SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant __
Check the appropriate box:
X Preliminary Proxy Statement __ Confidential, for
Use of the Commission Only
(as permitted by Rule
14a-6(e)(2))
__ Definitive Proxy Statement
__ Definitive Additional Materials
__ Soliciting Material Under Rule 14a-12
WEBS INDEX FUND, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
__ Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
__ Fee paid previously with preliminary materials.
__ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
WEBS INDEX FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
March 23, 2000
To the Shareholders of WEBS Index Fund, Inc.:
A special meeting of the shareholders of WEBS Index Fund,
Inc. (the "Fund") will be held on May 5, 2000 at
10:00 a.m. (Eastern Time) in the offices of the Fund's
administrator and transfer agent, PFPC Inc., at 400 Bellevue
Parkway, Wilmington, Delaware 19809, for the following
purposes:
(1) To approve amendments to the Fund's Advisory Agreement,
dated as of March 15, 1996 (as amended October 19,
1999) between the Fund and Barclays Global Fund
Advisors to revise the fee arrangements and to make
certain other changes (all Fund shareholders);
(2) To approve a change of the Canada WEBS Index Series'
subclassification from diversified to non-diversified
(holders of shares of the Canada WEBS Index Series
only);
(3) To approve a change of the Japan WEBS Index Series'
subclassification from diversified to non-diversified
(holders of the Japan WEBS Index Series only);
(4) To approve a change of the United Kingdom WEBS Index
Series' subclassification from diversified to non-
diversified (holders of the United Kingdom WEBS Index
Series only); and
(5) To transact such other business as may properly come
before the special meeting or any adjournment thereof
(all Fund shareholders).
These proposals are discussed in the Proxy Statement
attached to this Notice. Each shareholder is invited to
attend the special meeting in person. Shareholders of record
at the close of business on March 6, 2000 have the right to
vote at the special meeting. IF YOU CANNOT BE PRESENT AT
THE SPECIAL MEETING, WE URGE YOU TO FILL IN, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY SO THAT THE SPECIAL
MEETING MAY BE HELD AND A MAXIMUM NUMBER OF SHARES MAY BE
VOTED. UNDER THE FUND'S BY LAWS, HOLDERS OF AT LEAST 50% OF
THE OUTSTANDING SHARES OF EACH WEBS INDEX SERIES ARE
REQUIRED TO BE PRESENT IN PERSON OR BY PROXY IN ORDER TO
HAVE A QUORUM FOR SUCH WEBS INDEX SERIES AT THE SPECIAL
MEETING.
TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION,
PLEASE MAIL YOUR PROXY PROMPTLY NO MATTER HOW MANY SHARES
YOU OWN.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
IN FAVOR OF PROPOSAL NO. 1 AND THAT THE SHAREHOLDERS OF THE
CANADA, JAPAN AND UNITED KINGDOM WEBS INDEX SERIES VOTE IN
FAVOR OF PROPOSALS NO. 2, 3 AND 4, RESPECTIVELY.
By Order of the Board of Directors,
R. Sheldon Johnson
Secretary
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND
RETURN YOUR PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
WEBS INDEX FUND, INC.
c/o PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(800) 810-WEBS (9327)
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of WEBS Index
Fund, Inc. (the "Fund") for use at the Fund's special meeting
of shareholders to be held in the offices of the Fund's
administrator and fund accounting agent, PFPC Inc., at
400 Bellevue Parkway, Wilmington, Delaware 19809, on May 5,
2000 at 10:00 a.m. (Eastern Time). The special meeting and any
adjournment thereof are collectively referred to in this Proxy
Statement as the "Meeting". The shares of each WEBS Index
Series are referred to in this Proxy Statement as "Shares".
It is expected that the solicitation of proxies will be primarily
by mail. The Fund's officers and service contractors may also
solicit proxies by telephone, telegraph, facsimile, e-mail or
personal interview. The Fund will bear all proxy solicitation
costs. Any shareholder giving a proxy may revoke it at any time
before it is exercised by submitting to the Fund a written notice
of revocation or a subsequently executed proxy or by attending
the Meeting and electing to vote in person. This Proxy Statement
and the enclosed form of proxy (the "Proxy") are expected to be
distributed to shareholders of each WEBS Index Series on or about
March 23, 2000.
A Proxy is enclosed with respect to your Shares. The Proxy
should be completed in full with respect to the matters affecting
your Shares. Each Share is entitled to one vote.
If your Proxy is executed properly and returned the Shares
represented by it will be voted at the Meeting in accordance with
your instructions on the Proxy. If you do not expect to be
present at the Meeting and wish your Shares to be voted, please
date and sign the enclosed Proxy and mail it in the enclosed
reply envelope.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS MOST RECENT
ANNUAL REPORT TO SHAREHOLDERS TO ANY SHAREHOLDER UPON REQUEST.
THE FUND'S ANNUAL REPORT TO SHAREHOLDERS MAY BE OBTAINED FROM THE
FUND BY SENDING A WRITTEN REQUEST TO THE FUND AT THE ADDRESS
PROVIDED ABOVE, OR BY CALLING (800) 810-WEBS (9327).
PROPOSALS TO BE VOTED ON
Proposal Voting
Shareholders
1. Approval of Amendments to the
Fund's Advisory Agreement Each WEBS Index Series
2. Approval of Change of Canada WEBS
Index Series' Subclassification Canada WEBS Index Series
3. Approval of Change of Japan WEBS
Index Series' Subclassification Japan WEBS Index Series
4. Approval of Change of United Kingdom
WEBS Index Series' Subclassification United Kingdom WEBS
Index Series
PROPOSAL 1: APPROVAL OF AMENDMENTS TO THE FUND'S ADVISORY
AGREEMENT
(Each WEBS Index Series Voting Separately)
At a January 28, 2000 Special Meeting of the Board of Directors
of the Fund, the Board considered and approved, and recommended
to shareholders for their approval, amendments to the Advisory
Agreement, dated as of March 15, 1996, as amended October 19,
1999 (the "Current Advisory Agreement"), between the Fund and
Barclays Global Fund Advisors (the "Adviser"). The amendments
provide for a revised investment advisory fee to be paid to the
Adviser, as explained below, and would generally fix the expenses
ratio of each WEBS Index Series at .59% of average daily net
assets plus payments under the Fund's Rule 12b-1 Distribution
Plan of up to .25% of average daily net assets. The net expense
ratios, without the inclusion of Rule 12b-1 fee, of the Fund's 17
operational WEBS Index Series in the fiscal year ended August 31,
1999 ranged from a high of 1.23% in the case of the Malaysia (Free)
WEBS Index Series to a low of .74% in the case of the Japan WEBS
Index Series. The impact of the Proposed Advisory Agreement on the
net expense ratio less Rule 12b-1 fees and the rate of advisory fee
paid by a WEBS Index Series would vary significantly, depending on
the asset levels of the Series and the other existing Series.
