<PAGE> 1
As filed with the Securities and Exchange Commission on September 28, 1998
Registration No. 33-97598
811-9102
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 11
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14
(CHECK APPROPRIATE BOX OR BOXES)
WEBS INDEX FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
C/O PFPC INC. 19809
400 BELLEVUE PARKWAY (Zip Code)
WILMINGTON, DELAWARE
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (302) 791-3239
NATHAN MOST
PRESIDENT
WEBS INDEX FUND, INC.
C/O PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DELAWARE 19809
(Name and Address of Agent for Service)
COPIES TO:
DONALD R. CRAWSHAW, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
It is proposed that this filing will become effective (check appropriate box)
+ / / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
+ /x/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
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<S> <C>
PART A
Item 1. Cover Page...................................................... Cover Page
Item 2. Synopsis........................................................ Summary Expenses
Item 3. Condensed Financial Information................................. Financial Highlights
Item 4. General Description of Registrant............................... Cover Page; WEBS Index Fund, Inc. and its
Investment Objective; Investment
Policies; General Information
Item 5. Management of the Fund.......................................... Summary Expenses; Management of the Fund
Item 6. Capital Stock and Other Securities.............................. Tax Matters; General Information
Item 7. Purchase of Securities Being Offered............................ Management of the Fund; Exchange Listing
and Trading of WEBS; Purchase and
Issuance of WEBS in Creation Units
Item 8. Redemption or Repurchase........................................ Redemption of WEBS in Creation Units
Item 9. Pending Legal Proceedings....................................... Not Applicable
PART B
Item 10. Cover Page .................................................... Cover Page
Item 11. Table of Contents ............................................. Table of
Item 12. General Information and History ............................... Description of the Fund
Item 13. Investment Objectives and Policies ............................ Investment Policies and Restrictions;
Brokerage Transactions
Item 14. Management of the Fund ........................................ Management of the Fund; Investment
Advisory, Management, Administrative and
Distribution Services
Item 15. Control Persons and Principal Holders of Securities ........... Management of the Fund; Investment
Advisory, Management, Administrative and
Distribution Services
Item 16. Investment Advisory and Other Services ........................ Management of the Fund; Investment
Advisory, Management, Administrative and
Distribution Services; Counsel and
Independent Auditors
Item 17. Brokerage Allocation .......................................... Brokerage Transactions
Item 18. Capital Stock and Other Securities ............................ Capital Stock and Shareholder Reports;
Taxes
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................................... Purchase and Issuance of WEBS in Creation
Units; Redemption of WEBS in Creation
Units; Determining Net Asset Value
Item 20. Tax Status ..................................................... Dividends and Distributions; Taxes
Item 21. Underwriters.................................................... Investment Advisory, Management,
Administrative and Distribution Services;
Purchase and Issuance of WEBS in Creation
Units
Item 22. Calculations of Performance Data................................ Performance Information
Item 23. Financial Statements............................................ Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C of this Registration Statement.
<PAGE> 3
WORLD EQUITY BENCHMARK SHARES(SM)
WEBS INDEX FUND, INC.
WEBS Index Fund, Inc. (the "Fund") is an index fund consisting of
separate series (each, a "WEBS Index Series"), each of which invests primarily
in common stocks in an effort to track the performance of a specified foreign
equity market index. The initial seventeen WEBS Index Series offered by this
Prospectus are the Australia WEBS Index Series, the Austria WEBS Index Series,
the Belgium WEBS Index Series, the Canada WEBS Index Series, the France WEBS
Index Series, the Germany WEBS Index Series, the Hong Kong WEBS Index Series,
the Italy WEBS Index Series, the Japan WEBS Index Series, the Malaysia (Free)
WEBS Index Series, the Mexico (Free) WEBS Index Series, the Netherlands WEBS
Index Series, the Singapore (Free) WEBS Index Series, the Spain WEBS Index
Series, the Sweden WEBS Index Series, the Switzerland WEBS Index Series and the
United Kingdom WEBS Index Series.
The investment objective of each WEBS Index Series of the initial
seventeen WEBS Index Series is to seek to provide investment results that
correspond generally to the price and yield performance of publicly traded
securities in the aggregate in particular markets, as represented by a
particular foreign equity securities index compiled by Morgan Stanley Capital
International ("MSCI"). THE MSCI INDICES (AS DEFINED HEREIN) UTILIZED BY THE
FUND REFLECT THE REINVESTMENT OF NET DIVIDENDS (EXCEPT FOR THE MSCI MEXICO
(FREE) INDEX UTILIZED BY THE MEXICO (FREE) WEBS INDEX SERIES, WHICH REFLECTS THE
REINVESTMENT OF GROSS DIVIDENDS).
The shares of common stock of each WEBS Index Series are sometimes
referred to as "World Equity Benchmark Shares (SM)" or "WEBS (SM)." The WEBS are
listed for trading on the American Stock Exchange, Inc. (the "AMEX"). The
non-redeemable WEBS trade on the AMEX during the day at prices that differ to
some degree from their net asset value. There can be no assurance that an active
trading market will 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.
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 __, 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 __, 1998
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND'S SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY SHARES IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary................................................... 4
Summary of Fund Expenses............................................. 6
Financial Highlights................................................. 10
The Fund and its WEBS Index Series................................... 16
WEBS Index Fund, Inc. and its Investment Objective............. 16
World Equity Benchmark Shares: "WEBS".......................... 16
Who Should Invest?............................................. 16
Investment Policies............................................ 17
Implementation of Policies..................................... 18
Investment Limitations......................................... 19
The Benchmark MSCI Indices Utilized by the WEBS Index Series... 20
Management of the Fund......................................... 26
Exchange Listing and Trading of WEBS........................... 27
Investment Considerations and Risks............................ 28
Determination of Net Asset Value............................... 29
Creation Units................................................. 30
Purchase and Issuance of WEBS in Creation Units................ 30
Redemption of WEBS in Creation Units........................... 31
Dividends and Capital Gains Distributions...................... 31
Tax Matters.................................................... 32
Book-Entry Only System......................................... 33
Performance.................................................... 33
Year 2000 Compliance........................................... 34
European Currency Unification.................................. 34
General Information............................................ 35
Available Information.......................................... 35
</TABLE>
2
<PAGE> 5
"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.
3
<PAGE> 6
PROSPECTUS SUMMARY
The Fund and its WEBS Index
Series.................... WEBS Index Fund, Inc. (the "Fund") is an
index fund consisting of separate series
(each, a "WEBS Index Series"), the Australia
WEBS Index Series, the Austria WEBS Index
Series, the Belgium WEBS Index Series, the
Canada WEBS Index Series, the France WEBS
Index Series, the Germany WEBS Index Series,
the Hong Kong WEBS Index Series, the Italy
WEBS Index Series, the Japan WEBS Index
Series, the Malaysia (Free) WEBS Index
Series, the Mexico (Free) WEBS Index Series,
the Netherlands WEBS Index Series, the
Singapore (Free) WEBS Index Series, the
Spain WEBS Index Series, the Sweden WEBS
Index Series, the Switzerland WEBS Index
Series and the United Kingdom WEBS Index
Series.
Investment Objective of the WEBS
Index Series................... The investment objective of each WEBS Index
Series of the initial seventeen WEBS Index
Series is to seek to provide investment
results that correspond generally to the
price and yield performance of publicly
traded securities in the aggregate in
particular markets, as represented by a
particular foreign equity securities index
compiled by Morgan Stanley Capital
International ("MSCI"). Such indices are
referred to herein as "MSCI Indices." THE
MSCI INDICES UTILIZED BY THE FUND REFLECT
THE REINVESTMENT OF NET DIVIDENDS (EXCEPT
FOR THE MSCI MEXICO (FREE) INDEX UTILIZED BY
THE MEXICO (FREE) WEBS INDEX SERIES, WHICH
REFLECTS THE REINVESTMENT OF GROSS
DIVIDENDS).
WEBS............................. The shares issued in respect of each WEBS
Index Series are referred to as "World
Equity Benchmark Shares" or "WEBS." WEBS of
a WEBS Index Series are issued by the Fund
only in large aggregations of WEBS called
"Creation Units" on a continuous basis
through Funds Distributor, Inc. at their net
asset value next determined after receipt of
an order. WEBS are not offered by the Fund
in less than Creation Unit aggregations, but
shares of WEBS may be bought or sold in the
secondary market. EXCEPT WHEN AGGREGATED IN
CREATION UNITS, WEBS ARE NOT REDEEMABLE
SECURITIES OF THE FUND.
Exchange Listing and Trading of
WEBS............................ The WEBS have been listed for secondary
market trading on the American Stock
Exchange, Inc. A "round lot" of WEBS is 100
shares. At October __, 1998, the closing
price per share of the WEBS of each WEBS
Index Series was between $___ (_____ WEBS
Index Series) and $__ (_____ WEBS Index
Series) although there can be no assurance
of this price range or that an 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. Morgan Stanley
Trust Company ("MSTC") 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> 7
THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED
("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF
MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY WEBS INDEX FUND, INC.
("LICENSEE"). THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY
CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL
INTERNATIONAL S.A.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY MEMBER OF
THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY, OR
IN THE WEBS OF ANY WEBS INDEX SERIES PARTICULARLY, OR THE ABILITY OF THE INDICES
IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS
THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN
STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK
("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO
MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND
CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX SERIES OR THE ISSUER
THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS
OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX SERIES OR THE OWNERS OF THE WEBS OF
ANY WEBS INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR
CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN
STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS
RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN, THE DETERMINATION OF THE TIMING
OF, PRICES OF, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED
OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY WEBS
INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED UNDER ANY LICENSE AGREEMENT OR FOR ANY OTHER
USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED WARRANTIES,
AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MSCI INDICES OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY
OR CIPSA HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
The information contained herein regarding MSCI, the MSCI Indices,
local securities markets and The Depository Trust Company ("DTC") was obtained
from publicly available sources.
5
<PAGE> 8
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, $_______; 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 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 30
of this Prospectus.
6
<PAGE> 9
<TABLE>
<CAPTION>
HONG
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY KONG
WEBS WEBS WEBS WEBS WEBS WEBS WEBS
INDEX INDEX INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases of
Creation Units of WEBS (as a percentage of
amount of investment) ....................... None None None None None None None
Maximum Transaction Fee (a) for Purchase of one
Creation Unit of WEBS:
In-kind and Cash Purchases (b) .............. $ 2,200 $ 1,700 $ 1,400 $ 3,400 $ 3,600 $ 2,500 $ 3,500
Additional Variable Charge for Cash
Purchases (NOTE - The Fund will not
ordinarily permit cash purchases.)(b) ..... .60% .67% .30% .30% .25% .25% .60%
Deferred Sales Load ............................. None None None None None None None
Maximum Redemption Transaction Fee (a) for
Redemption of one Creation Unit of WEBS:
In-kind and Cash Redemptions (c) ............ $ 2,200 $ 1,700 $ 1,400 $ 3,400 $ 3,600 $ 2,500 $ 3,500
Additional Variable Charge for Cash
Redemptions (NOTE - The Fund will not
ordinarily permit cash redemptions.) (c) . .60% .67% .30% .30% .25% .25% .60%
B. Annual Series Operating Expenses (as a
percentage of average net assets)
Management Fees ................................. .27% .27% .27% .27% .27% .27% .27%
12b-1 Fees (d) .................................. .20% .20% .20% .20% .20% .20% .20%
Other Expenses* ................................. -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total Operating Expenses* ....................... -- -- -- -- -- -- --
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MALAYSIA MEXICO SINGAPORE
ITALY JAPAN (FREE) (FREE) NETHERLANDS (FREE)
WEBS WEBS WEBS WEBS WEBS WEBS
INDEX INDEX INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES SERIES SERIES
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases of
Creation Units of WEBS (as a percentage of
amount of investment) ....................... None None None None None None
Maximum Transaction Fee (a) for Purchase of one
Creation Unit of WEBS:
In-kind and Cash Purchases (b) .............. $ 2,000 $ 7,700 $4,800 $2,500 $1,800 $2,500
Additional Variable Charge for Cash
Purchases (NOTE - The Fund will not
ordinarily permit cash purchases.)(b) ..... .30% .15% 1.07% .50% .25% 1.30%
Deferred Sales Load ............................. None None None None None None
Maximum Redemption Transaction Fee (a) for
Redemption of one Creation Unit of WEBS:
In-kind and Cash Redemptions (c) ............ $ 2,000 $ 7,700 $4,800 $2,500 $1,800 $2,500
Additional Variable Charge for Cash
Redemptions (NOTE - The Fund will not
ordinarily permit cash redemptions.) (c) . .30% .40% 1.07% .50% .25% 1.30%
B. Annual Series Operating Expenses (as a
percentage of average net assets)
Management Fees ................................. .27% .27% .27% .27% .27% .27%
12b-1 Fees (d) .................................. .20% .20% .20% .20% .20% .20%
Other Expenses* ................................. -- -- -- -- -- --
------- ------- ------ ------ ------ ------
Total Operating Expenses* ....................... -- -- -- -- -- --
======= ======= ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
UNITED
SPAIN SWEDEN SWITZERLAND KINGDOM
WEBS WEBS WEBS WEBS
INDEX INDEX INDEX INDEX
SERIES SERIES SERIES SERIES
------ ------ ------ ------
<S> <C> <C> <C> <C>
A. Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases of
Creation Units of WEBS (as a percentage of
amount of investment) ....................... None None None None
Maximum Transaction Fee (a) for Purchase of one
Creation Unit of WEBS:
In-kind and Cash Purchases (b) .............. $2,300 $2,200 $1,800 $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) ............ $2,300 $2,200 $1,800 $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* ................................. -- -- -- --
------ ------ ------ -----
Total Operating Expenses* ....................... -- -- -- --
====== ====== ====== =====
</TABLE>
*These expense ratio percentages reflect the average daily net assets of the 17
WEBS Index Series for the fiscal year ended August 31, 1998, which totaled
$ . The net assets of the 17 WEBS Index Series totaled
$ as of August 31, 1998.
7
<PAGE> 10
(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. Until further notice, the Fund has suspended new creations of
creation units of WEBS of its Malaysia (Free) WEBS Index Series. The
basic purchase transaction fees for in-kind and cash purchases are the
same no matter how many Creation Units of a given WEBS Index Series are
being purchased pursuant to any one purchase order except in the case
of the Malaysia (Free) WEBS Index Series where the amount shown
reflects inclusion of a variable charge based on the total market value
of one Creation Unit of the relevant WEBS Index Series. The variable
charge represents stamp duty or "put through" fees imposed when
securities are delivered in the local market. The charge for Malaysia
is .30% of market value. The Fund may adjust such fees from time to
time based upon actual experience. Cash purchases of Creation Units,
when available, are also subject to an Additional Variable Charge,
expressed as a percentage of the value of the Portfolio Deposit. The
Fund will not ordinarily permit cash purchases. See "Purchase and
Issuance of WEBS in Creation Units."
(c) Paid to the Fund to offset transaction costs incurred by each WEBS
Index Series in connection with the redemption of a Creation Unit. The
redemption transaction fees listed are the fees expected to be imposed
in connection with the redemption of Creation Units of a given WEBS
Index Series. The basic redemption transaction fees are the same no
matter how many Creation Units of a given WEBS Index Series are being
redeemed pursuant to any one redemption request. The Fund may adjust
such fees from time to time based upon actual experience. Cash
redemptions of Creation Units, when available, are also subject to an
Additional Variable Charge, expressed as a percentage of the value of
the Creation Unit(s) being redeemed. The Fund does not ordinarily
permit cash redemptions. See "Redemption of WEBS in Creation Units."
(d) All payments by the Fund to the Distributor will be made pursuant to
the Fund's Rule 12b-1 Plan at a rate set from time to time by the Board
of Directors, provided that the annual rate may not exceed .25% of the
Fund's average daily net assets. The Board of Directors has determined
to limit the annual fee payable under the Rule 12b-1 Plan with respect
to each WEBS Index Series so as not to exceed .20% of the average daily
net assets of each WEBS Index Series until further notice. See
"Management of the Fund -- Distributor." A long-term shareholder of a
WEBS Index Series may pay more in total sales charges than the economic
equivalent of the maximum front-end sales charges otherwise permitted
by the rules of the National Association of Securities Dealers, Inc. In
addition, the Distributor has 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.
8
<PAGE> 11
EXAMPLES OF EXPENSES
(a) WEBS in less than Creation Units are not redeemable. The Fund redeems
Creation Units principally on an in-kind basis for Deposit Securities.
See "Redemption of WEBS in Creation Units" herein and in the Statement
of Additional Information. If an investor were permitted to purchase
and redeem less than a Creation Unit of WEBS on an in-kind basis, such
investor would pay the following expenses on a $1,000 investment
(payment with a deposit of Deposit Securities), assuming (1) a 5%
annual return and (2) redemption (delivery of Deposit Securities), at
the end of each indicated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
($) ($) ($) ($)
------ ------- ------- --------
<S> <C> <C> <C> <C>
Australia WEBS Index Series.................. -- -- -- --
Austria WEBS Index Series.................... -- -- -- --
Belgium WEBS Index Series.................... -- -- -- --
Canada WEBS Index Series..................... -- -- -- --
France WEBS Index Series..................... -- -- -- --
Germany WEBS Index Series.................... -- -- -- --
Hong Kong WEBS Index Series.................. -- -- -- --
Italy WEBS Index Series...................... -- -- -- --
Japan WEBS Index Series...................... -- -- -- --
Malaysia (Free) WEBS Index Series............ -- -- -- --
Mexico (Free) WEBS Index Series.............. -- -- -- --
Netherlands WEBS Index Series................ -- -- -- --
Singapore (Free) WEBS Index Series........... -- -- -- --
Spain WEBS Index Series...................... -- -- -- --
Sweden WEBS Index Series..................... -- -- -- --
Switzerland WEBS Index Series................ -- -- -- --
United Kingdom WEBS Index Series............. -- -- -- --
</TABLE>
(b) Such an investor would pay the following expenses on the same
investment, assuming no redemptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
($) ($) ($) ($)
------ ------- ------- --------
<S> <C> <C> <C> <C>
Australia WEBS Index Series.................. -- -- -- --
Austria WEBS Index Series.................... -- -- -- --
Belgium WEBS Index Series.................... -- -- -- --
Canada WEBS Index Series..................... -- -- -- --
France WEBS Index Series..................... -- -- -- --
Germany WEBS Index Series.................... -- -- -- --
Hong Kong WEBS Index Series.................. -- -- -- --
Italy WEBS Index Series...................... -- -- -- --
Japan WEBS Index Series...................... -- -- -- --
Malaysia (Free) WEBS Index Series............ -- -- -- --
Mexico (Free) WEBS Index Series.............. -- -- -- --
Netherlands WEBS Index Series................ -- -- -- --
Singapore (Free) WEBS Index Series........... -- -- -- --
Spain WEBS Index Series...................... -- -- -- --
Sweden WEBS Index Series..................... -- -- -- --
Switzerland WEBS Index Series................ -- -- -- --
United Kingdom WEBS Index Series............. -- -- -- --
</TABLE>
The examples above illustrate the estimated expenses associated with a
$1,000 investment in a Creation Unit of WEBS on an in-kind basis over periods of
1, 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 $______ and $________ depending on the WEBS Index
Series, assuming for this purpose that the net asset value of a Creation Unit
was the same as the value of the Deposit Securities as of such date. See the
second paragraph under "Summary of Fund Expenses."
9
<PAGE> 12
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 year ended August 31, 1997 are a part of
previous financial statements audited by ______________. 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
-----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $10.15 $9.95(1)
------ --------
Net investment income/(loss)(+)........... 0.17 0.10
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other
assets and
liabilities denominated in foreign
currencies............................... 0.47 0.29
------ --------
Net increase/(decrease) in net assets
resulting from operations................ 0.64 0.39
------ --------
Less distributions
Dividends from net investment income...... (0.16) (0.08)
Dividends in excess of net investment
income.................................... (0.04) (0.05)
Distributions from net realized capital
gains..................................... (0.04) (0.02)
Distributions in excess of net realized
gains..................................... -- --
Return of capital......................... (0.20) (0.04)
------ --------
Total dividends and distributions........ (0.44) (0.19)
------ --------
Net asset value, end of period............ $10.35 $10.15
====== ======
Total Investment Return(2).................. 6.23% 3.88%(4)
------ --------
Ratios/Supplemental Data
Net assets, end of period (in 000's)...... $41,406 $12.177
Ratios of expenses to average net
assets(5)................................. 1.33% 1.59%(3)
Ratios of net investment income/(loss) to
average net assets(5).................... 1.57% 2.18%(3)
Portfolio turnover(6)..................... 5.30% 8.84%(4)
Average commission rate paid.............. $0.0182 $0.0085
</TABLE>
<TABLE>
<CAPTION>
AUSTRIA WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- -------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period........ $10.40 $10.91(1)
------ ------
Net investment income/(loss)(+)............. (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................................. 0.13 (0.41)
------ ------
Net increase/(decrease) in net assets
resulting from operations.................. 0.11 (0.37)
------ ------
Less distributions
Dividends from net investment income........ -- (0.02)
Dividends in excess of net investment
income...................................... -- (0.01)
Distributions from net realized capital
gains....................................... -- (0.03)
Distributions in excess of net realized
gains....................................... -- --
Return of capital........................... -- (0.08)
------ ------
Total dividends and distributions.......... (0.14)
------ ------
Net asset value, end of period.............. $10.51 $10.40
====== ======
Total Investment Return(2).................... 1.06% (3.39)%(4)
------ ------
Ratios/Supplemental Data
Net assets, end of period (in 000's)........ $4,205 $13,520
Ratios of expenses to average net
assets(5)................................... 1.68% 1.56%(3)
Ratios of net investment income/(loss) to
average net assets(5)...................... (0.22)% 0.87%(3)
Portfolio turnover(6)....................... 28.47% 9.60%(4)
Average commission rate paid................ $0.1719 $0.2986
</TABLE>
<TABLE>
<CAPTION>
BELGIUM WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period........ $ 14.99 $14.92(1)
------- ------
Net investment income/(loss)(+)............. 0.77 0.40
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other
assets and liabilities denominated in
foreign currencies......................... 0.62 0.36
------- -------
Net increase/(decrease) in net assets
resulting from operations.................. 1.39 0.76
------- -------
Less distributions
Dividends from net investment income........ (0.33) (0.54)
Dividends in excess of net investment
income...................................... (0.28) (0.09)
Distributions from net realized capital
gains....................................... (0.12) (0.06)
Distributions in excess of net realized
gains....................................... -- --
Return of capital........................... (0.01) --
------- ------
Total dividends and distributions.......... (0.74) (0.69)
------- ------
Net asset value, end of period.............. $ 15.64 $14.99
-====== ======
Total Investment Return(2).................... 9.26% 5.01%(4)
------- ------
Ratios/Supplemental Data
Net assets, end of period (in 000's)........ $32,528 $1,800
Ratios of expenses to average net
assets(5)................................... 1.24% 2.29%(3)
Ratios of net investment income/(loss) to
average net assets(5)...................... 4.63% 5.67%(3)
Portfolio turnover(6)....................... 16.83 6.25%(4)
Average commission rate paid................ $0.3379 $0.4327
</TABLE>
- ---------------------------------------
* Commencement of operations.
** Less than one cent per share.
" Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not annualized.
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<CAPTION>
AUSTRALIA WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/11/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................ 1.33% 1.60%(3)
Ratios of net investment income/(loss) to
average net assets before waivers......... 1.57% 2.17%(3)
</TABLE>
<TABLE>
<CAPTION>
AUSTRIA WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/11/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................ 1.69% 1.57%(3)
Ratios of net investment income/(loss) to
average net assets before waivers......... (0.22)% 0.86%(3)
</TABLE>
<TABLE>
<CAPTION>
BELGIUM WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
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)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
10
<PAGE> 13
<TABLE>
<CAPTION>
CANADA WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- -------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ....... $ 10.60 $ 10.17(1)
-------- -------
Net investment income/(loss)(+) ............ 0.05 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......................... 2.97 0.43
-------- -------
Net increase/(decrease) in net assets
resulting from operations ................. 3.02 0.47
-------- -------
Less distributions
Dividends from net investment income ....... (0.05) (0.03)
Dividends in excess of net investment
income ..................................... (0.00)** (0.01)
Distributions from net realized capital
gains....................................... (0.14) --
Distributions in excess of net realized
gains....................................... -- 0.00
Return of capital .......................... -- 0.00
-------- -------
Total dividends and distributions ......... (0.19) (0.04)
-------- -------
Net asset value, end of period ............. $ 13.43 $ 10.60
======== =======
Total Investment Return(2) ................... 28.50% 4.63%(4)
-------- -------
Ratios/Supplemental Data
Net assets, end of period (in 000's) .... $ 24,168 $13,776
Ratios of expenses to average net
assets(5)................................ 1.35% 1.44%(3)
Ratios of net investment income/(loss) to
average net assets(5) .................. 0.39% 0.79%(3)
Portfolio turnover(6) ................... 11.02% 0.00%(4)
Average commission rate paid ............ $ 0.0217 --
</TABLE>
<TABLE>
<CAPTION>
FRANCE WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ..... $ 12.73 $ 12.42(1)
------- -------
Net investment income/(loss)(+) .......... 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....................... 1.95 0.45
------- -------
Net increase/(decrease) in net assets
resulting from operations ............... 2.12 0.62
------- -------
Less distributions
Dividends from net investment income ..... (0.15) (0.09)
Dividends in excess of net investment
income.................................... -- (0.01)
Distributions from net realized capital
gains..................................... (0.20) 0.00
Distributions in excess of net realized
gains..................................... -- --
Return of capital ........................ -- (0.21)
------- -------
Total dividends and distributions ....... (0.35) (0.31)
------- -------
Net asset value, end of period ........... $ 14.50 $ 12.73
======= =======
Total Investment Return(2) ................. 16.60% 4.95%(4)
------- -------
Ratios/Supplemental Data
Net assets, end of period (in 000's) ..... $14,519 $22,930
Ratios of expenses to average net
assets(5)................................. 1.52% 1.84%(3)
Ratios of net investment income/(loss) to
average net assets(5) ................... 1.17% 2.72%(3)
Portfolio turnover(6) .................... 7.13% 0.00%(4)
Average commission rate paid ............. $0.0137 $0.3956
</TABLE>
<TABLE>
<CAPTION>
GERMANY WEBS INDEX SERIES
-----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- ------------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ..... $ 13.64 $ 13.23(1)
------- -------
Net investment income/(loss)(+) .......... 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........................ 2.77 0.47
------- -------
Net increase/(decrease) in net assets
resulting from operations ............... 2.80 0.53
------- -------
Less distributions
Dividends from net investment income ..... (0.03) (0.03)
Dividends in excess of net investment .... (0.01) (0.01)
income ...................................
Distributions from net realized capital
gains..................................... (0.07) --
Distributions in excess of net realized
gains..................................... -- (0.01)
Return of capital ........................ (0.02) (0.07)
------- -------
Total dividends and distributions ....... (0.13) (0.12)
------- -------
Net asset value, end of period ........... $ 16.31 $ 13.64
======= =======
Total Investment Return(2) ................. 20.51% 4.00%(4)
------- -------
Ratios/Supplemental Data
Net assets, end of period (in 000's) ..... $24,486 $28,664
Ratios of expenses to average net
assets(5)................................. 1.37% 1.68%(3)
Ratios of net investment income/(loss) to
average net assets(5) ................... 0.23% 1.00%(3)
Portfolio turnover(6) .................... 9.04% 0.00%(4)
Average commission rate paid ............. $0.0236 --
</TABLE>
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not annualized.
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<CAPTION>
CANADA WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- ------------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................ 1.36% 1.45%(3)
Ratios of net investment income/(loss) to
average net assets before waivers..... ..... 0.39% 0.78%(3)
</TABLE>
<TABLE>
<CAPTION>
FRANCE WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- ------------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................ 1.52% 1.85%(3)
Ratios of net investment income/(loss) to
average net assets before waivers......... 1.17% 2.71%(3)
</TABLE>
<TABLE>
<CAPTION>
GERMANY WEBS INDEX SERIES
----------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- ------------------
<S> <C> <C> <C>
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)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
11
<PAGE> 14
<TABLE>
<CAPTION>
HONG KONG WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ...... $ 13.05 $ 12.83(1)
-------- --------
Net investment income/(loss)(+) .......... 0.26 0.15
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions and translation of other
assets and liabilities denominated in
foreign currencies....................... 2.12 0.27
-------- --------
Net increase/(decrease) in net assets
resulting from operations................ 2.38 0.42
-------- --------
Less distributions
Dividends from net investment income ..... (0.21) (0.13)
Dividends in excess of net investment
income.................................... (0.01) (0.02)
Distributions from net realized capital
gains..................................... (0.34) (0.01)
Distributions in excess of net realized
gains..................................... 0.00 --
Return of capital ........................ (0.14) (0.04)
-------- --------
Total dividends and distributions ....... (0.70) (0.20)
-------- --------
Net asset value, end of period ........... $ 14.73 $ 13.05
======== ========
Total Investment Return(2) ................. 17.80% 3.22%(4)
-------- --------
Ratios/Supplemental Data
Net assets, end of period (in 000's) ..... $ 25,417 $ 7,845
Ratios of expenses to average net
assets(5)................................. 1.43% 1.52%(3)
Ratios of net investment income/(loss) to
average net assets(5) ................... 1.71% 2.37%(3)
Portfolio turnover(6) .................... 22.90% 0.00%(4)
Average commission rate paid ............. $ 0.0058 $ 0.0007
</TABLE>
<TABLE>
<CAPTION>
ITALY WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ...... $ 13.79 $ 13.62(1)
-------- --------
Net investment income/(loss)(") .......... 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....................... 3.10 0.31
-------- --------
Net increase/(decrease) in net assets
resulting from operations................ 3.22 0.56
-------- --------
Less distributions
Dividends from net investment income ..... (0.11) (0.14)
Dividends in excess of net investment
income.................................... (0.24) (0.03)
Distributions from net realized capital .. -- (0.14)
gains
Distributions in excess of net realized
gains..................................... -- --
Return of capital ........................ -- (0.08)
-------- --------
Total dividends and distributions ....... (0.35) (0.39)
-------- --------
Net asset value, end of period ........... $ 16.66 $ 13.79
======== ========
Total Investment Return(2) ................. 23.37% 4.11%(4)
-------- --------
Ratios/Supplemental Data
Net assets, end of period (in 000's) ..... $ 32,495 $ 35,170
Ratios of expenses to average net ........ 1.33% 1.43%(3)
assets(5)
Ratios of net investment income/(loss) to
average net assets(5) ................... 0.76% 3.69%(3)
Portfolio turnover(6) .................... 13.70% 19.80%(4)
Average commission rate paid ............. $ 0.0045 $ 0.0046
</TABLE>
<TABLE>
<CAPTION>
JAPAN WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ...... $ 14.33 $ 14.79(1)
-------- --------
Net investment income/(loss)(+) .......... (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....................... (1.65) (0.39)
-------- --------
Net increase/(decrease) in net assets
resulting from operations................ (1.71) 0.46
-------- --------
Less distributions
Dividends from net investment income ..... -- --
Dividends in excess of net investment
income.................................... -- --
Distributions from net realized capital
gains..................................... -- --
Distributions in excess of net realized
gains..................................... (0.01) --
Return of capital ........................ -- --
-------- --------
Total dividends and distributions ....... -- --
-------- --------
Net asset value, end of period ........... $ 12.61 $ 14.33
======== ========
Total Investment Return(2) ................. (11.97)% (3.11)%(4)
-------- --------
Ratios/Supplemental Data
Net assets, end of period (in 000's) ..... $158,957 $103,164
Ratios of expenses to average net
assets(5)................................. 1.19% 1.37%(3)
Ratios of net investment income/(loss) to
average net assets(5) ................... (0.48)% (1.01)%(3)
Portfolio turnover(6) .................... 12.90% 21.54%(4)
Average commission rate paid ............. $ 0.0162 $ 0.0152
-------- --------
</TABLE>
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not annualized.
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<CAPTION>
HONG KONG WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................ 1.43% 1.53%(3)
Ratios of net investment income/(loss) to
average net assets before waivers......... 1.71% 2.36%(3)
</TABLE>
<TABLE>
<CAPTION>
ITALY WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................ 1.33% 1.44%(3)
Ratios of net investment income/(loss) to
average net assets before waivers......... 0.76% 3.68%(3)
</TABLE>
<TABLE>
<CAPTION>
JAPAN WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
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)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
12
<PAGE> 15
<TABLE>
<CAPTION>
MALAYSIA (FREE) WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $13.80 $13.24(1)
------ --------
Net investment income/(loss)(+)........ 0.01 (0.02)
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions and translation
of other assets and liabilities
denominated in foreign currencies..... (5.55) 0.59
------ ----
Net increase/(decrease) in net assets
resulting from operations............. (5.54) 0.57
------ ----
Less distributions
Dividends from net investment income... 0.00** --
Dividends in excess of net investment
income................................. (0.01) --
Distributions from net realized capital
gains.................................. -- --
Distributions in excess of net realized
gains.................................. -- --
Return of capital...................... (0.02) (0.01)
------ ------
Total dividends and distributions..... (0.03) (0.01)
------ ------
Net asset value, end of period......... $8.23 $13.80
===== ======
Total Investment Return(2)............... (40.20)% 4.28%(4)
------ ------
Ratios/Supplemental Data
Net assets, end of period (in 000's)... $12.339 $9,318
Ratios of expenses to average net
assets(5).............................. 1.46% 1.58%(3)
Ratios of net investment income/(loss)
to average net assets(5).............. 0.04% (0.35)%(3)
Portfolio turnover(6).................. 0.00% 0.00%(4)
Average commission rate paid........... -- --
</TABLE>
<TABLE>
<CAPTION>
MEXICO (FREE) WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $11.52 $9.95(1)
------ --------
Net investment income/(loss)(+).......... 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................... 4.07 1.59
---- ----
Net increase/(decrease) in net assets
resulting from operations............... 4.09 1.59
---- ----
Less distributions
Dividends from net investment income..... (0.01) --
Dividends in excess of net investment
income................................... (0.01) (0.01)
Distributions from net realized capital
gains.................................... (0.44) --
Distributions in excess of net realized
gains.................................... -- --
Return of capital........................ (0.04) (0.01)
------ -----
Total dividends and distributions....... (0.50) (0.02)
------ -----
Net asset value, end of period........... $15.11 $11.52
====== ======
Total Investment Return(2)............ 35.21% 15.93%(4)
------- ------
Ratios/Supplemental Data
Net assets, end of period (in 000's)..... $16.627 $5,759
Ratios of expenses to average net
assets(5)................................ 1.63% 1.75%(3)
Ratios of net investment income/(loss) to
average net assets(5)................... 0.14% 0.01%(3)
Portfolio turnover(6).................... 22.80% 0.00%(4)
Average commission rate paid............. $0.0066 --
</TABLE>
<TABLE>
<CAPTION>
NETHERLANDS WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $17.36 $15.91(1)
------ ---------
Net investment income/(loss)(+).......... 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................... 4.79 1.54
---- ----
Net increase/(decrease) in net assets
resulting from operations............... 4.90 1.78
---- ----
Less distributions
Dividends from net investment income (0.10) (0.14)
Dividends in excess of net investment
income................................... (0.01) (0.01)
Distributions from net realized capital
gains.................................... (0.71) (0.08)
Distributions in excess of net realized
gains.................................... -- (0.01)
Return of capital........................ (0.02) (0.09)
------ ------
Total dividends and distributions....... (0.84) (0.33)
------ ------
Net asset value, end of period........... $21.42 $17.36
====== ======
Total Investment Return(2)................. 28.04% 11.19%(4)
------- -------
Ratios/Supplemental Data
Net assets, end of period (in 000's)..... $9,661 $6,962
Ratios of expenses to average net
assets(5)................................ 1.46% 1.63(3)
Ratios of net investment income/(loss) to
average net assets(5)................... 0.54% 2.93%(3)
Portfolio turnover(6).................... 12.68 4.32%(4)
Average commission rate paid............. $0.0354 $0.0651
</TABLE>
- -----------------------------------
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not annualized.
