $25,527
BELGIUM $42,020 FRANCE $30,985 ITALY $23,865
HONG KONG $35,506 ITALY $23,628 FRANCE $23,503
SPAIN $34,004 HONG KONG $22,083 CANADA $19,267
AUSTRIA $30,270 CANADA $19,167 AUSTRALIA $15,984
ITALY $25,977 MEXICO (FREE) $17,365 AUSTRIA $14,525
CANADA $22,620 AUSTRALIA $16,327 HONG KONG $10,941
AUSTRALIA $18,664 AUSTRIA $13,245 MEXICO (FREE) $10,678
SINGAPORE (FREE) $15,973 SINGAPORE (FREE) $9,645 SINGAPORE (FREE) $7,250
MALAYSIA (FREE) $8,655 JAPAN $8,019 JAPAN $6,809
JAPAN $6,413 MALAYSIA (FREE) $5,717 MALAYSIA (FREE) $4,172
<FN>
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%).
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.
</FN>
</TABLE>
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.
07/98
<PAGE>
WEBS
[GRAPHIC OMITTED]
World
Equity
Benchmark
Shares
MSCI Indices and S&P 500 Total Cumulative Return--$10,000 Investment
for the ten years ended 6/30/98
In US Dollars (Reinvestment of Net Dividends except for Mexico (Free) and the
S&P 500)*
[GRAPHIC OMITTED]
AVERAGE
ANNUAL
RETURN TOTAL CUMULATIVE RETURN
MEXICO (FREE) 24.77% $91,462
SWITZERLAND 21.33% $69,129
NETHERLANDS 20.64% $65,318
S&P 500 18.54% $54,787
SWEDEN 18.23% $53,374
GERMANY 17.46% $49,975
FRANCE 15.64% $42,749
UNITED KINGDOM 15.62% $42,686
BELGIUM 15.44% $42,020
HONG KONG 13.51% $35,506
SPAIN 13.02% $34,004
AUSTRIA 11.71% $30,270
ITALY 10.03% $25,997
CANADA 8.51% $22,620
AUSTRALIA 6.44% $18,664
SINGAPORE (FREE) 4.79% $15,973
MALAYSIA (FREE) -1.43% $8,655
JAPAN -4.35% $6,413
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%).
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 Please read the prospectus
and Standard and Poor's Corporation. carefully before you invest.
MSCI/SP500 07/98
<PAGE>
WEBS(TRADEMARK)
(GRAPHIC OMITTED)
World
Equity
Benchmark
Shares
Average Annual Performance of MSCI Indices and the S&P 500 - periods ending
9/30/98
In US Dollars - (Reinvestment of Net Dividends, except for Mexico (Free) and
S&P 500.)*
<TABLE>
<CAPTION>
TOTAL CUMULATIVE RETURN
$10,000 INVESTMENT
YTD 1 YR 3 YR 5 YR 10 YR 9/30/98-9/30/98
--- ---- ---- ---- ----- -----------------------
<S> <C> <C> <C> <C> <C> <C>
AUSTRALIA -7.29 -19.25 -0.60 5.58 5.51 $17,090
AUSTRIA -7.33 -9.64 -2.48 -0.73 7.92 $21,424
BELGIUM 36.48 40.05 23.17 21.49 14.50 $38,742
CANADA -18.69 -22.99 6.96 8.59 5.90 $17,746
FRANCE 15.92 14.34 18.31 12.49 13.22 $34,618
GERMANY 15.27 15.49 18.48 16.81 14.65 $39,237
HONG KONG -25.71 -47.11 -7.67 0.47 14.27 $37,951
ITALY 19.99 23.97 21.72 14.95 8.26 $22,107
JAPAN -17.18 -33.53 -17.50 -10.96 -5.96 $5,408
MALAYSIA (FREE)(DAGGER) -56.90 -73.37 -44.31 -27.08 -5.19 $5,870
MEXICO (FREE)(DAGGER) -39.83 -41.87 2.11 -5.84 21.51 $70,172
NETHERLANDS 2.04 -0.79 19.54 19.95 18.39 $54,096
SINGAPORE (FREE)(DAGGER) -35.67 -48.93 -25.12 -10.31 5.13 $16,490
SPAIN 16.81 14.75 30.82 21.42 11.62 $30,016
SWEDEN -0.65 -11.66 14.21 20.91 14.88 $40,052
SWITZERLAND -0.42 7.77 17.22 20.29 19.15 $57,660
UNITED KINGDOM 3.03 3.36 18.42 16.59 14.42 $38,477
- ------------------------------------------------------------------------------------------------
EAFE -0.55 -8.34 3.75 5.35 5.10 $16,438
- ------------------------------------------------------------------------------------------------
EAFE EX JAPAN 5.02 1.91 14.59 14.56 13.46 $35,346
- ------------------------------------------------------------------------------------------------
EUROPE 8.26 8.34 18.84 17.21 14.48 $38,656
- ------------------------------------------------------------------------------------------------
S&P 500 4.81 7.37 20.28 17.25 14.10 $37,404
<FN>
MSCI: Morgan Stanley Capital International
EAFE: Europe, Australasia and Far East.