The Adviser would also become responsible for the general management
of the Fund's affairs and would no longer have the benefit of certain
indemnities provided to the Adviser by the Fund in the Current
Advisory Agreement. A copy of the Advisory Agreement as proposed
to be amended (the "Proposed Advisory Agreement"), marked to show
all changes from the Current Advisory Agreement, is attached to
this Proxy Statement as Annex A.
Background to the Proposal
The Proposed Advisory Agreement was approved by the Board in
connection with the Board's determination that it is in the best
interests of the Fund and its WEBS Index Series for the Fund to
participate in the Adviser's iSharesTM initiative, which is
expected to be launched in April 2000. At their October 19, 1999
regular meeting, the Directors were advised that the Adviser
intended to make a significant commitment to the U.S. market for
exchange traded index funds in 2000. In particular, the Adviser
planned to introduce up to 48 new exchange traded funds that
would be series of the recently formed iShares Trust, and to
devote a substantial amount of its own resources to publicize the
introduction of its new funds and to promote their acceptance by
investors. The Directors were informed that the Adviser intended
to make a proposal to the Board for inclusion of the Fund in its
iShares initiative that would involve, among other things, an
increase in the Adviser's responsibilities for the general
management of the Fund's affairs and a restructuring of the
Fund's service provider arrangements, including the introduction
of fee arrangements that would effectively fix a substantial
portion of the expense ratio of each of the Fund's WEBS Index
Series at levels significantly lower than those paid by each of
the WEBS Index Series in the Fund's fiscal year ended August 31,
1999. The Directors responded that they would consider whether
any proposal submitted to them by the Adviser or any other
person, including service providers other than the Adviser, was
in the best interests of the Fund and its shareholders. After
participating in a conference call on November 19, 1999, the
Board asked that the Adviser's proposal address a number of
specific concerns of the Board.
The Adviser subsequently made a detailed written proposal (as
amended, the "iShares Proposal") to the Board for inclusion of
the Fund in the iShares family of funds (the "iShares Family").
The iShares Proposal contemplated, among other things, that the
Fund's existing distributor, administrator and transfer agent,
and its custodian and stock lending agent, would be replaced by
the entities that had been selected to provide such services to
the iShares Trust. The Directors discussed the proposal during a
conference call on December 3, 1999 and at a meeting with
representatives of the Adviser on December 8, 1999. At that
meeting, the Adviser explained that it had conducted an extensive
review of potential service providers in connection with its
iShares initiative and negotiated fee and other arrangements with
such service providers that the Adviser believed were extremely
attractive. In the case of the distributor, the Adviser
explained that it had selected, subject to the approval of the
board of directors of the iShares Trust, SEI Investments
Distribution Company ("SEI") to be the distributor for iShares.
The Adviser also noted that it intended to assume significant
responsibility for marketing iShares itself. The Adviser stated
that while its proposal to the Board could be modified to
accommodate the Fund's existing service providers other than the
distributor, the Fund's retention of SEI as its distributor was
an essential part of the iShares Proposal because of the need to
unify the marketing and sales effort for the iShares Family. The
Adviser stated that it could modify its proposal to accommodate
working with the Fund's existing administrator and transfer agent
and custodian and stock lending agent, but only at higher fees
than those in its initial proposal, absent a significant
reduction in the fee schedules of such persons.
At the December 8, 1999 meeting, the Adviser acknowledged that
Funds Distributor, Inc. ("FDI") had been the Fund's distributor
since the Fund commenced operations in March 1996, and had
questioned the propriety of the Adviser recommending the
termination of the distribution contract by the Fund, noting that
FDI had made significant expenditures in connection with the
distribution of the Fund's shares since the Fund's inception;
that such expenditures exceeded the revenues it had received in
respect of the Fund by a significant amount; and that termination
of the distribution agreement would result not only in the
elimination of revenues to FDI pursuant to the Fund's Rule 12b-1
Distribution Plan, but also in the termination of a consulting
agreement between its affiliate, FDI Distribution Services, Inc.
("FDID") and the Adviser. The Adviser indicated that, in order
to ensure a smooth transition of the distribution function and to
secure the benefits of the work done by FDI over the years, it
was discussing various possible arrangements with FDI in the
event the Directors determined to support the iShares Proposal.
After the December 8, 1999 meeting, the Directors asked the
Adviser to respond to various questions and concerns, and
determined to offer the Fund's current administrator and transfer
agent, and its current custodian and stock lending agent, the
opportunity to consult with the Adviser and submit revised fee
proposals that were competitive with those of the Adviser's
preferred service provider. Such submissions, the Adviser's
responses to the Directors' questions, a number of possible
arrangements with FDI, and various versions of the Adviser's
proposal were reviewed by the Directors during a conference call
on January 14, 2000 and at meetings held on January 25 and 28,
2000.
At the January 28, 2000 meeting, the Adviser recommended to the
Board and the Board approved, among other things: the Proposed
Advisory Agreement, subject to shareholder approval; lower fee
schedules for the Fund's administrator and transfer agent and
custodian and stock lending agent; and, in principle, the
marketing of the Fund under the "iShares" name (it is
anticipated that the Board will take action to change the name of
the Fund and each of its WEBS Index Series to include the term
"iShares" shortly prior to the launch of the iShares
initiative). The Directors also indicated, in response to a
question from the Adviser, that they would welcome at a future
time a proposal that an officer of the Adviser become a Director
of the Fund.
At the January 28, 2000 meeting, the Board also approved, upon
the recommendations of the Adviser, the termination of FDI as
distributor for the Fund and the appointment of SEI as
distributor, effective no later than March 28, 2000. In
addition, the Board approved the removal of the previous
limitation on annual distribution fees paid by a WEBS Index
Series under the Fund's Rule 12b-1 Distribution Plan (up to .20%
of the average daily net assets of the WEBS Index Series)
effective at the time that SEI becomes the Fund's distributor,
with the effect that each WEBS Index Series may pay annual
distribution fees of up to .25% of the average daily net assets
of the WEBS Index Series under the Rule 12b-1 Distribution plan
(the maximum permitted by the Rule 12b-1 Distribution plan). The
Directors also approved, upon the recommendation of the Adviser,
a Marketing and Consulting Agreement with FDID (the "Marketing
Agreement"). The Marketing Agreement provides that FDID will
provide certain marketing and consulting services in connection
with the distribution of the Fund's shares for a period of three
years after the date that SEI becomes the Fund's distributor, in
return for a fee of .035% of the average daily net assets of the
Fund's 17 initial WEBS Index Series. Such fee is to be paid
pursuant to the Fund's Rule 12b-1 Distribution Plan and
contains the provisions required by Rule 12b-1, including a
provision that it may be terminated without penalty by the Fund
at any time. The Adviser informed the Board that it had agreed
to make payments aggregating $500,000 to FDI in return for
certain assets and services and in connection with the transition
of the distribution function for the Fund from FDI to SEI. The
Adviser noted that FDI appreciated that the Board was taking
action in order for the Fund to participate in the iShares
initiative and looked forward to assisting in the Fund's future
growth through the services to be provided pursuant to the
Marketing Agreement. The Adviser also noted that FDI would be
actively involved in ensuring a successful transition of the
distribution function to SEI.