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<CAPTION>
MALAYSIA (FREE) WEBS INDEX SERIES
------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96* - 8/31/96
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers........................... 1.47% 1.59%(3)
Ratios of net investment income/(loss) to
average net assets before waivers........ 0.04% (.0.36)%(3)
</TABLE>
<TABLE>
MEXICO (FREE) WEBS INDEX SERIES
------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96* - 8/31/96
<CAPTION>
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers........................... 1.63% 1.76%(3)
Ratios of net investment income/(loss) to
average net assets before waivers....... 0.13% 0.00%(3)
</TABLE>
<TABLE>
<CAPTION>
NETHERLANDS WEBS INDEX SERIES
------------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96* - 8/31/96
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers........................... 1.43% 1.64%(3)
Ratios of net investment income/(loss) to
average net assets before waivers........ 0.53% 2.92%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
13
<PAGE> 16
<TABLE>
<CAPTION>
SINGAPORE (FREE) WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $11.38 $12.24(1)
------ ---------
Net investment income/(loss)(+)........ 0.00** 0.04
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions and translation
of other assets and liabilities
denominated in foreign currencies..... (2.67) (0.86)
------ ------
Net increase/(decrease) in net assets
resulting from operations............. (2.67) (0.82)
------ ------
Less distributions
Dividends from net investment income... 0.00** (0.03)
Dividends in excess of net investment
income................................. (0.01) (0.01)
Distributions from net realized capital
gains.................................. (0.02) --
Distributions in excess of net realized
gains.................................. -- --
Return of capital...................... (0.02) --
Total dividends and distributions..... (0.05) (0.04)
------ ------
Net asset value, end of period......... $8.66 $11.38
===== ======
Total Investment Return(2)............... (23.48)% (6.73)%(4)
Ratios/Supplemental Data
Net assets, end of period (in 000's)... $14,722 $9,107
Ratios of expenses to average net
assets(5).............................. 1.43% 1.56%(3)
Ratios of net investment income/(loss)
to average net assets(5).............. 0.03% 0.69%(3)
Portfolio turnover(6).................. 13.40% 26.29%(4)
Average commission rate paid........... $0.0076 $0.0118
</TABLE>
<TABLE>
<CAPTION>
SPAIN WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period..... $14.09 $13.28(1)
------ ---------
Net investment income/(loss)(+)........ 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..... 5.33 0.98
---- ----
Net increase/(decrease) in net assets
resulting from operations............. 5.52 1.12
Less distributions
Dividends from net investment income... (0.12) (0.18)
Dividends in excess of net investment
income................................. (0.05) --
Distributions from net realized capital
gains.................................. (0.86) (0.13)
Distributions in excess of net realized
gains.................................. -- --
Return of capital...................... (0.09) --
Total dividends and distributions..... (1.12) (0.31)
------ ------
Net asset value, end of period......... $18.49 $14.09
====== ======
Total Investment Return(2)............... 39.15% 8.45%(4)
------ ------
Ratios/Supplemental Data
Net assets, end of period (in 000's)... $8,321 $4,227
Ratios of expenses to average net
assets(5).............................. 1.67% 1.76%(3)
Ratios of net investment income/(loss)
to average net assets(5).............. 1.04% 2.04%
Portfolio turnover(6).................. 19.21% 4.73%(4)
Average commission rate paid........... $0.0344 $0.0723
</TABLE>
<TABLE>
<CAPTION>
SWEDEN WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $14.67 $13.22(1)
------ ---------
Net investment income/(loss)(+)............. 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......................... 4.45 1.67
---- ----
Net increase/(decrease) in net assets
resulting from operations.................. 4.42 1.87
---- ----
Less distributions
Dividends from net investment income........ -- (0.23)
Dividends in excess of net investment
income...................................... -- (0.07)
Distributions from net realized capital
gains....................................... (0.77) (0.12)
Distributions in excess of net realized
gains....................................... -- --
Return of capital........................... -- --
Total dividends and distributions.......... (0.77) (0.42)
------ ------
Net asset value, end of period.............. $18.32 $14.67
====== ======
Total Investment Return(2).................... 30.10% 14.13%(4)
------ -----
Ratios/Supplemental Data
Net assets, end of period (in 000's)........ $8,243 $4,400
Ratios of expenses to average net
assets(5)................................... 1.64% 1.75%(3)
Ratios of net investment income/(loss) to
average net assets(5)...................... (0.19)% 3.05%(3)
Portfolio turnover(6)....................... 13.71% 5.87%(4)
Average commission rate paid................ $0.0229 $0.0561
</TABLE>
- -----------------------------------
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not annualized.
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<CAPTION>
SINGAPORE (FREE) WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers........................... 1.43% 1.57%(3)
Ratios of net investment income/(loss) to
average net assets before waivers........ 0.03% 0.68%(3)
</TABLE>
<TABLE>
<CAPTION>
SPAIN WEBS INDEX SERIES
---------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers........................... 1.67% 1.77%(3)
Ratios of net investment income/(loss) to
average net assets before waivers........ 1.04% 2.03%(3)
</TABLE>
<TABLE>
<CAPTION>
SWEDEN WEBS INDEX SERIES
--------------------------------------------------
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
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)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
14
<PAGE> 17
<TABLE>
<CAPTION>
SWITZERLAND WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.... $12.29 $12.07(1)
------ ------
Net investment income/(loss)(+)......... (0.04) 0.08
Net realized and unrealized gain/(loss)
on investments and foreign currency
related transactions and translation of
other assets and liabilities
denominated in foreign currencies...... 2.11 0.24
---- ----
Net increase/(decrease) in net assets
resulting from operations.............. 2.07 0.32
---- ----
Less distributions
Dividends from net investment income.... -- (0.06)
Dividends in excess of net investment
income.................................. -- --
Distributions from net realized capital
gains................................... (0.57) --
Distributions in excess of net realized
gains................................... -- --
Return of capital....................... (0.00)** --
----- ------
Total dividends and distributions...... (0.57) (0.10)
----- -----
Net asset value, end of period.......... $13.79 $12.29
====== ======
Total Investment Return(2)................ 16.69% 2.60%(4)
----- -----
Ratios/Supplemental Data
Net assets, end of period (in 000's).... $13,805 $6,158
Ratios of expenses to average net
assets(5)............................... 1.52% 1.82%(3)
Ratios of net investment income/(loss)
to average net assets(5)............... (0.29)% 1.39%(3)
Portfolio turnover(6)................... 48.05% 17.06%(4)
Average commission rate paid............ $0.8788 $0.7852
</TABLE>
<TABLE>
<CAPTION>
UNITED KINGDOM WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.... $13.15 $12.14
------ ------
Net investment income/(loss)(+)......... 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...... 3.62 1.06
---- ----
Net increase/(decrease) in net assets
resulting from operations.............. 4.00 1.27
---- ----
Less distributions
Dividends from net investment income.... (0.32) (0.20)
Dividends in excess of net investment
income.................................. (0.06) (0.03)
Distributions from net realized capital
gains................................... (0.17) (0.00)**
Distributions in excess of net realized
gains................................... -- --
Return of capital....................... (0.10) (0.03)
------ ------
Total dividends and distributions...... (0.65) (0.26)
------ ------
Net asset value, end of period.......... $16.50 $13.15
====== ======
Total Investment Return(2)................ 30.48% 10.41%(4)
----- -----
Ratios/Supplemental Data
Net assets, end of period (in 000's).... $29,721 $15,790
Ratios of expenses to average net
assets(5)............................... 1.38% 1.61%(3)
Ratios of net investment income/(loss) to
average net assets(5).................. 2.47% 3.62%(3)
Portfolio turnover(6)................... 1.84% 0.00%(4)
Average commission rate paid............ $0.0314 --
</TABLE>
- -----------------------------------
* Commencement of operations.
** Less than one cent per share.
+ Based on average shares outstanding throughout the period.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized.
(4) Not annualized.
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:
<TABLE>
<CAPTION>
SWITZERLAND WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................. 1.53% 1.83%(3)
Ratios of net investment income/(loss) to
average net assets before waivers.......... (0.29%) 1.38%(3)
</TABLE>
<TABLE>
<CAPTION>
UNITED KINGDOM WEBS INDEX SERIES
FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED 8/31/98 ENDED 8/31/97 03/12/96*-8/31/96
------------- ------------- -----------------
<S> <C> <C> <C>
Ratios of expenses to average net assets
before waivers............................ 1.38% 1.62%(3)
Ratios of net investment income/(loss) to
average net assets before waivers......... 2.47% 3.61%(3)
</TABLE>
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
15
<PAGE> 18
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 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."
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INVESTMENT POLICIES
The Fund is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
each WEBS Index Series of the Fund, utilizing a "passive" or indexing investment
approach, attempts to approximate the investment performance of its benchmark
index by investing in a portfolio of stocks selected through the use of
quantitative analytical procedures. Stocks are selected for inclusion in a WEBS
Index Series in order to have aggregate investment characteristics (based on
market capitalization and industry weightings), fundamental characteristics
(such as return variability, earnings valuation and yield) and liquidity
measures similar to those of the subject MSCI Index taken in its entirety. WEBS
Index Series generally will not hold all of the stocks in their respective
benchmark indices but will typically hold a representative subset of such stocks
selected through the Adviser's application of portfolio sampling techniques.
However, each WEBS Index Series reserves the right to invest in all of the
stocks in its benchmark index and where a WEBS Index Series benchmark index is
comprised of relatively few securities it may do so on a regular basis. In
addition, a WEBS Index Series may hold stocks that are not in the relevant MSCI
Index if the Adviser determines this to be appropriate in light of the WEBS
Index Series' investment objective and relevant investment constraints.
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 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 August 31 1998, as
a result of this policy with respect to industry concentration, the ___WEBS
Index Series concentrates (that is, it invests 25% or more of the value of its
assets) in the ____ industry, the ___ WEBS Index Series concentrates in the ____
industry[___] and the ___WEBS Index Series concentrates in the ___ 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
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<PAGE> 20
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 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 (and in the case
of certain WEBS Index Series, has exceeded) 5%, perhaps significantly,
notwithstanding the fact the expected tracking error is less than 5%. A tracking
error of 0% would indicate perfect tracking, which would be achieved when the
net asset value of the WEBS Index Series increases or decreases in exact
proportion to changes in its benchmark index. Factors such as expenses of the
Fund, taxes, the need to comply with the diversification and other requirements
of the Internal Revenue Code, the existence of uninvested assets in the
portfolios (including cash and deferred organizational expenses), the fact that
the MSCI Indices "smooth" dividend payments evenly over a year while the Fund
records dividends on the ex date, and the fact that the MSCI Indicies utilized
by certain WEBS Index Series assume a different foreign tax withholding rate
than that applicable to such WEBS Index Series, may adversely impact the
tracking of the performance of a WEBS Index Series to that of its benchmark
index. The Adviser will monitor the tracking error of each WEBS Index Series on
an ongoing basis and will seek to minimize tracking error to the maximum extent
possible. See also the discussion of portfolio sampling in the preceding
paragraph. There can be no assurance that any WEBS Index Series will achieve any
particular level of tracking error relative to the performance of the relevant
benchmark index. Semiannual and annual reports of the Fund disclose tracking
error over the previous six month periods, and in the event that tracking error
exceeds 5%, the Board will consider what action might be appropriate.
Although the policy of each WEBS Index Series of the Fund is to remain
substantially fully invested in equity securities, a WEBS Index Series may also
invest in combinations of certain stock index futures contracts, options on such
futures contracts, stock index options, stock index swaps and cash and
Short-Term Investments that are intended to provide the WEBS Index Series with
exposure to such equity securities, and in cash, local currency, forward
currency exchange contacts and certain Short-Term Investments that are not
associated with related positions in stock index futures contracts, options on
such futures contracts, stock index options or stock index swaps. Such
investments may be made to invest uncommitted cash balances or, in limited
circumstances, to assist in meeting shareholder redemptions of Creation Units of
WEBS.
A WEBS Index Series may purchase stock index futures contracts, options
on such futures contracts and stock index options and may enter into stock index
swaps to simulate full investment in the underlying index to a limited extent.
This may be done to facilitate trading (e.g., to rapidly gain exposure to a
market in anticipation of purchasing the underlying equities over time), to
reduce transaction costs or because the Adviser has determined that the use of
such instruments permits the WEBS Index Series to gain exposure to the
underlying equities at a lower cost than by making direct investments in the
cash market. While each of these instruments can be used to leverage an
investment portfolio, no WEBS Index Series may use them to leverage its net
assets.
A WEBS Index Series may enter into foreign currency forward and foreign
currency futures contracts to facilitate settlements in local markets, in
connection with stock index futures positions, and to protect against currency
exposure in connection with its distributions to 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'
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<PAGE> 21
ability to provide investment results that correspond generally to the price and
yield performance of its benchmark index. These loans may not exceed 33% of a
WEBS Index Series' total assets. The documentation for these loans will provide
that the WEBS Index Series will receive collateral equal to at least 100% of the
current market value of the loaned securities, as marked to market each day that
the net asset value of the WEBS Index Series is determined, consisting of
government securities or other assets permitted by applicable regulations and
interpretations. A WEBS Index Series will pay reasonable administrative and
custodial fees in connection with the loan of securities. The WEBS Index Series
will invest collateral in Short-Term Investments, and the WEBS Index Series will
bear the risk of loss of the invested collateral. In addition, a WEBS Index
Series will be exposed to the risk of loss should a borrower default on its
obligation to return the borrowed securities. MSTC serves as Lending Agent of
the Fund and, in such capacity, shares equally with the respective WEBS Index
Series any net income earned on invested collateral. A WEBS Index Series' share
of income from the loan collateral will be included in the WEBS Index Series'
gross investment income. The Fund will comply with the conditions for securities
lending established by the SEC staff.
Although each WEBS Index Series generally seeks to invest for the long
term, the WEBS Index Series retain the right to sell securities irrespective of
how long they have been held. However, because of the "passive" investment
management approach of the Fund, the portfolio turnover rate for each WEBS Index
Series is expected to be under 50%, a generally lower turnover rate than for
many other investment companies. A portfolio turnover rate of 50% would occur if
one half of a WEBS Index Series' securities were sold within one year.
Ordinarily, securities are sold by a WEBS Index Series only to reflect certain
administrative changes in 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.
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. The MSCI Indices have covered the world's developed markets since 1969,
and in 1988, MSCI commenced coverage of the emerging markets.
Although local stock exchanges have traditionally calculated their own
indices, these are generally not comparable with one another, due to differences
in the representation of the local market, mathematical formulas, base dates and
methods of adjusting for capital changes. MSCI applies the same criteria and
calculation methodology across all markets for all indices, developed and
emerging.
MSCI Indices are notable for the depth and breadth of their coverage.
MSCI generally seeks to have 60% of the capitalization of a country's stock
market reflected in the MSCI Index for such country. Thus, the MSCI Indices
balance the inclusiveness of an "all share" index against the replicability of a
"blue chip" index.
Weighting
All single-country MSCI Indices are market capitalization weighted,
i.e., companies are included in the indices at their full market value (total
number of shares issued and paid up, multiplied by price). MSCI believes full
market capitalization weighting is preferable to other weighting schemes for
both theoretical and practical reasons.
MSCI calculates two indices in some countries in order to address the
issue of restrictions on foreign ownership in such countries. The additional
indices are called "Free" indices, and they exclude companies and share classes
not purchasable by foreigners. Free indices are currently calculated for China,
Indonesia, Malaysia, Mexico, the Philippines, Singapore and Thailand, and for
those regional and international indices which include such markets.
Indonesia, Malaysia, Singapore and Thailand currently impose foreign
ownership limits on domestic stock, and when the foreign ownership limit is
reached, foreigners may only trade with other foreigners, frequently at a price
that is higher than the price available to domestic investors. The Free Indices
for such countries are designed to reflect the actual investment conditions for
international investors by using the foreign prices for stocks where relevant.
The Free Indices for Indonesia, Malaysia, Singapore and Thailand will use
foreign prices only when a foreign ownership limit is reached on a constituent
stock and a determination is made that there is sufficient long-term liquidity
at the foreign price. To compensate for the distorting inflation of a company's
weight that may occur as a result of using the higher foreign prices for its
shares, a compensating factor called a Free Market Capitalization Factor
("FMCF") may be applied to the total number of shares of a "foreign priced"
constituent stock in the respective Index. A FMCF is the approximate ratio of
domestic price to foreign price and is applied in an effort to align the free
market capitalization weight with the domestic market capitalization weight.
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%)
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<PAGE> 23
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 ____% 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
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 ____% 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 ____% 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 ____% 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 ____% 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 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%), Telecommunication (15.01%) and Banking
(12.03%), for a total of approximately 43.44% of the MSCI Germany.
The MSCI Germany represented approximately ____% 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%) and
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
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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 Telecommunication (20.37%), for a total of approximately 64.69% of
the MSCI Hong Kong. The MSCI Hong Kong represented approximately ____% 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 ____% 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
____% of the aggregate capitalization of the Japanese equity markets at August
31, 1998.
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 Telecom 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 ____% 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 ____% 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 ____% 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). 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)
22
<PAGE> 25
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
____% 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 ____% 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, 1997, 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 ____% 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
____% of the aggregate capitalization of the Swiss equity markets at August 31,
1998.
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 ____%
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 for 1998 are through August 31, 1998.
<TABLE>
<CAPTION>
MSCI AUSTRALIA INDEX
<S> <C> <C> <C>
1988 - 36.40% 1994 - 5.40%
1989 - 9.30% 1995 - 11.19%
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
1990 - (17.54%) 1996 - 16.49%
1991 - 33.64% 1997 - (10.44%)
1992 - (10.82%) 1998 - __.__%
1993 - 35.17%
MSCI AUSTRIA INDEX
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 - __.__%
1993 - 28.09%
MSCI BELGIUM INDEX
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 - __.__%
1993 - 23.51%
MSCI CANADA INDEX
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 - __.__%
1993 - 17.58%
MSCI FRANCE INDEX
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 - __.__%
1993 - 20.91%
MSCI GERMANY INDEX
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 - __.__%
1993 - 35.64%
MSCI HONG KONG INDEX
1988 - 28.12% 1994 - (28.90%)
1989 - 8.39% 1995 - 22.57%
1990 - 9.17% 1996 - 33.08%
1991 - 49.52% 1997 - (23.39%)
1992 - 32.29% 1998 - __.__%
1993 - 116.70%
MSCI ITALY INDEX
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 - __.__%
1993 - 28.53%
MSCI JAPAN INDEX
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 - __.__%
1993 - 25.48%
MSCI MALAYSIA (FREE) INDEX
1988 - 26.54% 1994 - (19.94%)
1989 - 55.76% 1995 - 5.16%
1990 - (7.91%) 1996 - 25.89%
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C> <C> <C>
1991 - 4.95% 1997 - (68.11%)
1992 - 17.76% 1998 - __.__%
1993 - 110.00%
MSCI MEXICO (FREE) INDEX
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 - __.__%
1993 - 49.35%
MSCI NETHERLANDS INDEX
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 - __.__%
1993 - 35.28%
MSCI SINGAPORE (FREE) INDEX
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 - __.__%
1993 - 73.41%
MSCI SPAIN INDEX
1988 - 13.53% 1994 - (4.80)%
1989 - 9.76% 1995 - 29.83%
1990 - (13.85%) 1996 - 40.04%
1991 - 15.63% 1997 - 25.41%
1992 - (21.87%) 1998 - __.__%
1993 - 29.78%
MSCI SWEDEN INDEX
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 - __.__%
1993 - 36.99%
MSCI SWITZERLAND INDEX
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 - __.__%
1993 - 45.79%
MSCI UNITED KINGDOM INDEX
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 - __.__%
1993 - 24.44%
</TABLE>
MANAGEMENT OF THE FUND
Board of Directors. The Board has responsibility for the overall
management of the Fund, including general supervision of the duties performed by
the Adviser and other service providers. Additional information about the Board
and the officers of the Fund appears in the Statement of Additional Information
under the heading "Management of the Fund."
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
25
<PAGE> 28
parent, Barclays Global Investors, N.A., manage, administer or advise
assets aggregating in excess of $___ billion. For its investment management
services to each WEBS Index Series, the Adviser is paid management fees equal to
each WEBS Index Series' allocable portion of: .27% per annum of the aggregate
net assets of the Fund less than or equal to $1.7 billion, plus .15% per annum
of the aggregate net assets of the Fund between $1.7 billion and $7 billion,
plus .12% per annum of the aggregate net assets of the Fund between $7 billion
and $10 billion, plus .08% per annum of the aggregate net assets of the Fund in
excess of $10 billion. The management fees are accrued daily and paid by the
Fund as soon as practical after the last day of each calendar quarter. The
Adviser may from time to time reimburse expenses to one or more WEBS Index
Series. From time to time, a WEBS Index Series, to the extent consistent with
its investment objective, policies and restrictions, may invest in the
securities of companies with which the Adviser has a lending relationship.
Administrator. PFPC Inc. (the "Administrator"), an indirect wholly
owned subsidiary of PNC Bank Corp., is the Administrator of the Fund, and is
responsible for certain clerical, recordkeeping and bookkeeping services, except
those performed by the Adviser, by MSTC in its capacity as Custodian, or by PNC
Bank, N.A. in its capacity as Transfer Agent. The Administrator has no role in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund. For the administrative and fund accounting
services the Administrator provides to the Fund, the Administrator is paid
aggregate fees equal to each WEBS Index Series' allocable portion of: .22% per
annum of the aggregate average daily net assets of the Fund up to $1.5 billion;
plus .15% per annum of the aggregate average daily net assets of the Fund
between $1.5 billion and $3 billion, plus .14% per annum of the aggregate
average daily net assets of the Fund between $3 billion and $5 billion, plus
.13% per annum of the aggregate average daily net assets of the Fund between $5
billion and $7.5 billion, plus .115% per annum of the aggregate average daily
net assets of the Fund between $7.5 billion and $10 billion, plus .10% per annum
of the aggregate average daily net assets of the Fund in excess of $10 billion
(the "Standard Fee Schedule"). The 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.
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. Morgan Stanley Trust Company ("MSTC")
serves as the Custodian for
26
<PAGE> 29
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, MSTC causes the
delivery of loaned securities from the Fund to borrowers, arranges for the
return of loaned securities to the Fund at the termination of the loans,
requests deposit of collateral, monitors daily the value of the loaned
securities and collateral, requests that borrowers add to the collateral when
required by the loan agreements, and provides recordkeeping and accounting
services necessary for the operation of the program. For its services as Lending
Agent, the Fund pays MSTC, in respect of each WEBS Index Series, 50% of the net
investment income earned on the collateral for securities loaned. MSTC may from
time to time reimburse expenses to one or more WEBS Index Series. MSTC, as
Custodian and Lending Agent, has no role in determining the investment policies
of the Fund or which securities are to be purchased or sold by the Fund. The
principal business address of MSTC is One Pierrepont Plaza, Brooklyn, New York
11201.
Transfer Agent. PNC Bank, N.A. ("PNC"), an indirect wholly owned
subsidiary of PNC Bank Corp., provides transfer agency services to the Fund.
PNC, as transfer agent (the "Transfer Agent"), has no role in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. The principal business address of PNC is Broad and Chestnut
Streets, Philadelphia, Pennsylvania 19110.
The Glass-Steagall Act and other applicable laws may limit the ability
of a bank or other depositary institution to become an underwriter or
distributor of securities. However, in the opinion of the Fund, these laws do
not prohibit such depository institutions from providing services for investment
companies such as the administrative, accounting and other services. In the
event that a change in these laws prevented a bank from providing such services,
it is expected that other services arrangements would be made and that
shareholders would not be adversely affected.
In addition to the fees described above, the Fund is responsible for
the payment of expenses that include, among other things, organizational
expenses, compensation of the Directors of the Fund, reimbursement of
out-of-pocket expenses incurred by the Administrator, exchange listing fees,
brokerage and other costs (including costs incurred by a WEBS Index Series in
connection with any rebalancing of its portfolio), legal and audit fees, and
litigation and extraordinary expenses.
EXCHANGE LISTING AND TRADING OF WEBS
The WEBS of each WEBS Index Series have been listed for trading on the
AMEX. WEBS trade on the AMEX at prices that differ to some degree from their net
asset value. See "Investment Considerations and Risks" and "Determination of Net
Asset Value." However, 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 once a day, because the IOPV may not
be computed in a manner consistent with such net asset value. 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 attendant in settlement procedures; difficulties in enforcing
contractual obligations; lesser liquidity and the significantly smaller market
capitalization of most non-U.S. securities markets; lesser levels of regulation
of the securities markets; different accounting, disclosure and reporting
requirements; more substantial government involvement in the economy; higher
rates of inflation; greater social, economic, and political uncertainty and the
risk of nationalization or expropriation of assets and risk of war. Certain WEBS
Index Series' specific considerations are set forth in the Statement of
Additional Information.
Volatility of Foreign Equity Markets
The U.S. dollar performance of foreign equity markets, particularly
emerging markets, has generally been substantially more volatile than that of
U.S. markets. For example, from October 8, 1992 to October __, 1998, the
27
<PAGE> 30
average price volatility of the Standard and Poor's 500 Index, a broad measure
of the U.S. equity market, was ____%. In contrast, during the same period, the
average price volatility of the respective MSCI Indices was as follows: the MSCI
Australia (____%), the MSCI Austria (____%), the MSCI Belgium (____%), the MSCI
Canada (____%), the MSCI France (____%), the MSCI Germany (____%), the MSCI Hong
Kong (____%), the MSCI Italy (____%), the MSCI Japan (____%), the MSCI Malaysia
(Free) (____%), the MSCI Mexico (Free) (____%), the MSCI Netherlands (____%),
the MSCI Singapore (Free) (____%), the MSCI Spain (____%), the MSCI Sweden
(____%), the MSCI Switzerland (____%), and the MSCI United Kingdom (____%).
Short-term volatility in these markets can be significantly greater.
Foreign Currency Fluctuations
Because each WEBS Index Series' assets are generally invested in
non-U.S. securities, and because a substantial portion of the revenues and
income of each WEBS Index Series are received in a foreign currency, while WEBS
Index Series dividends and other distributions are paid in U.S. dollars, the
dollar value of a WEBS Index Series' net assets are adversely affected by
reductions in the value of subject foreign currency relative to the dollar and
are positively affected by increases in the value of such currency relative to
the dollar. Also, government or monetary authorities have imposed and may in the
future impose exchange controls that could adversely affect exchange rates. Any
such currency fluctuations will affect the net asset value of a WEBS Index
Series irrespective of the performance of its underlying portfolio. Other than
to facilitate settlements in local markets or to protect against currency
exposure in connection with its distributions to shareholders or borrowings, the
Fund does not expect to engage in currency transactions for the purpose of
hedging against the decline in value of any foreign currencies.
Concentration and Lack of Diversification of Certain WEBS Index Series
Each WEBS Index Series of the Fund (except for the Canada WEBS Index
Series, the Japan WEBS Index Series and the United Kingdom WEBS Index Series) is
classified as "non-diversified" for purposes of the 1940 Act, which means each
of those WEBS Index Series is not limited by the 1940 Act with regard to the
portion of its assets that may be invested in the securities of a single issuer.
In addition, a number of WEBS Index Series concentrate their investments in
particular industries. See "Investment Policies" herein. However, each WEBS
Index Series, regardless of whether classified as non-diversified, intends to
maintain the required level of diversification and otherwise conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code, in order to relieve the WEBS Index Series of any
liability for Federal income tax to the extent that its earnings are distributed
to shareholders. See "Dividends and Capital Gains Distributions" and "Tax
Matters" in this Prospectus. Compliance with the diversification requirements of
the Internal Revenue Code severely limits the investment flexibility of certain
WEBS Index Series and makes it less likely that such WEBS Index Series will meet
their investment objectives.
The stocks of particular issuers, or of issuers in particular
industries, may dominate the benchmark indices of certain WEBS Index Series and,
consequently, the investment portfolios of such WEBS Index Series, which may
adversely affect the performance of such WEBS Index Series or subject such WEBS
Index Series to greater price volatility than that experienced by more
diversified investment companies. The WEBS of a WEBS Index Series may be more
susceptible to any single economic, political or regulatory occurrence than the
portfolio securities of an investment company that is more broadly invested than
the subject WEBS Index Series in the equity securities of the relevant market.
Information concerning the companies and industry sectors that represent the
largest components of the various benchmark indices is set forth above under
"The Benchmark MSCI Indices Utilized by the WEBS Index Series."
As indicated above, the WEBS have been listed for trading on the AMEX.
There can be no assurance that active trading markets for the WEBS will develop
or be maintained. The Distributor does not maintain a secondary market in WEBS.
Trading in WEBS on the AMEX may be halted due to market conditions or for
reasons that, in the view of the AMEX, make trading in WEBS inadvisable. In
addition, trading in WEBS on the AMEX is subject to trading halts caused by
extraordinary market volatility pursuant to AMEX "circuit breaker" rules that
require trading in securities on the AMEX to be halted in the event of specified
market moves. There can be no assurance that the requirements of the AMEX
necessary to maintain the listing of any WEBS Index Series will continue to be
met or will remain unchanged. See "Exchange Listing and Trading of WEBS."
The net asset value of the WEBS of a WEBS Index Series fluctuate with
changes in the market value of the portfolio securities of the WEBS Index Series
and changes in the market rate of exchange between the U.S. dollar and the
subject foreign currency. The market prices of WEBS fluctuate in accordance with
changes in net asset value and supply and demand on the AMEX. The Fund cannot
predict whether WEBS will trade below, at or above their net asset value. Price
differences may be due, in large part, to the fact that supply and demand forces
at work in the secondary trading market for WEBS will be closely related to, but
not identical to, the same forces influencing the prices of the stocks of the
subject MSCI Index trading individually or in the aggregate at any point in
time. However, 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 (e.g., WEBS of the Malaysia (Free) WEBS Index Series began trading at a
material discount to net asset value in September 1998 when the Fund suspended
creations, and discouraged redemptions, of WEBS of such series after the
Malaysian government imposed stringent capital controls).
28
<PAGE> 31
Lending of Securities
Although each WEBS Index Series receives collateral in connection with
all loans of portfolio securities, and such collateral is marked to market, the
WEBS Index Series would be exposed to the risk of loss should a borrower default
on its obligation to return the borrowed securities (e.g., the loaned securities
may have appreciated beyond the value of the collateral held by the Fund). In
addition, each WEBS Index Series bears the risk of loss of any collateral that
it invests in Short-Term Investments.
Use of Certain Instruments
The risk of loss associated with futures contracts is potentially
unlimited due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in an immediate and substantial
loss or gain. However, no WEBS Index Series will use futures contracts, options
or swap agreements for speculative purposes or to leverage its net assets and
each WEBS Index Series will comply with applicable SEC requirements regarding
the segregation of assets in connection with futures positions. Accordingly, the
primary risks associated with the use of futures contracts, options and swap
agreements by a WEBS Index Series are: (i) imperfect correlation between the
change in market value of the stocks included in the benchmark index or held by
the WEBS Index Series and the prices of futures contracts, options and swap
agreements; (ii) possible lack of a liquid secondary market for a futures
contract or listed option and the resulting inability to close futures or listed
option positions prior to their maturity date; and (iii) the risk of the
counterparty or guaranteeing agent defaulting. Over-the-counter options and swap
agreements are generally less liquid than exchange traded securities and the SEC
staff considers most over-the-counter options to be illiquid. The Fund will
treat such options as illiquid to the extent required by applicable SEC staff
positions. Illiquid assets may not represent more than 15% of the net assets of
a WEBS Index Series.
Since there are generally no futures traded on the MSCI Indices, it may
be necessary for a WEBS Index Series to utilize other futures contracts or
combinations thereof to simulate the 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 different rate from the rate used by MSCI in
the event the Adviser concludes that such rate is more appropriate.
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:
<TABLE>
<CAPTION>
VALUE PER
WEBS INDEX SERIES WEBS PER CREATION UNIT CREATION UNIT
- ----------------- ---------------------- (IN DOLLARS)
------------
<S> <C> <C>
Australia WEBS Index Series.............................. 200,000 --------
Austria WEBS Index Series................................. 100,000 --------
Belgium WEBS Index Series............................... 40,000 --------
</TABLE>
29
<PAGE> 32
<TABLE>
<S> <C> <C>
Canada WEBS Index Series........................... 100,000 ________
France WEBS Index Series........................... 200,000 ________
Germany WEBS Index Series.......................... 300,000 ________
Hong Kong WEBS Index Series........................ 75,000 ________
Italy WEBS Index Series............................ 150,000 ________
Japan WEBS Index Series............................ 600,000 ________
Malaysia (Free)WEBS Index Series................... 75,000 ________
Mexico (Free) WEBS Index Series.................... 100,000 ________
Netherlands WEBS Index Series...................... 50,000 ________
Singapore (Free) WEBS Index Series................. 100,000 ________
Spain WEBS Index Series............................ 75,000 ________
Sweden WEBS Index Series........................... 75,000 ________
Switzerland WEBS Index Series...................... 125,000 ________
United Kingdom WEBS Index Series................... 200,000 ________
</TABLE>
See "Purchase and Issuance of WEBS in Creation Units" and "Redemption
of WEBS in Creation Units." The Board of Directors of the Fund reserves the
right to declare a split 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 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.
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
30
<PAGE> 33
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 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
31
<PAGE> 34
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 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, 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.
32
<PAGE> 35
PERFORMANCE
The performance of the WEBS Index Series may be quoted in
advertisements, sales literature or reports to shareholders in terms of average
annual total return, cumulative total return and yield.
Quotations of average annual total return will be expressed in terms of
average annual rate of return of a hypothetical investment in a WEBS Index
Series over periods of 1, 5 and 10 years (or the life of the WEBS Index Series,
if shorter). Such total return figures reflect the deduction of a proportional
share of such WEBS Index Series' expenses on an annual basis, and assume that
all dividends and distributions are reinvested when paid.
Quotations of a cumulative total return are calculated for any
specified period by assuming a hypothetical investment in a WEBS Index Series on
the date of the commencement of the period and assume that all dividends and
distributions are reinvested on ex date. However, currently there is no dividend
reinvestment option available to shareholders of WEBS and such calculation is
provided for informational purposes only. The net increase or decrease in the
value of the investment over the period is divided by its beginning value to
arrive at cumulative total return. Total return calculated in this manner will
differ from the calculation of average annual total return in that it is not
expressed in terms of an average rate of return.
The yield of a WEBS Index Series refers to income generated by an
investment in such WEBS Index Series over a specified 30-day (one month) period.
Yields for the WEBS Index Series are expressed as annualized percentages.
Quotations of average annual total return, cumulative total return or
yield reflect only the performance of a hypothetical investment in a WEBS Index
Series during the particular time period on which the calculations are based.
Such quotations for a WEBS Index Series will vary based on changes in market
conditions and the level of such WEBS Index Series' expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
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." Once it has been determined which countries will participate in the
Economic and Monetary Union (the "EMU"), the Euro will become legal tender in
these countries. 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 (the "ECB") 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 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.
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<PAGE> 36
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.
_______________ 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.
34
<PAGE> 37
WEBS INDEX FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER __, 1998
This Statement of Additional Information is not a Prospectus, and
should be read in conjunction with the Prospectus dated November __, 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> 38
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Description of the Fund................................................. 1
Investment Policies and Restrictions .......................................... 1
Special Considerations and Risks................................................ 13
The MSCI Indices................................................................ 24
Exchange Listing and Trading.................................................... 40
Management of the Fund ......................................................... 41
Investment Advisory, Management, Administrative and Distribution Services....... 44
Brokerage Transactions ......................................................... 48
Book Entry Only System ......................................................... 48
Purchase and Issuance of WEBS in Creation Units................................. 49
Redemption of WEBS in Creation Units .......................................... 53
Determining Net Asset Value..................................................... 55
Dividends and Distributions..................................................... 55
Taxes .......................................................................... 56
Capital Stock and Shareholder Reports ......................................... 57
Performance Information ....................................................... 59
Counsel and Independent Auditors................................................ 62
Financial Statements............................................................ 62
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
- The Case For International Index Investing
- WEBS Investment Highlights
- The Facts About 17 Foreign Markets
- Frequently Asked Questions (Q & A)
- MSCI Index Performance Charts
</TABLE>
- ---------------------------
THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED
("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF
MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY WEBS INDEX FUND, INC.
("LICENSEE"). THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY
CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL
INTERNATIONAL S.A.
WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY MEMBER OF
THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY, OR
IN THE WEBS OF ANY WEBS INDEX SERIES PARTICULARLY, OR THE ABILITY OF THE INDICES
IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS
THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN
STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK
("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO
MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND
CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX SERIES OR THE ISSUER
THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS
OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX SERIES OR THE OWNERS OF THE WEBS OF
ANY WEBS INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR
CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN
STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS
RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN THE DETERMINATION OF THE TIMING
OF, PRICES OF, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED
OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
WEBS INDEX SERIES
i
<PAGE> 39
ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION OR LIABILITY
TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN CONNECTION WITH THE
ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY WEBS INDEX SERIES.
ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED UNDER ANY LICENSE AGREEMENT OR FOR ANY OTHER
USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED WARRANTIES,
AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MSCI INDICES OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY
OR CIPSA HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.
The information contained herein regarding MSCI, the MSCI Indices, local
securities markets and The Depository Trust Company ("DTC") was obtained from
publicly available sources.