(DAGGER) Lipper does not have a net dividend return for these indices
*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%).
</FN>
</TABLE>
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.
Source: Lipper Analytical Services,
Morgan Stanley Capital International Please read the prospectus carefully
and Standard and Poor's Corporation before you invest.
10/98
<PAGE>
WEBS (TRADEMARK)
(LOGO OMITTED)
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>
RANKING 1997 1996 1995 1994
--------------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Mexico (Free) 53.92% Spain 40.05% Switzerland 44.12% Japan 21.44%
2. Switzerland 44.25% Sweden 37.21% S&P 500 37.58% Sweden 18.34%
3. Italy 35.48% Hong Kong 33.08% Sweden 33.36% Netherlands 11.70%
4. S&P 500 33.36% Canada 28.54% Spain 29.83% Italy 11.56%
5. Spain 25.41% Netherlands 27.51% Netherlands 27.71% Belgium 8.24%
6. Germany 24.57% United Kingdom 27.42% Belgium 25.88% Singapore (Free) 5.81%
7. Netherlands 23.77% Malaysia (Free) 25.89% Hong Kong 22.57% Australia 5.40%
8. United Kingdom 22.62% S&P 500 22.96% United Kingdom 21.27% Germany 4.66%
9. Belgium 13.55% France 21.20% Canada 18.31% Switzerland 3.54%
10. Sweden 12.92% Mexico (Free) 18.70% Germany 16.41% S&P 500 1.32%
11. Canada 12.80% Australia 16.49% France 14.12% United Kingdom -1.63%
12. France 11.94% Germany 13.58% Singapore (Free) 12.19% Canada -3.04%
13. Austria 1.57% Italy 12.59% Australia 11.19% Spain -4.80%
14. Australia -10.44% Belgium 12.03% Malaysia (Free) 5.16% France -5.18%
15. Hong Kong -23.29% Austria 4.51% Italy 1.05% Austria -6.28%
16. Japan -23.67% Switzerland 2.28% Japan 0.69% Malaysia (Free) -19.94%
17. Singapore (Free) -40.46% Singapore (Free) 0.33% Austria -4.72% Hong Kong -28.90%
18. Malaysia (Free) -68.11% Japan -15.50% Mexico (Free) -20.37% Mexico (Free) -40.55%
</TABLE>
<TABLE>
<CAPTION>
RANKING 1993 1992 1991
------------------------ ------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Hong Kong 116.70% Hong Kong 32.29% Mexico (Free) 126.04%
Malaysia (Free) 110.00% Mexico (Free) 24.98% Hong Kong 49.52%
Singapore (Free) 73.41% Malaysia (Free) 17.76% Singapore (Free) 43.61%
Mexico (Free) 49.35% Switzerland 17.23% Australia 33.64%
Switzerland 45.79% S&P 500 7.62% S&P 500 30.47%
Sweden 36.99% Singapore (Free) 4.49% France 17.83%
Germany 35.64% France 2.81% Netherlands 17.80%
Netherlands 35.28% Netherlands 2.30% United Kingdom 16.02%
Australia 35.17% Belgium -1.47% Switzerland 15.77%
Spain 29.78% United Kingdom -3.65% Spain 15.63%
Italy 28.53% Germany -10.27% Sweden 14.42%
Austria 28.09% Austria -10.65% Belgium 13.77%
Japan 25.48% Australia -10.82% Canada 11.08%
United Kingdom 24.44% Canada -12.15% Japan 8.92%
Belgium 23.51% Sweden -14.41% Germany 8.16%
France 20.91% Japan -21.45% Malaysia (Free) 4.95%
Canada 17.58% Spain -21.87% Italy -1.82%
S&P 500 10.08% Italy -22.22% Austria -12.23%
<FN>
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%).
</FN>
</TABLE>
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.
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 Capital International, Please read the prospectus carefully
and Standard and Poor's Corporation before you invest.
MSCIFACT 10/98