The Current Advisory Agreement
Under the Current Advisory Agreement, the Adviser, subject to the
supervision of the Fund's Board of Directors and in conformity
with the stated investment policies of each WEBS Index Series,
manages the investment of each WEBS Index Series' assets. The
Adviser is responsible for providing continuous supervision of
the investment portfolio of each WEBS Index Series. For its
investment management services to each WEBS Index Series that has
commenced operations, the Adviser is currently paid management
fees equal to each WEBS Index Series' allocable portion of: .27%
per annum of the aggregate net assets of the existing Series of
the Fund plus the EMU WEBS Index Series and USA WEBS Index
Series, neither of which has commenced operations (collectively,
the "Developed Country Series") less than or equal to $1.7
billion, plus .15% per annum of the aggregate net assets of the
Developed Country Series between $1.7 billion and $7 billion,
plus .12% per annum of the aggregate net assets of the Developed
Country Series between $7 billion and $10 billion, plus .08% per
annum of the aggregate net assets of the Developed Country Series
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 one or more WEBS Index Series for certain expenses.
The Fund is responsible for all of its expenses other than those
specifically assumed by the Adviser.
Pursuant to the Current Advisory Agreement, the Adviser is not
liable for any error of judgment or mistake of law or for any
loss suffered by the Fund or its shareholders with respect to
matters covered by the Current Advisory Agreement, and the Fund
will indemnify the Adviser, its directors, officers, employees
and control persons for certain liabilities, including all
losses, claims, damages or liabilities arising under the federal
securities laws or other federal or state laws, unless such loss
or liability results from willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's duties or the
reckless disregard of the Adviser's obligations and duties. This
indemnification would be removed under the Proposed Advisory
Agreement.
The Current Advisory Agreement, with respect to all WEBS Index
Series, is subject to annual approval by (1) the Fund's Board of
Directors or (2) vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of 1940 (the
"1940 Act") of the Fund, provided that in either event the
continuance also is approved by a majority of the Fund's Board of
Directors 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 Current Advisory
Agreement is terminable without penalty, on 60 days' notice, by
the Fund's Board of Directors or by vote of the holders of a
majority (as defined in the 1940 Act) of the Fund's outstanding
voting securities. The Current Advisory Agreement is also
terminable upon 60 days' notice by the Adviser and will terminate
automatically in the event of its assignment (as defined in the
1940 Act).
The Current Advisory Agreement provides that the Adviser may
enter into subadvisory agreements with additional investment
advisers to act as subadvisers with respect to any particular
WEBS Index Series. The Adviser will pay subadvisers, if any, out
of the fees received by the Adviser. No such subadvisory
arrangements exist or are contemplated at this time.
The Current Advisory Agreement was approved in respect of each of
the 17 initial WEBS Index Series of the Fund by its initial
shareholder on March 6, 1996. The sole shareholder of each WEBS
Index Series that has not yet commenced operations (i.e. the
Brazil (Free), EMU, Greece, Indonesia, Korea, Portugal, South
Africa, Thailand, Taiwan, Turkey and USA WEBS Index Series) will
approve the Proposed Advisory Agreement as it applies to each
such WEBS Index Series prior to the commencement of operations of
any such series. At its January 28, 2000 meeting, the Board of
Directors approved the Current Advisory Agreement for each WEBS
Index Series through March 2001, subject to its replacement with
the Proposed Advisory Agreement upon its approval by
shareholders.
For the fiscal year ended August 31, 1999, the Fund paid fees to
the Adviser for its advisory service as follows: Australia WEBS
Index Series $135,613; Austria WEBS Index Series $27,123; Belgium
WEBS Index Series $44,906; Canada WEBS Index Series $33,205;
France WEBS Index Series $137,387; Germany WEBS Index Series
$219,901; Hong Kong WEBS Index Series $197,467; Italy WEBS Index
Series $186,292; Japan WEBS Index Series $1,096,060; Malaysia
(Free) WEBS Index Series $176,782; Mexico (Free) WEBS Index
Series $39,012; Netherlands WEBS Index Series $68,016; Singapore
(Free) WEBS Index Series $255,259; Spain WEBS Index Series
$92,868; Sweden WEBS Index Series $43,348; Switzerland WEBS Index
Series $93,758; and United Kingdom WEBS Index Series $245,947.
The Proposed Advisory Agreement
The Proposed Advisory Agreement provides that the Fund will
continue to be responsible for its expenses, but that the Adviser
will receive from the Fund the difference between the Fund's
expenses (except for: expenses incurred in connection with the
execution of portfolio transactions; expenses incurred in
connection with the Fund's Rule 12b-1 Distribution Plan;
litigation expenses; taxes; any cost or expense that a majority
of the Directors of the Fund who are not "interested persons"
(as defined in the 1940 Act) deems to be an extraordinary
expense; and the advisory fee itself) and .59% per annum of the
aggregate net assets of the Developed Country Series less than or
equal to $7.0 billion, plus .54% per annum of the aggregate net
assets of the Developed Country Series between $7.0 billion and
$11.0 billion, plus .49% per annum of the aggregate net assets of
the Developed Country Series in excess of $11.0 billion. The
Adviser would be responsible for any expenses of the Fund (other
than the exceptions listed above) that would cause the Fund's
expenses to exceed such levels. The effect of the proposed
amendments, at current asset levels and assuming no litigation
expenses, taxes or extraordinary expenses, would be an expense
ratio of .84% for each of the Fund's 17 initial WEBS Index Series
(that is, .59% as contemplated by the Proposed Advisory Agreement
plus .25% under the Fund's Rule 12b-1 Distribution Plan). The
Proposed Advisory Agreement would remove the indemnities provided
to the Adviser under the Current Advisory Agreement and require
the Adviser to be responsible for the general management of the
Fund's affairs. It is contemplated that the names of the Fund
and each of its WEBS Index Series will be changed to use the term
"iShares" shortly prior to the time the new iShares funds are
introduced which is expected to be April 2000. The Proposed
Advisory Agreement provides that the Fund will, at the request of
the Adviser, change its name and those of its series to delete
any reference to "iShares" in the event the Adviser or one of its
affiliates is no longer the Fund's investment adviser.