Unless otherwise specified, all references in this Statement of Additional
Information to "dollars," "USD," "US$" or "$" are to United States Dollars, all
references to "AUD," or "A$" are to Australian Dollars, all references to "ATS"
are to Austrian Schillings, all references to "BEF" are to Belgian Francs, all
references to "CAD" or "CA$" are to Canadian Dollars, all references to "FRF" or
"FF" are to French Francs, all references to "DEM" or "DM" are to the German
Deutsche Mark, all references to "HKD" or "HK$" are to Hong Kong Dollars, all
references to "ITL" or "LL" are to Italian Lira, all references to "JPY" or "Y"
are to Japanese Yen, all references to "MYR" are to Malaysian Ringgits, all
references to "MXN" are to Mexican Pesos, all references to "NLG" are to
Netherlands Guilders, all references to "SGD" are to Singapore Dollars, all
references to "ESP" are to Spanish Pesetas, all references to "SEK" are to
Swedish Krona, all references to "CHF" are to Swiss Francs, and all references
to "GBP," "pound sterling" 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 1.74749, ATS
12.4088, BEF 36.372, CAD 1.56415, FRF 5.91, DEM 1.7635, HKD 7.7432, ITL
1,742.85, JPY 141.19, MYR 4.18525, MXN 10.15, NLG 1.99005, 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.
ii
<PAGE> 40
GENERAL DESCRIPTION OF THE FUND
WEBS Index Fund, Inc. (the "Fund") is a management investment company
organized as a series fund. The Fund currently consists of seventeen series
(each, a "WEBS Index Series"), each of which invests in a portfolio of common
stocks (the "Portfolio Securities") consisting of some or all of the component
securities of a specified foreign securities index, selected to reflect the
performance thereof. The Fund was incorporated under the laws of the State of
Maryland on August 31, 1994. The shares of each WEBS Index Series are referred
to herein as "World Equity Benchmark Shares(SM)" or "WEBS(SM)". The seventeen
WEBS Index Series offered by the Fund are the Australia WEBS Index Series, the
Austria WEBS Index Series, the Belgium WEBS Index Series, the Canada WEBS Index
Series, the France WEBS Index Series, the Germany WEBS Index Series, the Hong
Kong WEBS Index Series, the Italy WEBS Index Series, the Japan WEBS Index
Series, the Malaysia (Free) WEBS Index Series, the Mexico (Free) WEBS Index
Series, the Netherlands WEBS Index Series, the Singapore (Free) WEBS Index
Series, the Spain WEBS Index Series, the Sweden WEBS Index Series, the
Switzerland WEBS Index Series and the United Kingdom WEBS Index Series.
Each WEBS Index Series offers and issues WEBS at their net asset value
only in aggregations of a specified number of shares (each, a "Creation Unit"),
usually in exchange for a basket of Portfolio Securities (together with the
deposit of a specified cash payment). Such Creation Units of WEBS are separable
upon issue into identical shares which are listed and traded on the American
Stock Exchange (the "AMEX"). WEBS are also redeemable only in Creation Units,
also usually in exchange for Portfolio Securities and a specified cash payment.
The Fund reserves the right to offer a "cash" option for sales and redemptions
of WEBS (subject to applicable legal requirements), as well as the option to
offer WEBS on a "cash only" basis. In each instance of such cash sales or
redemptions, the Fund will impose transaction fees based on transaction expenses
in the particular country that will be higher than the transaction fees
associated with in-kind purchases or redemptions. In all cases, such fees will
be limited in accordance with the requirements of the Securities and Exchange
Commission (the "SEC") applicable to management investment companies offering
redeemable securities.
INVESTMENT POLICIES AND RESTRICTIONS
The following information supplements and should be read in conjunction
with the sections entitled "Investment Policies" and "Investment Limitations" in
the Prospectus.
Each of the seventeen WEBS Index Series has the policy to remain as
fully invested as practicable in a pool of equity securities the performance of
which will approximate the performance of the subject MSCI Index taken in its
entirety. A WEBS Index Series will normally invest at least 95% of its total
assets in stocks that are represented in the relevant MSCI Index and will at all
times invest at least 90% of its total assets in such stocks except, that in
order to permit the Adviser additional flexibility to comply with the
requirements of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and other regulatory requirements and to manage future corporate
actions and index changes in the smaller markets, each of the Austria, Belgium,
Hong Kong, Mexico (Free), Netherlands, 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 Rating Group), bank
certificates of deposit and bankers' acceptances; repurchase agreements
collateralized by the foregoing securities; participation interests in such
securities; and shares of money market funds (subject to applicable limits under
the Investment Company Act of 1940, as amended, (the "1940 Act")).
A WEBS Index Series will not invest in cash reserves or Short-Term
Investments, or utilize futures contracts, options on futures contracts, options
or swap agreements as part of a temporary defensive strategy to protect against
potential stock market declines. A WEBS Index Series may enter into forward
currency exchange contracts and foreign currency futures contracts in order to
facilitate settlements in local markets in connection with stock index futures,
and to protect against currency exposure in connection with its distributions to
shareholders, but not as part of a defensive strategy to protect against
fluctuations in exchange rates.
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<PAGE> 41
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 ____
billion or US$____ billion.
The Austrian Equity Markets
General Background. Relative to international standards, the Vienna
stock market is small in terms of total capitalization and yearly turnover. The
Vienna Stock Exchange (VSE) is one of the oldest in the world and was founded in
1771 as a state institution to provide a market for state-issued bonds, as well
as for exchange transactions. The Stock Exchange Act of 1875 (the "Act")
established the VSE as an autonomous institution. The Act is still in force,
placing control and administration of the exchange in the hands of the
Borsekammer (Board of Governors), chosen from among the members of the exchange.
The Borsekammer consists of 25 individuals with the title of Borserat (stock
exchange councillor). Some are elected by members and some are designated by
organizations of the securities industry for a period of five years. The
councillors must be members of the exchange and they elect from amongst
themselves a President and three Vice Presidents. Shares account for about 80%
and investment fund certificates for about 20% of total listed securities on the
VSE. Business of the exchange can be transacted only by members. Almost all the
credit institutions in Vienna, some in the Austrian provinces and the joint
stock banks are represented on the stock exchange, as well as the private banks,
savings banks and other credit institutions. Certain securities which do not
have an official listing may be dealt in on the floor of the stock exchange with
permission of the management. This unlisted trading is the main activity of the
free brokers (Frei Makeler), of whom there are three.
Reporting, Accounting and Auditing. Austrian reporting, accounting and
auditing standards differ from U.S. standards. In general, Austrian corporations
do not provide all of the disclosure required by U.S. law and accounting
practice, and such disclosure may be less timely and less frequent than that
required of U.S. corporations.
Size of Equity Markets. As of August 31, 1998, the total market
capitalization of the Austrian equity markets was approximately ATS __ billion
or US$ __ billion.
The Belgian Equity Markets
General Background. The Brussels Stock Exchange (BSE) was founded by
Napoleonic decree in 1801. Since January 1, 1991 the BSE has been officially
organized as the "Societe de la Bourse de Valeurs Mobileres de Bruxelles" (SBVM)
the shareholders of which are Belgian securities houses. The law of December 4,
1990 on financial operations and markets terminated the monopoly of the
individual brokers. Now only securities houses are allowed to carry out stock
exchange orders. Brokers, banks, brokerage firms and insurance companies can
participate in the capital of a securities house. Its
2
<PAGE> 42
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 __ billion or
US$__ billion.
The Canadian Equity Markets
General Background. The first Canadian stock exchange appeared in the
1870s. Today, Canada is the world's fourth largest public equity market by
trading volume and the fifth largest by market capitalization. There are five
stock exchanges across Canada, located in Toronto, Montreal, Vancouver, Calgary
and Winnipeg. Of these, the Toronto Stock Exchange is the largest, accounting
for almost 80% of Canadian trading volumes. Measured by the value of shares
traded, the Toronto Stock Exchange is the second largest in North America and
among the ten largest in the world.
Reporting, Accounting and Auditing. As recognized by the Securities and
Exchange Commission in one of the proposing releases relating to the
Multijurisdictional Disclosure System, Canadian reporting, accounting and
auditing practices are closer to U.S. standards than those of any other foreign
jurisdiction. Every issuer that qualifies an offering of securities for
distribution in Canada becomes subject to periodic disclosure requirements.
Authoritative accounting and auditing standards, which are uniform across
Canada, are developed by a national body, the Canadian Institute of Chartered
Accountants ("CICA"). Although promulgated auditing standards in Canada differ
from U.S. standards in some respects, generally accepted practices in Canada
routinely encompass all significant auditing procedures required by U.S.
standards. Further, CICA periodically evaluates new auditing standards adopted
by the American Institute of Certified Public Accountants, CICA's U.S.
counterpart, to determine whether similar guidelines may be appropriate for
Canadian auditors. Canadian GAAP are similar to their U.S. counterparts,
although there are some differences in measurement and disclosure.
Size of Equity Markets. As of August 31, 1998, the total market
capitalization of the Canadian markets was approximately CAD __ billion or US$__
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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<PAGE> 43
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 __ billion or
US$__ billion.
The German Equity Markets
General Background. The history of Frankfurt as a financial center can
be traced back to the early Middle Ages. Frankfurt had the right to issue coins
as early as 1180; the first exchange office was opened in 1402. Germany has been
without a central stock exchange, the position formerly held by the Berlin
exchange, since 1945. Today there are eight independent stock exchanges, of
which Dusseldorf and Frankfurt account for over three-quarters of the total
volume. Frankfurt is the main exchange in Germany. Exchange securities are
denominated in German Marks, the official currency of Germany. Equities may be
traded in Germany in one of three markets: (i) the official market, comprised of
trading in shares which have been formally admitted to official listing by the
admissions committee of the relevant stock exchange, based on disclosure in the
listing application; (ii) the "semi-official" unlisted market, comprised of
trading in shares not in the official listing; and (iii) the unofficial,
over-the-counter market, which is governed by the provisions of the Civil Code
and the Merchant Code and not by the provisions of any stock exchange. There is
no stamp duty in Germany, but a nonresident capital gains tax may apply in
certain circumstances.
Reporting, Accounting and Auditing. German reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, German
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
Size of Equity Markets. As of August 31, 1998, the total market
capitalization of the Germany equity markets was approximately DEM __ billion or
US$__ 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 __ billion
or US$__ billion.
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<PAGE> 44
The Italian Equity Markets
General Background. The first formal exchange was created in Italy in
1808 with the establishment of the Milan Stock Exchange. Since then nine other
exchanges have been founded. Milan is the most important exchange, accounting
for 90% of total equity volume and about 80% of turnover in fixed income
securities. After the Milan Stock Exchange the other exchanges, in order of
importance, are: Rome, Turin, Genoa, Bologna, Florence, Naples, Palermo, Trieste
and Venice. By law the only persons allowed to trade in the official posts of
the stock exchange are the stockbrokers, who must act as brokers and not trade
for their own account. Banks and intermediaries are allowed to enter the trading
post as observers. In 1991, the Parliament passed legislation creating Societa
di intermediazone mobiliare (SIMs). SIMs were created to regulate brokerage
activities in the securities market and are allowed to trade on their own and
for customers' accounts. In 1986, the Centro Elaboraizione Dati (C.E.D. Borsa),
a subsidiary of the Milan Stock Exchange, developed a supporting service called
Borsamat. The Borsamat records all trading floor orders, links all Italian
exchanges, checks transaction details and issues confirmations. Italy has the
world's largest government securities market after the United States and Japan.
At the end of 1993, issues of treasury bills, notes and bonds outstanding
totaled US$1,133 billion.
Reporting, Accounting and Auditing. Italian reporting, accounting and
auditing practices are regulated by Italy's National Control Commission. These
practices bear some similarities to United States standards, but differ
significantly in many important respects. In general, Italian corporations do
not provide all of the disclosure required by U.S. law and accounting practice,
and such disclosure may be less timely, less frequent and less consistent than
that required of U.S. corporations.
Size of Equity Markets. As of August 31, 1998, the total market
capitalization of the Italian equity markets was approximately ITL __ billion or
US$__ 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 __ billion
or US$__ billion.
The Malaysian Equity Markets
General Background. The securities industry in Malaysia dates back to
the early 1930's. Kuala Lumpur and Singapore were a single exchange until 1973
when they separated and the Kuala Lumpur Stock Exchange (KLSE) was formed. The
KLSE operated under a provisional set of rules until 1983 when a new Securities
Industry Act came into force. As of April 30, 1993, 320 companies were listed on
the KLSE main board. A Second Board, established in 1988, allows smaller
companies to tap additional capital. Fifty-seven companies were listed on the
Second Board as of April 30, 1993. Over the years, the KLSE's close links with
the Stock Exchange of Singapore (SES) has rendered it very vulnerable to
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<PAGE> 45
developments in Singapore. Consequently, the Government decided, as a matter of
national policy, on a delisting of Malaysian incorporated companies from the
SES. This was effected on January 1, 1990. A similar move was made by Singapore,
resulting in the delisting of all Singapore companies on the KLSE on January 1,
1990. There are two main stock indices in Malaysia. The wider ranging KLSE
Composite represents 80 counters. The New Straits Times Industrial Index is an
average of 30 industrial stocks.
Reporting, Accounting and Auditing. Malaysian reporting, accounting and
auditing standards differ substantially from U.S. standards. In general,
Malaysian corporations do not provide all of the disclosure required by U.S. law
and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
Size of Equity Markets. As of August 31, 1998, the total market
capitalization of the Malaysian equity markets was approximately MYR __ billion
or US$__ 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 ____ billion
or US$ ____ 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 __ billion or US$__
billion.
The Singaporean Equity Markets
General Background. The Stock Exchange of Singapore (SES) was formed in
1973 with the separation of the joint stock exchange with Malaysia, which had
been in existence since 1938. The linkage between the SES and the Kuala Lumpur
Stock Exchange (KLSE) remained strong as many
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<PAGE> 46
companies in Singapore and Malaysia jointly listed on both exchanges, until
January 1, 1990 when the dual listing was terminated. SES has a tiered market,
with the formation of the second securities market, SESDAQ (Stock Exchange of
Singapore Dealing and Automated Quotation System) in 1987. SESDAQ was designed
to provide an avenue for small and medium-sized companies to raise funds for
expansion. In 1990, SES introduced an over-the-counter (OTC) market known as
CLOB International, to allow investors access to international securities listed
on foreign exchanges. SES also has a direct link with the National Association
of Securities Dealers Automated Quotation (NASDAQ) system, which was set up in
March 1988 to allow traders in the Asian time zone access to selected securities
on the U.S. OTC markets. This is made possible through a daily exchange of
trading prices and volumes of the stocks quoted on NASDAQ. The Singapore Stock
Exchange is one of the most developed in Asia and has a strong international
orientation.
Reporting, Accounting and Auditing. Singaporean reporting, accounting
and auditing standards differ substantially from U.S. standards. In general,
Singaporean corporations do not provide all of the disclosure required by U.S.
law and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.
Size of Equity Markets. As of August 31, 1998, the total market
capitalization of the Singaporean markets was approximately SGD __ billion or
US$__ 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 __ billion or
US$ __ billion.
The Swedish Equity Markets
General Background. Organized trading of securities in Sweden can be
traced back to 1776. Although the Stockholm Stock Exchange was founded in 1864,
the real formation of a stock exchange in an international sense took place in
1901. The statutes of the stock exchange were modified in 1906 and, from the
beginning of 1907, commercial banks were admitted as members. During the 1970's
the Stockholm market was characterized by limited turnover and dull trading
conditions. In 1980 the market started to climb and for several years Stockholm
was one of the best performing stock markets in both price and volume growth.
This regeneration of a market for risk capital was reflected in the large number
of companies introduced in the early 1980's. The Stockholm Stock Exchange is
structured on a membership basis, with the Bank Inspection Board being the
supervising authority. The board consists of 11 directors and one chief
executive. The directors of the board are elected by the Swedish government, and
the Association of the Swedish Chamber of Commerce, the Federation of Swedish
Industries and the member companies of the Stock Exchange. There are three
different markets for trading shares in Sweden. The dominant market is the A1
list, for the largest and most heavily traded companies. The second distinct
market is the Over-the-Counter Market, which is more loosely regulated than the
official market and caters to small and medium sized companies. The other market
is the unofficial parallel market which deals in unlisted shares, both on and
off the exchange floor. The shares most frequently traded on this market are
those which have been delisted from the other markets and those which are only
occasionally available for trading.
There are also two independent markets for options -- the Swedish
Options Market (OM) and the Swedish Options and Futures Exchange (SOFE). They
offer calls, puts and forwards on Swedish stocks and stock market index.
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<PAGE> 47
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 __ billion or
US$__ billion.
The Swiss Equity Markets
General Background. There are three principal stock exchanges in
Switzerland, the largest of which is Zurich, followed by Geneva and Basle. The
Geneva exchange is the oldest and was formally organized in 1850. The Basle and
the Zurich exchanges were founded in 1876 and 1877, respectively. The Geneva
Exchange is a corporation under public law and in Zurich and Basle the exchanges
are institutions under public law. There are three different market segments for
the trading of equities in Switzerland. The first is the official market, the
second is the semi-official market, and the third is the unofficial market. On
the official market, trading takes place among members of the exchange on the
official trading floors. Trading in the semi-official market also takes place on
the floors of the exchanges, but this market has traditionally been reserved for
smaller companies not yet officially accepted on the exchange. Unofficial market
trading is conducted by members and non-members alike. Typical trading on this
market involves shares with small turnover. Both listed and unlisted securities
can, however, be traded on this market.
Reporting, Accounting and Auditing. Swiss reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Swiss
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.
Size of Equity Markets. As of August 31, 1998, the total market
capitalization of the Swiss equity markets was approximately CHF __ billion or
US$__ 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 __
billion or US$__ 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
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
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<PAGE> 48
WEBS Index Series is expected to be under 50%, a generally lower turnover rate
than for many other investment companies. A portfolio turnover rate of 50% would
occur if one half of a WEBS Index Series' securities were sold within one year.
(For purposes of calculating portfolio turnover rate, the Fund does not take
into account "sales" of securities by means of in-kind redemptions, since such
transactions do not impact a WEBS Index Series' portfolio composition or
weighting.) Ordinarily, securities will be sold from a WEBS Index Series only to
reflect certain administrative changes in an MSCI Index (including mergers or
changes in the composition of the Index) or to accommodate cash flows out of the
WEBS Index Series while seeking to keep the performance of the WEBS Index Series
in line with that of its benchmark index. In addition, securities may be sold
from a WEBS Index Series in certain circumstances to ensure the WEBS Index
Series' compliance with the diversification and other requirements of the
Internal Revenue Code and with other requirements, which would tend to raise the
portfolio turnover rate of such WEBS Index Series. Purchases and sales of
securities involve transaction costs borne by the respective WEBS Index Series.
A WEBS Index Series may borrow money from a bank up to a limit of 33%
of the market value of its assets, but only for temporary or emergency purposes.
A WEBS Index Series may borrow money only to facilitate distributions to
shareholders or meet redemption requests (in connection with Creation Units of
WEBS that the Fund agrees to redeem for cash) prior to the settlement of
securities already sold or in the process of being sold by such WEBS Index
Series. To the extent that a WEBS Index Series borrows money prior to receiving
distributions on its portfolio securities or prior to selling securities in
connection with a redemption, it may be leveraged; at such times, the WEBS Index
Series may appreciate or depreciate in value more rapidly than its benchmark
index. A WEBS Index Series will not make cash purchases of securities when the
amount of money borrowed exceeds 5% of the market value of its total assets.
LENDING PORTFOLIO SECURITIES
The Fund may lend portfolio securities to brokers, dealers and other
financial institutions needing to borrow securities to complete transactions and
for other purposes. Because the government securities or other assets that are
pledged as collateral to the Fund in connection with these loans generate
income, securities lending enables a WEBS Index Series to earn additional income
that may partially offset the expenses of such WEBS Index Series, and thereby
reduce the effect that expenses have on such WEBS Index Series' ability to
provide investment results that substantially correspond to the price and yield
performance of its respective MSCI Index. These loans may not exceed 33% of a
WEBS Index Series' total assets. The documentation for these loans provide that
the WEBS Index Series will receive collateral equal to at least 100% of the
current market value of the loaned securities, as marked to market each day that
the net asset value of the WEBS Index Series is determined, consisting of
government securities or other assets permitted by applicable regulations and
interpretations. A WEBS Index Series pays reasonable administrative and
custodial fees in connection with the loan of securities. The WEBS Index Series
invests collateral in Short-Term Investments. Morgan Stanley Trust Company
("MSTC") serves as Lending Agent of the Fund and, in such capacity, shares
equally with the respective WEBS Index Series any net income earned on invested
collateral. A WEBS Index Series' share of income from the loan collateral is
included in the WEBS Index Series' gross investment income.
The Fund will comply with the conditions for lending established by the
Securities and Exchange Commission (the "SEC"). The SEC currently requires that
the following conditions be met whenever portfolio securities are loaned: (1)
the WEBS Index Series must receive at least 100% collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities lent rises above the level of the collateral; (3) the WEBS Index
Series must be able to terminate the loan at any time; (4) the WEBS Index Series
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (5) the WEBS Index Series may pay only reasonable custodian fees in
connection with the loan and will pay no finder's fees; and (6) while voting
rights on the loaned securities may pass to the borrower, the Fund's Board of
Directors (the "Board" or the "Directors") must terminate the loan and regain
the right to vote the securities if a material event adversely affecting the
investment occurs. Although each WEBS Index Series will receive collateral in
connection with all loans of portfolio securities, and such collateral will be
marked to market, the WEBS Index Series will be exposed to the risk of loss
should a borrower default on its obligation to return the borrowed securities
(e.g., the loaned securities may have appreciated beyond the value of the
collateral held by the Fund). In addition, each WEBS Index Series bears the risk
of loss of any cash collateral that it invests in Short-Term Investments.
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<PAGE> 49
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 Adviser believes to be representative of the relevant benchmark
index.
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<PAGE> 50
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 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.
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<PAGE> 51
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 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
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<PAGE> 52
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 attendant in settlement procedures; difficulties in
enforcing contractual obligations; lesser liquidity and significantly smaller
market capitalization of most non-U.S. securities markets; lesser levels of
regulation of the securities markets; more substantial government involvement in
the economy; higher rates of inflation; greater social, economic, and political
uncertainty; and the risk of nationalization or expropriation of assets and risk
of war.
CURRENCY TRANSACTIONS
Foreign exchange transactions involve a significant degree of risk and
the markets in which foreign exchange transactions are effected are highly
volatile, highly specialized and highly technical. Significant changes,
including changes in liquidity and prices, can occur in such markets within very
short periods of time, often within minutes. Foreign exchange trading risks
include, but are not limited
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<PAGE> 53
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 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
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<PAGE> 54
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 Community (the "Member
States") signed the "Single European Act," an agreement to establish a free
market. The development of a unified common European market has promoted the
free flow of goods and services; however, since September 1992, Europe's
monetary policy has been affected by fluctuating currencies. Additionally,
1993's tight monetary policies and high inflation caused Europe's economies to
ebb into recession.
The Maastricht Treaty on economic and monetary union (the "EMU") is
intended to provide its members with a stable monetary framework. The prospect
of EMU has triggered a sharp convergence of interest rates across Europe, with
risk premium over the German interest rates levels having decreased. Adding to
the favorable monetary conditions, the monetary easing experienced by core
countries has triggered a strong depreciation of their currencies. Consequently,
European activity has accelerated again in 1997.
The prospect of the EMU has reduced the roles of exchange rate
depreciation, fiscal profligacy and political control over central banks on the
business cycle. As a result, the European cycle is becoming less volatile. We
believe that future core European business cycles will resemble those in the
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United States, where swings in activity are determined mainly by exogenous
shocks to the system, policy mistakes and inventory corrections.
The EMU is scheduled to take place on January 1, 1999 with Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Spain, Portugal,
and the Netherlands. The costs associated with a delay and possible abandonment
appear to be too great to allow the political leaders to walk away from their
commitment. The EMU should be a net plus for European investment spending and
for economic growth. In addition, a less volatile business cycle should be
beneficial for future business planning. This should be a net plus for
shareholder value and for the markets in general. The community's future
challenge will be to allow more countries into the EMU while maintaining its
stability.
Austria. Austria's small population and its limited domestic market are
not sufficient to support single large industrial sectors. Since raw materials
are limited and the terrain supports only a small agricultural sector, Austria's
Gross Domestic Product ("GDP") is based on its labor force and service industry.
Its skilled labor force has focused on special niche industries for export, with
high value added through technological applications, and a vibrant services
sector, based initially on tourism, has emerged and currently accounts for over
60% of Austria's GDP.
As a result of the second world war, much of the Austrian industrial
sector was converted to public ownership and the Austrian Industrial
Administration Company ("OIAG") was created to function as a holding company for
these nationalized industries. Due to global recession and the troublesome state
of public finance in Austria, the government attempted to reduce the drain of
the OIAG on the country's budget by reducing the OIAG's labor force and
reorganizing the OIAG into seven separate holding companies. The reorganization
of the OIAG, along with public asset sales, helped to reduce the budget deficit
from 5.1% of GDP in 1986 to 3.3% of GDP in 1992. Losses in 1993, however, caused
the government to begin selling the group to the private sector. With the steady
trend toward privatization and the increased importance of foreign capital,
Austria is a likely member of the EMU.
Belgium. Rising new industries in Belgium include light engineering,
chemicals, and food processing and services, with the service industry sector
currently accounting for approximately 70% of GDP. Even though the agricultural
sector is small, accounting for only about 2% of GDP, its importance is
reflected in Belgium's thriving food processing business. Some of Belgium's
traditional industries, coal, steel, textiles and heavy engineering, have
experienced a steep decline over the past two decades but this decline has been
partly offset by the rising new industries. Company ownership is held by a few
large private sector groups through a web of holding and operating companies.
Belgium's open trade policy, together with a successful strategy of
competitive disinflation and a lower domestic demand growth, has led to
substantial current account surpluses. Exports are running at approximately 77%
of GDP and imports at approximately 74%.
High unemployment rates and a large public debt continue to occupy the
government's attention. Through a series of expenditure reductions and tax
increases, the government was able to reduce the deficit to 5.9% of GDP in 1990,
but this trend reversed itself in 1991. The rise in the deficit was fueled by an
economic slowdown, followed by a recession in 1993, along with increasing social
security and interest payments. By 1993, the deficit had increased to 7.2% of
GDP. Belgium implemented a series of tough fiscal restrictions over the last
four years with a view to meeting the Maastricht criteria. As a result, the
budget deficit fell from 7.2% of GDP in 1993, to 2.9% in 1996. The debt to GDP
ratio has also started to decline.
France. France is a leading industrial country. Its large service
sector, accounting for approximately two-thirds of GDP, includes tourism,
transportation and computer consultancy. The once dominant iron and steel and
textile industries have given way to the fast growing aerospace, chemicals and
pharmaceuticals, plastics and telecommunications industries. The automobile
industry, the most important industry in the early eighties, has been largely
overtaken by capital goods industries. The capital goods industries account for
one-fifth of the country's exports and supply as many jobs as the agricultural
sector.
High unemployment rates (currently 12.5%) and a soaring budget deficit
are some of the main economic concerns that have plagued France for the past
decade. Since 1993, the government has been trying to solve these problems
through a mix of higher taxes, which reached a record level in 1995, and a
reduction of non-wage costs. In 1996, the largest attempt to cut the budget
deficit was implemented, leading to a disparity of interest rate differentials
vis-a-vis Germany.
The government's 1996 implementation of an unpopular far-reaching
reform of the social
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<PAGE> 56
security system, which aimed to curb health care spending through tighter
control from the Parliament and supervisory bodies, resulted in a protracted
strike.
In 1997, the unexpected Socialist victory in the early general election
raised fresh doubts about the French authorities' commitment to cut the budget
deficit in line with the EMU requirements. However, the new government finally
decided to implement a temporary 10% corporate tax increase, the second one
since 1995, and cut spending, which should allow France to qualify for the EMU.
The government also envisions reducing current employees' weekly working time
and hiring 350,000 youths in the public sector to cut unemployment rates.
The future economic challenges facing the French government include
reducing the budget deficit to a level acceptable to the EMU requirements,
downsizing and restructuring the public sector and improving the business
environment, particularly by increasing labor market flexibility.
Germany. Germany, the third largest economy in the world, has faced
substantial economic challenges resulting from the reunification of East and
West Germany. The former East Germany, which had been insulated from any real
competition, was under invested in housing and infrastructure and was not geared
to handle full economic and political union with West Germany. In addition, the
cost of reunification, which West Germany intended to finance with increased
taxes, proved to be much greater than anticipated due to the high cost of social
security transfers, extensive environmental damage and a worse than expected
economic condition. As a result, the public sector deficit rose from 0% to 7.5%
in 1993 and the Bundesbank (central bank) sharply raised interest rates, causing
the economy to recess.
Germany began to recover from recession in 1994, but the rise in
interest rates and the appreciation of the deutschemark restricted market
advances. The sharp monetary eases implemented by the Bundesbank along with the
depreciation of the deutschemark through 1997 have created very favorable
monetary conditions to which the economy is responding. Germany's fiscal health
and prosperity over the next few years will largely depend on the continued
growth of capitalism in eastern Germany.
Italy. Italy is a net importer of agricultural products and also
imports most of its energy products. Aside from tourism and design, Italy's
service sector is not very competitive. Through networks of small and
medium-sized companies Italy's strengths lie in its manufacturing sector,
particularly in machine tools and consumer goods. In the early 1990s, industry
began to struggle to compete as a result of wage increases and an exchange rate
policy designed to limit the effect of government borrowing on the inflation
rate. In September 1992, the lira collapsed and was forced to leave the Exchange
Rate Mechanism (ERM). The lira recovered in 1996 and returned to the ERM by the
end of that year.
The Bank of Italy, operating autonomously, has historically followed a
tough monetary policy in an effort to prevent government borrowing from causing
inflation.
Beginning in 1991, the government implemented a fiscal policy that
reduced government borrowing through tax measures and spending cuts. Since then,
successive governments have delivered to parliament ambitious budget laws that
included revenue raising measures and cuts to the pension system, health
service, local government and defense. Despite the slow pace of reform to avoid
social unrest, impressive improvements have been made to realize 1997's
3%-of-GDP deficit target as required by the Maastricht Treaty.
In 1992, Italy also began a privatization program by transferring major
state holdings to joint stock companies as an intermediate step to total or, at
least partial, floatation on the stock exchange. Although the privatization
program was somewhat curbed in 1994, it resumed in 1995 and is still proceeding.
The Netherlands. The Netherlands boasts one of the highest levels of
GDP per capita in the world. While industry is its most important sector, the
Netherlands also benefits from agricultural and natural gas resources.
Foreign trade is vital to the Netherlands, accounting for approximately
50% of GDP. The recovery of exports by the end of the 1980s was fueled by
government policies on wage moderation, although such policies resulted in an
increased unemployment rate. Additionally, the reunification of Germany resulted
in a surge in demand for exports.
Public spending has exceeded 50% of GDP, including transfer payments.
The public-sector
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deficit is a political and economic problem and has received heightened
government attention. While the deficit has been reduced recently, further
reduction remains a key government objective. The Netherlands has efficiently
increased the flexibility of its labor market and cut indirect wage costs. As a
consequence, the Netherlands should outperform the European average in terms of
economic performance over the years to come.
Spain. Spain's entry into the European Community in 1986 was followed
by a period of rapid economic growth. Economic growth did not continue; however,
and the government's restrictive monetary policy and the overvalued peseta
contributed to a downturn in investment along with a rise in unemployment in the
early 1990s. Currently, the government faces the challenges of addressing the
domestic concerns of controlling inflation, reducing the deficit and effecting
labor reform against the competing interests of maintaining a monetary policy
suitable for Spain's participation in the EMU.
In June 1989, Spain joined the Exchange Rate Mechanism of the European
Monetary System with the goal of maintaining a stable currency. The resulting
huge inflow of foreign capital caused the Spanish economy to lose some of its
competitiveness. Despite the devaluation of the peseta and the easing of
monetary policy in 1993, Spain slipped into its worst recession in 30 years.
Economic growth has recovered since then, averaging 2.4% from 1994-96. The
center-right government elected in 1996 has displayed a strong ability to
control public spending through structural reforms. By the end of 1997, Spain
should be able to fulfill all the Maastricht criteria and its participation in
the EMU should not be questioned.
In June of 1994, Spain experienced a general strike by the trade
unions. The strike, while unsuccessful, led to reforms in the labor market to
ease the rigid regulations that govern permanent job contracts. Spanish
unemployment is currently the highest in the European Union; however, 1997's
strong economic growth and new reforms to improve the flexibility of the labor
market have decreased the rate of unemployment from 24.6% in 1994 to 20.5% as of
July 1997.
Sweden. Sweden has a highly developed and successful industrial sector.
The chief industries, most of which are privately owned, include textiles,
furniture, electronics, dairy, metals, ship building, clothing, engineering,
chemicals, food processing, fishing, paper, oil and gas, automobiles and
shipping. Productivity, as measured by GDP per capita, is well above the
European average, although two-thirds of GDP passes through the public sector.
Successive governments have traditionally afforded Swedes generous
benefits for unemployment, sick leave, child care, elderly care and general
public welfare, along with state medical care. This extensive social welfare
system has proved unsustainable in recent years and has resulted in large
government deficits. Furthermore, a wide tax wedge, caused by the generous
social benefits, is a key impediment to job creation and is the reason for the
high unemployment rate. Almost half of the personal disposable income received
by Swedes resulted from transfer payments, a system for redistributing income.
Sweden suffered a severe recession in the early 1990s causing GDP to
fall 5% between 1990 and 1993. The economic recovery gathered pace in 1994 and
is now in its fourth year. Nonetheless, the recession led to a drop in the
standard of living and has left Sweden with a large gap in its public finances.
The budget deficit peaked in 1993 at 12.3% of GDP.
Sweden, which joined the European Community on January 1, 1995,
received strong pressure to bring its public finances under control. A fiscal
consolidation plan, entailing a tightening of policy over a period of four
years, was approved by Parliament in 1995. The implementation of the plan is
currently on track and Sweden is most likely to achieve a balanced budget in
1998. The resulting improvement in investor and business confidence has boosted
Sweden's economic prospects and, despite the continuing fiscal consolidation,
such economic prospects are some of the best in Europe for the remainder of the
decade.
Switzerland. Due to its lack of raw materials, Switzerland has based
its economic growth on its highly skilled labor market and technological
manufacturing expertise. Switzerland's strengths lie in chemicals and
pharmaceuticals, watches, precision instruments (machinery equipments),
engineering, food, financial services and 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
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recession and stagnation. Some signs of economic revival have appeared in 1997,
since the economy traditionally operates in tandem with the rest of Europe.
Moreover, because of its safe haven status, the currency has been under
increased pressures due to the prospect of the EMU currency, the Euro, which in
turn has aggravated the economic situation. For the remainder of 1997 and
forward, the monetary policy is likely to remain targeted at the exchange rate.
The United Kingdom. The May 1 general election resulted in a landslide
victory for the Labor Party, led by Tony Blair, which had been out of office
since May 1979. In its first few months, the Labor Party administration has
shown signs of pursuing policies which are very similar to the market-oriented
policies of the outgoing government. It has granted operational independence to
the Bank of England, a step which the Conservative government had been reluctant
to take.
The new government is more open to EMU than the outgoing
administration, but early participation nonetheless remains unlikely. The Labor
leadership is in favor of the EMU in principle, but has stated that any eventual
practical decision to join must be preceded by a greater economic convergence
than that specified by the Maastricht Treaty and a formal referendum.
The UK economy has grown since 1993, and has continued to grow strongly
during early 1997. Measured unemployment has fallen sharply, toward levels more
typical of the United States than of Continental Europe, and corporate
profitability has been approaching levels not seen since the 1960s.
Unfortunately, inflation performance remains disappointing, and it is still
uncertain whether the independent central bank will be successful at fine-tuning
the business cycle.
REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Austria .................... 1.1 1.8 3.0 0.4
Belgium .................... 1.4 1.9 2.3 1.3
France ..................... 1.3 2.2 2.8 1.3
Germany .................... 1.4 1.9 2.9 1.1
Italy ...................... 0.7 3.0 2.2 1.2
Netherlands ................ 2.7 2.4 2.7 0.2
Spain ...................... 2.2 2.8 2.1 1.2
Sweden ..................... 1.1 3.6 3.3 2.2
Switzerland ................ -0.7 0.1 1.0 0.8
United Kingdom ............. 2.1 2.5 3.8 2.1
</TABLE>
Source: World Economic Outlook, May 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-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
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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 recent months, the Southeast Asian currency markets have come under
severe selling pressure from abroad, as foreign investors and speculators alike
have heavily sold regional currencies viewed to be overvalued. The Thai Baht was
the first to come under pressure, but Indonesian, Malaysian, Phillipine,
Singaporean, Taiwanese, South Korean and Hong Kong currencies have all been
affected. Equity and fixed income markets have also faced selling pressure as
foreign investors have been concerned with the overall financial prospects of
the region. For the near to intermediate term at least, these developments could
lead to higher interest rates, lower economic growth and continued volatility in
the currency and securities markets in the region.