Reasons for the Board of Directors' Recommendation
As noted above under "Background to the Proposal", the Fund's
Board of Directors considered the iShares Proposal during four
in-person meetings and three conference calls. Each meeting
included separate meetings of the four Directors who are not
"interested persons" of the Fund and consultation by such
Directors with counsel. After carefully considering the
information presented to them, the Board determined that the
iShares Proposal was in the best interests of the Fund and each
of its WEBS Index Series, and voted to approve and recommend the
Proposed Advisory Agreement to the Fund's shareholders.
In its presentation to the Board, the Adviser stated that, based
on extensive market research, it believed that the Fund's WEBS
Index Series would benefit from (i) lower costs of some of the
WEBS Index Series resulting from the proposed fee arrangements
which, based on current asset levels, would generally fix the
expense ratios of each the Fund's WEBS Index Series at .84% of
average daily net assets and (ii) increased promotion from their
inclusion in the iShares Family. The Adviser stated that the
benefits of lower costs of some of the WEBS Index Series and
increased promotion should increase the rate of asset growth,
which in turn would result in increased liquidity of the Fund's
shares. The Adviser noted that its proposed fee schedule
included breakpoints so that the WEBS Index Series would
generally benefit from decreases in their expense ratios when
assets of the Developed Country Series reached the $7 billion and
$11 billion levels. The Adviser reviewed with the Board its
detailed plans for the introduction of iShares, including its
plans to expend substantial resources (including substantial
amounts of its own resources) on promotion of the iShares brand.
The Adviser stated that the 44 iShares funds that were expected
to be introduced in 2000 related primarily to domestic indices,
and that the Adviser proposed that the Fund's WEBS Index Series
provide most of the non-U.S. country-based component of the
iShares Family.
The Directors were persuaded that the proposed advisory fee
arrangements, together with the Fund's participation in the
iShares initiative, likely would result in an increase in the
rate of growth of the assets of the Fund's WEBS Index Series, and
that such growth would be beneficial to the Fund's WEBS Index
Series and their shareholders. The Directors concurred with the
Adviser's view that increased liquidity should be a result of
increased assets, and that this would be a benefit to the
shareholders of the Fund's WEBS Index Series. The Directors also
considered the competitive landscape, including the expected
introduction of new competing funds, and concluded that the
Fund's long-term prospects for growth and success would be
improved if it became part of the iShares Family. In considering
the proposed changes to the advisory fee, the Directors reviewed
comparative fee and expense ratio data and the nature and quality
of the services provided by the Adviser since the Fund's
inception, including the performance of each WEBS Index Series
compared to its benchmark index. The Directors considered the
profitability of the current fee arrangements to the Adviser in
1999 and the Adviser's policies and practices regarding the
allocation of brokerage (including the fact that the Adviser does
not enter into soft dollar arrangements or recommend directed
brokerage arrangements for its investment company clients). The
Directors also considered the impact of the proposed fee
arrangements on the Fund's WEBS Index Series at various net asset
levels.
In considering the proposed fee arrangements, the Directors noted
that in the Fund's fiscal year ended August 31, 1999, the expense
ratios of the Fund's 17 initial WEBS Index Series had ranged from
a high of 1.43% for the Malaysia (Free) WEBS Index Series (which
had incurred significant expenses as a result of the imposition
by the Malaysian government of capital controls on September 1,
1998) to a low of 0.94% for the Japan WEBS Index Series, which is
by far the largest of the 17 WEBS Index Series. The Adviser
noted, and the Directors recognized, that had the Proposed
Advisory Agreement been in effect in fiscal 1999, the expense
ratios of each WEBS Index Series would have been .84%, which
would have been a significant benefit to shareholders. The
Directors also noted that the breakpoints in the Current Advisory
Agreement and the contract with the administrator and accounting
services agent, and the fact that a portion of the Fund's
expenses are relatively fixed and do not vary with increased
assets, resulted in significant expense ratio reductions as the
Fund's net assets increase, and that depending on the level of
the assets of the Developed Country Series, the fee schedule in
the Proposed Advisory Agreement would result in higher fees to
the Adviser, and a higher expense ratio in respect of certain of
the Fund's WEBS Index Series, than those payable under the fee
schedule in the Current Advisory Agreement. The Directors
recognized that under the Proposed Advisory Agreement, the
benefits of: breakpoints in the Fund's contract with the
administrator, the amortization of the Fund's deferred
organization expenses (which will be completed in March 2001),
and the spreading of relatively fixed expenses of the Fund over
larger amounts of net assets of the Fund would accrue to the
Adviser and not to the Fund. They also noted that, based on
current asset levels, the effect of the proposed fee change
varied significantly from WEBS Index Series to WEBS Index Series.
The Directors considered the Proposed Advisory Agreement and the
iShares Proposal from the point of view of each separate WEBS
Index Series during the course of their deliberations. They also
noted the expanded duties of the Adviser under the Proposed
Advisory Agreement, the breakpoints in the fee schedule in the
Proposed Advisory Agreement, the fact that the net fees to the
Adviser and each of the Fund's WEBS Index Series under the
Proposed Advisory Agreement would be lower than those under the
Current Advisory Agreement and other service provider contracts
at current asset levels, and that the Adviser had been incurring
costs in support of proposed new WEBS Index Series. The
Directors also considered the Proposed Advisory Agreement in the
context of the entire iShares Proposal. The Directors determined
that the Proposed Advisory Agreement should continue for a one
year period from the date of its approval by shareholders (rather
than the two year period permitted by the 1940 Act) and alerted
the Adviser that they would closely review the profitability of
the Adviser's relationship with the Fund in connection with the
proposed continuance thereof in 2001.
After careful consideration of the information presented to them
and all factors that they deemed relevant and extensive
discussion, the disinterested Directors and the entire Board
unanimously approved the Proposed Advisory Agreement and
recommended it to shareholders for their approval.
Information Concerning the Effect of the Proposed Advisory
Agreement
The following tables compare the compensation paid to the Adviser
by each WEBS Index Series under the Current Advisory Agreement in
the Fund's fiscal year ended August 31, 1999 and the compensation
that the WEBS Index Series would have paid in fiscal 1999 had the
Proposed Advisory Agreement and the fee reductions by the
administrator and custodian been in effect throughout such
period. "Other Expenses" do not include Rule 12b-1 fees. As noted
above, the Board of Directors has approved payment by the WEBS
Index Series at that maximum rate of .25% under the Fund's Rule
12b-1 Plan of Distribution. In fiscal 1999 the Rule 12b01 fee
rate paid was .20%.