Australia. Australia has a prosperous Western-style capitalist economy,
with per capita GDP comparable to levels in industrialized Western European
countries. Economic growth accelerated markedly in 1994 as robust domestic
spending boosted activity. Australia is rich in natural resources and is the
largest exporter of beef and wool, the second-largest exporter of mutton and
among the top wheat exporters in the world. Australia is also a major exporter
of minerals, metals and fossil fuels. Due to the nature of Australia's exports,
a downturn in world commodity prices could have a large impact on its economy.
The government is in the process of developing policies to promote foreign
investment, expand research and development, increase funding for national land
care and reform the public housing policy. Additionally, the government has
continued to support privatization of state-owned enterprises.
While economic data suggests an easing from the unsustainable rates of
growth reached during 1994, the outlook is for continued, but moderate economic
growth. While GDP grew by 3.2% in 1995, debt is expected to continue to rise.
Regardless of the intensification of the severe drought in eastern
Australia, economic growth was strong in 1994-95 and improvements were made in
reducing unemployment. The inflation rate reached 5.1% in 1995. This was the
result of increased food prices, due to the drought, and the government's
increased taxes on tobacco and motor vehicles.
Hong Kong. The transfer of sovereignty from Britain to China, which has
created a sense of uncertainty in Hong Kong's economy, has largely been a smooth
transition. Under the principle of "one country, two systems," Hong Kong is now
a special administrative region (SAR) of the People's Republic of China and is
empowered with a high degree of autonomy. It has retained its administrative,
legislative and judicial systems. The SAR government has full control over its
monetary and fiscal policies and it maintains its own customs and immigration
control, separate from the mainland. Except for issues relating to national
security and foreign policy, the SAR is largely run as an independent territory.
The first chief executive of the SAR, Mr. C.H. Tung, a former shipping
tycoon, has vowed to make a difference in the lives of the people of Hong Kong,
by focusing his attention on the areas of housing, education and infrastructure.
In the past, the chronic shortage of housing has been a strong influence on the
property market. Hong Kong property prices today are among the highest in the
world. The Tung administration will announce a major housing package in October
1997, detailing its plan to double the supply of apartments in the territory.
Worth noting is that there is heavy exposure to the property market in Hong
Kong's banking sector as well as the stock market as a whole.
The integration of Hong Kong's economy with that of the mainland
continues apace. While the integration process in the 1980's was driven by the
relocation of Hong Kong's labor-intensive manufacturing sector to Southern
China, the integration theme for the 1990's is that of Hong Kong becoming a
service center for China's fast growing economy. A large number of mainland
companies have established offices in Hong Kong as a window for interaction with
the global economy. The Hong
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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.
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 impediment to strong continued exports
and economic recovery, because it makes Japanese goods sold in other countries
more expensive and reduces the value of foreign earnings repatriated to Japan.
Since the Japanese economy is so dependent on exports, any fall off in exports
may be seen as a sign of economic weakness, which may adversely affect the
market.
Geologically, Japan is located in a volatile area of the world and has
historically been vulnerable to earthquakes, volcanoes and other natural
disasters. As demonstrated by the Kobe earthquake in January of 1995, which
resulted in the death of 5,000 people and billions of dollars of damage, natural
disasters can be significant enough to affect the country's economy.
Malaysia. Over the last two decades, Malaysia has experienced rapid
industrialization, transforming a once commodity driven economy to one dominated
by the manufacturing sector. Although commodities remain important to the
Malaysian economy, where tin, rubber, palm oil, timber, oil and gas have played
a leading role, the electronics sector is now the fastest growing and most
important sector by far. In fact, Malaysia has become the world's third-largest
producer of semiconductor devices (after the U.S. and Japan) and the world's
largest exporter of semiconductor devices.
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The high rates of investment that have been required to sustain
Malaysia's rapid growth have been met with high rates of domestic savings and
significant inflows of foreign direct investment. This combination has been
instrumental in maintaining fast growth while simultaneously limiting
inflationary pressures. Although free repatriation of profits is allowed,
Malaysia has experienced a high rate of reinvestment of profits from foreign
direct investment.
The Bank Negara Malaysia (the central bank) manages the exchange value
of the Ringgit against a basket of foreign currencies. Recently, there has been
significant selling pressure on the ringgit as foreign investors have
dramatically sold down the currency. The general feeling of currency
overvaluation has hurt the Southeast Asian market, in particular Thailand and
Malaysia, and has been compounded by speculative currency trading. The weak
Ringgit has caused an outflow of foreign capital which has in turn hurt other
Malaysian markets. While the Malaysian government has recently lifted certain
selling restrictions on particular financial assets, these restrictions have
contributed to a general feeling of apprehension among foreign investors as to
the Malaysian government's commitment to free market dynamics and the Malaysian
government's ability to stabilize its own financial markets.
The future direction of Malaysian manufacturing, and the economy as a
whole, depends on the performance of manufactured exports. Foreign direct
investment is the source of Malaysia's export dynamism. Malaysia is developing
its human capital base and its infrastructure in order to continue attracting
foreign investment. This strategy has led to an increased import-intensity of
growth. It also makes Malaysia vulnerable to potentially volatile foreign
capital flows, as has recently been the case, and downturns in demand in its
export markets. Malaysia's continued success depends on reducing the import
content of exports through increased technology transfer to develop linkages
between exporters and domestic input supplies.
Singapore. Singapore has become a high-income, highly industrialized
country though rapid growth in its manufacturing sector due largely to
significant foreign investment. Of particular importance is the electronics
industry in which Singapore is the leading producer of disk drives. The
financial and business services sector has also experienced recent growth, while
the mining and agriculture sectors are of minimal importance. Oil refining and
chemical industries have long been important and recently a significant
pharmaceutical sector has emerged. Since 1987, annual growth has been high,
ultimately reaching 10% in 1993 and 1994 and 9% in 1995. This sustained annual
growth can be attributed to high investment and exports. Personal consumption
growth has been low, which makes Singapore the highest saving country in the
world.
The government has followed an interventionist economic policy with
respect to its individual industries. To instill faith in its interventionist
policies, the government has sought to maintain economic stability. The taxes
are relatively high, but rates are stable. Monetary policy has aimed at keeping
inflation low by using the exchange rate as the main instrument. Labor market
pressure has been controlled by setting limits on the percentage of foreign
labor employed and applying a levy on employers of foreign labor. In addition,
the government, recognizing that land use is a constraint on growth, has sought
to make existing land use more efficient.
The government directly holds stakes in individual companies across the
board, from high-tech defense contractors to low-tech service businesses. The
government also holds indirect stakes in firms through a number of agencies.
Such government ownership interests may discourage the development of private
firms due to fears that the government entities may be given certain advantages
not available to private entities. Some privatization of state-owned businesses
is ongoing, however, such as the telephone business and certain other utilities.
Singapore is heavily dependent on foreign trade with the total value of
trade goods and services reaching 278% of GDP in 1994. The country has also seen
a large volume of re-export trade. The industrial base is dominated by foreign
multinationals, with only a few large domestic firms. Though foreign investment
is a key to the continued prosperity of Singapore, the main concern about future
prospects is that productivity growth has not been consistent over the years.
With one of the highest investment rates in the world, sustaining rapid output
growth increasingly will depend on boosting productivity growth.
Singapore's financial markets have come under recent selling pressure,
as fears that the Singapore Dollar may be overvalued have spurred both
fundamental and speculative currency selling. The weakened Singapore Dollar has
resulted in increased selling pressure on other Singapore markets. The Monetary
Authority of Singapore has largely been allowing the Singapore dollar to
fluctuate according to market forces, resulting in a recent depreciation.
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REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<CAPTION>
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Australia......................................................... 4.0 3.2 5.2 3.4
Hong Kong......................................................... 4.5 4.8 5.3 6.1
Japan ............................................................ 3.6 1.4 0.6 0.1
Malaysia ......................................................... 8.4 9.5 9.2 8.3
Singapore......................................................... 7.0 8.8 10.1 10.4
</TABLE>
Source: World Economic Outlook, May 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 led to significant
public sector job losses; although these were offset for the most part by
private sector job gains, overall employment growth remained below par. As a
result, Canada's unemployment rate has remained above 9% since 1990.
With the fiscal drag on the economy having reached its maximum in 1996,
the continued strength in investment in machinery and equipment, along with a
competitively-valued Canadian dollar, suggest that Canada may have brighter
prospects in the short run. Risks remain however. Continued economic
sluggishness may diminish Canada's fiscal resolve and bring about a call for tax
cuts. Due to the high level of outstanding debt in the public sector, it will be
difficult for Canada to maintain advances made in its competitiveness over the
long run. Another significant problem faced by the Canadian economy is the
ongoing uncertainty caused by the separatist movement in Quebec, Canada's second
largest and second most populous province. After a very narrow defeat in the
October 1995 referendum campaign, Quebec's separatist government vowed to hold
another referendum within a year of its reelection. The next provincial election
in Quebec must take place by summer 1999.
CANADIAN REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<S> <C>
1997 --
1996 1.5
1995 2.3
1994 4.1
1993 2.2
1992 0.8
1991 1.8
</TABLE>
Source: World Economic Outlook, May 1998 (International Monetary Fund)
Mexico
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Mexico. During the 1980's, Mexico pursued policies designed to reform
the economy and promote sustained growth. These policies included fiscal
discipline, tax reform, opening the economy, deregulation and privatization.
While successful in reducing inflation and raising growth, these policies
resulted in a substantial budget deficit and an overvalued exchange rate by the
end of 1994, which made the country unable to withstand the shocks that occurred
in 1994. This resulted in the destabilization of the Mexican economy at the end
of 1994. These shocks included a series of violent internal political events, a
sharp turnaround in U.S. interest rate policy, beginning in February 1994, and a
belated recognition by financial market participants of too-large growth in
monetary aggregates and fiscal red ink. All combined to create a crisis of
confidence on the part of foreign portfolio investors.
In December 1994, a sharp and rapid devaluation of the peso ensued,
engendering higher inflation and new concerns, both about Mexico's ability to
repay its short-term obligations and the stability of the Mexican banking
system. These concerns led to higher interest rates and an eventual refinancing
of internal bank obligations or refunding debt issues in 1995. Also in 1995, the
government amortized US$29 billion of short-term dollar-linked debt, of which
two thirds was actually paid in dollars using longer-term funds borrowed from
the International Monetary Fund and the U.S. Department of Treasury. U.S.
Treasury obligations have since been repaid.
In 1995-96, using a mix of tight monetary policy and tight fiscal
discipline, the Mexican government endeavored to restore stability in Mexico's
financial and foreign exchange markets, lower inflation rates, enhance
international competitiveness, protect the solvency of the banking system and
stimulate economic recovery and job creation. The government was successful on
the whole, reducing inflation and the volatility of the exchange rate and
reducing nominal interest rates. Mexico's overall operational fiscal balance
budgets in 1995 and 1996 equaled .7% and -.8% of GDP, respectively. In 1996,
there were significant declines in real and nominal interest rates.
Mexico's GDP, which declined 6.2% in 1995, grew by 5.1% in 1996 and
inflation totaled 27.7%, according to official estimates from Mexico's Ministry
of Finance. Mexico's balance of payment's deficit was reduced from US$29.4
billion in 1994, to US$1.8 billion in 1996, all according to official government
estimates. Also according to official estimates, economic growth has averaged
6.4% in the six quarters since 1996, suggesting that sustainable recovery is
underway.
According to official statistics, inflation, which reached a peak in
April 1995 with the 8% growth in consumer prices, has averaged 1.6% in the
twelve months ending with June 1997. The Mexican peso has remained relatively
stable in 1997, despite the July 6, 1997 Congressional election losses by the
governing party, the PRI. The 48-hour interbank Mexican peso equaled M$7.66 on
December 31, 1996, and M$7.82 on July 31. Real interest rates have continued to
decline in 1997.
MEXICO REAL GDP RATE OF GROWTH (ANNUAL % CHANGE)
<TABLE>
<S> <C>
1997 --
1996 5.1
1995 -6.2
1994 4.5
1993 2.0
1992 3.6
1991 4.2
</TABLE>
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. 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,
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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:
<TABLE>
<S> <C>
Market Coverage Target 60% of market
Industry Representation Mirror the Local Market
Liquidity Maximize
Float Maximize
Cross-Ownership Avoid/Minimize
Size Sample with Size Characteristics of Universe
</TABLE>
Coverage. To reflect accurately country-wide performance as well as the
performance of industry groups, MSCI aims to capture 60% of total market
capitalization at both the country and industry level. To reflect local market
performance, an index should contain a percentage of the market's
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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
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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:
- In the period between the ex date and the date of dividend
reinvestment, a dividend receivable is a component of the
index return.
- Dividends are deemed received on the payment date.
- To determine the payment date, a fixed time lag is assumed to
exist between the ex date and the payment date. This time lag
varies by country, and is determined in accordance with
general practice within that market.
- Reinvestment of dividends occurs at the end of the month in
which the payment date falls.
PRICE AND EXCHANGE RATES
Prices. Prices used to calculate the MSCI Indices are the official
exchange closing prices. All prices are taken from the dominant exchange in each
market. In countries where there are foreign ownership limits, MSCI uses the
price quoted on the official exchange, regardless of whether the limit has been
reached.
Exchange Rates. MSCI uses WM/Reuters Closing Spot Rates for all
developed and emerging markets except those in Latin America. The WM/Reuters
Closing Spot Rates were established by a committee of investment managers and
data providers, including MSCI, whose object was to standardize exchange rates
used by the investment community. Exchange rates are taken daily at 4 p.m.
London time by the WM Company and are sourced whenever possible from
multi-contributor quotes on Reuters. Representative rates are selected for each
currency based on a number of "snapshots" of the latest contributed quotations
taken from the Reuters service at short intervals around 4 PM. WM/Reuters
provides closing bid and offer rates. MSCI uses these to calculate the mid-point
to 5 decimal places.
MSCI continues to monitor exchange rates independently and may, under
exceptional circumstances, elect to use an alternative exchange rate if the
WM/Reuters rate is believed not to be representative for a given currency on a
particular day. Because of the high volatility of currencies in some Latin
American countries, MSCI continues to use its own timing and sources for these
markets. The exchange rate for the MSCI Mexico (Free) Index is that prevailing
as of 3:00 p.m. New York City time.
CHANGES TO THE INDICES
In changing the constituents of the indices, MSCI attempts to balance
representativeness versus undue turnover. An index must represent the current
state of an evolving marketplace, yet at the same time minimize turnover, which
is costly as well as inconvenient for managers.
There are two broad categories of changes to the MSCI Indices. The
first consists of market-driven changes such 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> 67
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 AUD159,162 billion or US$__ billion. In
percentage terms, the MSCI Australia represented approximately __% 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:
a
<TABLE>
<S> <C>
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%
</TABLE>
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.
28
<PAGE> 68
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 ATS23,291 billion or US$__ billion. In
percentage terms, the MSCI Austria represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI Austria
Index as of August 31, 1998.
29
<PAGE> 69
THE MSCI BELGIUM INDEX
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 BEF125,225 billion or US$__ billion. In
percentage terms, the MSCI Belgium represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
1. Utilities - Electrical & Gas.......................... 27.14%
2. Banking............................................... 18.13%
3. Insurance............................................. 17.16%
4. Energy Sources........................................ 6.85%
5. Food and 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%
</TABLE>
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 CAD267,272 billion or US$__ billion. In
percentage terms, the MSCI Canada represented approximately __ 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:
<TABLE>
<S> <C>
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%
</TABLE>
As of August 31, 1998, the largest five constituents together comprised
approximately 34.12% of
30
<PAGE> 70
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 FRF644,821 billion or US$__ billion. In
percentage terms, the MSCI France represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
Appendix A hereto contains a complete list of the securities in the MSCI France
Index as of August 31, 1998.
31
<PAGE> 71
THE MSCI GERMANY INDEX
On August 31, 1998, the MSCI Germany Index (with net dividends
reinvested) (the "MSCI Germany") consisted of 67 stocks with an aggregate market
capitalization of approximately DEM 722,558 billion or US$__ billion. In
percentage terms, the MSCI Germany represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 35 stocks with an aggregate
market capitalization of approximately HKD 112,828 billion or US$__ billion. In
percentage terms, the MSCI Hong Kong represented approximately __% 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:
<TABLE>
<S> <C>
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....................................... 2.38%
</TABLE>
32
<PAGE> 72
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 ITL308,334 billion or US$__ billion. In
percentage terms, the MSCI Italy represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
Appendix A hereto contains a complete list of the securities constituting the
MSCI Italy Index as of August 31, 1998.
33
<PAGE> 73
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 JPY__ billion or US$__ billion. In percentage
terms, the MSCI Japan represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 MYR31,906 billion or US$__
billion. In percentage terms, the MSCI Malaysia (Free) represented approximately
__% 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:
<TABLE>
<S> <C>
1. Telekom Malaysia...................................... 15.13%
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%
</TABLE>
34
<PAGE> 74
<TABLE>
<S> <C>
10. Kuala Lumpur Kepong................................... 2.75%
</TABLE>
As of August 31, 1998, the largest five constituents together comprised
approximately 42.78% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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 55,106 billion or US__ billion. In
percentage terms, the MSCI Mexico (Free) represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
35
<PAGE> 75
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 370,043 billion or US$__ billion. In
percentage terms, the MSCI Netherlands represented approximately __% 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:
<TABLE>
<S> <C>
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. Kon. PTT Nederland.................................... 4.89%
7. Ahold................................................. 4.55%
8. KPN (Kon.) PTT Nederland.............................. 3.89%
9. Heineken N.V.......................................... 3.42%
10. Wolters Kluwer........................................ 3.34%
</TABLE>
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:
<TABLE>
<S> <C>
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. Chemicals........................................... 3.18%
</TABLE>
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 37 stocks with an aggregate market
capitalization of approximately SGD 33,774 billion or US$__ billion. In
percentage terms, the MSCI Singapore (Free) represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
36
<PAGE> 76
<TABLE>
<S> <C>
7. United Overseas Bank Fgn........................... 5.23%
8. City Developments.................................. 4.19%
9. Creative Technology................................ 2.67%
10. Keppel Corp........................................ 1.95%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 196,143 billion or US$__ billion. In
percentage terms, the MSCI Spain represented approximately __%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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
37
<PAGE> 77
<TABLE>
<S> <C>
8. Real Estate.......................................... 1.61%
9. Leisure & Tourism.................................... 1.57%
10. Food & Household Products............................ 1.21%
</TABLE>
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 188,633 billion or US$__ billion. In
percentage terms, the MSCI Sweden represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 520,645 billion or US$__ billion. In
percentage terms, the MSCI Switzerland represented approximately __% 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:
<TABLE>
<S> <C>
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%
</TABLE>
38
<PAGE> 78
<TABLE>
<S> <C>
7. Roche Holding Inhaber................................ 5.25%
8. Zuerich Allied....................................... 5.14%
9. Novartis Inhaber..................................... 2.16%
10. ABB Ag Inhaber....................................... 1.83%
</TABLE>
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:
<TABLE>
<S> <C>
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%
</TABLE>
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 1,426,976 billion or US$__ billion. In
percentage terms, the MSCI UK represented approximately __% 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:
<TABLE>
<S> <C>
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. Vodaform Group......................................... 2.92%
7. Zeneca Group........................................... 2.57%
8. Diageo................................................. 2.49%
9. HSBC Holdings (HKD 10)................................. 2.42%
10. Halifax................................................ 2.27%
</TABLE>
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:
<TABLE>
<S> <C>
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....................................... 6.07%
8. Utilities - Electrical & Gas......................... 5.02%
</TABLE>
39
<PAGE> 79
<TABLE>
<S> <C>
9. Financial Services................................... 4.98%
10. Beverages & Tobaco................................... 4.36%
</TABLE>
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 Index - covering European, Australasian and the Far
Eastern markets - is comprised of a weighted allocation of the MSCI Indices for
Japan (__%), the United Kingdom (__%), Germany (__%), France (__%), Switzerland
(__%), Netherlands (__%), Hong Kong (__%), Singapore (__%), Belgium (__%),
Malaysia (__%), Australia (__%), Spain (__%), Italy (__%), Sweden (__%), Denmark
(__%), Finland (__%), Norway (__%), New Zealand (__%), Austria (__%) and Ireland
(__%). The weightings shown parenthetically are based on the EAFE Index as of
September __, 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
Index by investing in the numbers of WEBS specified for the following 15 WEBS
Index Series, in order to achieve the basket weightings listed below:
<TABLE>
<CAPTION>
% of
WEBS Number of Value of
Index Series WEBS Basket
------------ ---- ------
<S> <C> <C>
Japan __ __%
United Kingdom __ __%
Germany __ __%
France __ __%
Switzerland __ __%
Netherlands __ __%
Hong Kong __ __%
Australia __ __%
Malaysia (Free) __ __%
Italy __ __%
Sweden __ __%
Spain __ __%
Singapore (Free) __ __%
Belgium __ __%
Austria __ __%
</TABLE>
The total cost of the above basket of WEBS, again using the values per
Creation Unit in the Prospectus, would be $__. It should be noted that the WEBS
basket set forth above does not include representation of five countries
included in the MSCI EAFE Index, representing __% of the value of
40
<PAGE> 80
such index on September __, 1998.
EXCHANGE LISTING AND TRADING
The WEBS of each WEBS Index Series have been listed for trading on the
AMEX. The AMEX has approved modifications to its Rules to permit the listing of
WEBS. The non-redeemable WEBS trade on the AMEX at prices that may differ to
some degree from their net asset value. See "Special Considerations and Risks"
and "Determining Net Asset Value". There can be no assurance that the
requirements of the AMEX necessary to maintain the listing of WEBS of any Index
Series will continue to be met. The AMEX may remove the WEBS of a WEBS Index
Series from listing if (1) following the initial twelve-month period beginning
upon the commencement of trading of a WEBS Index Series, there are fewer than 50
beneficial holders of the WEBS for 30 or more consecutive trading days, (2) the
value of the underlying index or portfolio of securities on which such WEBS
Index Series is based is no longer calculated or available or (3) such other
event shall occur or condition exist that, in the opinion of the AMEX, makes
further dealings on the AMEX inadvisable. In addition, the AMEX will remove the
shares from listing and trading upon termination of the Fund.
As in the case of other stocks traded on the AMEX, the brokers'
commission on transactions will be based on negotiated commission rates at
customary levels for retail customers and rates which range between $.015 to
$.12 per share for institutions and high net worth individuals.
In order to provide current WEBS pricing information, the AMEX disseminates
through the facilities of the Consolidated Tape Association an updated
"indicative optimized portfolio value" ("IOPV") for each WEBS Index Series as
calculated by Bloomberg, L.P ("Bloomberg"). The Fund is not involved in or
responsible for any aspect of the calculation or dissemination of the IOPVs, and
makes no warranty as to the accuracy of the IOPVs. IOPVs are disseminated on a
per WEBS Index Series basis every 15 seconds during regular AMEX trading hours
of 9:30 a.m. to 4:00 p.m. New York time.
The IOPV has an equity securities value component and a cash component. The
equity securities values included in the IOPV are the values of the Deposit
Securities for each WEBS Index Series. While the IOPV reflects the current
market value of the Deposit Securities required to be deposited in connection
with the purchase of a Creation Unit of WEBS, it does not necessarily reflect
the precise composition of the current portfolio of securities held by the Fund
for each WEBS Index Series at a particular point in time, because the current
portfolio of a WEBS Index Series may include securities that are not a part of
the current Deposit Securities. Therefore, the IOPV on a per WEBS Index Series
basis disseminated during AMEX trading hours should not be viewed as a real time
update of the net asset value per WEBS share of the Fund, which is calculated
only once a day. It is possible that the value of the portfolio of securities
held by the Fund for a particular WEBS Index Series may diverge from the
applicable IOPV during any trading day. In such case, the IOPV would not
precisely reflect the value of a WEBS Index Series' portfolio.
The equity securities included in the IOPV reflect the same market
capitalization weighting as the Deposit Securities of the particular WEBS Index
Series. In addition to the equity component described in the preceding
paragraph, the IOPV for each WEBS Index Series includes a cash component
consisting of estimated accrued dividend and other income, less expenses. Each
IOPV also reflects changes in currency exchange rates between the U.S. dollar
and the applicable home foreign currency. For the WEBS Index Series of
Australia, Japan, Malaysia (Free), Hong Kong and Singapore (Free), there is no
overlap in trading hours between the foreign market and the AMEX. Therefore, for
each of these WEBS Index Series, Bloomberg utilizes closing prices (in
applicable foreign currency prices) in the foreign market for securities in the
WEBS Index Series portfolio, and converts the price to U.S. dollars. This value
is updated every 15 seconds during AMEX trading hours to reflect changes in
currency exchange rates between the U.S. dollar and the applicable foreign
currency. For WEBS Index Series which have trading hours overlapping regular
AMEX trading hours, Bloomberg updates the applicable IOPV every 15 seconds to
reflect price changes in the principal foreign market, and converts such prices
into U.S. dollars based on the current currency exchange rate. When the foreign
market is closed but the AMEX is open, the IOPV is updated every 15 seconds to
reflect changes in currency exchange rates after the foreign market closes.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS OF THE FUND
The Board has responsibility for the overall management and
operations of the Fund,
41
<PAGE> 81
including general supervision of the duties performed by the Adviser and other
service providers. The Board currently consists of five Directors. Nathan Most
is an "interested" director, as defined in the 1940 Act, by reason of his
position as President of the Fund.
<TABLE>
<CAPTION>
POSITION WITH THE PRINCIPAL OCCUPATIONS
NAME AND ADDRESS FUND DURING PAST FIVE YEARS
- ---------------- ---- ----------------------
<S> <C> <C>
Nathan Most Director, President and Senior Vice President (retired) (from 1992 to
P.O. Box 193 Chairman of the Board 1996) and Vice President (from 1980 to 1992) of
Burlingame, CA 94011-0193 the American Stock Exchange, Inc.; President and
Age 84 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; Trustee and Member of
Management the Executive Committee (since 1991) of The
GTE Corporation Common Fund, a non-profit organization; Member
One Stamford Forum of the Investment Committee (since 1988) of the
Stamford, CT 06904 TWA Pilots Annuity Trust Fund; Vice Chairman and
Age 62 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
1251 Avenue of the Americas of Trustees of Macalester College; Trustee
23rd Floor (since 1995) of Russell Sage Foundation; Member
New York, NY 10020 (since 1994) of Wilmer Eye Institute Advisory
Age 48 Counsel at John Hopkins University Hospital;
President (since 1992) of the Hultquist Foundation.
Lloyd N. Morrisett Director President (since 1969) of The John and Mary R.
President Markle Foundation; Member (since 1968) of the
The Markle Foundation Council on Foreign Relations; Member (since
75 Rockefeller Plaza 1970) of the American Association for the
Suite 1800 Advancement of Science; Chairman (since 1970) of
New York, NY 10099 the Children's Television Workshop; Director
Age 68 (since 1976) of Haskins Laboratories, Inc.;
Director (1990-January, 1997) of The Multimedia
Corporation; Director (since 1992) of Classroom, Inc.;
Director (since 1994) of Infonautics Corporation;
Member of Board of Overseers (since 1995) of Dartmouth
School of Medicine; Director (since 1995) of Smith
College-Center for the Study of Social and Political
Change. Trustee (from 1973 to 1983, from 1985 to 1995,
and since 1996) of RAND.
</TABLE>
42
<PAGE> 82
<TABLE>
<S> <C> <C>
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 (since 1995) of
Age 51 Taubman Centers, Inc. (a real estate investment
trust); Director (since 1992) of FLIR Systems (an
imaging technology company); Director (since 1994) of
General Motors Acceptance Corporation; Director (since
1994) of General Motors Insurance Corporation;
Director (since 1995) of Equity Fund of Latin America;
Director (since 1995) of the Commonwealth Equity Fund;
Member (since 1994) of the Pension Managers Advisory
Committee of the New York Stock Exchange; Member
(since 1995) of the New York State Retirement System
Advisory Board; Chairman (since 1995) of the
Investment Advisory Committee of Howard Hughes Medical
Institute.
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 42 President (from 1993 to 1995) of PFPC
International; Vice President and Chief Accounting
Officer (since 1987) of PNC Institutional Management
Corp.
R. Sheldon Johnson Secretary Managing Director, Global Equity
Managing Director Derivatives, Morgan Stanley & Co.
Morgan Stanley & Co Incorporated (since 1988).
Incorporated
1585 Broadway
New York, NY 10036
Age 50
JoAnne M. Bennick Assistant Treasurer Vice President and Director of Quality Assurance
Vice President (since 1993) of PFPC Inc.; Audit Manager (from
PFPC Inc. 1990 to 1993) and Audit Associate (from 1985 to
103 Bellevue Parkway 1990) of Coopers & Lybrand.
Wilmington, DE 19809
Age 38
Gary M. Gardner Assistant Secretary Chief Counsel (since 1994) of PFPC Inc.;
Chief Counsel Associate General Counsel (from 1992 to 1994) of
PFPC Inc. The Boston Company, Inc.; General Counsel (from
400 Bellevue Parkway 1986 to 1992) of SunAmerica Asset Management Inc.
Wilmington, DE 19809
Age 46
Mary Jane Maloney Assistant Secretary Counsel of PNC Bank, N.A. (since 1996); Attorney
PFPC Inc. (from 1993 to 1996) of Drinker Biddle & Reath;
400 Bellevue Parkway Attorney (from 1991 to 1993) of L'Abbate &
Wilmington, DE 19809 Balkan.
Age 32
</TABLE>
43
<PAGE> 83
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 AGGREGATE BENEFITS ACCRUED AS BENEFITS FROM REGISTRANT
PERSON, COMPENSATION FROM PART OF FUND UPON AND FUND COMPLEX
POSITION REGISTRANT EXPENSES RETIREMENT PAID TO DIRECTORS
-------- ---------- -------- ---------- -----------------
<S> <C> <C> <C> <C>
Nathan Most, ______ None None ______
Director, President
and Chairman of the Board
John B. Carroll, ______ None None ______
Director
Timothy A. Hultquist, ______ None None ______
Director
Lloyd N. Morrisett, ______ None None ______
Director
W. Allen Reed, ______ None None ______
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 $__ 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 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
<PAGE> 84
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 $__; Austria WEBS Index Series $9,748,
$8,459 and $__; Belgium WEBS Index Series $2,045, $38,995 and $__; Canada WEBS
Index Series $13,800, $59,093 and $__; France WEBS Index Series $14,503, $35,574
and $__; Germany WEBS Index Series $16,309, $49,546 and $__; Hong Kong WEBS
Index Series $7,597, $40,743 and $__; Italy WEBS Index Series $25,345, $78,513
and $__; Japan WEBS Index Series $105,230, $318,796 and $__; Malaysia (Free)
WEBS Index Series $7,550, $44,814 and $__; Mexico (Free) WEBS Index Series
$5,552, $26,482 and $__; Netherlands WEBS Index Series $5,510, $22,577 and $__;
Singapore (Free) WEBS Index Series $8,578, $34,141 and $__; Spain WEBS Index
Series $6,162, $14,044 and $__; Sweden WEBS Index Series $4,522, $15,088 and
$__; Switzerland WEBS Index Series $8,392, $24,197 and $__; and United Kingdom
WEBS Index Series $14,599, $57,283 and $__.
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 Morgan Stanley Trust Company ("MSTC")
in its capacity as Custodian, or by PNC Bank, N.A. ("PNC") in its capacity as
Transfer Agent. The Administrator has no role in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund. The principal business address of the Administrator is 400 Bellevue
Parkway, Wilmington, DE 19809.
For the administrative and fund accounting services the Administrator
provides to the Fund, PFPC is paid aggregate fees equal to each WEBS Index
Series' allocable portion of: .22% per annum of the aggregate average daily net
assets of the Fund up to $1.5 billion; plus .15% per annum of the aggregate
average daily net assets of the Fund between $1.5 billion and $3 billion, plus
.14% per annum of the aggregate average daily net assets of the Fund between $3
billion and $5 billion, plus .13% per annum of the aggregate average daily net
assets of the Fund between $5 billion and $7.5 billion, plus .115% per annum of
the aggregate average daily net assets of the Fund between $7.5 billion and $10
billion, plus .10% per annum of the aggregate average daily net assets of the
Fund in excess of $10 billion. The Administrator pays Morgan Stanley & 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 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
<PAGE> 85
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 $__; Austria WEBS Index Series $6,123,
$5,326 and $__; Belgium WEBS Index Series $1,289, $24,552 and $__; Canada WEBS
Index Series $8,682, $37,207 and $__; France WEBS Index Series $9,081, $22,398
and $__; Germany WEBS Index Series $10,284, $31,196 and $__; Hong Kong WEBS
Index Series $4,793, $25,653 and $__; Italy WEBS Index Series $15,927, $49,434
and $__; Japan WEBS Index Series $66,484, $200,723 and $__; Malaysia (Free) WEBS
Index Series $4,761, $28,216 and $__; Mexico (Free) WEBS Index Series $3,503,
$16,674 and $__; Netherlands WEBS Index Series $3,475, $14,215 and $__;
Singapore (Free) WEBS Index Series $5,412, $21,496 and $__; Spain WEBS Index
Series $3,858, $8,842 and $__; Sweden WEBS Index Series $2,878, $9,500 and $__;
Switzerland WEBS Index Series $5,251, $15,235 and $__; and United Kingdom WEBS
Index Series $9,200, $36,067 and $__.
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 Fund 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 -
$___; Austria WEBS Index Series - $___; Belgium WEBS Index Series - $___; Canada
WEBS Index Series - $___; France WEBS Index Series - $___; Germany WEBS Index
Series - $___; Hong Kong WEBS Index Series - $___; Italy WEBS Index Series -
$___; Japan WEBS Index Series - $___; Malaysia (Free) WEBS Index Series - $___;
Mexico (Free) WEBS Index Series - $___; Netherlands WEBS Index Series - $___;
Singapore (Free) WEBS Index Series - $___; Spain WEBS Index Series - $___;
Sweden WEBS Index Series - $___; Switzerland WEBS Index Series - $___; and
United Kingdom WEBS Index Series - $___.
THE DISTRIBUTOR
Funds Distributor, Inc. (the "Distributor") is the principal underwriter
and distributor of WEBS. Its address is 60 State Street, Suite 1300, Boston, MA
02109, and investor information can be obtained by calling 1-800-810-WEBS(9327).
The Distributor has entered into an agreement with the Fund which will continue
for two years from its effective date, and which is renewable annually
thereafter (the "Distribution Agreement"), pursuant to which it distributes Fund
shares. WEBS will be continuously offered for sale by the Fund through the
Distributor only in Creation Units, as described below under "Purchase and
Issuance of WEBS in Creation Units." WEBS in less than Creation Units are not
distributed by the Distributor. The Distributor also acts as agent for the Fund.
The Distributor will deliver a prospectus to persons purchasing WEBS in Creation
Units and will maintain records of both orders placed with it and confirmations
of acceptance furnished by it. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of
the National Association of Securities Dealers, Inc. Funds Distributor, Inc., as
Distributor, has no role in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund.
To compensate the Distributor for the distribution-related services it
provides, and broker-dealers authorized by the Distributor for distribution
services they provide, the Fund has adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's Plan, for each WEBS
Index Series the Distributor is entitled to receive a distribution fee, accrued
daily and paid monthly, calculated with respect to each WEBS Index Series at a
rate set from time to time by the Board of Directors, provided that the annual
rate may not exceed .25% of the average daily net assets of such WEBS Index
Series. The Board of Directors has determined to limit the annual fee payable
under the Rule 12b-1 Plan with respect to each WEBS Index Series so as not to
exceed .20% of the average daily net assets of each WEBS Index Series until
further notice. From time to time the Distributor may waive
<PAGE> 86
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 $__; Austria WEBS
Index Series, $9,026, $7,833 and $__; Belgium WEBS Index Series, $1,894, $36,106
and $__; Canada WEBS Index Series, $12,780, $54,716 and $__; France WEBS Index
Series, $13,429, $32,938 and $__; Germany WEBS Index Series, $15,100 and $45,876
and $__; Hong Kong WEBS Index Series, $7,034, $37,724 and $__; Italy WEBS Index
Series, $23,467, $72,698 and $__; Japan WEBS Index Series, $97,436, $295,181 and
$__; Malaysia (Free) WEBS Index Series, $6,990, $41,495 and $__; Mexico (Free)
WEBS Index Series, $5,141, $24,521 and $__; Netherlands WEBS Index Series,
$5,102, $20,904 and $__; Singapore Index (Free) WEBS Index Series, $7,943,
$31,612 and $__; Spain WEBS Index Series, $5,706, $13,003 and $__; Sweden WEBS
Index Series, $4,187, $13,971 and $__; Switzerland WEBS Index Series, $7,770,
$22,405 and $__; and United Kingdom WEBS Index Series, $13,517, $53,040 and $__.