FEES AND
ACTUAL FEES EXPENSES FOR FISCAL
AND EXPENSES 1999 UNDER PROPOSED
FOR FISCAL 1999 FEE STRUCTURE*
AUSTRALIA WEBS INDEX SERIES
Management Fee
(as a percentage of average daily net assets) 0.27% 0.15%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.53% 0.44%0
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
as a percentage of average daily net assets) 0.80% 0.59%
Net fee received (reimbursement paid)
by the Adviser $135,613 $78,488
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (42.12%)
AUSTRIA WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.00%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.84% 0.74%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A (0.15%)
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 1.11% 0.59%
Net fee received (reimbursement paid)
by the Adviser $27,123 $(15,684)
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (157.83%)
BELGIUM WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.00%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.77% 0.66%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A (0.07%)
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 1.04% 0.59%
Net fee received (reimbursement paid)
by the Adviser $44,906 $(10,810)
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (124.07%)
CANADA WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.00%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.76% 0.66%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A (0.07%)
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 1.03% 0.59%
Net fee received (reimbursement paid)
by the Adviser $33,205 $(8,042)
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (124.22%)
FRANCE WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.11%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.59% 0.48%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A (0.00%)
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.86% 0.59%
Net fee received (reimbursement paid)
by the Adviser $137,387 $53,888
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (60.78%)
GERMANY WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.17%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.53% 0.42%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.80% 0.59%
Net fee received (reimbursement paid)
by the Adviser $219,901 $7,803
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (37.33%)
HONG KONG WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.18%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.54% 0.41%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.80% 0.59%
Net fee received (reimbursement paid)
by the Adviser $197,467 $132,032
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (33.14%)
ITALY WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.13%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.56% 0.46%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.83% 0.59%
Net fee received (reimbursement paid)
by the Adviser $186,292 $91,932
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (50.65%)
JAPAN WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.22%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.47% 0.37%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.74% 0.59%
Net fee received (reimbursement paid)
by the Adviser $1,096,060 $882,351
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (19.50%)
MALAYSIA (FREE) WEBS INDEX
Management Fee (as a percentage
of average daily net assets) 0.27% 0.00%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.96% 0.86%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A (0.27%)
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 1.23% 0.59%
Net fee received (reimbursement paid)
by the Adviser $176,782 $(166,033)
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (193.92%)
MEXICO (FREE) WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.00%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.79% 0.72%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A (0.13%)
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 1.06% 0.59%
Net fee received (reimbursement paid)
by the Adviser $39,012 $(15,133)
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (138.79%)
NETHERLANDS WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.11%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.60% 0.48%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.87% 0.59%
Net fee received (reimbursement paid)
by the Adviser $68,016 $(27,399)
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (59.72%)
SINGAPORE (FREE) WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.20%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.50% 0.39%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.77% 0.59%
Net fee received (reimbursement paid)
by the Adviser $255,259 $190,401
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (25.41%)
SPAIN WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.13%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.57% 0.46%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.84% 0.59%
Net fee received (reimbursement paid)
by the Adviser $92,868 $41,661
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (55.14%)
SWEDEN WEBS INDEX SERIES
Management Fee (as a percentage
of average daily net assets) 0.27% 0.04%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.66% 0.55%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.93% 0.59%
Net fee received (reimbursement paid)
by the Adviser $43,348 $6,049
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (86.05%)
SWITZERLAND WEBS INDEX
Management Fee (as a percentage
of average daily net assets) 0.27% 0.08%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.62% 0.51%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.89% 0.59%
Net fee received (reimbursement paid)
by the Adviser $93,758 $6,518
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (71.72%)
UNITED KINGDOM WEBS INDEX
Management Fee (as a percentage
of average daily net assets) 0.27% 0.20%
Other expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.50% 0.39%
Expense reimbursement by the Adviser
(as a percentage of average daily net assets) N/A 0.00%
Net expenses (other than Rule 12b-1 fees)
(as a percentage of average daily net assets) 0.77% 0.59%
Net fee received (reimbursement paid)
by the Adviser $245,523 $189,523
Decrease in fee payable to the Adviser
under Proposed Advisory Agreement (22.94%)
* "Other expenses" reflect the fee reductions agreed to by the
Fund's administrator and transfer agent and its custodian and
stock lending agent in connection with the iShares Proposal.
The advisory fee shown is the fee rate that each WEBS Index
Series would have paid in fiscal 1999 had the Proposed
Advisory Agreement and such fee reductions been in effect
throughout such fiscal year.
As noted above, the impact of the Proposed Advisory Agreement on
a WEBS Index Series' expense ratio varies significantly depending
on the level of such Series' average daily net assets and on the
average daily net assets of the Developed Markets Series. During
the six months ended February 29, 2000, the average daily net
assets of many WEBS Index Series, and of the Developed Markets
Series, were materially higher than in fiscal 1999. Had the
Proposed Advisory Agreement and the new fee schedules for the
administrator and custodian been in effect during such six month
period, the percentage reduction in the Adviser's fees from many
of the WEBS Index Series would have been lower than those
disclosed in the above table. In addition, the Japan WEBS Index
Series would have paid the Adviser $6,566 more than it paid under
the Current Advisory Agreement, an increase of .60%. The fee
reduction to the Adviser for the other WEBS Index Series would
have varied from a 19.67% decrease (Singapore (Free) WEBS Index
Series) to a 180.1% decrease (Canada WEBS Index Series). At
significantly higher levels of average daily net assets, each
WEBS Index Series would pay higher fees to the Adviser, and have
a higher expense ratio, than it would under the Current Advisory
Agreement.
Affiliated Brokerage
For the fiscal year ended August 31, 1999, the Fund paid $704,320
in aggregate brokerage commissions. During that fiscal year,
certain portfolio transactions were executed through Morgan
Stanley & Co. Incorporated ("MS&Co."), an affiliated broker of
the Fund due to the Fund Secretary's position as a Managing
Director of MS&Co. As a percentage of aggregate brokerage
commissions paid during the fiscal year, MS&Co. received 5.72% of
the aggregate dollar amount ($40,300).
Additional Information About the Adviser
The Adviser is a California corporation and a wholly owned
subsidiary of Barclays Global Investors, N.A., which in turn is
wholly owned indirectly by Barclays Bank PLC. The Adviser is
registered as an investment adviser under the Investment Advisers
Act of 1940. As of December 31, 1999, the Adviser and its
affiliates managed assets aggregating in excess of $780 billion.
The principal executive officers and their positions with the
Adviser are set forth below:
Name Position with the Adviser
Garrett Bouton Chairman and Chief Executive Officer
Patricia C. Dunn Managing Director
Lawrence G. Tint Managing Director
Geoffrey Fletcher Chief Financial Officer
Andrea M. Zulberti Chief Administrative Officer
Joanne T. Medero Secretary
Theda R. Haber Assistant Secretary
Terri L. Slane Assistant Secretary
The Adviser also acts as investment adviser or sub-adviser for a
number of investment companies and portfolios, including three
international equity index funds. Information concerning the three
international equity index funds, each of which is either advised
or sub-advised by the Adviser, is set forth below:
Adviser's Role
Fund and In Management Net Assets Contractual Advisory/
Portfolio of Fund and as of Sub-Advisory Fee
Names Portfolios 2/29/2000 Arrangement
MIP
International
Index Fund Adviser $70,674,027 0.15% of net assets of
first 1 billion;plus 0.10%
of net assets thereafter
E*Trade
Global Titans
Index Fund Sub-Adviser $10,470,093 0.20% of net assets of
first 200 million; plus
0.15% of net assets between
200 million and 500 million;
plus 0.12% thereafter
($40,000 per year minimum
State Farm
International
Equity Index Sub-Adviser $155,573,505 0.35% of net assets of first
$50 million; plus 0.30% of
net assets of next $50
million; plus 0.20% of net
assets thereafter; minus
$3,750 and a the fund's custody
fees
REQUIRED VOTE
The approval of Proposal 1 in respect of a WEBS Index Series
requires the affirmative vote of a majority of the shares of the
WEBS Index Series, as defined in the 1940 Act, outstanding and
entitled to vote at the Meeting. Under the 1940 Act, this means
(i) 67% or more of the voting securities of the WEBS Index Series
present at the Meeting, in person or by proxy, or (ii) more than
50% of the outstanding voting securities of the WEBS Index Series
(a "1940 Act Majority"). In the event that Proposal 1 does not
receive the required vote from the shareholders of any WEBS Index
Series, the Current Advisory Agreement will continue in effect
with respect to such WEBS Index Series, and the Board of
Directors will consider other actions that may be taken,
including such proposals as may be recommended by the Adviser.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSED AMENDMENTS TO THE ADVISORY AGREEMENT
PROPOSALS TO CHANGE SUBCLASSIFICATIONS OF EACH OF THE CANADA,
JAPAN AND UNITED KINGDOM WEBS INDEX SERIES FROM DIVERSIFIED TO
NON-DIVERSIFIED
The Canada WEBS Index Series, Japan WEBS Index Series and United
Kingdom WEBS Index Series are classified as management investment
companies under the 1940 Act, and subclassified as open-end
companies and diversified companies. Under the 1940 Act, a
"diversified company" must meet the following requirements: at
least 75% of the value of its total assets must be represented by
cash and cash items, U.S. Government securities, securities of
other investment companies, and other securities limited in
respect of any one issuer to an amount not greater in value than
5% of the value of the total assets of such company and to not
more than 10% of the outstanding voting securities of such
issuer. At the Meeting, shareholders of the Canada WEBS Index
Series, Japan WEBS Index Series and United Kingdom WEBS Index
Series will be asked to approve a change to each of these WEBS
Index Series' subclassifications from a diversified company to a
non-diversified company. A non-diversified company 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.
The investment return of a non-diversified fund typically is
dependent upon the performance of a smaller number of securities
than is the investment return of a diversified fund of comparable
size. A diversified fund typically provides more stable
investment returns than a non-diversified fund. Change to non-
diversified status would provide greater discretion to the
Adviser to enter into more concentrated positions with respect to
individual investments. Each WEBS Index Series of the Fund,
regardless of whether classified as diversified or
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 of 1986, as amended (the "Code"), in
order to relieve it of any liability for Federal income tax to
the extent that its earnings are distributed to shareholders. The
Code test applies at the end of each fiscal quarter, and
generally requires that at least 50% of the value of each WEBS
Index Series' total assets be represented by the types of assets
which satisfy the 75% asset diversification requirement imposed
by the 1940 Act. In addition, no more than 25% of the value of
the investment company's assets may be invested in the securities
of any one issuer. As discussed below, the Canada and United
Kingdom WEBS Index Series would not be diversified companies as
defined in the 1940 Act if they fully replicated the Morgan
Stanley Capital International ("MSCI") Canada and United
Kingdom Indices, respectively, and the Adviser believes that the
MSCI Japan Index may become non-diversified for purposes of the
1940 Act in the near term. Under the 1940 Act, if a fund that is
classified as "non-diversified" for purposes of the 1940 Act is
in fact diversified for such purposes for a two year period, its
subclassification will change to "diversified" automatically.
PROPOSAL 2: APPROVAL OF CHANGE OF CANADA WEBS INDEX SERIES'
SUBCLASSIFICATION FROM DIVERSIFIED TO NON-DIVERSIFIED
(Applies Only to Holders of Shares of the Canada WEBS Index
Series)
The Board of Directors has approved the Canada WEBS Index Series'
proposed change to a non-diversified company in light of recent
and anticipated changes in the Canadian securities markets and in
the MSCI Canada Index, which is the Canada WEBS Index Series'
benchmark. As a result of developments in the Canadian
securities markets since the inception of the Canada WEBS Index
Series, particularly the appreciation of two stocks, Nortel
Networks Ltd. and BCE Inc., the aggregate index weighting of the
companies in the MSCI Canada Index with a weighting of greater
than 5% has increased to 57.07% (as of March 9, 2000) from 17.25%
(as of March 7, 1996). Thus, if the Canada WEBS Index Series'
portfolio replicated the MSCI Canada Index, it would not be
"diversified" for 1940 Act purposes.
While the Canada WEBS Index Series uses a portfolio sampling
technique and does not normally invest in all of the securities
in the MSCI Canada Index, it typically holds a representative
subset of those securities, including significant positions in
securities that have index weightings of more than 5%. As a
result of the recent changes in the Canadian securities markets
and the MSCI Canada Index, the requirement that the Canada WEBS
Index Series operate as a diversified company has made it more
difficult for the Canada WEBS Index Series to track closely the
performance of its benchmark index, which has become
non-diversified. The proposed change to a non-diversified
company will increase the Canada WEBS Index Series' investment
flexibility and is expected to improve its ability to track the
MSCI Canada Index.
REQUIRED VOTE
The approval of Proposal 2 requires the affirmative vote of a
1940 Act Majority of the Canada WEBS Index Series. In the event
that Proposal 2 does not receive the affirmative vote of a 1940
Act Majority of the Canada WEBS Index Series, the Board of
Directors will consider other actions that may be taken,
including such proposals as may be recommended by the Adviser.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE
CANADA WEBS INDEX SERIES VOTE "FOR" THE CHANGE IN THE CANADA
WEBS INDEX SERIES' SUBCLASSIFICATION
PROPOSAL 3: APPROVAL OF CHANGE OF JAPAN WEBS INDEX SERIES'
SUBCLASSIFICATION FROM DIVERSIFIED TO NON-DIVERSIFIED
(Applies Only to Holders of Shares of the Japan WEBS Index
Series)
The Board of Directors has approved the Japan WEBS Index Series'
proposed change to a non-diversified company in light of recent
and potential changes in the Japanese securities markets and in
the MSCI Japan Index, which is the Japan WEBS Index Series'
benchmark. As a result of developments in the Japanese
securities markets since the inception of the Japan WEBS Index
Series, the number of companies in the MSCI Japan Index with a
weighting of greater than 5% is now two, having an aggregate
index weighting of 13.03% (as of March 9, 2000) from none (as of
March 7, 1996).