In the aggregate, the Distributor received $246,107, $849,695 and $__ 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 $__, respectively, and
paying out the remainder to unaffiliated third parties. The retained amounts
represent .02%, respectively, of the average daily net assets of the WEBS Index
Series, which the Distributor receives for monitoring the purchase and
redemption of Creation Units, as described below under the "Purchase and
Issuance of WEBS in Creation Units" and "Redemption of WEBS in Creation Units."
During the period from commencement of operations to August 31, 1996 and during
the fiscal years ended August 31, 1997 and 1998, the Distributor paid $184,746,
$494,970 and $__; $26,779, $342,394 and $__; and $14,893, $35,841 and $__,
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
<PAGE> 87
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
MSTC serves as the Custodian for the cash and portfolio securities of each
WEBS Index Series of the Fund pursuant to a Custodian Agreement between MSTC and
the Fund and as Lending Agent for each WEBS Index Series. As Lending Agent, MSTC
causes the delivery of loaned securities from the Fund to borrowers, arranges
for the return of loaned securities to the Fund at the termination of the loans,
requests deposit of collateral, monitors daily the value of the loaned
securities and collateral, requests that borrowers add to the collateral when
required by the loan agreements, and provides recordkeeping and accounting
services necessary for the operation of the program. MSTC may from time to time
reimburse expenses to one or more WEBS Index Series. MSTC, as Custodian and
Lending Agent, has no role in determining the investment policies of the Fund or
which securities are to be purchased or sold by the Fund. The principal business
address of MSTC is One Pierrepont Plaza, Brooklyn, New York, 11201.
For its custody services to each WEBS Index Series, MSTC will be paid per
annum fees based on the aggregate net assets of the WEBS Index Series as
follows: Australia WEBS Index Series (.__%); Austria WEBS Index Series (.__%);
Belgium WEBS Index Series (.__%); Canada WEBS Index Series (.__%); France WEBS
Index Series (.__%); Germany WEBS Index Series (.__%); Hong Kong WEBS Index
Series (.__%); Italy WEBS Index Series (.__%); Japan WEBS Index Series (.__%);
Malaysia (Free) WEBS Index Series (.__%); Mexico (Free) WEBS Index Series
(.__%); Netherlands WEBS Index Series (.__%); Singapore (Free) WEBS Index Series
(.__%); Spain WEBS Index Series (.__%); Sweden WEBS Index Series (.__%);
Switzerland WEBS Index Series (.__%); and United Kingdom WEBS Index Series
(.__%). As remuneration for its services in connection with lending portfolio
securities of the WEBS Index Series, MSTC is paid by the Fund, in respect of
each WEBS Index Series, 50% of the net investment income earned on the
collateral for securities loaned.
TRANSFER AGENT
PNC (the "Transfer Agent"), an indirect wholly owned subsidiary of PNC Bank
Corp., provides transfer agency services pursuant to an agreement with the Fund.
The Transfer Agent has no role in determining the investment policies of the
Fund or which securities are to be purchased or sold by the Fund. The principal
business address of the Transfer Agent is Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19110.
ADDITIONAL EXPENSES
In addition to the fees described above, the Fund is responsible for
expenses that include, among other things, organizational expenses (which were
capitalized at the commencement of operations and are being amortized on the
reverse sum of the years digits method), compensation of the Directors of the
Fund, reimbursement of out-of-pocket expenses incurred by the Administrator,
exchange listing fees, license fees, brokerage costs, legal and audit fees, and
litigation and extraordinary expenses. For the use of the relevant MSCI Index,
each WEBS Index Series pays a license fee to Morgan Stanley equal to .03% per
annum of the aggregate net assets of the WEBS Index Series.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio securities, the Adviser looks for prompt execution of the order at a
favorable price. Generally, the Adviser works with recognized dealers in these
securities, except when a better price and execution of the order can be
obtained elsewhere. The Fund will not deal with affiliates in principal
transactions unless permitted by exemptive order or applicable rule or
regulation. Since the investment objective of each WEBS Index Series is
investment performance that corresponds to that of an index, the Adviser does
not intend to select brokers and dealers for the purpose of receiving research
services in addition to a favorable price and prompt execution either from that
broker or an unaffiliated third party.
Subject to allocating brokerage to receive a favorable price and prompt
execution, the Adviser may select brokers who are willing to provide payments to
third party service suppliers to a WEBS Index Series, to reduce expenses of the
WEBS Index Series.
The Adviser assumes general supervision over placing orders on behalf of
the Fund for the purchase
<PAGE> 88
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 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
<PAGE> 89
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.
GENERAl
The Fund issues and sells WEBS only in Creation Units on a continuous basis
through the Distributor, without an initial sales load, at their net asset value
next determined after receipt, on any Business Day (as defined herein), of an
order in proper form.
A "Business Day" with respect to each WEBS Index Series is any day on which
(i) the New York Stock Exchange ("NYSE") and (ii) the stock exchange(s) and Fund
subcustodian(s) relevant to such WEBS Index Series are open for business. As of
the date of the Prospectus, the NYSE observes the following holidays: New Year's
Day, President's Day (Washington's Birthday), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
stock exchange and/or subcustodian holidays relevant to each WEBS Index Series
are set forth in Appendix B to this Statement of Additional Information.
PORTFOLIO DEPOSIT
The consideration for purchase of a Creation Unit of WEBS of a WEBS Index
Series generally consists of the in-kind deposit of a designated portfolio of
equity securities (the "Deposit Securities") constituting an optimized
representation of the WEBS Index Series' benchmark foreign securities index and
an amount of cash computed as described below (the "Cash Component"). Together,
the Deposit Securities and the Cash Component constitute the "Portfolio
Deposit," which represents the minimum initial and subsequent investment amount
for shares of any WEBS Index Series of the Fund. The Cash Component is an amount
equal to the Dividend Equivalent Payment (as defined below), plus or minus, as
the case may be, a Balancing Amount (as defined below). The "Dividend Equivalent
Payment" enables the Fund to make a complete distribution of dividends on the
next dividend payment date, and is an amount equal, on a per Creation Unit
basis, to the dividends on all the Portfolio Securities with ex-dividend dates
within the accumulation period for such distribution (the "Accumulation
Period"), net of expenses and liabilities for such period, as if all of the
Portfolio Securities had been held by the Fund
<PAGE> 90
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 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
<PAGE> 91
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 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
<PAGE> 92
relevant subcustodian, the Custodian shall notify the Distributor and the
Adviser, and the Fund will issue and cause the delivery of the Creation Unit of
WEBS.
To the extent contemplated by an Authorized Participant's agreement with
the Fund, the Fund will issue Creation Units of WEBS to such Authorized
Participant notwithstanding the fact that the corresponding Portfolio Deposits
have not been received in part or in whole, in reliance on the undertaking of
the Authorized Participant to deliver the missing Deposit Securities as soon as
possible, which undertaking shall be secured by such Authorized Participant's
delivery and maintenance of collateral consisting of cash or Short-Term
Investments having a value at least equal to such amount as required by the Fund
in accordance with its then-effective procedures, provided that such amount
shall be no less than 105% of the value of the missing Deposit Securities.
Information concerning the Fund's current procedures for collateralization of
missing Deposit Securities is available from the Distributor. The Authorized
Participant Agreement will permit the Fund to buy the missing Deposit Securities
at any time and will subject the Authorized Participant to liability for any
shortfall between the cost to the Fund of purchasing such securities and the
value of the collateral.
All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Fund, and the Fund's
determination shall be final and binding.
CASH PURCHASE METHOD
Although the Fund does not ordinarily permit cash purchases of Creation
Units, when cash purchases of Creation Units of WEBS are available or specified
for a WEBS Index Series, they will be effected in essentially the same manner as
in-kind purchases thereof. In the case of a cash purchase, the investor must pay
the cash equivalent of the Deposit Securities it would otherwise be required to
provide through an in-kind purchase, plus the same Cash Component required to be
paid by an in-kind purchaser. In addition, to offset the Fund's brokerage and
other transaction costs associated with using the cash to purchase the requisite
Deposit Securities, the investor will be required to pay a fixed purchase
transaction fee, plus an additional variable charge for cash purchases, which is
expressed as a percentage of the value of the Deposit Securities. The
transaction fees for in-kind and cash purchases of Creation Units of WEBS are
described below.
PURCHASE TRANSACTION FEE
A purchase transaction fee payable to the Fund is imposed to compensate the
Fund for the transfer and other transaction costs of a WEBS Index Series. THE
PURCHASE TRANSACTION FEE FOR IN-KIND AND CASH PURCHASES AND THE ADDITIONAL
VARIABLE CHARGE FOR CASH PURCHASES (WHEN CASH PURCHASES ARE AVAILABLE OR
SPECIFIED) ARE LISTED FOR THE RELEVANT WEBS INDEX SERIES IN THE SHAREHOLDER
TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND EXPENSES" IN THE PROSPECTUS.
Where the Fund permits an in-kind purchaser to substitute cash in lieu of
depositing a portion of the Deposit Securities, the purchaser will be assessed
the additional variable charge for cash purchases on the "cash in lieu" portion
of its investment. Purchasers of WEBS in Creation Units are responsible for the
costs of transferring the securities constituting the Deposit Securities to the
account of the Fund. See "Summary of Fund Expenses" in the Prospectus.
EXAMPLE
A hypothetical example of the costs of creating a Creation Unit of WEBS of
the Japan WEBS Index Series is set forth below for illustrative purposes only.
The exchange rate reflected in the table is Y _____ per US$1.
<TABLE>
<CAPTION>
UNIT CREATION DAILY NAV
UNIT CREATION CALCULATION CALCULATION
CALCULATION IN UNITED IN UNITED
IN JAPANESE YEN STATES DOLLARS STATES DOLLARS
--------------- -------------- --------------
<S> <C> <C> <C>
Execution..................................................... -- -- --
Commissions................................................... -- -- N/A
</TABLE>
<PAGE> 93
<TABLE>
<S> <C> <C> <C>
Stamp Taxes................................................... -- -- N/A
Risk Premium.................................................. -- -- N/A
Accrued Income................................................ -- -- --
Creation Charge............................................... -- -- N/A
WEBS Unit Value............................................... -- -- --
Per WEBS...................................................... -- --
Shares........................................................ --
</TABLE>
See "Management of the Fund," in the Prospectus, and "Investment
Advisory, Management, Administrative and Distribution Services" herein, for
additional information concerning the distribution arrangements for WEBS.
REDEMPTION OF WEBS IN CREATION UNITS
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Redemption of WEBS in Creation
Units."
The following information describes the redemption procedure for
Creation Units of WEBS generally. In light of the capital restrictions imposed
by the government on Malaysia on September 1, 1998, however, 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.
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.
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
<PAGE> 94
resident Australian or New Zealand holder, notwithstanding the foregoing, such
holder is only entitled to receive cash upon its redemption of Creation Units of
WEBS.
A redemption transaction fee payable to the Fund is imposed to offset
transfer and other transaction costs that may be incurred by the relevant WEBS
Index Series. THE REDEMPTION TRANSACTION FEE FOR REDEMPTIONS IN KIND AND FOR
CASH AND THE ADDITIONAL VARIABLE CHARGE FOR CASH REDEMPTIONS (WHEN CASH
REDEMPTIONS ARE AVAILABLE OR SPECIFIED) ARE LISTED FOR THE RELEVANT WEBS INDEX
SERIES IN THE SHAREHOLDER TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND
EXPENSES" IN THE PROSPECTUS. Investors will also bear the costs of transferring
the Portfolio Deposit from the Fund to their account or on their order.
Investors who use the services of a broker or other such intermediary may be
charged a fee for such services.
Redemption requests in respect of Creation Units of any WEBS Index
Series must be submitted to the Distributor by or through an Authorized
Participant on a day that the AMEX is open for business, 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
<PAGE> 95
Index Series, Appendix B hereto identifies the instances where more than seven
days would be needed to deliver redemption proceeds. PURSUANT TO AN ORDER OF THE
SEC, IN RESPECT OF EACH WEBS INDEX SERIES, THE FUND WILL MAKE DELIVERY OF
IN-KIND REDEMPTION PROCEEDS WITHIN THE NUMBER OF DAYS STATED IN APPENDIX B TO BE
THE MAXIMUM NUMBER OF DAYS NECESSARY TO DELIVER REDEMPTION PROCEEDS.
If neither the redeeming Beneficial Owner nor the Authorized
Participant acting on behalf of such redeeming Beneficial Owner has appropriate
arrangements to take delivery of the Portfolio Securities in the applicable
foreign jurisdiction and it is not possible to make other such arrangements, or
if it is not possible to effect deliveries of the Portfolio Securities in such
jurisdiction, the Fund may in its discretion exercise its option to redeem such
shares in cash, and the redeeming Beneficial Owner will be required to receive
its redemption proceeds in cash. In such case, the investor will receive a cash
payment equal to the net asset value of its shares based on the net asset value
of WEBS of the relevant WEBS Index Series next determined after the redemption
request is received in proper form (minus a redemption transaction fee and
additional variable charge for cash redemptions specified above, to offset the
Fund's brokerage and other transaction costs associated with the disposition of
Portfolio Securities of the WEBS Index Series). Redemptions of WEBS for Deposit
Securities will be subject to compliance with applicable United States federal
and state securities laws and each WEBS Index Series (whether or not it
otherwise permits cash redemptions) reserves the right to redeem Creation Units
for cash to the extent that the WEBS Index Series could not lawfully deliver
specific Deposit Securities upon redemptions or could not do so without first
registering the Deposit Securities under such laws.
Although the Fund does not ordinarily permit cash redemptions of
Creation Units (except that, as noted above, resident Australian and New Zealand
holders may redeem solely for cash), in the event that cash redemptions are
permitted or required by the Fund, proceeds will be paid to the Authorized
Participant redeeming shares on behalf of the redeeming investor as soon as
practicable after the date of redemption (within seven calendar days thereafter,
except for the instances listed in Appendix B hereto where more than seven
calendar days would be needed).
Because the Portfolio Securities of a WEBS Index Series may trade on
the relevant exchange(s) on days that the AMEX is closed or are otherwise not
Business Days for such WEBS Index Series, stockholders may not be able to redeem
their shares of such WEBS Index Series, or to purchase or sell WEBS on the AMEX,
on days when the net asset value of such WEBS Index Series could be
significantly affected by events in the relevant foreign markets.
The right of redemption may be suspended or the date of payment
postponed with respect to any WEBS Index Series (1) for any period during which
the New York Stock Exchange is closed (other than customary weekend and holiday
closings); (2) for any period during which trading on the New York Stock
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the shares of the WEBS Index
Series' portfolio securities or determination of its net asset value is not
reasonably practicable; or (4) in such other circumstance as is permitted by the
SEC.
DETERMINING NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Determination of Net Asset Value."
Net asset value per share for each WEBS Index Series of the Fund is
computed by dividing the value of the net assets of such WEBS Index Series
(i.e., the value of its total assets less total liabilities) by the total number
of WEBS outstanding, rounded to the nearest cent. Expenses and fees, including
the management, administration and distribution fees, are accrued daily and
taken into account for purposes of determining net asset value. 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
<PAGE> 96
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. The AMEX
also disseminates during its trading day an indicative optimized portfolio
value ("IOPV") for each WEBS Index Series.
DIVIDENDS AND DISTRIBUTIONS
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Dividends and Capital Gains
Distributions."
Dividends from net investment income are declared and paid at least
annually by each WEBS Index Series. Distributions of net realized securities
gains, if any, generally are declared and paid once a year, but the Fund may
make distributions on a more frequent basis for certain WEBS Index Series to
improve tracking error or to comply with the distribution requirements of the
Internal Revenue Code, in all events in a manner consistent with the provisions
of the 1940 Act. In addition, the Fund intends to distribute at least annually
amounts representing the full dividend yield on the underlying portfolio
securities of each WEBS Index Series, net of expenses of such WEBS Index Series,
as if such WEBS Index Series owned such underlying portfolio securities for the
entire dividend period. As a result, some portion of each distribution may
result in a return of capital. See "Tax Matters."
Dividends and other distributions on WEBS are distributed, as described
below, on a pro rata basis to Beneficial Owners of such WEBS. Dividend payments
are made through DTC and the Authorized Participants to Beneficial Owners then
of record with proceeds received from the Fund.
The Fund makes additional distributions to the minimum extent necessary
(i) to distribute the entire annual investment company taxable income of the
Fund, plus any net capital gains and (ii) to avoid imposition of the excise tax
imposed by Section 4982 of the Internal Revenue Code. Management of the Fund
reserves the right to declare special dividends if, in its reasonable
discretion, such action is necessary or advisable to preserve the status of each
WEBS Index Series as a regulated investment company ("RIC") or to avoid
imposition of income or excise taxes on undistributed income.
TAXES
The following information supplements and should be read in conjunction
with the sections in the Prospectus entitled "Dividends and Capital Gains
Distributions" and "Tax Matters."
The Fund on behalf of each WEBS Index Series has the right to reject an
order for a purchase of WEBS if the purchaser (or group of purchasers) would,
upon obtaining the WEBS so ordered, own 80% or more of the outstanding WEBS of a
given WEBS Index Series and if, pursuant to section 351 of the Internal Revenue
Code, the respective WEBS Index Series would have a basis in the securities
different from the market value of such securities on the date of deposit. The
Fund also has the right to require information necessary to determine beneficial
share ownership for purposes of the 80% determination. See "Purchase and
Issuance of WEBS in Creation Units."
Each WEBS Index Series intends to qualify for and to elect treatment as
a separate RIC under Subchapter M of the Internal Revenue Code. To qualify for
treatment as a RIC, a company must annually distribute at least 90 percent of
its net investment company taxable income (which includes dividends, interest
and net short-term capital gains) and meet several other requirements. Among
such other requirements are the following: (1) at least 90 percent of the
company's annual gross income must be derived from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (2) at the close of each
quarter of the company's taxable year, (a) at least 50 percent of the market
value of the company's total assets must be represented by cash and cash items,
U.S. government securities, securities of other regulated 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).
<PAGE> 97
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.
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
<PAGE> 98
United Kingdom WEBS Index Series. Each WEBS Index Series has been issued a
separate class of capital stock. The Board may designate additional series of
common stock and classify shares of a particular series into one or more classes
of that series.
Each WEBS issued by the Fund has a pro rata interest in the assets of
the corresponding WEBS Index Series. The Fund is currently authorized to issue 6
billion shares of common stock. The following number of shares is currently
authorized for each WEBS Index Series: the Australia WEBS Index Series, __
million shares; the Austria WEBS Index Series, __ million shares; the Belgium
WEBS Index Series, __ million shares; the Canada WEBS Index Series, __ million
shares; the France WEBS Index Series, __ million shares; the Germany WEBS Index
Series, __ million shares; the Hong Kong WEBS Index Series, __ million shares;
the Italy WEBS Index Series, __ million shares; the Japan WEBS Index Series, __
million shares; the Malaysia (Free) WEBS Index Series, __ million shares; the
Mexico (Free) WEBS Index Series, __ million shares; the Netherlands WEBS Index
Series, __ million shares, the Singapore (Free) WEBS Index Series, __ million
shares; the Spain WEBS Index Series, __ million shares; the Sweden WEBS Index
Series, __ million shares; the Switzerland WEBS Index Series, __ million shares;
and the United Kingdom WEBS Index Series, __ million shares. Fractional shares
will not be issued. Shares have no preemptive, exchange, subscription or
conversion rights and are freely transferable. Each share is entitled to
participate equally in dividends and distributions declared by the Board with
respect to the relevant WEBS Index Series, and in the net distributable assets
of such WEBS Index Series on liquidation. Shareholders are entitled to require
the Fund to redeem Creation Units of their shares.
Each WEBS has one vote with respect to matters upon which a stockholder
vote is required consistent with the requirements of the 1940 Act and the rules
promulgated thereunder and the Maryland General Corporation Law; stockholders
have no cumulative voting rights with respect to their shares. Shares of all
series vote together as a single class except that if the matter being voted on
affects only a particular WEBS Index Series it will be voted on only by that
WEBS Index Series and if a matter affects a particular WEBS Index Series
differently from other WEBS Index Series, that WEBS Index Series will vote
separately on such matter. Under Maryland law, the Fund is not required to hold
an annual meeting of stockholders unless required to do so under the 1940 Act.
The policy of the Fund is not to hold an annual meeting of stockholders unless
required to do so under the 1940 Act. All shares of the Fund (regardless of WEBS
Index Series) have noncumulative voting rights for the election of Directors.
Under Maryland law, Directors of the Fund may be removed by vote of the
stockholders.
As of September __, 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, __%, Belgium WEBS Index
Series, __%, Canada WEBS Index Series, __%, France WEBS Index Series, __%,
Germany WEBS Index Series, __%, Italy WEBS Index Series, __%, Japan WEBS Index
Series, __%, Mexico (Free) WEBS Index Series, __%, Netherlands WEBS Index
Series, __%, Spain WEBS Index Series, __%, Sweden WEBS Index Series, __%,
Switzerland WEBS Index Series, __% and United Kingdom WEBS Index Series, __%;
(2) Bear, Stearns Securities Corp., One Metrotech Center North, Brooklyn, NY
11201-3859, Malaysia (Free) WEBS Index Series, __%, Mexico (Free) WEBS Index
Series, __% and Singapore (Free) WEBS Index Series, __%; (3) Brown Bros.
Harriman & Co., 59 Wall Street, New York, NY 10005, Australia WEBS Index Series,
__%, Austria WEBS Index Series, __%, Canada WEBS Index Series, __%, France WEBS
Index Series, __%, Italy WEBS Index Series, __%, Japan WEBS Index Series, __%,
Netherlands WEBS Index Series, __%, Spain WEBS Index Series, __%, Sweden WEBS
Index Series, __%, Switzerland WEBS Index Series, __% and United Kingdom WEBS
Index Series, __%; (4) Charles Schwab & Co., Inc., Newport Financial Center, 111
Pavonia Avenue East, 3rd Floor, Jersey City, NJ 07310, Austria WEBS Index
Series, __%, Hong Kong WEBS Index Series, __%, Malaysia (Free) WEBS Index
Series, __% and Singapore (Free) WEBS Index Series, __%; (5) The Chase Manhattan
Bank, One Chase Manhattan Plaza, New York, NY 10081, Australia WEBS Index
Series, __%, Spain WEBS Index Series, __% and Switzerland WEBS Index Series,
__%; (6) Citibank, N.A., 1410 Westshore Blvd., Tampa, FL 33607, Canada WEBS
Index Series, __%, France WEBS Index Series, __%, Germany WEBS Index Series,
__%, Italy WEBS Index Series, __%, Spain WEBS Index Series, __%, Sweden WEBS
Index Series, __%, Switzerland WEBS Index Series, __% and United Kingdom WEBS
Index Series, __%; (7) Dean Witter Reynolds Inc., 5 World Trade Center, 5th
Floor, New York, NY 10048, Mexico (Free) WEBS Index Series, __%; (8)Fifth Third
Bank, Fifth Third Center, Cincinatti, OH 45201, France WEBS Index Series, __%,
Germany WEBS Index Series, __%, Netherlands WEBS Index Series, __93%, Sweden
WEBS Index Series, __%, Switzerland WEBS Index Series, __% and United Kingdom
WEBS Index Series, __%; (9) Goldman, Sachs & Co., 1 New York Plaza, New York, NY
10004, Canada WEBS Index Series, __%; (10) Merrill Lynch Pierce Fenner & Smith
Safekeeping, 101 Hudson Street, Jersey City, NJ 07302, Hong Kong WEBS Index
Series, __%, Italy WEBS Index Series, __%, Malaysia (Free) WEBS Index Series,
__% and Singapore (Free) WEBS Index Series, __%; (11) Morgan Stanley & Co.
Incorporated, One Pierrepont Plaza, Brooklyn, NY
<PAGE> 99
11201, Austria WEBS Index Series, __%, Belgium WEBS Index Series, __%, Canada
WEBS Index Series, __%, France WEBS Index Series, __%, Germany WEBS Index
Series, __%, Italy WEBS Index Series, __%, Japan WEBS Index Series, __%, Mexico
(Free) WEBS Index Series, __%, Netherlands WEBS Index Series, __%, Sweden WEBS
Index Series, __% and United Kingdom WEBS Index Series, __%; (12) National
Financial Services Corporation, 1 World Financial Center, Tower A, New York, NY
10281, Austria WEBS Index Series, __%, Hong Kong WEBS Index Series, __% and
Singapore (Free) WEBS Index Series, __%; (13) Northern Trust Company, 801 S.
Canal Street, Chicago, IL 60607, Japan WEBS Index Series, __%; (14) PaineWebber
Incorporated, 1000 Harbor Blvd., Weehawken, NJ 07086, Canada WEBS Index Series,
__%, France WEBS Index Series, __%, Malaysia (Free) WEBS Index Series, __%,
Mexico (Free) WEBS Index Series, __%, Netherlands WEBS Index Series, __% and
Sweden WEBS Index Series, __%; (15) Prudential Securities Incorporated, 1 New
York Plaza, 9th Floor, New York, NY 10292, Canada WEBS Index Series, __%, Hong
Kong WEBS Index Series, __%, Netherlands WEBS Index Series, __%, Spain WEBS
Index Series, __% and United Kingdom WEBS Index Series, __%; (16) Smith Barney
Inc., 333 West 34th Street, 3rd Floor, New York, NY 10001, Austria WEBS Index
Series, __%, Belgium EBS Index Series, __%, Hong Kong WEBS Index Series, __%,
Japan WEBS Index Series, __%, Malaysia (Free) WEBS Index Series, __%, Singapore
(Free) WEBS Index Series, __% and Spain WEBS Index Series, __%; (17) State
Street Bank & Trust Company, 1776 Heritage Drive, Quincy, MA 02171, Canada WEBS
Index Series, __%, Italy WEBS Index Series, __%, Japan WEBS Index Series, __%,
Netherlands WEBS Index Series, __%, Sweden WEBS Index Series, __%, Switzerland
WEBS Index Series, __% and United Kingdom WEBS Index Series, __%; and (18) Wells
Fargo Bank, N.A., 464 California Street, San Francisco, CA 94104, Germany WEBS
Index Series, __%.
The Fund does not have information concerning the beneficial ownership
of the WEBS held in the names of such DTC Participants.
The Fund issues through the Authorized Participants to its stockholders
semi-annual reports containing unaudited financial statements and annual reports
containing financial statements audited by independent auditors approved by the
Fund's Directors and by the stockholders when meetings are held and such other
information as may be required by applicable laws, rules and regulations.
Beneficial Owners also receive annually notification as to the tax status of the
Fund's distributions.
Stockholder inquiries may be made by writing to the Fund, c/o PFPC
Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
PERFORMANCE INFORMATION
The performance of the WEBS Index Series may be quoted in
advertisements, sales literature or reports to shareholders in terms of average
annual total return, cumulative total return and yield.
Quotations of average annual total return are expressed in terms of the
average annual rate of return of a hypothetical investment in a WEBS Index
Series over periods of 1, 5 and 10 years (or the life of a WEBS Index Series, if
shorter). Such total return figures will reflect the deduction of a proportional
share of such WEBS Index Series' expenses on an annual basis, and will assume
that all dividends and distributions are reinvested when paid.
Total return is calculated according to the following formula: P(1 +
T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10
year period). The total return for the period from commencement of operations to
August 31, 1996 and for the fiscal years ended August 31, 1997and 1998,
respectively, for each of the WEBS Index Series was: Australia WEBS Index Series
3.88%, 6.23% and __%; Austria WEBS Index Series (3.39)%, 1.06% and __%; Belgium
WEBS Index Series 5.01%, 9.26% and __%; Canada WEBS Index Series 4.63%, 28.50%
and __%; France WEBS Index Series 4.95%, 16.60% and __%; Germany WEBS Index
Series 4.00%, 20.51%, and __%; Hong Kong WEBS Index Series 3.22%, 17.80% and
__%; Italy WEBS Index Series 4.11%, 23.37% and __%; Japan WEBS Index Series
(3.11)%, (11.97)% and __%; Malaysia (Free) WEBS Index Series 4.28%, (40.20)% and
__%; Mexico (Free) WEBS Index Series 15.93%, 35.21% and __%; Netherlands WEBS
Index Series 11.19%, 28.04% and __%; Singapore (Free) WEBS Index Series (6.73)%,
(23.48)% and __%; Spain WEBS Index Series 8.45%, 39.15% and __%; Sweden WEBS
Index Series 14.13%, 30.10% and __%; Switzerland WEBS Index Series 2.60%, 16.69%
and __% ; and United Kingdom WEBS Index Series 10.41%, 30.48% and __%.
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
59
<PAGE> 100
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) to the 6th power -1] (where a =
dividends and interest earned during the period, b = expenses accrued for the
period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends and d =
the maximum offering price per share on the last day of the period).
Quotations of cumulative total return, average annual total return or
yield reflect only the performance of a hypothetical investment in a WEBS Index
Series during the particular time period on which the calculations are based.
Such quotations for a WEBS Index Series will vary based on changes in market
conditions and the level of such WEBS Index Series' expenses, and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
The cumulative and average total returns and yields do not take into
account federal or state income taxes which may be payable; total returns and
yields would, of course, be lower if such charges were taken into account.
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods for calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
Because some or all of the Fund's investments are denominated in
foreign currencies, the strength or weakness of the U.S. dollar as against these
currencies may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future fluctuations in the value of the U.S.
dollar against these currencies. In addition, marketing materials may cite
country and economic statistics and historical stock market performance
information for any of the countries in which the Fund invests, including, but
not limited to, the following: population growth, gross domestic product,
inflation rate, average stock market price-earnings ratios and the total value
of stock markets. Sources for such statistics may include official publications
of various foreign governments and exchanges.
From time to time, in advertising and marketing literature, the Fund's
performance may be compared to the performance of broad groups of open-end and
closed-end investment companies with similar investment goals, as tracked by
independent organizations such as Investment Company Data, Inc., Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc.,
Value Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk.
In addition, in connection with the communication of its performance to
current or prospective shareholders, the Fund also may compare those figures to
the performance of certain unmanaged indices which may assume the reinvestment
of dividends or interest but generally do not reflect deductions for
administrative and management costs. Examples of such indices include, but are
not limited to the following:
Dow Jones Industrial Average
Consumer Price Index
Standard & Poor's 500 Composite Stock Price Index (S&P 500)
NASDAQ OTC Composite Index
NASDAQ Industrials Index
International Finance Corporation's (Global) Composite and (Investable)
Composite Indices
60
<PAGE> 101
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:
<TABLE>
<CAPTION>
COUNTRY NATIONAL INDEX
------- --------------
<S> <C>
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
</TABLE>
From time to time, the Fund may use in marketing materials a graph
entitled "The Efficient Frontier," which illustrates the historical risks and
returns of selected unmanaged indices which track the performance of various
combinations of United States and international securities for a certain time
period, such as twenty years. A twenty year graph, for example, shall use twenty
year annualized international returns represented by the MSCI Europe,
Australasia and Far East (EAFE) Index and twenty year annualized United States
returns represented by the S&P 500 Index. Risk is measured by the standard
deviation in overall performance within each index. Data presented in the graph
shall be provided by Ibbotson Associates, Inc. Performance of an index is
historical and does not represent performance of the Fund, and is not a
guarantee of future results. For an example of the use of an "Efficient
Frontier" graph, please see "The Case for International Index Investing" at
Appendix C of this Statement of Additional Information.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements and
sales literature concerning the Fund, including reprints of, or selections from,
editorials or articles about the Fund. Sources for Fund performance information
and articles about the Fund include, but are not limited to, the following:
American Association of Individual Investors' Journal, a monthly
publication of the AAII that includes articles on investment analysis
techniques.
Barron's, a Dow Jones and Company, Inc. business and financial weekly
that periodically reviews investment company performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of investment companies
investing abroad.
CDA Investment Technologies, an organization that provides performance
and ranking information through examining the dollar results of
hypothetical mutual fund investments and comparing these results
against appropriate indices.
61
<PAGE> 102
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.
_________________, 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
62
<PAGE> 103
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, _____________, 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.