While the Japan WEBS Index Series uses a portfolio sampling
technique and does not normally invest in all of the securities
in the MSCI Japan Index, it typically holds a representative
subset of those securities, including significant positions in
securities that have index weightings of more than 5%. The
proposed change to a non-diversified company will increase the
Japan WEBS Index Series' investment flexibility and is expected
to improve its ability to track the MSCI Japan Index should such
index become non-diversified. While the MSCI Japan Index is
currently "diversified" for 1940 Act purposes, the Adviser
believes that there is a material risk of it becoming non-
diversified in the near term as a result of pending and future
possible mergers of Japanese companies and recent trends. The
Adviser proposed, and the Directors have approved and recommended
to shareholders, a change of the Japan WEBS Index Series'
subclassification to "non-diversified" in light of such
possible changes to the MSCI Japan Index. The Adviser and the
Directors believe that it is appropriate for shareholders to vote
on this matter at the upcoming Special Meeting of Shareholders to
avoid the possible expense and distraction of holding another
Special Meeting of Shareholders of the Japan WEBS Index Series in
the near term. The Adviser does not expect to cause the Japan
WEBS Index Series to invest in a non-diversified portfolio if the
MSCI Japan Index does not become non-diversified. As noted
above, the Japan WEBS Index Series will revert to "diversified"
status two years after the change if it continues to be operated
as a diversified company throughout such two year period.
REQUIRED VOTE
The approval of Proposal 3 requires the affirmative vote of the
holders of a 1940 Act Majority of the Japan WEBS Index Series.
In the event that Proposal 3 does not receive the affirmative
vote of a 1940 Act Majority of the Japan WEBS Index Series, the
Board of Directors will consider other actions that may be taken,
including such proposals as may be recommended by the Adviser and
the Fund's counsel.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE JAPAN
WEBS INDEX SERIES VOTE "FOR" THE CHANGE IN THE JAPAN WEBS INDEX
SERIES' SUBCLASSIFICATION.
PROPOSAL 4: APPROVAL OF CHANGE OF UNITED KINGDOM WEBS INDEX
SERIES' SUBCLASSIFICATION FROM DIVERSIFIED TO NON-DIVERSIFIED
(Applies Only to Holders of Shares of the United Kingdom WEBS
Index Series)
The Board of Directors has approved the United Kingdom WEBS Index
Series' proposed change to a non-diversified company in light of
recent and anticipated changes in the British securities markets
and in the Morgan Stanley Capital International ("MSCI") United
Kingdom Index, which is the United Kingdom WEBS Index Series'
benchmark. As a result of developments in the British securities
markets since the inception of the United Kingdom WEBS Index
Series, particularly the creation by merger of BPAmoco p.l.c. and
Vodafone AirTouch PLC, the number of companies in the MSCI United
Kingdom Index with a weighting of greater than 5% has increased
to three, having an aggregate index weighting of 33.74% (as of
March 9, 2000) from two having a total weight of 10.36% (as of
March 7, 1996). This situation will be significantly exacerbated
upon consummation of the pending acquisition of Mannesmann AG by
Vodofone AirTouch PLC. Thus, if the United Kingdom WEBS Index
Series' portfolio replicated the MSCI United Kingdom Index, it
would not be "diversified" for 1940 Act purposes.
While the United Kingdom WEBS Index Series uses a portfolio
sampling technique and does not normally invest in all of the
securities in the MSCI United Kingdom Index, it typically holds a
representative subset of those securities, including significant
positions in securities that have index weightings of more than
5%. As a result of the recent changes in the British securities
markets and the MSCI United Kingdom Index, the requirement that
the United Kingdom WEBS Index Series operate as a diversified
company has made it more difficult for the United Kingdom WEBS
Index Series to track closely the performance of its benchmark
index, which has become non-diversified. The proposed change to
a non-diversified company will increase the United Kingdom WEBS
Index Series' investment flexibility and is expected to improve
its ability to track the MSCI United Kingdom Index.
REQUIRED VOTE
The approval of Proposal 4 requires the affirmative vote of a
1940 Act Majority of the United Kingdom WEBS Index Series. In
the event that Proposal 2 does not receive the affirmative vote
of a 1940 Act Majority of the United Kingdom WEBS Index Series,
the Board of Directors will consider other actions that may be
taken, including such proposals as may be recommended by the
Adviser and the Fund's counsel.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE
UNITED KINGDOM WEBS INDEX SERIES VOTE "FOR" THE CHANGE IN THE
UNITED KINGDOM WEBS INDEX SERIES' SUBCLASSIFICATION.
VOTING INFORMATION
RECORD DATE. Only shareholders of record at the close of
business on March 6, 2000, will be entitled to vote at the
Meeting. On that date, the number of outstanding Shares were as
follows:
WEBS Index Series Number of Shares Outstanding
Australia 5,800,830
Austria 1,200,030
Belgium 840,030
Canada 800,343
France 3,401,405
Germany 6,605,652
Hong Kong 6,526,419
Italy 2,400,030
Japan 58,804,837
Malaysia (Free) 17,025,030
Mexico (Free) 1,500,030
Netherlands 1,001,477
Singapore (Free) 13,701,362
Spain 1,500,340
Sweden 825,240
Switzerland 2,626,643
United Kingdom 6,201,850
QUORUM. In the event that a quorum is not present at the
Meeting, or in the event that a quorum is present at the Meeting
but sufficient votes to approve the proposals are not received,
the persons named as proxies, or their substitutes, may propose
one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares, represented at
the Meeting in person or by proxy. If a quorum is not present,
the persons named as proxies will vote those proxies which they
are entitled to vote FOR the proposal in favor of any
adjournment, and will vote those proxies required to be voted
AGAINST the proposal against any adjournment. A quorum is
constituted with respect to each WEBS Index Series by the
presence in person or by proxy of the holders of more than 50% of
the outstanding voting shares of that WEBS Index Series. A
quorum must be present at the meeting with respect to each WEBS
Index Series with respect to each proposal to be acted upon for
that WEBS Index Series. For example, a quorum must be present
for the Canada WEBS Index Series for a vote to be held for that
Series with respect to Proposals 1 and 2. Properly executed
proxies may be returned with instructions to abstain from voting
or withhold authority to vote (an "abstention") or represent a
broker "non-vote" (which is a proxy from a broker or nominee
indicating that the broker or nominee has not received
instructions from the beneficial owner or other person entitled
to vote shares on a particular matter with respect to which the
broker or nominee does not have the discretionary power to vote).