63
<PAGE> 104
<TABLE>
<CAPTION>
APPENDIX A-1
MSCI AUSTRALIA INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ---------------- ---
<S> <C> <C> <C>
NATIONAL AUSTRALIA BANK Banking 29,981 10.78%
BROKEN HILL PROP CO Energy Sources 26,936 9.68%
TELSTRA CORP Telecommunications 23,839 8.57%
AMP LTD Insurance 23,393 8.41%
NEWS CORP Broadcasting & Publishing 21,467 7.72%
WESTPAC BANKING Banking 17,603 6.33%
NEWS CORP PLVO Broadcasting & Publishing 16,831 6.05%
LEND LEASE Real Estate 8,922 3.21%
COLES MYER Merchandising 8,167 2.94%
BRAMBLES INDUSTRIES Business & Public Services 7,725 2.78%
FOSTERS BREWING GROUP Beverages & Tobacco 6,767 2.43%
RIO TINTO LTD Metals--Non Ferrous 6,155 2.21%
WMC Metals--Non Ferrous 5,787 2.08%
COCA-COLA AMATIL Beverages & Tobacco 4,124 1.48%
WESTFIELD TRUST Real Estate 4,104 1.48%
AMCOR Forest Products & Paper 3,975 1.43%
GENERAL PROPERTY TRUST Real Estate 3,875 1.39%
AUSTRALIAN GAS LIGHT CO Utilities--Electrical & Gas 3,627 1.30%
CSR Building Material & Components 3,542 1.27%
PACIFIC DUNLOP Multi-Industry 3,200 1.15%
GIO AUSTRALIA HLDGS Insurance 3,190 1.15%
PIONEER INTERNATIONAL Building Material & Components 3,018 1.09%
SOUTHCORP HOLDINGS Multi-Industry 2,918 1.05%
BORAL Building Material & Components 2,837 1.02%
TABCORP HOLDINGS Leisure & Tourism 2,778 1.00%
GOODMAN FIELDER Food & Household Products 2,734 0.98%
SANTOS Energy Sources 2,599 0.93%
QBE INSURANCE GROUP Insurance 2,350 0.84%
NORMANDY MINING Gold Mines 2,345 0.84%
NORTH Metals--Non Ferrous 2,318 0.83%
ORICA Chemicals 2,314 0.83%
SMITH (HOWARD) Multi-Industry 1,813 0.65%
LEIGHTON HOLDINGS Construction & Housing 1,445 0.52%
MIM HOLDINGS Metals--Non Ferrous 1,433 0.52%
HARDIE (JAMES) IND Building Material & Components 1,426 0.51%
STOCKLAND TRUST Real Estate 1,370 0.49%
ROTHMANS (AUSTRALIA) Beverages & Tobacco 1,350 0.49%
SCHRODERS PROPERTY FUND Real Estate 1,104 0.40%
FAULDING (F.H.) & CO Health & Personal Care 1,023 0.37%
FUTURIS CORP Misc. Materials & Commodities 764 0.27%
QCT RESOURCES Energy Sources 746 0.27%
EMAIL Appliances & Household Durables 704 0.25%
JONES (DAVID) Merchandising 637 0.23%
AUSTRALIAN NATIONAL IND Metals--Steel 631 0.23%
STAR CITY (SYDNEY HBR CA) Leisure & Tourism 547 0.20%
SONS OF GWALIA Gold Mines 546 0.20%
CROWN Leisure & Tourism 497 0.18%
RGC Metals--Non Ferrous 488 0.18%
NEWCREST MINING Gold Mines 463 0.17%
DELTA GOLD Gold Mines 461 0.17%
GREAT CENTRAL MINES Gold Mines 365 0.13%
METAL MANUFACTURES Industrial Components 287 0.10%
RESOLUTE Gold Mines 265 0.10%
ASHTON MINING Misc. Materials & Commodities 257 0.09%
BURNS, PHILP & CO Food & Household Products 91 0.03%
A-1
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
APPENDIX A-2
MSCI AUSTRIA INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) ($)
- ---------------- --------------- ---------------- ---
<S> <C> <C> <C>
BANK AUSTRIA STAMM Banking 64,490 22.31%
VERBUND OESTERR ELEK A Utilities--Electrical & Gas 61,722 21.36%
OMV AG Energy Sources 33,243 11.50%
WIENERBERGER BAUSTOFF Building Material & Components 22,206 7.68%
VA TECHNOLOGIE Machinery & Engineering 19,260 6.66%
EA-GENERALI STAMM Insurance 17,795 6.16%
FLUGHAFEN WIEN Business & Public Services 10,960 3.79%
AUSTRIAN AIRLINES Transportation--Airlines 10,500 3.63%
MAYR-MELNHOF KARTON Misc. Materials & Commodities 8,574 2.97%
BOEHLER-UDDEHOLM Metals--Steel 7,062 2.44%
RHI Misc. Materials & Commodities 6,919 2.39%
BBAG OESTERR BRAU STAMM Beverages & Tobacco 6,269 2.17%
BANK AUSTRIA PART Banking 5,776 2.00%
BWT STAMM Machinery & Engineering 3,485 1.21%
BAU HOLDING STAMM Construction & Housing 3,075 1.06%
LENZING Chemicals 2,283 0.79%
AUSTRIA MIKRO SYSTEME Electronic Components, Instruments 1,566 0.54%
UNIVERSALE-BAU Construction & Housing 1,561 0.54%
EA-GENERALI VORZUG Insurance 1,250 0.43%
BAU HOLDING VORZUG Construction & Housing 1,021 0.35%
A-2
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
APPENDIX A-3
MSCI BELGIUM INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
- ---------------- --------------- ---------------- ---
<S> <C> <C> <C>
KBC BANCASSUR.(KREDIETBK) Banking 825,577 18.13%
FORTIS AG Insurance 781,737 17.16%
ELECTRABEL Utilities--Electrical & Gas 704,782 15.47%
TRACTEBEL Utilities--Electrical & Gas 531,213 11.66%
PETROFINA Energy Sources 312,110 6.85%
UCB (GROUPE) Health & Personal Care 299,019 6.57%
SOLVAY Chemicals 214,113 4.70%
GROUPE BRUXELLES LAMBERT Multi-Industry 162,994 3.58%
DELHAIZE-LE LION Merchandising 161,452 3.54%
BARCO Electronic Components, Instruments 118,710 2.61%
COLRUYT Merchandising 115,274 2.53%
D'IETEREN Automobiles 93,017 2.04%
CBR (CIMENTERIES) Building Material & Components 80,842 1.77%
BEKAERT Industrial Components 52,998 1.16%
UNION MINIERE Metals--Non Ferrous 45,074 0.99%
GLAVERBEL (GROUPE) Misc. Materials & Commodities 34,092 0.75%
CMB Transportation--Shipping 21,696 0.48%
A-3
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
APPENDIX A-4
MSCI CANADA INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
NORTHERN TELECOM Electrical & Electronics 47,598 11.39%
BCE INC Telecommunications 33,838 8.09%
THOMSON CORP Broadcasting & Publishing 22,923 5.48%
ROYAL BANK OF CANADA Banking 21,119 5.05%
SEAGRAM CO Beverages & Tobacco 17,178 4.11%
BANK MONTREAL Banking 16,690 3.99%
CANADIAN IMPERIAL BANK Banking 14,168 3.39%
BANK NOVA SCOTIA Banking 13,829 3.31%
BOMBARDIER B Aerospace & Military Technology 12,887 3.08%
IMASCO Multi-Industry 12,536 3.00%
CANADIAN PACIFIC Multi-Industry 11,456 2.74%
TRANSCANADA PIPELINES Utilities--Electrical & Gas 11,148 2.67%
IMPERIAL OIL Energy Sources 10,570 2.53%
BARRICK GOLD CORP Gold Mines 10,362 2.48%
ALCAN ALUMINIUM Metals--Non Ferrous 8,209 1.96%
MAGNA INTERNATIONAL A Industrial Components 7,151 1.71%
WESTON (GEORGE) Merchandising 6,192 1.48%
POWER CORP OF CANADA Financial Services 5,719 1.37%
SUNCOR ENERGY Energy Sources 5,597 1.34%
NEWBRIDGE NETWORKS CORP Electrical & Electronics 5,487 1.31%
FAIRFAX FINANCIAL HLDGS Insurance 5,401 1.29%
PETRO-CANADA Energy Sources 5,386 1.29%
NORANDA Metals--Non Ferrous 5,285 1.26%
IPL ENERGY Energy Sources 4,831 1.16%
LAIDLAW Business & Public Services 4,806 1.15%
PLACER DOME Gold Mines 4,698 1.12%
POTASH CORP SASKATCHEWAN Chemicals 4,518 1.08%
TELUS CORP Telecommunications 4,500 1.08%
NATIONAL BANK OF CANADA Banking 3,918 0.94%
ALBERTA ENERGY CO Energy Sources 3,908 0.93%
TRANSALTA CORP Utilities--Electrical & Gas 3,708 0.89%
TALISMAN ENERGY Energy Sources 3,574 0.85%
CANADIAN OCCIDENTAL Energy Sources 3,463 0.83%
EDPERBRASCAN CORP A Multi-Industry 3,297 0.79%
WESTCOAST ENERGY Utilities--Electrical & Gas 3,087 0.74%
RENAISSANCE ENERGY Energy Sources 3,004 0.72%
CANADIAN TIRE CORP A Merchandising 2,971 0.71%
ABITIBI-CONSOLIDATED Forest Products & Paper 2,881 0.69%
INCO COMMON Metals--Non Ferrous 2,597 0.62%
CANADIAN NAT RESOURCES Energy Sources 2,321 0.56%
SOUTHAM Broadcasting & Publishing 2,254 0.54%
GULF CANADA RESOURCES Energy Sources 2,071 0.50%
POCO PETROLEUMS Energy Sources 1,966 0.47%
MACMILLAN BLOEDEL Forest Products & Paper 1,940 0.46%
QUEBECOR B Broadcasting & Publishing 1,909 0.46%
ANDERSON EXPLORATION Energy Sources 1,883 0.45%
AGRIUM Chemicals 1,787 0.43%
MDS B Health & Personal Care 1,728 0.41%
LOEWEN GROUP Business & Public Services 1,718 0.41%
DOFASCO Metals--Steel 1,673 0.40%
ROGERS COMMUNICATIONS B Broadcasting & Publishing 1,622 0.39%
CAMECO CORP Metals--Non Ferrous 1,605 0.38%
METHANEX CORP Chemicals 1,597 0.38%
UNITED DOMINION IND Machinery & Engineering 1,544 0.37%
HUDSON'S BAY CO Merchandising 1,533 0.37%
COMINCO Metals--Non Ferrous 1,521 0.36%
MOORE CORP Business & Public Services 1,425 0.34%
TECK CORP B Metals--Non Ferrous 1,357 0.32%
MOLSON COS A Beverages & Tobacco 1,279 0.31%
A-4
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
AIR CANADA COMMON Transportation--Airlines 1,247 0.30%
RANGER OIL Energy Sources 1,235 0.30%
RIO ALGOM Metals--Non Ferrous 1,130 0.27%
DOMTAR Forest Products & Paper 1,101 0.26%
CAE Aerospace & Military Technology 1,032 0.25%
OSHAWA GROUP A Merchandising 991 0.24%
PROVIGO Merchandising 849 0.20%
STELCO A Metals--Steel 833 0.20%
EXTENDICARE SV Business & Public Services 783 0.19%
COTT CORP Beverages & Tobacco 637 0.15%
CAMBIOR Gold Mines 610 0.15%
CCL INDUSTRIES B Misc. Materials & Commodities 587 0.14%
CO-STEEL Metals--Steel 478 0.11%
ECHO BAY MINES Gold Mines 457 0.11%
AGNICO-EAGLE MINES Gold Mines 298 0.07%
INCO VBN Metals--Non Ferrous 191 0.05%
COREL CORP Business & Public Services 147 0.04%
SPAR AEROSPACE Aerospace & Military Technology 123 0.03%
INT'L FOREST PRODUCTS A Forest Products & Paper 102 0.02%
A-5
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
APPENDIX A-5
MSCI FRANCE INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
FRANCE TELECOM Telecommunications 385,858 10.13%
LOREAL Health & Personal Care 218,320 5.73%
VIVENDI (GENERALE EAUX) Business & Public Services 208,130 5.46%
AXA-UAP Insurance 206,560 5.42%
ELF AQUITAINE Energy Sources 196,617 5.16%
ALCATEL Electrical & Electronics 177,213 4.65%
TOTAL SA Energy Sources 169,192 4.44%
SUEZ LYONNAISE DES EAUX Business & Public Services 161,661 4.24%
CARREFOUR Merchandising 137,827 3.62%
PINAULT-PRINT.-REDOUTE Merchandising 124,590 3.27%
DANONE (GROUPE) Food & Household Products 123,369 3.24%
RHONE-POULENC ORD A Health & Personal Care 103,589 2.72%
SANOFI Health & Personal Care 86,129 2.26%
SOCIETE GENERALE Banking 84,526 2.22%
LVMH Recreation, Other Consumer Goods 80,022 2.10%
SAINT-GOBAIN Building Material & Components 78,922 2.07%
BNP BANQUE NTLE PARIS Banking 77,991 2.05%
AIR LIQUIDE Chemicals 72,242 1.90%
CAP GEMINI SA Business & Public Services 67,655 1.78%
PROMODES Merchandising 67,545 1.77%
PARIBAS Banking 67,090 1.76%
LAFARGE (FRANCE) Building Material & Components 53,033 1.39%
PEUGEOT SA Automobiles 52,698 1.38%
SCHNEIDER Electrical & Electronics 49,751 1.31%
ACCOR Leisure & Tourism 49,728 1.30%
CASINO ORD Merchandising 43,643 1.15%
CANAL + Broadcasting & Publishing 43,117 1.13%
LEGRAND ORD Electrical & Electronics 40,771 1.07%
VALEO Industrial Components 40,081 1.05%
SODEXHO ALLIANCE Business & Public Services 39,731 1.04%
MICHELIN B Industrial Components 39,341 1.03%
THOMSON-CSF Aerospace & Military Technology 34,721 0.91%
ERIDANIA BEGHIN-SAY Food & Household Products 32,729 0.86%
BOUYGUES ORD Construction & Housing 30,470 0.80%
DASSAULT SYSTEMES Business & Public Services 28,522 0.75%
LAGARDERE Multi-Industry 27,300 0.72%
ESSILOR INTERNATIONAL Health & Personal Care 23,643 0.62%
PERNOD RICARD Beverages & Tobacco 22,475 0.59%
COMPTOIRS MODERNES Merchandising 21,877 0.57%
BIC Recreation, Other Consumer Goods 18,435 0.48%
SAGEM Electrical & Electronics 17,674 0.46%
SEITA Beverages & Tobacco 15,748 0.41%
SIDEL Machinery & Engineering 15,246 0.40%
USINOR Metals--Steel 15,230 0.40%
PECHINEY ORD A Metals--Non Ferrous 14,511 0.38%
EURAFRANCE Financial Services 12,521 0.33%
PRIMAGAZ Utilities--Electrical & Gas 9,900 0.26%
IMETAL Misc. Materials & Commodities 9,325 0.24%
PATHE Leisure & Tourism 9,135 0.24%
SIMCO Real Estate 9,017 0.24%
TECHNIP Machinery & Engineering 8,973 0.24%
GROUPE GTM Construction & Housing 8,303 0.22%
SEB Appliances & Household Durables 7,994 0.21%
COFLEXIP Energy Equipment & Services 7,713 0.20%
UNIBAIL Real Estate 7,653 0.20%
CLUB MEDITERRANEE Leisure & Tourism 7,288 0.19%
CASINO ADP Merchandising 6,837 0.18%
ZODIAC Aerospace & Military Technology 6,465 0.17%
SEFIMEG Real Estate 6,352 0.17%
A-6
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
BONGRAIN Food & Household Products 6,297 0.17%
SOMMER-ALLIBERT Industrial Components 5,082 0.13%
NATEXIS Banking 4,866 0.13%
CPR Financial Services 3,788 0.10%
CHARGEURS Textiles & Apparel 2,824 0.07%
GENERALE GEOPHYSIQUE Energy Equipment & Services 2,143 0.06%
NORD-EST Misc. Materials & Commodities 1,648 0.04%
SKIS ROSSIGNOL Recreation, Other Consumer Goods 1,246 0.03%
A-7
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
APPENDIX A-6
MSCI GERMANY INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
ALLIANZ Insurance 128,467 10.08%
DEUTSCHE TELEKOM Telecommunications 121,599 9.54%
DAIMLER-BENZ Automobiles 92,999 7.30%
MANNESMANN Telecommunications 69,715 5.47%
SIEMENS STAMM Electrical & Electronics 67,231 5.28%
SAP STAMM Business & Public Services 60,003 4.71%
MUENCHENER RUECK NAM Insurance 59,341 4.66%
BAYER. HYPO-& VEREINSBANK Banking 58,396 4.58%
DEUTSCHE BANK Banking 57,508 4.51%
VEBA Utilities--Electrical & Gas 50,661 3.98%
BAYER Chemicals 50,292 3.95%
SAP VORZUG Business & Public Services 46,010 3.61%
RWE STAMM Utilities--Electrical & Gas 45,405 3.56%
BASF Chemicals 42,063 3.30%
VOLKSWAGEN STAMM Automobiles 40,183 3.15%
DRESDNER BANK Banking 37,419 2.94%
VIAG Utilities--Electrical & Gas 36,433 2.86%
METRO STAMM Merchandising 23,344 1.83%
LUFTHANSA Transportation--Airlines 14,561 1.14%
SCHERING Health & Personal Care 12,809 1.01%
MERCK KGAA Health & Personal Care 12,645 0.99%
THYSSEN Metals--Steel 11,685 0.92%
AACHEN & MUNCH BET NAMEN Insurance 11,139 0.87%
PREUSSAG Multi-Industry 9,558 0.75%
BEIERSDORF Health & Personal Care 9,307 0.73%
LINDE Machinery & Engineering 8,939 0.70%
ADIDAS-SALOMON Recreation, Other Consumer Goods 8,673 0.68%
VOLKSWAGEN VORZUG Automobiles 8,279 0.65%
DEGUSSA Chemicals 7,674 0.60%
HEIDELBERGER ZEMENT STAM Building Material & Components 6,872 0.54%
KARSTADT Merchandising 6,802 0.53%
MAN STAMM Machinery & Engineering 6,429 0.50%
AXA COLONIA KONZ STAMM Insurance 5,568 0.44%
CONTINENTAL Industrial Components 5,454 0.43%
RWE VORZUG Utilities -- Electrical & Gas 5,368 0.42%
HOCHTIEF Construction & Housing 4,458 0.35%
DOUGLAS HOLDING Merchandising 3,322 0.26%
SGL CARBON Misc. Materials & Commodities 3,264 0.26%
AACHEN & MUNCH BET INH Insurance 2,347 0.18%
BUDERUS Building Material & Components 2,102 0.16%
DYCKERHOFF VORZUG Building Material & Components 2,060 0.16%
AGIV AG IND & VERKEHR Multi-Industry 1,731 0.14%
MAN VORZUG Machinery & Engineering 1,728 0.14%
METRO VORZUG Merchandising 1,548 0.12%
BILFINGER + BERGER Construction & Housing 1,495 0.12%
GROHE (FRIEDRICH) VORZUG Building Material & Components 1,460 0.11%
FAG KUGELFISCHER Industrial Components 1,385 0.11%
MUENCHENER RUECK INH Insurance 1,367 0.11%
DEUTZ Machinery & Engineering 1,190 0.09%
BRAU & BRUNNEN Beverages & Tobacco 890 0.07%
RHEINMETALL STAMM Aerospace & Military Technology 857 0.07%
IWKA Machinery & Engineering 835 0.07%
AXA COLONIA KONZ VORZUG Insurance 777 0.06%
RHEINMETALL VORZUG Aerospace & Military Technology 624 0.05%
SALAMANDER Textiles & Apparel 580 0.05%
HOLSTEN-BRAUEREI Beverages & Tobacco 416 0.03%
STRABAG Construction & Housing 323 0.03%
ESCADA STAMM Textiles & Apparel 203 0.02%
ESCADA VORZUG Textiles & Apparel 162 0.01%
A-8
</TABLE>
<PAGE> 112
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
HERLITZ STAMM Business & Public Services 161 0.01%
HERLITZ VORZUG Business & Public Services 115 0.01%
A-9
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
APPENDIX A-7
MSCI HONG KONG INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
HONGKONG TELECOM Telecommunications 178,131 20.37%
HUTCHISON WHAMPOA Multi-Industry 143,853 16.45%
HANG SENG BANK Banking 88,814 10.16%
CLP HOLDINGS Utilities--Electrical & Gas 85,354 9.76%
CHEUNG KONG HOLDINGS Real Estate 76,315 8.73%
SUN HUNG KAI PROPERTIES Real Estate 61,249 7.01%
HONGKONG CHINA GAS Utilities--Electrical & Gas 39,000 4.46%
SWIRE PACIFIC A Multi-Industry 35,402 4.05%
CATHAY PACIFIC AIRWAYS Transportation--Airlines 21,669 2.48%
WHARF HOLDINGS Real Estate 20,551 2.35%
NEW WORLD DEVELOPMENT Real Estate 18,171 2.08%
BANK EAST ASIA Banking 14,290 1.63%
JOHNSON ELECTRIC HLDGS Electrical & Electronics 13,783 1.58%
HANG LUNG DEVELOPMENT CO Real Estate 9,239 1.06%
SHANGRI-LA ASIA Leisure & Tourism 8,978 1.03%
TELEVISION BROADCASTS Broadcasting & Publishing 7,229 0.83%
SINO LAND Real Estate 6,879 0.79%
HYSAN DEVELOPMENT Real Estate 5,908 0.68%
SOUTH CHINA MORNING POST Broadcasting & Publishing 5,455 0.62%
HONGKONG SHANGHAI HOTEL Leisure & Tourism 4,774 0.55%
VARITRONIX INTERNATIONAL Misc. Materials & Commodities 4,544 0.52%
HOPEWELL HOLDINGS Multi-Industry 3,900 0.45%
WING LUNG BANK Banking 3,740 0.43%
MIRAMAR HOTEL & INVEST. Real Estate 2,945 0.34%
REGAL HOTELS INT'L Leisure & Tourism 2,791 0.32%
CHINESE ESTATES HOLDINGS Real Estate 2,028 0.23%
HONGKONG AIRCRAFT HAECO Aerospace & Military Technology 1,574 0.18%
DICKSON CONCEPTS INT'L Merchandising 1,557 0.18%
ORIENTAL PRESS GROUP Broadcasting & Publishing 1,363 0.16%
ELEC & ELTEK INT'L HLDGS Electronic Components, Instruments 1,215 0.14%
TAI CHEUNG HOLDINGS Real Estate 1,063 0.12%
KUMAGAI GUMI (HK) Construction & Housing 995 0.11%
SHUN TAK HOLDINGS Transportation--Shipping 936 0.11%
GIORDANO INTERNATIONAL Merchandising 635 0.07%
A-10
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
APPENDIX A-8
MSCI ITALY INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
ENI Energy Sources 85,291,486 15.87%
TIM ORD Telecommunications 76,672,054 14.27%
ASSICURAZIONI GENERALI Insurance 59,640,646 11.10%
TELECOM ITALIA ORD Telecommunications 49,046,160 9.13%
CREDITO ITALIANO ORD Banking 21,589,535 4.02%
FIAT ORD Automobiles 19,299,541 3.59%
INA Insurance 17,890,690 3.33%
SAN PAOLO DI TORINO ORD Banking 17,335,081 3.23%
BANCA COMMERCIALE ORD Banking 17,155,808 3.19%
BANCA INTESA ORD Banking 14,340,693 2.67%
IMI ISTITUTO MOBILIARE Banking 13,202,260 2.46%
MEDIASET Broadcasting & Publishing 13,041,215 2.43%
OLIVETTI ORD Telecommunications 11,172,400 2.08%
EDISON ORD Utilities--Electrical & Gas 10,520,336 1.96%
MEDIOBANCA Banking 10,214,427 1.90%
PIRELLI SPA ORD Industrial Components 10,013,982 1.86%
TIM RNC Telecommunications 9,694,898 1.80%
MONTEDISON ORD Multi-Industry 8,728,560 1.62%
RAS ORD Insurance 8,394,823 1.56%
TELECOM ITALIA RNC Telecommunications 7,688,308 1.43%
ITALGAS Utilities--Electrical & Gas 5,789,595 1.08%
BENETTON GROUP Textiles & Apparel 5,155,295 0.96%
RINASCENTE ORD Merchandising 3,784,038 0.70%
PARMALAT FINANZIARIA Food & Household Products 3,696,428 0.69%
BANCA POPOLARE MILANO Banking 3,205,567 0.60%
FIAT PRIV Automobiles 3,201,622 0.60%
BANCA INTESA RNC Banking 2,850,464 0.53%
FIAT RNC Automobiles 2,511,738 0.47%
ITALCEMENTI ORD Building Material & Components 2,469,590 0.46%
RAS RNC Insurance 2,441,504 0.45%
MONDADORI ORD Broadcasting & Publishing 2,348,362 0.44%
BULGARI Recreation, Other Consumer Goods 2,277,212 0.42%
SAI ORD Insurance 2,178,022 0.41%
SIRTI Construction & Housing 1,822,521 0.34%
MAGNETI MARELLI ORD Industrial Components 1,563,871 0.29%
FALCK ORD Metals--Steel 1,513,414 0.28%
SNIA BPD ORD Multi-Industry 1,471,122 0.27%
CARTIERE BURGO ORD Forest Products & Paper 1,254,676 0.23%
LANE G.MARZOTTO ORD Textiles & Apparel 1,150,146 0.21%
MONTEDISON RNC Multi-Industry 944,926 0.18%
IMPREGILO ORD Construction & Housing 773,519 0.14%
ITALCEMENTI RNC Building Material & Components 657,232 0.12%
SAI RNC Insurance 513,811 0.10%
RENO MEDICI A ORD Forest Products & Paper 457,607 0.09%
DANIELI & CO ORD Machinery & Engineering 452,080 0.08%
CEMENTIR Building Material & Components 427,831 0.08%
RINASCENTE RNC Merchandising 400,443 0.07%
PIRELLI SPA RNC Industrial Components 285,367 0.05%
RINASCENTE PRIV Merchandising 258,249 0.05%
LANE G.MARZOTTO RISP Textiles & Apparel 246,821 0.05%
DANIELI & CO RNC Machinery & Engineering 213,419 0.04%
SNIA BPD RNC Multi-Industry 131,150 0.02%
A-11
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
APPENDIX A-9
MSCI JAPAN INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
NTT CORP Telecommunications 14,318,363 7.66%
TOYOTA MOTOR CORP Automobiles 11,121,273 5.95%
BANK TOKYO-MITSUBISHI Banking 5,219,301 2.79%
HONDA MOTOR CO Automobiles 4,539,215 2.43%
MATSUSHITA ELECT IND'L Appliances & Household Durables 4,538,978 2.43%
SONY CORP Appliances & Household Durables 4,344,342 2.32%
TOKYO ELECTRIC POWER CO Utilities--Electrical & Gas 3,933,493 2.10%
SUMITOMO BANK Banking 3,693,082 1.98%
TAKEDA CHEMICAL IND Health & Personal Care 3,517,369 1.88%
EAST JAPAN RAILWAY CO Transportation--Road & Rail 3,000,904 1.61%
ITO-YOKADO CO Merchandising 2,871,140 1.54%
BRIDGESTONE CORP Industrial Components 2,616,437 1.40%
FUJI PHOTO FILM CO Recreation, Other Consumer Goods 2,599,385 1.39%
CANON INC Data Processing & Reproduction 2,553,703 1.37%
KANSAI ELECTRIC POWER CO Utilities--Electrical & Gas 2,497,528 1.34%
NOMURA SECURITIES CO Financial Services 2,478,762 1.33%
FUJITSU Data Processing & Reproduction 2,391,403 1.28%
HITACHI Electrical & Electronics 2,146,436 1.15%
DENSO CORP Industrial Components 2,104,869 1.13%
TOKIO MARINE & FIRE Insurance 1,940,440 1.04%
MITSUBISHI HEAVY IND Machinery & Engineering 1,714,360 0.92%
ROHM CO Electronic Components, Instruments 1,573,499 0.84%
DAI NIPPON PRINTING CO Business & Public Services 1,551,386 0.83%
NEC CORP Electrical & Electronics 1,536,688 0.82%
SANKYO CO Health & Personal Care 1,533,594 0.82%
NIPPON STEEL CORP Metals--Steel 1,520,720 0.81%
INDUSTRIAL BANK OF JAPAN Banking 1,498,336 0.80%
MITSUBISHI ESTATE CO Real Estate 1,413,083 0.76%
KAO CORP Food & Household Products 1,361,391 0.73%
TOKAI BANK Banking 1,227,276 0.66%
KIRIN BREWERY CO Beverages & Tobacco 1,212,878 0.65%
MITSUBISHI CORP Wholesale & International Trade 1,205,669 0.65%
KYOCERA CORP Electronic Components, Instruments 1,205,666 0.65%
MURATA MANUFACTURING CO Electronic Components, Instruments 1,189,827 0.64%
SHIZUOKA BANK Banking 1,156,313 0.62%
FUJI BANK Banking 1,143,816 0.61%
NISSAN MOTOR CO Automobiles 1,117,343 0.60%
YAMANOUCHI PHARM. Health & Personal Care 1,089,495 0.58%
MITSUI & CO Wholesale & International Trade 1,087,284 0.58%
TOHOKU ELECTRIC POWER CO Utilities--Electrical & Gas 1,083,265 0.58%
TOPPAN PRINTING CO Business & Public Services 1,073,924 0.57%
ASAHI BANK Banking 1,067,412 0.57%
ACOM CO Financial Services 1,064,270 0.57%
KINKI NIPPON RAILWAY CO Transportation--Road & Rail 1,035,204 0.55%
SHARP CORP Appliances & Household Durables 1,022,051 0.55%
SECOM CO Business & Public Services 1,021,787 0.55%
MITSUBISHI TRUST Banking 1,001,896 0.54%
SAKURA BANK Banking 998,035 0.53%
FANUC Electronic Components, Instruments 991,125 0.53%
TAISHO PHARMACEUTICAL CO Health & Personal Care 988,069 0.53%
SUMITOMO ELECTRIC IND Industrial Components 985,994 0.53%
OSAKA GAS CO Utilities--Electrical & Gas 963,102 0.52%
ASAHI GLASS CO Misc. Materials & Commodities 910,380 0.49%
SHIN-ETSU CHEMICAL CO Chemicals 889,499 0.48%
TORAY INDUSTRIES Chemicals 875,942 0.47%
ASAHI BREWERIES Beverages & Tobacco 865,209 0.46%
TOKYO GAS CO Utilities--Electrical & Gas 861,744 0.46%
AJINOMOTO CO Food & Household Products 787,701 0.42%
MARUI CO Merchandising 782,396 0.42%
A-12
</TABLE>
<PAGE> 116
<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 770,198 0.41%
MITSUI FUDOSAN CO Real Estate 763,941 0.41%
SEKISUI HOUSE Construction & Housing 753,069 0.40%
NIPPON EXPRESS CO Transportation--Road & Rail 745,548 0.40%
SUMITOMO CHEMICAL CO Chemicals 719,315 0.38%
TOYODA AUTOMATIC LOOM Machinery & Engineering 693,179 0.37%
SMC CORP Machinery & Engineering 686,833 0.37%
JUSCO CO Merchandising 681,337 0.36%
DAIWA HOUSE IND CO Construction & Housing 668,776 0.36%
YAMATO TRANSPORT CO Transportation--Road & Rail 657,513 0.35%
JAPAN AIRLINES CO Transportation--Airlines 656,922 0.35%
ASAHI CHEMICAL IND CO Chemicals 647,536 0.35%
SUMITOMO CORP Wholesale & International Trade 647,228 0.35%
KAWASAKI STEEL CORP Metals--Steel 634,865 0.34%
KOMATSU Machinery & Engineering 630,263 0.34%
ORIX CORP Financial Services 605,758 0.32%
HOYA CORP Electronic Components, Instruments 601,332 0.32%
TOKYO ELECTRON Electronic Components, Instruments 592,778 0.32%
ADVANTEST CORP Electronic Components, Instruments 589,889 0.32%
MITSUBISHI CHEMICAL CORP Chemicals 585,743 0.31%
MITSUBISHI ELECTRIC CORP Electrical & Electronics 581,004 0.31%
SHISEIDO CO Health & Personal Care 575,057 0.31%
DAIWA SECURITIES CO Financial Services 570,910 0.31%
EISAI CO Health & Personal Care 559,874 0.30%
DAIICHI PHARMACEUTICAL Health & Personal Care 547,592 0.29%
OJI PAPER CO Forest Products & Paper 538,412 0.29%
SUMITOMO METAL IND Metals--Steel 530,721 0.28%
NIPPON YUSEN K.K Transportation--Shipping 528,168 0.28%
GUNMA BANK Banking 510,456 0.27%
NGK INSULATORS Industrial Components 508,373 0.27%
MINEBEA CO Industrial Components 497,688 0.27%
SHIMANO Recreation, Other Consumer Goods 493,622 0.26%
NIPPON OIL CO Energy Sources 484,204 0.26%
SUMITOMO MARINE & FIRE Insurance 483,476 0.26%
MITSUI MARINE & FIRE Insurance 473,641 0.25%
CREDIT SAISON CO Financial Services 471,329 0.25%
KURARAY CO Chemicals 471,131 0.25%
KINDEN CORP Construction & Housing 461,890 0.25%
PIONEER ELECTRONIC CORP Appliances & Household Durables 457,323 0.24%
JOYO BANK Banking 455,322 0.24%
HANKYU CORP Transportation--Road & Rail 448,398 0.24%
NIPPON PAPER IND CO Forest Products & Paper 447,929 0.24%
KAWASAKI HEAVY IND Machinery & Engineering 442,685 0.24%
SEVENTY-SEVEN BANK Banking 439,238 0.23%
TOSTEM CORP Building Material & Components 437,063 0.23%
KUBOTA CORP Machinery & Engineering 433,794 0.23%
OBAYASHI CORP Construction & Housing 419,088 0.22%
TOYO SEIKAN KAISHA Misc. Materials & Commodities 414,172 0.22%
OLYMPUS OPTICAL CO Electronic Components, Instruments 412,544 0.22%
UNY CO Merchandising 405,754 0.22%
UNI-CHARM CORP Health & Personal Care 404,337 0.22%
OMRON CORP Electrical & Electronics 390,776 0.21%
NIPPON MEAT PACKERS Food & Household Products 377,955 0.20%
KAJIMA CORP Construction & Housing 375,392 0.20%
TOKYU CORP Transportation--Road & Rail 369,464 0.20%
NIKON CORP Electronic Components, Instruments 360,748 0.19%
NAGOYA RAILROAD CO Transportation--Road & Rail 355,035 0.19%
CHIBA BANK Banking 354,113 0.19%
MARUBENI CORP Wholesale & International Trade 345,610 0.18%
TEIJIN Chemicals 344,960 0.18%
NKK CORP Metals--Steel 340,250 0.18%
ITOCHU CORP Wholesale & International Trade 332,749 0.18%
SHIMIZU CORP Construction & Housing 332,179 0.18%
A-13
</TABLE>
<PAGE> 117
<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 328,891 0.18%
MITSUI MINING & SMELTING Metals--Non Ferrous 328,594 0.18%
SEKISUI CHEMICAL CO Building Material & Components 327,414 0.18%
TOTO Building Material & Components 315,113 0.17%
ODAKYU ELECTRIC RAILWAY Transportation--Road & Rail 312,930 0.17%
CITIZEN WATCH CO Recreation, Other Consumer Goods 312,365 0.17%
MITSUBISHI MATERIALS Metals--Non Ferrous 310,502 0.17%
EBARA CORP Machinery & Engineering 308,573 0.17%
SHIONOGI & CO Health & Personal Care 308,143 0.16%
TOBU RAILWAY CO Transportation--Road & Rail 307,065 0.16%
ONWARD KASHIYAMA CO Textiles & Apparel 304,402 0.16%
YAMAGUCHI BANK Banking 303,698 0.16%
NANKAI ELECTRIC RAILWAY Transportation--Road & Rail 300,596 0.16%
NSK Industrial Components 299,206 0.16%
BANK YOKOHAMA Banking 298,271 0.16%
YAMAZAKI BAKING CO Food & Household Products 297,096 0.16%
NISSIN FOOD PRODUCTS CO Food & Household Products 295,759 0.16%
NICHIDO FIRE & MARINE Insurance 295,692 0.16%
FURUKAWA ELECTRIC CO Industrial Components 293,862 0.16%
HIROSE ELECTRIC CO Electronic Components, Instruments 286,444 0.15%
SUMITOMO METAL MINING CO Metals--Non Ferrous 283,999 0.15%
CASIO COMPUTER CO Recreation, Other Consumer Goods 281,203 0.15%
NITTO DENKO CORP Misc. Materials & Commodities 281,099 0.15%
NGK SPARK PLUG CO Industrial Components 281,000 0.15%
MYCAL CORP Merchandising 278,993 0.15%
TAKASHIMAYA CO Merchandising 278,054 0.15%
ISETAN CO Merchandising 273,348 0.15%
KANEKA CORP Chemicals 271,132 0.15%
TOHO CO Leisure & Tourism 267,713 0.14%
YAMAHA CORP Recreation, Other Consumer Goods 266,267 0.14%
KYOWA HAKKO KOGYO CO Health & Personal Care 263,813 0.14%
MAKITA CORP Electrical & Electronics 263,451 0.14%
KOKUYO CO Business & Public Services 263,320 0.14%
NIPPON FIRE & MARINE Insurance 258,799 0.14%
DAIEI Merchandising 257,493 0.14%
TBS TOKYO BROADCASTING Broadcasting & Publishing 244,943 0.13%
AOYAMA TRADING CO Merchandising 244,724 0.13%
CHUGAI PHARMACEUTICAL CO Health & Personal Care 243,226 0.13%
DAINIPPON INK Chemicals 240,626 0.13%
TAISEI CORP Construction & Housing 238,543 0.13%
DAIKIN INDUSTRIES Machinery & Engineering 235,992 0.13%
SEGA ENTREPRISES Recreation, Other Consumer Goods 234,929 0.13%
MITSUBISHI RAYON CO Chemicals 233,024 0.12%
MITSUI OSK LINES Transportation--Shipping 232,780 0.12%
KOMORI CORP Machinery & Engineering 223,731 0.12%
FUJIKURA Industrial Components 215,344 0.12%
MITSUI TRUST & BANK CO Banking 213,622 0.11%
MITSUBISHI LOGISTICS Business & Public Services 209,133 0.11%
KONICA CORP Recreation, Other Consumer Goods 208,358 0.11%
HOUSE FOODS(HOUSE FD IND Food & Household Products 207,909 0.11%
WACOAL CORP Textiles & Apparel 202,788 0.11%
KURITA WATER INDUSTRIES Machinery & Engineering 200,106 0.11%
KEIHIN ELECTRIC EXPRESS Transportation--Road & Rail 196,973 0.11%
HITACHI ZOSEN CORP Machinery & Engineering 194,607 0.10%
NIPPON COMSYS CORP Construction & Housing 193,949 0.10%
AMADA CO Machinery & Engineering 191,342 0.10%
YOKOGAWA ELECTRIC CORP Electronic Components, Instruments 186,451 0.10%
NTN CORP Industrial Components 183,771 0.10%
NISHIMATSU CONSTRUCTION Construction & Housing 183,698 0.10%
NAMCO Leisure & Tourism 177,539 0.09%
MITSUKOSHI Merchandising 175,587 0.09%
MITSUBISHI GAS CHEMICAL Chemicals 175,135 0.09%
SAPPORO BREWERIES Beverages & Tobacco 172,943 0.09%
A-14
</TABLE>
<PAGE> 118
<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 170,219 0.09%
MEIJI SEIKA KAISHA Food & Household Products 169,016 0.09%
TAIYO YUDEN CO Electronic Components, Instruments 160,391 0.09%
KANDENKO CO Construction & Housing 160,112 0.09%
JAPAN ENERGY CORP Energy Sources 159,031 0.09%
UBE INDUSTRIES Misc. Materials & Commodities 158,257 0.08%
CSK CORP Business & Public Services 157,545 0.08%
DAITO TRUST CONSTRUCTION Construction & Housing 153,511 0.08%
KAMIGUMI CO Business & Public Services 152,796 0.08%
KOYO SEIKO CO Industrial Components 150,714 0.08%
KIKKOMAN CORP Food & Household Products 150,666 0.08%
FUJITA KANKO Leisure & Tourism 148,839 0.08%
LION CORP Health & Personal Care 148,070 0.08%
AUTOBACS SEVEN CO Merchandising 146,363 0.08%
SUMITOMO HEAVY IND Machinery & Engineering 143,678 0.08%
HANKYU DEPARTMENT STORES Merchandising 142,902 0.08%
Q. P. CORP Food & Household Products 141,602 0.08%
YASUDA TRUST & BANK CO Banking 141,492 0.08%
SKYLARK CO Leisure & Tourism 139,180 0.07%
MORI SEIKI CO Machinery & Engineering 138,765 0.07%
HIGO BANK Banking 138,621 0.07%
SHOWA DENKO K.K Chemicals 135,485 0.07%
TAKARA SHUZO CO Beverages & Tobacco 135,259 0.07%
SNOW BRAND MILK PRODUCTS Food & Household Products 135,184 0.07%
TOSOH CORP Chemicals 134,489 0.07%
SANDEN CORP Industrial Components 134,470 0.07%
SANRIO CO Recreation, Other Consumer Goods 132,522 0.07%
TAKARA STANDARD CO Appliances & Household Durables 131,966 0.07%
TOKYO STYLE CO Textiles & Apparel 131,617 0.07%
INAX CORP Building Material & Components 130,396 0.07%
ASHIKAGA BANK Banking 129,370 0.07%
KONAMI CO Business & Public Services 129,254 0.07%
SANWA SHUTTER CORP Building Material & Components 128,582 0.07%
KAWASAKI KISEN KAISHA Transportation--Shipping 126,124 0.07%
HOKURIKU BANK Banking 125,225 0.07%
KISSEI PHARMACEUTICAL CO Health & Personal Care 122,757 0.07%
SUMITOMO FORESTRY CO Building Material & Components 122,406 0.07%
COSMO OIL CO Energy Sources 122,000 0.07%
NISSHINBO INDUSTRIES Textiles & Apparel 121,435 0.06%
TOKYO DOME CORP Leisure & Tourism 118,525 0.06%
OKUMURA CORP Construction & Housing 118,399 0.06%
NIPPON SHOKUBAI CO Chemicals 115,950 0.06%
TOYOBO CO Textiles & Apparel 114,387 0.06%
EZAKI GLICO CO Food & Household Products 112,828 0.06%
SHIMACHU CO Merchandising 111,980 0.06%
NIPPON SHEET GLASS CO Misc. Materials & Commodities 110,521 0.06%
NIHON CEMENT CO Building Material & Components 106,796 0.06%
DENKI KAGAKU KOGYO K.K Chemicals 105,926 0.06%
MEIJI MILK PRODUCTS CO Food & Household Products 105,453 0.06%
ARABIAN OIL CO Energy Sources 105,160 0.06%
ITOHAM FOODS Food & Household Products 104,975 0.06%
NORITAKE CO Recreation, Other Consumer Goods 104,680 0.06%
SEINO TRANSPORTATION CO Transportation--Road & Rail 104,663 0.06%
BROTHER INDUSTRIES Appliances & Household Durables 102,939 0.06%
TEIKOKU OIL CO Energy Sources 102,539 0.05%
SUMITOMO OSAKA CEMENT CO Building Material & Components 102,240 0.05%
AMANO CORP Machinery & Engineering 102,044 0.05%
PENTA-OCEAN CONSTRUCTION Construction & Housing 100,718 0.05%
ORIENT CORP Financial Services 99,011 0.05%
KATOKICHI CO Food & Household Products 95,200 0.05%
DAIMARU Merchandising 94,838 0.05%
OKUMA CORP Machinery & Engineering 92,100 0.05%
DAICEL CHEMICAL IND Chemicals 90,480 0.05%
A-15
</TABLE>
<PAGE> 119
<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 88,599 0.05%
MITSUI ENGINEERING&SHIP. Machinery & Engineering 87,298 0.05%
MITSUBISHI OIL CO Energy Sources 84,178 0.05%
SEIYU Merchandising 83,938 0.04%
NICHIREI CORP Food & Household Products 82,134 0.04%
MAKINO MILLING MACHINE Machinery & Engineering 81,484 0.04%
GUNZE Textiles & Apparel 79,115 0.04%
TAKUMA CO Machinery & Engineering 77,888 0.04%
MITSUBISHI PAPER MILLS Forest Products & Paper 77,855 0.04%
NAGASE & CO Chemicals 76,326 0.04%
DAIWA KOSHO LEASE CO Real Estate 74,888 0.04%
MAEDA ROAD CONSTRUCTION Construction & Housing 74,067 0.04%
NIPPON LIGHT METAL CO Metals--Non Ferrous 74,054 0.04%
JACCS CO Financial Services 72,883 0.04%
DAIDO STEEL CO Metals--Steel 71,171 0.04%
KANSAI PAINT CO Chemicals 70,198 0.04%
TOYO EXTERIOR CO Building Material & Components 67,595 0.04%
NIPPON SHINPAN CO Financial Services 66,940 0.04%
ISHIHARA SANGYO KAISHA Chemicals 66,294 0.04%
UNIDEN CORP Electrical & Electronics 65,546 0.04%
TRANS COSMOS Business & Public Services 65,456 0.04%
KYUDENKO CORP Construction & Housing 64,739 0.03%
KANEBO Health & Personal Care 63,670 0.03%
KUREHA CHEMICAL IND CO Chemicals 63,490 0.03%
TSUBAKIMOTO CHAIN CO Machinery & Engineering 63,293 0.03%
OYO CORP Business & Public Services 62,980 0.03%
DAIFUKU CO Machinery & Engineering 62,722 0.03%
DAINIPPON SCREEN MFG CO Electronic Components, Instruments 61,860 0.03%
KUMAGAI GUMI CO Construction & Housing 60,677 0.03%
TOEI CO Leisure & Tourism 58,613 0.03%
IWATANI INTERNATIONAL Utilities--Electrical & Gas 57,348 0.03%
JAPAN STEEL WORKS Machinery & Engineering 56,367 0.03%
NOF CORP Chemicals 54,756 0.03%
TOKYOTOKEIBA CO Leisure & Tourism 52,195 0.03%
MITSUI-SOKO CO Business & Public Services 52,074 0.03%
JGC CORP Machinery & Engineering 50,729 0.03%
NIPPON SHARYO Machinery & Engineering 48,741 0.03%
NIPPON SUISAN KAISHA Food & Household Products 46,992 0.03%
MISAWA HOMES CO Construction & Housing 46,951 0.03%
UNITIKA Chemicals 44,446 0.02%
KURABO INDUSTRIES Textiles & Apparel 44,110 0.02%
TOKYO TATEMONO CO Real Estate 43,334 0.02%
OKAMOTO INDUSTRIES Multi-Industry 41,364 0.02%
MARUHA CORP Food & Household Products 39,793 0.02%
TOA CORP Construction & Housing 39,779 0.02%
FUJITA CORP Construction & Housing 35,675 0.02%
NIIGATA ENGINEERING CO Machinery & Engineering 31,896 0.02%
SANKYO ALUMINIUM IND CO Building Material & Components 30,300 0.02%
CHIYODA CORP Machinery & Engineering 30,245 0.02%
KAKEN PHARMACEUTICAL CO Health & Personal Care 29,516 0.02%
NIPPON BEET SUGAR MFG CO Food & Household Products 28,947 0.02%
DAIKYO Real Estate 27,530 0.01%
SATO KOGYO CO Construction & Housing 25,528 0.01%
JAPAN METALS & CHEMICALS Metals--Steel 25,255 0.01%
TOYO ENGINEERING CORP Machinery & Engineering 24,982 0.01%
HAZAMA CORP Construction & Housing 24,872 0.01%
HASEKO CORP Construction & Housing 24,599 0.01%
AOKI CORP Construction & Housing 24,393 0.01%
RENOWN Textiles & Apparel 20,021 0.01%
GAKKEN CO Broadcasting & Publishing 19,011 0.01%
A-16
</TABLE>
<PAGE> 120
<TABLE>
<CAPTION>
APPENDIX A-10
MSCI MALAYSIA INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
TELEKOM MALAYSIA Telecommunications 21,140 15.83%
TENAGA NASIONAL Utilities--Electrical & Gas 13,111 9.82%
MALAYAN BANKING Banking 10,528 7.88%
SIME DARBY Multi-Industry 6,404 4.80%
MALAYSIA INT'L SHIPPING Transportation--Shipping 5,837 4.37%
ROTHMANS PALL MALL (MAL) Beverages & Tobacco 5,440 4.07%
RESORTS WORLD Leisure & Tourism 4,714 3.53%
YTL CORP Construction & Housing 4,602 3.45%
NESTLE (MALAYSIA) Food & Household Products 3,848 2.88%
KUALA LUMPUR KEPONG Misc. Materials & Commodities 3,674 2.75%
RHB CAPITAL Banking 3,270 2.45%
PUBLIC BANK Banking 3,212 2.41%
GOLDEN HOPE PLANTATIONS Misc. Materials & Commodities 3,086 2.31%
UNITED ENGINEERS (MAL) Multi-Industry 2,041 1.53%
MAGNUM CORP Leisure & Tourism 1,967 1.47%
PROTON Automobiles 1,913 1.43%
PERLIS PLANTATIONS Food & Household Products 1,581 1.18%
ORIENTAL HOLDINGS Automobiles 1,566 1.17%
COMMERCE ASSET-HOLDING Banking 1,503 1.13%
MALAYSIAN AIRLINE SYSTEM Transportation--Airlines 1,484 1.11%
BERJAYA LAND Leisure & Tourism 1,435 1.07%
HIGHLANDS & LOWLANDS Misc. Materials & Commodities 1,398 1.05%
IOI CORP Misc. Materials & Commodities 1,339 1.00%
SHELL REFINING CO (FOM) Energy Sources 1,335 1.00%
TECHNOLOGY RESOURCES IND Telecommunications 1,164 0.87%
EDARAN OTOMOBIL NASIONAL Automobiles 1,149 0.86%
MALAYSIAN RESOURCES CORP Real Estate 1,114 0.83%
AMMB HOLDINGS Financial Services 1,068 0.80%
GUINNESS ANCHOR Beverages & Tobacco 1,025 0.77%
MALAYAN UNITED IND Multi-Industry 962 0.72%
RASHID HUSSAIN Financial Services 943 0.71%
JAYA TIASA HOLDINGS Forest Products & Paper 927 0.69%
MALAYSIA MINING CORP Multi-Industry 912 0.68%
RJ REYNOLDS Beverages & Tobacco 850 0.64%
TIME ENGINEERING Electrical & Electronics 830 0.62%
MALAYSIAN OXYGEN Chemicals 823 0.62%
MALAYSIAN PACIFIC IND Electronic Components, Instruments 762 0.57%
BERJAYA GROUP Multi-Industry 737 0.55%
KEDAH CEMENT HOLDINGS Building Material & Components 730 0.55%
TA ENTERPRISE Financial Services 646 0.48%
MBF CAPITAL Financial Services 629 0.47%
MULTI-PURPOSE HOLDINGS Multi-Industry 622 0.47%
TAN CHONG MOTOR HOLDINGS Automobiles 614 0.46%
AMSTEEL CORP Metals--Steel 610 0.46%
HUME INDUSTRIES MALAYSIA Building Material & Components 579 0.43%
SELANGOR PROPERTIES Real Estate 575 0.43%
UMW HOLDINGS Machinery & Engineering 570 0.43%
PAN MALAYSIA CEMENT WRKS Building Material & Components 554 0.41%
MALAYAN CEMENT Building Material & Components 546 0.41%
HONG LEONG INDUSTRIES Multi-Industry 539 0.40%
MULPHA INTERNATIONAL Multi-Industry 518 0.39%
EKRAN Construction & Housing 453 0.34%
PETALING GARDEN Real Estate 431 0.32%
IGB CORP Real Estate 423 0.32%
NEW STRAITS TIMES PRESS Broadcasting & Publishing 419 0.31%
METROPLEX Real Estate 415 0.31%
HONG LEONG PROPERTIES Real Estate 413 0.31%
KIAN JOO CAN FACTORY Misc. Materials & Commodities 410 0.31%
SUNGEI WAY HOLDINGS Building Material & Components 388 0.29%
A-17
</TABLE>
<PAGE> 121
<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 365 0.27%
IDRIS HYDRAULIC MALAYSIA Financial Services 318 0.24%
LAND & GENERAL Multi-Industry 315 0.24%
MALAYSIAN MOSAICS Wholesale & International Trade 270 0.20%
LANDMARKS Leisure & Tourism 244 0.18%
ANTAH HOLDINGS Financial Services 204 0.15%
PROMET Machinery & Engineering 188 0.14%
MYCOM Real Estate 173 0.13%
PILECON ENGINEERING Construction & Housing 172 0.13%
MALAYAWATA STEEL Metals--Steel 160 0.12%
JOHAN HOLDINGS Industrial Components 152 0.11%
KEMAYAN CORP Misc. Materials & Commodities 145 0.11%
KELANAMAS INDUSTRIES Multi-Industry 52 0.04%
A-18
</TABLE>
<PAGE> 122
<TABLE>
<CAPTION>
APPENDIX A-11
MSCI MEXICO (FREE) INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
GRUPO MODELO C Beverages & Tobacco 57,881 10.35%
TELEFONOS MEXICO A Telecommunications 45,397 8.12%
CIFRA V Merchandising 43,429 7.76%
KIMBERLY-CLARK MEXICO A Health & Personal Care 30,213 5.40%
EMPRESAS LA MODERNA A Beverages & Tobacco 27,568 4.93%
GRUPO TELEVISA CPO Broadcasting & Publishing 26,265 4.70%
GRUPO CARSO Multi-Industry 22,391 4.00%
GRUPO INDUSTRIAL BIMBO A Food & Household Products 21,468 3.84%
FEMSA UNIT Beverages & Tobacco 18,190 3.25%
ALFA Multi-Industry 13,500 2.41%
GRUPO MEXICO B Metals--Non Ferrous 12,335 2.21%
CEMEX A Building Material & Components 11,402 2.04%
CONSTITUENT NAME B Multi-Industry 10,742 1.92%
CEMEX B Building Material & Components 10,642 1.90%
INDUSTRIAS PENOLES CP Metals--Non Ferrous 9,667 1.73%
CIFRA C Merchandising 8,666 1.55%
GRUPO CONTINENTAL Beverages & Tobacco 8,438 1.51%
APASCO Building Material & Components 8,213 1.47%
BANACCI B Banking 6,079 1.09%
CONTROLADORA COM MEX UBC Merchandising 5,995 1.07%
BANACCI A Banking 5,876 1.05%
EMPRESAS ICA Construction & Housing 5,689 1.02%
CEMEX CPO Building Material & Components 5,627 1.01%
GRUPO ELEKTRA CPO Merchandising 4,876 0.87%
VITRO A Misc. Materials & Commodities 4,507 0.81%
GRUPO IND'L MASECA B2 Food & Household Products 3,811 0.68%
GRUPO FIN BANCOMER A Banking 3,738 0.67%
TUBOS ACERO DE MEXICO Energy Equipment & Services 3,278 0.59%
GRUPO FIN BANCOMER B Banking 3,167 0.57%
GRUPO FIN BBV-PROBURSA B Financial Services 3,141 0.56%
EMPAQUES PONDEROSA Misc. Materials & Commodities 2,573 0.46%
CORPORACION GEO B Construction & Housing 2,493 0.45%
GRUPO FIN BANORTE A Banking 1,829 0.33%
BANACCI L Banking 1,442 0.26%
CYDSA Chemicals 1,236 0.22%
GRUPO FIN BANORTE B Banking 1,170 0.21%
CONSORCIO G GRUPO DINA Machinery & Engineering 950 0.17%
HERDEZ (GRUPO) B Food & Household Products 743 0.13%
A-19
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
APPENDIX A-12
MSCI NETHERLANDS INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
ROYAL DUTCH PETROLEUM CO Energy Sources 216,373 29.38%
ING GROEP Financial Services 103,618 14.07%
UNILEVER NV CERT Food & Household Products 85,554 11.62%
ABN AMRO HOLDING Banking 55,608 7.55%
PHILIPS ELECTRONICS Appliances & Household Durables 44,216 6.00%
AHOLD (KON.) Merchandising 36,001 4.89%
KPN (KON. PTT NEDERLAND Telecommunications 33,475 4.55%
HEINEKEN NV Beverages & Tobacco 29,336 3.98%
WOLTERS KLUWER Broadcasting & Publishing 25,220 3.42%
TNT POST GROEP Business & Public Services 24,614 3.34%
AKZO NOBEL Chemicals 23,410 3.18%
ELSEVIER Broadcasting & Publishing 19,490 2.65%
GETRONICS Business & Public Services 8,734 1.19%
ASR VERZEKERINGSGROEP Insurance 6,387 0.87%
OCE Data Processing & Reproduction 5,612 0.76%
KLM Transportation--Airlines 4,921 0.67%
BUHRMANN (KON. KNP BT) Forest Products & Paper 3,306 0.45%
IHC CALAND Construction & Housing 2,882 0.39%
HOOGOVENS (KON.) Metals--Steel 2,494 0.34%
PAKHOED (KON.) Energy Equipment & Services 1,727 0.23%
STORK (VER MACHINE.) Machinery & Engineering 1,716 0.23%
HOLLANDSCHE BETON GROEP Construction & Housing 1,012 0.14%
NEDLLOYD (KON.) Transportation--Road & Rail 701 0.10%
A-20
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
APPENDIX A-13
MSCI SINGAPORE INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
SINGAPORE TELECOM Telecommunications 17,369 28.96%
SINGAPORE AIRLINES Transportation--Airlines 6,962 11.61%
SINGAPORE PRESS HLDG Broadcasting & Publishing 5,440 9.07%
SINGAPORE TECH ENGR. Machinery & Engineering 4,445 7.41%
OCBC BANK Banking 4,289 7.15%
DEVELOPMENT BK SINGAPORE Banking 3,520 5.87%
UNITED OVERSEAS BANK Banking 3,138 5.23%
CITY DEVELOPMENTS Real Estate 2,510 4.19%
CREATIVE TECHNOLOGY Electronic Components, Instruments 1,602 2.67%
KEPPEL CORP Multi-Industry 1,169 1.95%
DBS LAND Real Estate 1,139 1.90%
VENTURE MANUFACTURING Electronic Components, Instruments 991 1.65%
SINGAPORE TECH IND'L Multi-Industry 974 1.62%
FRASER & NEAVE Beverages & Tobacco 916 1.53%
UIC UNITED INDUSTRIAL Real Estate 658 1.10%
PARKWAY HOLDINGS Business & Public Services 580 0.97%
SEMBAWANG CORP Machinery & Engineering 545 0.91%
CYCLE & CARRIAGE Automobiles 539 0.90%
NATSTEEL Metals--Steel 420 0.70%
UNITED OVERSEAS LAND Real Estate 411 0.69%
OVERSEAS UNION ENT. Leisure & Tourism 399 0.67%
NEPTUNE ORIENT LINES NOL Transportation--Shipping 303 0.51%
ROBINSON AND CO Merchandising 293 0.49%
SHANGRI-LA HOTEL Leisure & Tourism 276 0.46%
STRAITS TRADING Multi-Industry 268 0.45%
HAW PAR CORP Multi-Industry 236 0.39%
HOTEL PROPERTIES Leisure & Tourism 181 0.30%
COMFORT GROUP Transportation--Road & Rail 150 0.25%
INCHCAPE MOTORS Automobiles 131 0.22%
FIRST CAPITAL CORP Real Estate 129 0.22%
A-21
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
APPENDIX A-14
MSCI SPAIN INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
TELEFONICA Telecommunications 5,178,618 17.63%
BANCO BILBAO VIZCAYA Banking 3,350,107 11.40%
ENDESA Utilities--Electrical & Gas 3,222,964 10.97%
BANCO SANTANDER Banking 2,714,648 9.24%
IBERDROLA Utilities--Electrical & Gas 2,263,722 7.71%
REPSOL Energy Sources 2,081,220 7.08%
GAS NATURAL SDG Utilities--Electrical & Gas 1,576,383 5.37%
BANCO CENTRAL HISPANO Banking 1,557,156 5.30%
ARGENTARIA CORP BANCARIA Banking 1,418,077 4.83%
TABACALERA Beverages & Tobacco 659,618 2.25%
UNION ELECTRICA FENOSA Utilities--Electrical & Gas 614,833 2.09%
AUTOPISTAS CESA (ACESA) Business & Public Services 593,149 2.02%
FOMENTO CONST Y CONTR Construction & Housing 382,399 1.30%
AGUAS DE BARCELONA Business & Public Services 343,807 1.17%
TELEPIZZA Leisure & Tourism 282,276 0.96%
AZUCARERA EBRO AGRICOLAS Food & Household Products 281,521 0.96%
ZARDOYA OTIS Machinery & Engineering 271,442 0.92%
ALBA (CORP FINANCIERA) Multi-Industry 247,241 0.84%
DRAGADOS Y CONSTRUCCION Construction & Housing 215,562 0.73%
ACS ACTIV. CONST. Y SVCS Construction & Housing 214,289 0.73%
VALLEHERMOSO Real Estate 201,122 0.68%
MAPFRE (CORPORACION) Insurance 198,024 0.67%
METROVACESA Real Estate 192,412 0.66%
SOL MELIA Leisure & Tourism 177,825 0.61%
ACERINOX Metals--Steel 169,543 0.58%
CORTEFIEL Merchandising 133,557 0.45%
VISCOFAN Misc. Materials & Commodities 126,413 0.43%
PORTLAND VALDERRIVAS Building Material & Components 119,524 0.41%
PROSEGUR Business & Public Services 105,304 0.36%
URBIS (INMOBILIARIA) Real Estate 78,379 0.27%
PULEVA Food & Household Products 73,569 0.25%
URALITA Building Material & Components 72,588 0.25%
FAES Health & Personal Care 62,339 0.21%
ASTURIANA DE ZINC Metals--Non Ferrous 51,567 0.18%
AGUILA (EL) Beverages & Tobacco 45,876 0.16%
ENCE EMPR NAC CELULOSAS Forest Products & Paper 44,505 0.15%
SARRIO Forest Products & Paper 27,774 0.09%
ERCROS Chemicals 26,108 0.09%
A-22
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
APPENDIX A-15
MSCI SWEDEN INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
ERICSSON (LM) B Electrical & Electronics 362,465 23.76%
ASTRA A Health & Personal Care 177,851 11.66%
HENNES & MAURITZ B Merchandising 126,190 8.27%
FOERENINGSSPARBANKEN Banking 70,458 4.62%
SVENSKA HANDELSBK A Banking 68,187 4.47%
VOLVO B Automobiles 63,766 4.18%
ABB AB A Electrical & Electronics 57,293 3.76%
SKANDIA FORSAKRING Insurance 51,763 3.39%
SKAND.ENSKILDA BANKEN A Banking 50,136 3.29%
ELECTROLUX B Appliances & Household Durables 45,120 2.96%
ASTRA B Health & Personal Care 39,248 2.57%
SKANSKA B Construction & Housing 38,114 2.50%
SCA SV CELLULOSA B Forest Products & Paper 33,344 2.19%
NETCOM SYSTEMS B Telecommunications 32,288 2.12%
SANDVIK A Machinery & Engineering 31,710 2.08%
SECURITAS B Business & Public Services 29,756 1.95%
VOLVO A Automobiles 28,181 1.85%
STORA KOPPARBERG A Forest Products & Paper 24,598 1.61%
ABB AB B Electrical & Electronics 23,265 1.52%
ATLAS COPCO A Machinery & Engineering 21,887 1.43%
WM-DATA B Business & Public Services 21,736 1.42%
AGA A Chemicals 14,956 0.98%
AGA B Chemicals 12,751 0.84%
OM GRUPPEN Financial Services 11,859 0.78%
SANDVIK B Machinery & Engineering 11,590 0.76%
ATLAS COPCO B Machinery & Engineering 10,808 0.71%
SWEDISH MATCH Beverages & Tobacco 10,542 0.69%
TRELLEBORG B Multi-Industry 8,615 0.56%
SSAB SVENSKT STAL A Metals--Steel 7,653 0.50%
SKF B Industrial Components 7,328 0.48%
SVENSKA HANDELSBK B Banking 6,243 0.41%
STORA KOPPARBERG B Forest Products & Paper 5,641 0.37%
SKF A Industrial Components 5,564 0.36%
DILIGENTIA Real Estate 3,992 0.26%
GRAENGES Metals--Non Ferrous 3,591 0.24%
SSAB SVENSKT STAL B Metals--Steel 2,791 0.18%
ESSELTE A Business & Public Services 2,397 0.16%
ESSELTE B Business & Public Services 2,048 0.13%
A-23
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
APPENDIX A-16
MSCI SWITZERLAND INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
NOVARTIS NAMEN Health & Personal Care 153,270 20.35%
ROCHE HOLDING GENUSS Health & Personal Care 117,870 15.65%
NESTLE Food & Household Products 111,108 14.76%
UBS (NEW) Banking 95,801 12.72%
CREDIT SUISSE Banking 58,845 7.81%
SCHWEIZ RUECKVERS Insurance 46,467 6.17%
ROCHE HOLDING INHABER Health & Personal Care 39,548 5.25%
ZURICH ALLIED Insurance 38,710 5.14%
NOVARTIS INHABER Health & Personal Care 16,257 2.16%
ABB AG INHABER Electrical & Electronics 13,782 1.83%
ADECCO PORTEUR Business & Public Services 10,640 1.41%
ALUSUISSE-LONZA GROUP Multi-Industry 10,268 1.36%
HOLDERBANK INHABER Building Material & Components 8,003 1.06%
SAIRGROUP Transportation--Airlines 4,228 0.56%
SWATCH GROUP NOM (SMH) Recreation, Other Consumer Goods 3,251 0.43%
HOLDERBANK NAMEN Building Material & Components 3,240 0.43%
SWATCH GROUP PORT (SMH) Recreation, Other Consumer Goods 3,168 0.42%
SULZER Machinery & Engineering 2,844 0.38%
ABB AG NAMEN Electrical & Electronics 1,865 0.25%
VALORA HOLDING NAMEN Merchandising 1,673 0.22%
KUONI REISEN NAMEN B Leisure & Tourism 1,365 0.18%
FISCHER (GEORG) NAMEN Machinery & Engineering 1,344 0.18%
SCHINDLER NAMEN Machinery & Engineering 1,336 0.18%
SGS SURVEILLANCE PORT Business & Public Services 1,242 0.16%
SIKA FINANZ INHABER Chemicals 1,056 0.14%
SCHINDLER PART Machinery & Engineering 1,010 0.13%
DANZAS HOLDING Business & Public Services 998 0.13%
FORBO HOLDING Building Material & Components 885 0.12%
SGS SURVEILLANCE NOM Business & Public Services 816 0.11%
JELMOLI HOLDING INHABER Merchandising 807 0.11%
MOEVENPICK INHABER Leisure & Tourism 796 0.11%
JELMOLI HOLDING NAMEN Merchandising 516 0.07%
A-24
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
APPENDIX A-17
MSCI UNITED KINGDOM INDEX AS OF AUGUST 31, 1998
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
GLAXO WELLCOME Health & Personal Care 64,328 7.55%
BRITISH TELECOM Telecommunications 51,360 6.03%
BRITISH PETROLEUM Energy Sources 47,791 5.61%
SMITHKLINE BEECHAM Health & Personal Care 38,973 4.57%
LLOYDS TSB GROUP Banking 36,476 4.28%
VODAFONE GROUP Telecommunications 24,875 2.92%
ZENECA GROUP Health & Personal Care 21,858 2.57%
DIAGEO Beverages & Tobacco 21,233 2.49%
HSBC HOLDINGS (HKD 10) Banking 20,657 2.42%
HALIFAX Financial Services 19,376 2.27%
UNILEVER PLC Food & Household Products 17,958 2.11%
BARCLAYS Banking 17,087 2.01%
ABBEY NATIONAL Financial Services 16,621 1.95%
PRUDENTIAL CORP Insurance 15,960 1.87%
BG Utilities--Electrical & Gas 14,962 1.76%
MARKS & SPENCER Merchandising 13,758 1.61%
CABLE & WIRELESS Telecommunications 13,169 1.55%
GENERAL ELECTRIC PLC Electrical & Electronics 12,889 1.51%
CGU (COMMERCIAL UNION) Insurance 11,763 1.38%
TESCO Merchandising 11,346 1.33%
ALLIED ZURICH Insurance 10,737 1.26%
SAINSBURY (J) Merchandising 10,639 1.25%
HSBC HOLDINGS (GBP 0.75) Banking 10,241 1.20%
RENTOKIL INITIAL Business & Public Services 9,863 1.16%
BOOTS CO Merchandising 9,142 1.07%
CADBURY SCHWEPPES Beverages & Tobacco 9,001 1.06%
LEGAL & GENERAL GROUP Insurance 8,899 1.04%
BRITISH SKY BROADCASTING Broadcasting & Publishing 8,388 0.98%
RAILTRACK GROUP Business & Public Services 7,982 0.94%
GREAT UNIVERSAL STORES Merchandising 7,685 0.90%
ROYAL & SUN ALLIANCE INS Insurance 7,535 0.88%
GRANADA GROUP Leisure & Tourism 7,232 0.85%
KINGFISHER Merchandising 7,219 0.85%
BRITISH AEROSPACE Aerospace & Military Technology 7,154 0.84%
REUTERS GROUP Business & Public Services 7,020 0.82%
RIO TINTO PLC REG Metals--Non Ferrous 6,951 0.82%
SCOTTISH POWER Utilities--Electrical & Gas 6,927 0.81%
BRITISH AMERICAN TOBACCO Beverages & Tobacco 6,925 0.81%
ROYAL BANK OF SCOTLAND Banking 6,668 0.78%
PEARSON Broadcasting & Publishing 6,615 0.78%
NATIONAL POWER Utilities--Electrical & Gas 6,497 0.76%
BASS Leisure & Tourism 6,489 0.76%
NATIONAL GRID GROUP Utilities--Electrical & Gas 6,452 0.76%
BAA Business & Public Services 6,131 0.72%
REED INTERNATIONAL Broadcasting & Publishing 5,864 0.69%
LAND SECURITIES Real Estate 5,057 0.59%
SCOTTISH & NEWCASTLE Leisure & Tourism 4,970 0.58%
UNITED UTILITIES Business & Public Services 4,924 0.58%
GKN Machinery & Engineering 4,899 0.57%
CENTRICA Utilities--Electrical & Gas 4,842 0.57%
ASSOCIATED BRITISH FOODS Food & Household Products 4,829 0.57%
SIEBE Electronic Components, Instruments 4,544 0.53%
PEN & ORIENTAL STEAM Transportation--Shipping 4,220 0.50%
THAMES WATER Business & Public Services 4,175 0.49%
BRITISH AIRWAYS Transportation--Airlines 4,164 0.49%
COMPASS GROUP Business & Public Services 4,157 0.49%
BTR Multi-Industry 4,120 0.48%
IMPERIAL CHEMICAL ICI Chemicals 4,040 0.47%
BOC GROUP Chemicals 3,902 0.46%
A-25
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
SAFEWAY PLC Merchandising 3,494 0.41%
EMI GROUP Recreation, Other Consumer Goods 3,372 0.40%
SOUTHERN ELECTRIC Utilities--Electrical & Gas 3,086 0.36%
STAGECOACH HOLDINGS Transportation--Road & Rail 3,013 0.35%
BRITISH LAND CO Real Estate 3,003 0.35%
SCHRODERS Financial Services 2,998 0.35%
ROLLS-ROYCE Aerospace & Military Technology 2,996 0.35%
MISYS Business & Public Services 2,855 0.33%
LADBROKE GROUP Leisure & Tourism 2,853 0.33%
LUCASVARITY Industrial Components 2,808 0.33%
ANGLIAN WATER Business & Public Services 2,638 0.31%
CARLTON COMMUNICATIONS Leisure & Tourism 2,576 0.30%
WILLIAMS Business & Public Services 2,445 0.29%
SMITHS INDUSTRIES Machinery & Engineering 2,385 0.28%
PROVIDENT FINANCIAL Financial Services 2,323 0.27%
HANSON Building Material & Components 2,172 0.25%
BLUE CIRCLE INDUSTRIES Building Material & Components 2,125 0.25%
GUARDIAN ROYAL EXCHANGE Insurance 2,104 0.25%
TI GROUP Multi-Industry 2,065 0.24%
RMC GROUP Building Material & Components 2,060 0.24%
BRITISH STEEL Metals--Steel 2,054 0.24%
RANK GROUP Leisure & Tourism 1,977 0.23%
BURMAH CASTROL Energy Sources 1,943 0.23%
TATE & LYLE Food & Household Products 1,765 0.21%
MEPC Real Estate 1,643 0.19%
NEXT Merchandising 1,635 0.19%
LASMO Energy Sources 1,625 0.19%
WOLSELEY Building Material & Components 1,579 0.19%
ELECTROCOMPONENTS Electronic Components, Instruments 1,567 0.18%
BPB Building Material & Components 1,510 0.18%
HYDER Business & Public Services 1,495 0.18%
BBA GROUP Industrial Components 1,410 0.17%
SLOUGH ESTATES Real Estate 1,178 0.14%
SEDGWICK GROUP Insurance 1,170 0.14%
UNIGATE Food & Household Products 1,158 0.14%
HAMMERSON Real Estate 1,157 0.14%
ST JAMES'S PLACE CAPITAL Financial Services 1,151 0.14%
BUNZL Misc. Materials & Commodities 1,061 0.12%
UNITED BISCUITS Food & Household Products 1,039 0.12%
IMI Multi-Industry 1,038 0.12%
REXAM Misc. Materials & Commodities 1,032 0.12%
RACAL ELECTRONICS Electrical & Electronics 1,023 0.12%
OCEAN GROUP Business & Public Services 953 0.11%
ARJO WIGGINS APPLETON Forest Products & Paper 937 0.11%
THORN Appliances & Household Durables 920 0.11%
BOWTHORPE Electronic Components, Instruments 793 0.09%
COBHAM Aerospace & Military Technology 771 0.09%
GREAT PORTLAND ESTATES Real Estate 765 0.09%
TARMAC Building Material & Components 745 0.09%
JOHNSON MATTHEY Multi-Industry 738 0.09%
FKI Electrical & Electronics 733 0.09%
CARADON Building Material & Components 700 0.08%
JARVIS Construction & Housing 686 0.08%
PILKINGTON Misc. Materials & Commodities 675 0.08%
TAYLOR WOODROW Construction & Housing 644 0.08%
BERKELEY GROUP (THE) Construction & Housing 640 0.08%
LONRHO Gold Mines 520 0.06%
RUGBY GROUP Building Material & Components 517 0.06%
ENGLISH CHINA CLAYS Misc. Materials & Commodities 505 0.06%
LEX SERVICE Business & Public Services 487 0.06%
DE LA RUE Business & Public Services 459 0.05%
MEYER INTERNATIONAL Building Material & Components 435 0.05%
BARRATT DEVELOPMENTS Construction & Housing 406 0.05%
A-26
</TABLE>
<PAGE> 130
<TABLE>
<CAPTION>
INDEX MARKET WEIGHT IN
CAPITALIZATION MSCI INDEX
CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%)
---------------- --------------- ---------------- ---
<S> <C> <C> <C>
HEPWORTH Building Material & Components 381 0.04%
WIMPEY (GEORGE) Construction & Housing 375 0.04%
ELEMENTIS 98 Chemicals 371 0.04%
VICKERS Machinery & Engineering 347 0.04%
BICC Industrial Components 333 0.04%
AMEC Construction & Housing 313 0.04%
SEARS Merchandising 302 0.04%
MARLEY Building Material & Components 278 0.03%
COATS VIYELLA Textiles & Apparel 271 0.03%
LAIRD GROUP Machinery & Engineering 265 0.03%
WILSON (CONNOLLY) HLDGS Construction & Housing 233 0.03%
DELTA Industrial Components 201 0.02%
TRANSPORT DEVELOPMENT Transportation--Road & Rail 187 0.02%
COURTAULDS TEXTILES Textiles & Apparel 168 0.02%
A-27
</TABLE>
<PAGE> 131
TO BE UPDATED
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:
<TABLE>
<S> <C>
Labour Day(1) - October 6, 1998
Melbourne Cup Day(2) - November 4, 1998
Christmas Day - December 25, 1998
Boxing Day - December 26, 1998
New Year's Day - January 1, 1999
Australia Day - January 26, 1999
Labour Day(2) - March 9, 1999
Good Friday - April 10, 1999
Easter Monday - April 13, 1999
Queens Birthday - June 8, 1999
Bank Holiday(1) - August 3, 1999
Labour Day - October 5, 1999
Melbourne Cup Day - November 10, 1999
Christmas Day - December 25, 1999
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any
Australian holiday that would result in a settlement period that will exceed 7
calendar days in the fourth quarter of 1998 and calendar year 1999.
(1) NSW only.
(2) Victoria only.
<PAGE> 132
TO BE UPDATED
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:
<TABLE>
<S> <C>
Immaculate Conception - December 8, 1998
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day - December 26, 1998
New Year's Day - January 1, 1999
Epiphany - January 6, 1999
Good Friday(1) - 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 - June 11, 1999
National Holiday - October 26, 1999
Immaculate Conception - December 8, 1999
Christmas Eve - December 24, 1999
Christmas Day - December 25, 1999
New Year's Eve(1) - December 31, 1999
</TABLE>
REDEMPTION. A redemption request over the following Austrian holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ 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> 133
TO BE UPDATED
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:
<TABLE>
<S> <C>
Bank Holiday - November 3, 1998
Remembrance Day - November 11, 1998
Christmas Day - December 25, 1998
Bridging Day - December 26, 1998
New Years Eve(1) - December 31, 1998
New Years Day - January 1, 1999
Good Friday(1) - April 10, 1999
Easter Monday - April 13, 1999
Labour Day - May 1, 1999
Ascension Day - May 21, 1999
Bank Holiday - May 22, 1999
Whit Monday - June 1, 1999
National Day - July 21, 1999
Bank Holiday - August 17, 1999
Bank Holiday - November 2, 1999
Remembrance Day - November 11, 1999
Christmas Day(1) - December 25, 1999
New Years Eve - December 31, 1999
</TABLE>
REDEMPTION. A redemption request over the following Belgian holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ 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> 134
TO BE UPDATED
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:
<TABLE>
<S> <C>
Thanksgiving Day - October 13, 1998
Remembrance Day - November 11, 1998
Christmas Day - December 25, 1998
Boxing Day - December 26, 1998
New Year's Day - January 1, 1999
Good Friday - April 10, 1999
Victoria Day - May 18, 1999
St. Jean Baptiste(1) - June 24, 1999
Canada Day - July 1, 1999
Civic Holiday(2) - August 3, 1999
Labour Day - September 7, 1999
Thanksgiving Day - October 12, 1999
Remembrance Day(3) - November 11, 1999
Christmas Day - December 25, 1999
Observance of Boxing Day - December 28, 1999
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any
Canadian holiday that would result in a settlement period that will exceed 7
calendar days in the fourth quarter of 1998 and calendar year 1999.
(1) Montreal only.
(2) Except Quebec.
(3) Banks Only.
<PAGE> 135
TO BE UPDATED
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:
<TABLE>
<S> <C>
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 13, 1999
Labour Day - May 1, 1999
Armistice 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
Veteran's Day - November 11, 1999
Christmas Eve(1) - December 24, 1999
Christmas Day - December 25, 1999
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any
French holiday that would result in a settlement period that will exceed 7
calendar days in the fourth quarter of 1998 and calendar year 1999.
(1) Half day.
<PAGE> 136
TO BE UPDATED
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:
<TABLE>
<S> <C>
National Holiday - October 3, 1998
Reformation Day(1) - October 31, 1998
All Saints Day - November 1, 1998
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day - December 26, 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
Christmas Eve - December 24, 1999
Christmas Day - December 25, 1999
New Year's Eve - December 31, 1999
</TABLE>
REDEMPTION. A redemption request over the following German holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ 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> 137
TO BE UPDATED
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:
<TABLE>
<S> <C>
National Day - October 1, 1998
National Day - October 2, 1998
Chung Yeung Festival - October 10, 1998
Christmas Day - December 25, 1998
Christmas Holiday - December 26, 1998
1st Weekday in January - January 1, 1999
Lunar New Year's Day - January 28, 1999
Lunar New Year's Day - January 29, 1999
Lunar New Year's Day - January 30, 1999
Day Following Ching Ming Festival - April 6, 1999
Good Friday - April 10, 1999
Easter Monday - April 13, 1999
Tuen Ng Festival - May 30, 1999
SAR Establishment Day - July 1, 1999
Sino-Japanese War Victory Day - August 17, 1999
National Day - October 1, 1999
Day Following National Day - October 2, 1999
Day Following Mid-Autumn Festival - October 6, 1999
Chung Yeung Festival - October 28, 1999
Christmas Day - December 25, 1999
1st Weekday Following Christmas Day - December 28, 1999
</TABLE>
REDEMPTION. A redemption request over the following Hong Kong holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R + __ 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> 138
TO BE UPDATED
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:
<TABLE>
<S> <C>
Immaculate Conception - December 8, 1998
Christmas Eve(1) - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day - December 26, 1998
New Year's Day - January 1, 1999
Epiphany - January 6, 1999
Easter Monday - April 13, 1999
Labour Day - May 1, 1999
S. Ambrogio(2) - December 7, 1999
Immaculate Conception - December 8, 1999
Christmas Eve (1),(3) - December 24, 1999
Christmas Day - December 25, 1999
New Year's Eve(3) - December 31, 1999
</TABLE>
REDEMPTION. A redemption request over the following Italian holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ 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> 139
TO BE UPDATED
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:
<TABLE>
<S> <C>
Sports Day - October 10, 1998
Culture Day - November 3, 1998
Labour Thanksgiving Day Observed - November 24, 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 2, 1999
Adult's Day - January 15, 1999
Founding of the Nation - February 11, 1999
Vernal Equinox Day - March 20, 1999
Greenery Day - April 29, 1999
Constitution Day Observance - May 4, 1999
Children's Day - May 5, 1999
Marine Day - July 20, 1999
Respect of the Aged Day - September 15, 1999
Autumnal Equinox Day - September 23, 1999
Culture Day - November 3, 1999
Labor Thanksgiving Day - November 23, 1999
Emperor's Birthday - December 23, 1999
</TABLE>
REDEMPTION. A redemption request over the following Japanese holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ calendar
days would be the maximum number of calendar days necessary to satisfy a
redemption request made on the Japan WEBS Index Series.
<PAGE> 140
TO BE UPDATED
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:
<TABLE>
<S> <C>
Deepavali(1) - October 30, 1998
Christmas Day - December 25, 1998
New Year's Day - January 1, 1999
Chinese New Year - January 28, 1999
Chinese New Year - January 29, 1999
Hari Raya Puasa(1) - January 30, 1999
City Day Observance - February 2, 1999
Hari Raya Haji(1) - April 7, 1999
Maal Hijrah - April 28, 1999
Labour Day - May 1, 1999
Wesak Day Observance - May 11, 1999
Prophet Mohammed's Birthday - July 6, 1999
Independence Day(1) - August 31, 1999
Deepavali - October 19, 1999
Christmas Day - December 25, 1999
</TABLE>
REDEMPTION. A redemption request over the following Malaysian holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ calendar days
would be the maximum number of calendar days necessary to satisfy a redemption
request made on the Malaysia (Free) WEBS Index Series.
(1) Subject to change.
<PAGE> 141
TO BE UPDATED
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:
<TABLE>
<S> <C>
All Saint's 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 Wednesday(1) - April 8, 1999
Holy Thursday - April 9, 1999
Good Friday - April 10, 1999
Worker's Day - May 1, 1999
Puebla's Battle - May 5, 1999
State of the Union Address Day - September 1, 1999
Independence Day - September 16, 1999
All Saint's Day - November 2, 1999
Revolution Day - November 20, 1999
Christmas Eve(1) - December 24, 1999
Christmas Day - December 25, 1999
New Year's Eve - December 31, 1999
</TABLE>
REDEMPTION. A redemption request over the following Mexican holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ 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> 142
TO BE UPDATED
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:
<TABLE>
<S> <C>
Christmas Day - December 25, 1998
Boxing Day - December 26, 1998
Holiday - December 31, 1998
New Year's Day - January 1, 1999
Good Friday - April 10, 1999
Easter Monday - April 13, 1999
Queen's Birthday - April 30, 1999
Ascension Day - May 21, 1999
Whit Monday - June 1, 1999
Christmas Day - December 25, 1999
</TABLE>
REDEMPTION. A redemption request over the following Netherlands
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1998 and calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ calendar
days would be the maximum number of calendar days necessary to satisfy a
redemption request made on the Netherlands WEBS Index Series.
<PAGE> 143
TO BE UPDATED
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:
<TABLE>
<S> <C>
Deepavali - October 31, 1998
Christmas Day - December 25, 1998
New Year's Day - January 1, 1999
Chinese New Year - January 28, 1999
Chinese New Year - January 29, 1999
Hari Raya Puasa - January 30, 1999
Hari Raya Haji - April 7, 1999
Good Friday - April 10, 1999
Vesak Day Observance - May 11, 1999
National Day Observance - August 10, 1999
Deepavali(1) - October 19, 1999
Christmas Day - December 25, 1999
</TABLE>
REDEMPTION. A redemption request over the following Singaporean
holidays would result in a settlement period that will exceed 7 calendar days
(examples are based on the days particular holidays fall in the fourth quarter
of 1998 and calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+7 calendar days
would be the maximum number of calendar days necessary to satisfy a redemption
request made on the Singapore (Free) WEBS Index Series.
(1) Subject to change.
<PAGE> 144
TO BE UPDATED
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:
<TABLE>
<S> <C>
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 9, 1999
Good Friday - April 10, 1999
Labour Day - May 1, 1999
Independence Day(1),(2) - May 4, 1999
San Isidro - May 15, 1999
St. James' Day(2) - July 27, 1999
Assumption Day(2) - August 17, 1999
Immaculate Concepcion - December 8, 1999
Christmas Day - December 25, 1999
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any
Spanish holiday that would result in a settlement period that will exceed 7
calendar days in the fourth quarter of 1998 and calendar year 1999.
(1) Madrid only.
(2) Subject to change.
<PAGE> 145
TO BE UPDATED
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:
<TABLE>
<S> <C>
Christmas Eve - December 24, 1998
Christmas Day - December 25, 1998
Boxing Day - December 26, 1998
New Year's Eve - December 31, 1998
New Year's Day - January 1, 1999
Eve of Epiphany(1) - January 5, 1999
Epiphany - January 6, 1999
Good Friday - April 10, 1999
Easter Monday - April 13, 1999
Eve of Labour Day(1) - April 30, 1999
Labour Day - May 1, 1999
Eve of Ascension Day(1) - May 20, 1999
Ascension Day - May 21, 1999
Whit Monday - June 1, 1999
Midsummer Eve - June 19, 1999
Eve of All Saints' Day(1) - October 30, 1999
Christmas Eve - December 24, 1999
Christmas Day - December 25, 1999
New Year's Eve - December 31, 1999
</TABLE>
REDEMPTION. A redemption request over the following Swedish holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ 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> 146
TO BE UPDATED
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:
<TABLE>
<S> <C>
Christmas Eve(1) - December 24, 1998
Christmas Day - December 25, 1998
St. Stephen's Day - December 26, 1998
New Year's Day - January 1, 1999
Bank Holiday - January 2, 1999
Good Friday - April 10, 1999
Easter Monday - April 13, 1999
Sechselauten(2) - April 20, 1999
Labour Day - May 1, 1999
Ascension Day - May 21, 1999
Whit Monday - June 1, 1999
Knabenschiessen(2) - September 14
Christmas Day - December 25, 1999
</TABLE>
REDEMPTION. A redemption request over the following Swiss holidays
would result in a settlement period that will exceed 7 calendar days (examples
are based on the days particular holidays fall in the fourth quarter of 1998 and
calendar year 1999):
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE SETTLEMENT PERIOD
---- ------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
</TABLE>
In the fourth quarter of 1998 and calendar year 1999, R+__ 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> 147
TO BE UPDATED
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:
<TABLE>
<S> <C>
Christmas Day - December 25, 1998
Boxing day - December 26, 1998
New Year's Day - January 1, 1999
Good Friday - April 10, 1999
Easter Monday - April 13, 1999
May Day - May 4, 1999
Spring Bank Holiday - May 25, 1999
August Bank Holiday - August 31, 1999
Christmas Day - December 25, 1999
Boxing Day Observance - December 28, 1999
</TABLE>
REDEMPTION. The Fund is not aware of a redemption request over any
United Kingdom holiday that would result in a settlement period that will exceed
7 calendar days in the fourth quarter of 1998 and calendar year 1999.
<PAGE> 148
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> 149
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> 150
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> 151
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> 152
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:
- WEBS give investors broad market exposure for a specific
country, in one trade.
- WEBS give investors a way to gain exposure
internationally yet trade locally, on the AMEX.
- WEBS' index investing approach frees investors from the
process of stock selection and the many complexities
associated with direct foreign stock ownership.
- WEBS trade and settle in U.S. Dollars three business days
after the trade date.
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> 153
STRUCTURE
Q Who issues WEBS?
A WEBS Index Fund, Inc., an investment company registered
under the Investment Company Act of 1940, as amended, and
organized as a series fund.
Q Who owns the Fund?
A Investors in WEBS become equity shareholders in the Fund.
Q Who manages the investment portfolios of the WEBS Index
Series?
A Barclays Global Fund Advisors is responsible for the
investment management of each WEBS Index Series. Their
responsibilities include portfolio construction,
monitoring and rebalancing designed to help track the
performance of the relevant MSCI Index for each WEBS
Index Series.
Q Where are these portfolio securities held?
A Morgan Stanley Trust Company is the global custodian and
lending agent for the portfolio securities and cash of
each of the WEBS Index Series. Portfolio securities will
be held in the various foreign countries, through the
Custodian's network of local sub-custodians.
PRICING
Q How is Net Asset Value (NAV) determined?
A Net Asset Value (NAV) per WEBS for each WEBS Index Series
is computed by dividing the value of the net assets of
such WEBS Index Series by the total number of WEBS of
such Index Series outstanding, rounded to the nearest
cent. Expenses and fees, including the management,
administration and distribution fees, are accrued daily
and taken into account for purposes of determining NAV.
The NAV for each WEBS Index Series is determined as of
the close of the regular trading session on the New York
Stock Exchange, Inc. (NYSE), ordinarily 4:00 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> 154
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> 155
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> 156
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> 157
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> 158
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
- To buy WEBS shares on the AMEX, contact your broker.
<PAGE> 159
- To create WEBS Creation Units, contact an Authorized
Participant. The names of the current Authorized
Participants are available from the Distributor at
1-800-810-WEBS.
- To redeem WEBS Creation Units, contact Funds Distributor,
Inc. at the above toll-free number.
- To get current WEBS prices, consult your broker, or any
service that carries current trading information for
AMEX-listed securities.
- For information concerning requirements for purchasing or
redeeming Creation Unit aggregations of WEBS, call
1-800-810-WEBS.
Funds Distributor, Inc., Distributor
For more information on WEBS, including a prospectus
which details charges and expenses, please call
1-800-810-WEBS. Please read the prospectus carefully
before you invest.
The investment returns and principal value of a WEBS
investment will fluctuate, so that an investor's shares
when sold, or Creation Unit(s) when redeemed, will be
worth more or less than their original cost.
There are special risks of international investing,
including currency and political risks.
<PAGE> 160
World
Equity
Benchmark
Shares.
WORLD EQUITY BENCHMARK SHARES
What are WEBS?
- - WEBS are 17 country-specific series of securities that are listed and traded
on the American Stock Exchange (AMEX).
- - Each WEBS Index Series represents an investment in an optimized portfolio of
ordinary foreign shares that seeks to provide investment results that track
the price and yield performance of a specific Morgan Stanley Capital
International (MSCI) country index.
A simple trade.
A sophisticated
investment.
WEBS are not: WEBS do not:
- - Closed-end mutual funds. - Use leverage to increase their net assets.
- - ADRs or UITs. - Attempt to outperform an international market
- - Derivatives. through stock selection.
What is the purpose of WEBS?
- - WEBS are designed to give US investors exposure to specific international
equity markets through a diversified portfolio of stocks for each foreign
country selected.
- - These sophisticated investments are purchased through a simple stock trade
and are free from the complexities, but not the risks, of foreign investing.
INVESTMENT
HIGHLIGHTS
WEBS series issued for 17 countries:
<TABLE>
<CAPTION>
Country AMEX Symbol IOPV
-----------------------------------------------
<S> <C> <C>
Australia EWA WBJ
Austria EWO INY
Belgium EWK INK
Canada EWC WPB
France EWQ WBF
Germany EWG WDG
Hong Kong EWH INH
Italy EWI INE
Japan EWJ INJ
Malaysia (Free) EWM INM
Mexico (Free) EWW INW
Netherlands EWN INN
Singapore (Free) EWS INR
Spain EWP INP
Sweden EWD WBQ
Switzerland EWL INL
United Kingdom EWU INU
</TABLE>
*Indicative Optimized Portfolio Values* (IOPV's) are calculated using real-time
prices and FX rates and are updated every 15 seconds by BLOOMBERG(R). See the
Statement of Additional Information of WEBS Index Fund, Inc. for more
information on IOPV.
In Malaysia, Mexico and Singapore certain stocks have restrictions on foreign
ownership. MSCI created (Free) indexes in those countries which only include
stocks in which foreigners may invest.
Fund adviser:
- - Barclays Global Fund Advisors, one of the world's largest institutional
index money managers, will construct an optimized portfolio of foreign
ordinary shares that seeks to perform like those of a specific MSCI Index.
WEBS benefits:
- - WEBS provide investors immediate access to international markets.
- - At $5-$22 per share, it is a relatively low cost, simplified approach to
foreign investing.*
- - WEBS seek to produce investment results that correspond generally to the
price and yield performance of a particular MSCI Index.
- - Each WEBS Index Series holds a diversified portfolio of foreign stocks of a
country that is selected and monitored by a globally recognized
institutional money manager.
- - Pricing is anticipated to be near NAV, due to WEBS' unique structure.
- - Daily liquidity on the AMEX in US dollars.
- - Increase potential to enhance returns and reduce portfolio risk through
international diversification.
[WEBS LOGO](TM)
- ------------------------------------------------------------------------------
*As of year-end 12/31/97 the WEBS Index Series had maintained a price range of
$5-$22 per share. There is no guarantee that prices will remain within this
range.
<PAGE> 161
- ------------------------------------------------------------------------------
Creation Units:
- - They are large aggregations of a specified number of WEBS shares that are
created and redeemed through an "Authorized Participant" (Broker/Dealer).
- - Each Creation Unit is backed by an in-kind deposit of a portfolio of foreign
shares selected by the Adviser for each country offered, plus a specified
amount of cash.
- - The process of creating or redeeming shares in Creation Units at their net
asset value should enable WEBS to trade close to their NAV.
- - The Fund will not redeem or create WEBS in amounts less than Creation Units.
However, WEBS may be bought and sold on the AMEX in any amount.
For more information call
1 800 810-WEBS
VISIT OUR INTERNET SITE
for information and daily
prices and valuations
http://websontheweb.com
Investment risks:
- - There may be premiums/discounts to NAV from time to time, but large
variances are not expected to be sustained due to the Creation/Redemption
process.
- - WEBS are subject to foreign currency risk since they do not hedge
currencies.
- - Investment returns in international markets may be more volatile than that
of the US market. WEBS involve normal foreign investment risks, such as
market fluctuations, due to changes in the economic and political
developments in the countries with which they are associated.
Real-time IOPVs available on
THE BLOOMBERG(R)
WEBS<GO>
WEBS
c/o Funds Distributor Inc.
60 State Street
Suite 1300
Boston, MA 02109
The investment return and
principal value of a WEBS
investment will fluctuate
so that an investor's shares
when sold, or Creation Unit(s)
when redeemed, may be worth
more or less than their original
cost. There are special risks of
international investing, including
currency and political risks.
Please call your financial advisor
or 1 800 810-WEBS to obtain
more complete information
about WEBS, including a
prospectus which details charges
and expenses. Please read the
prospectus carefully before
you invest or send money.
WEBS features:
- - All 17 WEBS are traded in US dollars on the AMEX and settle T+3.
- - WEBS are marginable.
- - Can be sold short, even on a downtick.
- - WEBS are fully invested in stocks--generally, at least 95%.
- - Anticipated low portfolio turnover, since WEBS are "passively" managed.
- - WEBS are tax efficient; capital gains should be modest and are due mostly to
corporate actions and rebalancing.
- - Dividends and capital gains, if any, distributed in US dollars, at least
annually.
- - NAV daily at 4:00 pm NY time based on local market closing prices. Exchange
rates at 4:00 pm London time. Except Mexican WEBS, FX rate 3:00 pm NY time.
- - Real-time IOPV updated every 15 seconds by BLOOMBERG(R) and available on all
quote systems.
WEBS possible applications:
- - Alternative or complement to traditional closed-end and open-end funds.
- - Use as a country overweighting investment strategy.
- - Obtain index exposure to a single country or a specific region.
- - Use as a hedge.
- - Combine WEBS to create a customized portfolio of multiple or regional
international markets.
- - Replicate MSCI EAFE Index through the purchase of a portfolio of WEBS.
- - Gain access to the foreign countries that do not have country specific funds
available in the United States.
- - Use as the international component in an asset allocation account.
Distributed by:
Funds Distributor Inc.
- ------------------------------------------------------------------------------
<PAGE> 162
- -------------------------------------------------------------------------------
[WEBS LOGO](TM)
Average Annual Performance of MSCI Indices and the S&P 500 - periods ending
6/30/98
In US Dollars - (Reinvestment of Net Dividends, except for Mexico (Free) and S&P
500.)*
World
Equity
Benchmark
Shares
<TABLE>
<CAPTION>
Total Cumulative Return
$10,000 Investment
YTD 1 yr 3 yr 5 yr 10 yr 6/30/88-6/30/98
--- ---- ---- ---- ----- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Australia 1.23 -14.64 5.87 9.83 6.44 $18,664
Austria 23.86 29.29 5.01 7.75 11.71 $30,270
Belgium 43.31 46.06 25.62 22.56 15.44 $42,020
Canada 9.13 10.36 18.52 14.01 8.51 $22,620
France 38.70 42.23 23.93 18.64 15.64 $42,749
Germany 36.49 45.64 26.00 24.62 17.46 $49,975
Hong Kong -26.15 -48.39 -6.47 1.81 13.51 $35,506
Italy 33.17 62.21 27.79 19.00 10.03 $25,997
Japan -2.61 -31.84 -11.64 -7.40 -4.35 $6,413
Malaysia (Free)* -29.66 -74.64 -35.65 -16.04 -1.43 $8,655
Mexico (Free)* -22.23 -8.42 13.44 1.32 24.77 $91,462
Netherlands 22.82 26.66 28.89 27.03 20.64 $65,318
Singapore (Free)* -33.81 -57.77 -24.86 -6.23 4.79 $15,973
Spain 43.90 49.49 42.05 29.26 13.02 $34,004
Sweden 29.07 27.18 31.85 30.80 18.23 $53,374
Switzerland 20.49 32.34 27.78 27.40 21.33 $69,129
United Kingdom 15.70 29.89 25.59 20.61 15.62 $42,686
- ------------------------------------------------------------------------------------------------------------
EAFE 15.93 6.10 10.69 10.03 6.79 $19,284
- ------------------------------------------------------------------------------------------------------------
EAFE EX Japan 22.14 24.84 22.07 20.25 15.22 $41,280
- ------------------------------------------------------------------------------------------------------------
Europe 26.49 37.06 26.89 22.97 16.38 $45,563
- ------------------------------------------------------------------------------------------------------------
S&P 500 17.72 30.17 30.23 23.06 18.54 $54,787
</TABLE>
MSCI: Morgan Stanley Capital International
EAFE: Europe, Australasia and Far East.
(1) 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%).
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.
Source: Lipper Analytical Services, Morgan Stanley Capital International and
Standard and Poor's Corporation
Please read the prospectus carefully before you invest.
<PAGE> 163
<TABLE>
Annual Market Performance and Ranking for 17 MSCI Indices and S&P 500-periods ending 12/31
In US Dollars - (Reinvestments of Net Dividends, except for Mexico (Free) and S&P 500.)
[LOGO]
World
Equity
Benchmark
Shares
Ranking 1997 1996 1995 1994 1993
- ------- ---------------------- --------------------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Mexico(Free) 53.92% Spain 40.05% Switzerland 44.12% Japan 21.44% Hong Kong 116.70%
2. Switzerland 44.25% Sweden 37.21% S&P 500 37.58% Sweden 18.34% Malaysia (Free) 110.00%
3. Italy 35.48% Hong Kong 33.08% Sweden 33.36% Netherlands 11.70% Singapore (Free) 73.41%
4. S&P 500 33.36% Canada 28.54% Spain 29.83% Italy 11.56% Mexico (Free) 49.35%
5. Spain 25.41% Netherlands 27.71% Netherlands 27.71% Belgium 8.24% Switzerland 45.79%
6. Germany 24.57% United Kingdom 27.42% Belgium 25.88% Singapore(Free) 5.81% Sweden 36.99%
7. Netherlands 23.77% Malaysia(Free) 25.89% Hong Kong 22.57% Australia 5.40% Germany 35.64%
8. United Kingdom 22.62% S&P 500 22.96% United Kingdom 21.27% Germany 4.66% Netherlands 35.28%
9. Belgium 13.55% France 21.20% Canada 18.31% Switzerland 3.54% Australia 35.17%
10. Sweden 12.92% Mexico(Free) 18.70% Germany 16.41% S&P 500 1.32% Spain 29.78%
11. Canada 12.80% Australia 16.49% France 14.12% United Kingdom -1.63% Italy 28.53%
12. France 11.94% Germany 13.58% Singapore(Free) 12.19% Canada -3.04% Austria 28.09%
13. Austria 1.57% Italy 12.59% Australia 11.19% Spain -4.80% Japan 25.48%
14. Australia -10.44% Belgium 12.03% Malaysia(Free) 5.16% France -5.18% United Kingdom 24.44%
15. Hong Kong -23.29% Austria 4.51% Italy 1.05% Austria -6.28% Belgium 23.51%
16. Japan -23.67% Switzerland 2.28% Japan 0.69% Malaysia(Free) -19.94% France 20.91%
17. Singapore(Free) -40.46% Singapore(Free) 0.33% Austria -4.72% Hong Kong -28.90% Canada 17.58%
18. Malaysia(Free) -68.11% Japan -15.50% Mexico(Free) -20.37% Mexico(Free) -40.55% S&P 500 10.08%
Ranking 1992 1991
- ------- ---------------------- ----------------------
<S> <C> <C>
1. Hong Kong 32.29% Mexico(Free) 126.04%
2. Mexico(Free) 24.98% Hong Kong 49.52%
3. Malaysia(Free) 17.76% Singapore(Free) 43.61%
4. Switzerland 17.23% Australia 33.64%
5. S&P 500 7.62% S&P 500 30.47%
6. Singapore(Free) 4.49% France 17.83%
7. France 2.81% Netherlands 17.80%
8. Netherlands 2.30% United Kingdom 16.02%
9. Belgium -1.47% Switzerland 15.77%
10. United Kingdom -3.65% Spain 15.63%
11. Germany -10.27% Sweden 14.42%
12. Austria -10.65% Belgium 13.77%
13. Australia -10.82% Canada 11.08%
14. Canada -12.15% Japan 8.92%
15. Sweden -14.41% Germany 8.16%
16. Japan -21.45% Malaysia(Free) 4.95%
17. Spain -21.87% Italy -1.82%
18. Italy -22.22% Austria -12.23%
MCSI: Morgan Stanley Capital International
*Assumes reinvestment of net dividends except for the Mexico (Free) and the S&P 500 Indices. Net dividends means dividends after
reduction for taxes withheld at source. The Mexico (Free) and S&P 500 Indices reflect gross dividends since Mexican and U.S.
companies do not withhold tax from U.S. investors. U.S. Market represented by the S&P 500 Index. The dividend withholding rate used
by MSCI is that relevant for residents of Luxembourg, and such rate is higher than the rate applicable to U.S. residents in the case
of the following WEBS Index Series: Australia (30% vs. 15%), Austria (15% vs. 11%) and Germany (15% vs. 10%).
Past performance is no guarantee of future results, nor do index results represent any past or expected future performance of WEBS.
It is not possible to invest in an index. Indices are unmanaged, and do not bear expenses, unlike WEBS. Foreign markets may be
volatile and performance is subject to market fluctuations, political risks and currency risks.
Annual total return in U.S. $ for each country index is based on the change for the period of 1/1 through 12/31 in the market and
currency value of the individual stocks comprising each index, assuming reinvestment of any dividends. On June 2, 1997 the Malaysia
WEBS Index Series commenced using the MSCI Malaysia (Free) Index as its benchmark index.
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, Please read the prospectus carefully before you invest.
Morgan Stanley Capital International, 07/98
and Standard and Poor's Corporation
MSCIFACT
</TABLE>
<PAGE> 164
<TABLE>
MSCI Indices vs. S&P 500 -- periods ending 6/30/98
[LOGO] In US Dollars -- (Reinvestment of Net Dividends except for Mexico (Free) and the S&P 500)*
World
Equity
Benchmark
Shares
<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
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 carefully before you invest.
and Standard and Poor's Corporation.
</TABLE>
<PAGE> 165
<TABLE>
MSCI Indices and S&P 500 Total Cumulative Return -- $10,000 Investment
[LOGO] for the ten years ended 6/30/98
In US Dollars (Reinvestment of Net Dividends except for Mexico (Free) and the
S&P 500)*
World
Equity
Benchmark
Shares
<CAPTION>
Average Total
Annual Cumulative
Return Return
------- ----------
<S> <C> <C>
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 carefully before you invest.
and Standard and Poor's Corporation.
MSCI/SP500
</TABLE>
<PAGE> 166
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A: None.
Included in Part B: None.
<TABLE>
<CAPTION>
(b) Exhibits:
<S> <C>
(1) -- Articles of Amendment and Restatement of the Fund are incorporated herein by reference to
Pre-Effective Amendment No. 2 as filed with the SEC on March 1, 1996 ("Pre-Effective
Amendment No.2").
(1) (A) -- Articles of Amendment to the Charter of WEBS Index Fund, Inc. are incorporated herein by
reference to Post-Effective Amendment No. 2 as filed with the SEC on December 27, 1996 ("PEA
No.2").
(2) -- Amended Bylaws of the Fund are incorporated herein by reference to Pre-Effective Amendment
No. 2.
(2) (A) -- Amendment No. 1 to the Amended Bylaws of the Fund is incorporated by reference to
Post-Effective Amendment No. 8 as filed with the SEC on August 21, 1997 ("PEA No. 8").
(3) -- Not applicable.
(4) -- Form of global certificate evidencing shares of the Common Stock, $.001 par value, of each
Index Series of the Fund is incorporated by reference to Pre-Effective Amendment No. 2.
(5) -- Investment Management Agreement between the Fund and Barclays Global Fund Advisors is
incorporated by reference to Post-Effective Amendment No. 1 as filed with the SEC on October
30, 1996 ("PEA No. 1").
(6) -- Distribution Agreement between the Fund and Funds Distributor, Inc. is incorporated by
reference to PEA No. 1.
(6) (A) -- Amendment of Distribution Agreement between the Fund and Funds Distributor, Inc. is
incorporated by reference to PEA No. 8.
(6) (B) -- Form of Authorized Participant Agreement is incorporated by reference to PEA No. 1.
(6) (B) (1) -- Authorized Participant Agreement for Merrill Lynch is incorporated by reference to PEA No. 1.
(6) (C) -- Form of Sales and Investor Services Agreement is incorporated by reference to Post-Effective
Amendment No. 10 as filed with the SEC on October 29, 1997 ("PEA No. 10").
(6) (C) (1) -- Second Form of Sales and Investor Services Agreement is incorporated by reference to PEA No.
10.
(7) -- Not applicable.
(8) -- Custodian Agreement between the Fund and Morgan Stanley Trust Company dated as of March 5,
1996 is incorporated by reference to PEA No. 1.
(8) (A) -- Amendment of Custodian Agreement between the Fund and Morgan Stanley Trust Company is
incorporated by reference to PEA No. 8.
(8) (B) -- Lending Agreement dated as of March 5, 1996 between Morgan Stanley Trust Company and the
Fund is incorporated by reference to PEA No. 1.
(9) -- Amended Administration and Accounting Services Agreement between the Fund and PFPC Inc. is
incorporated by reference to PEA No. 10.
(9) (A) -- Transfer Agency Services Agreement between the Fund and PNC Bank, National Association is
incorporated by reference to PEA No. 1.
(9) (B) -- Amendment of Transfer Agency Services Agreement between the Fund and PNC Bank, National
Association is incorporated by reference to PEA No. 8.
(9) (C) -- License Agreement between the Fund and Morgan Stanley Capital International is incorporated
by reference to Pre-Effective Amendment No. 2.
</TABLE>
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<TABLE>
<S> <C>
(9) (D) -- Amendment of License Agreement between the Fund and Morgan Stanley Capital International is
incorporated by reference to PEA No 8.
(9) (E) (1) -- Sub-Administration Agreement between the Fund, PFPC Inc. and Morgan Stanley Trust Company is
incorporated by reference to PEA No. 10.
(9) (E) (2)* -- Assignment Letter among Morgan Stanley Trust Company, Morgan Stanley & Co. Incorporated and
PFPC Inc.
(10) -- Not applicable.
(11)* -- Opinion and consent of Ernst & Young, LLP.
(13) -- Subscription Agreement(s) between the Fund and Funds Distributor, Inc. with respect to the
Fund's initial capitalization in incorporated by reference to Pre-Effective Amendment No. 3
as filed with the SEC on March 6, 1996.
(13)(A) -- Letter of Representations among the Depository Trust Company, the Fund and Morgan Stanley
Trust Company is incorporated by reference to Pre-Effective Amendment No. 2.
(14) -- Not applicable.
(15) -- Form of 12b-1 Plan is incorporated by reference to Pre-Effective Amendment No. 2
(16) -- Schedule of Performance Computations is incorporated by reference to PEA No. 8
(17)* -- Financial Data Schedules.
</TABLE>
- -------------------------
* To be Filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of September 15, 1998, The Depository Trust Company was the record
holder of each of the initial seventeen WEBS Index Series of the Fund.
ITEM 27. INDEMNIFICATION
Incorporated by reference to PEA No. 7.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "Management of the Fund" in the Statement of Additional
Information. Information as to the directors and officers of the Adviser is
included in its form ADV filed with the Commission and is incorporated herein by
reference thereto.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Funds Distributor Inc. is the Fund's principal underwriter. Funds
Distributor Inc. also acts as a principal underwriter, depositor, or investment
adviser for the following other investment companies:
BJB Investment Funds
Barrage Funds
The Brandon Funds
Fremont Mutual Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc., d/b/a Harris Insight Funds
The JPM Advisor Funds
The JPM Institutional Funds
The JPM Pierpont Funds
The JPM Series Trust
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<PAGE> 168
The JPM Series Trust II
LKCM Fund
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
Orbitex Group of Funds
The Panagora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
The Skyline Funds
St. Clair Funds, Inc.
Waterhouse Investors Cash Management Fund, Inc.
(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
<TABLE>
<S> <C>
Director, President and Chief Executive - Marie E. Connolly
Officer
Executive Vice President - Richard W. Ingram
Executive Vice President - Donald R. Roberson
Senior Vice President - Michael S. Petrucelli
Director, Senior Vice President, Treasurer - Joseph F. Tower, III
and Chief Financial Officer
Senior Vice President - Paula R. David
Senior Vice President - Bernard A. Whalen
Director - William J. Nutt
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder will be maintained at the
offices of PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
The Fund hereby undertakes to call a meeting of the shareholders for
the purpose of voting upon the question of removal of any Director when
requested in writing to do so by the holders of at least 10% of the Fund's
outstanding shares of common stock and, in connection with such meeting to
comply with the provisions of Section 16(c) of the 1940 Act relating to
shareholder communications.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Fund pursuant to the foregoing provisions, or otherwise, the Fund
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Fund of expenses
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<PAGE> 169
incurred or paid by a director, officer or controlling person of the Fund in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Fund will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE> 170
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post- Effective
Amendment No. 11 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, and State of
New York, on the 25th day of September, 1998.
WEBS INDEX FUND, INC.
By: /S/ Nathan Most*
-----------------------------
Nathan Most
President
Pursuant to the requirements of the Securities Act of 1933, this Post- Effective
Amendment No. 11 to the Registration Statement has been signed below by the
following persons, in the capacities indicated, on the 25th day of September,
1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/S/ Nathan Most* President and Director
- --------------------------
(Nathan Most)
/S/ John B. Carroll* Director
- --------------------------
(John B. Carroll)
/S/ Timothy A. Hultquist* Director
- --------------------------
(Timothy A. Hultquist)
/S/ Lloyd N. Morrisett* Director
- --------------------------
(Lloyd N. Morrisett)
/S/ W. Allen Reed* Director
- --------------------------
(W. Allen Reed)
Treasurer (principal financial and
/S/Stephen M. Wynne accounting officer)
- --------------------------
(Stephen M. Wynne)
*By: /S/ Gary M.Gardner Attorney-In-Fact
- --------------------------
(Gary M. Gardner)
</TABLE>
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