Shares represented by broker non-votes are treated as being
present for purposes of determining a quorum. A vote cast does
not include an abstention or the failure to vote for or against
any proposal. Therefore, for purposes of determining the
affirmative vote of a "majority of the outstanding shares" in
respect of a proposal, an abstention or the failure to vote,
including a broker non-vote, although counted toward the
determination of a quorum, will be the equivalent of a vote
against the proposal.
ANNUAL MEETINGS. Consistent with its By-Laws and Maryland law,
the Fund does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other
applicable law.
OTHER SHAREHOLDER INFORMATION
As of March 6, 2000, 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:
WEBS Index Series Percentage of
And Name and Address Ownership
AUSTRALIA
The Chase Manhattan Bank 53.95%
One Chase Manhattan Plaza
New York, NY 10081
The Bank of New York 7.39%
One Wall Street
New York, NY 10286
Bankers Trust 5.74%
648 Grassmere Park Road
Nashville, TN 37211
AUSTRIA
The Bank of New York 22.65%
925 Patterson Plank Road
Secaucus, NJ 07094
Salomon Smith Barney Inc. 16.96%
333 West 34th Street, 3rd
Floor
New York, NY 10001
Brown Brothers Harriman & Co. 7.98%
63 Wall Street, 8th Floor
New York, NY 10005
National Financial Services 6.72%
Corporation
1 World Financial Center, Tower A
New York, NY 10281
BELGIUM
The Bank of New York 26.13%
925 Patterson Plank Road
Secaucus, NJ 07094
Citibank, N.A. 7.65%
P.O. Box 30576
Tampa, FL 33630
Bear, Stearns Securities Corp. 7.11%
One Metrotech Center, North
Brooklyn, NY 11201
National Financial 6.35%
Services Corporation
200 Liberty Street
New York, NY 10281
Salomon Smith Barney Inc. 5.94%
333 West 34th Street, 3rd
Floor
New York, NY 10001
CANADA
Charles Schwab & Co., Inc. 18.48%
Newport Financial Center
111 Pavonia Avenue East,
3rd Floor
Jersey City, NJ 07310
Prudential Securities 7.76%
Incorporated
1 New York Plaza, 9th Floor
New York, NY 10292
Brown Bros. Harriman & Co. 7.50%
59 Wall Street
New York, NY 10005
Goldman, Sachs & Co. 7.32%
1 New York Plaza
New York, NY 10004
RBC Dominion Securities Inc. 6.46%
- -- NSCC
200 Bay Street, Royal
Bank Plaza
Toronto, Ontario
Canada M5J 2W7
National Investors 5.46%
Services Corp.
55 Water Street
New York, NY 10281
FRANCE
Morgan Stanley & Co. 16.00%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
State Street Bank & Trust 9.77%
Company
1776 Heritage Drive
Quincy, MA 02171
The Bank of New York 9.20%
One Wall Street
New York, NY 10286
Brown Bros. Harriman & Co. 8.06%
59 Wall Street
New York, NY 10005
Wells Fargo Bank, N.A. 6.63%
464 California Street
San Francisco, CA 94104
GERMANY
Brown Bros. Harriman & Co. 12.82%
59 Wall Street
New York, NY 10005
State Street Bank & Trust 10.18%
Company
1776 Heritage Drive
Quincy, MA 02171
The Bank of New York 8.76%
One Wall Street
New York, NY 10286
Morgan Stanley & Co. 5.17%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
Charles Schwab & Co., Inc. 5.01%
Newport Financial Center
111 Pavonia Avenue East,
3rd Floor
Jersey City, NJ 07310
HONG KONG
Salomon Smith Barney Inc. 9.44%
333 West 34th Street, 3rd
Floor
New York, NY 10001
Morgan Stanley & Co. 8.82%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
Charles Schwab & Co., Inc. 6.32%
Newport Financial Center
111 Pavonia Avenue East,
3rd Floor
Jersey City, NJ 07310
Merrill Lynch Pierce 6.28%
Fenner & Smith
Safekeeping
101 Hudson Street
Jersey City, NJ 07302
Brown Bros. Harriman & Co. 5.58%
59 Wall Street
New York, NY 10005
ITALY
Brown Bros. Harriman & Co. 21.61%
59 Wall Street
New York, NY 10005
The Bank of New York 16.57%
One Wall Street
New York, NY 10286
Bear, Stearns Securities Corp. 8.92%
One Metrotech Center
North
Brooklyn, NY 11201-3859
Citibank, N.A. 7.74%
1410 Westshore Blvd.
Tampa, FL 33607
JAPAN
Morgan Stanley & Co. 13.55%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
Citibank, N.A. 7.74%
1410 Westshore Blvd.
Tampa, FL 33607
Brown Bros. Harriman & Co. 6.49%
59 Wall Street
New York, NY 10005
State Street Bank & Trust 6.19%
Company
1776 Heritage Drive
Quincy, MA 02171
The Bank of New York 6.05%
One Wall Street
New York, NY 10286
MALAYSIA
(FREE)
Brown Bros. Harriman & Co. 10.68%
59 Wall Street
New York, NY 10005
State Street Bank & Trust 9.01%
Company
1776 Heritage Drive
Quincy, MA 02171
The Bank of New York 8.97%
One Wall Street
New York, NY 10286
Merrill Lynch Pierce 7.26%
Fenner & Smith
Safekeeping
101 Hudson Street
Jersey City, NJ 07302
Salomon Smith Barney Inc. 6.84%
333 West 34th Street, 3rd Floor
New York, NY 10001
Charles Schwab & Co., Inc. 5.08%
Newport Financial Center
111 Pavonia Avenue East,
3rd Floor
Jersey City, NJ 07310
MEXICO
(FREE)
Morgan Stanley & Co. 27.30%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
The Bank of New York 9.23%
One Wall Street
New York, NY 10286
Salomon Smith Barney Inc. 5.58%
333 West 34th Street, 3rd Floor
New York, NY 10001
NETHERLANDS
Brown Bros. Harriman & Co. 13.63%
59 Wall Street
New York, NY 10005
Morgan Stanley & Co. 11.80%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
The Bank of New York 9.32%
One Wall Street
New York, NY 10286
Citibank, N.A. 9.02%
1410 Westshore Blvd.
Tampa, FL 33607
Prudential Securities 6.76%
Incorporated
1 New York Plaza
9th Floor
New York, NY 10292
SINGAPORE
(FREE)
Charles Schwab & Co., Inc. 8.67%
Newport Financial Center
111 Pavonia Avenue East,
3rd Floor
Jersey City, NJ 07310
Morgan Stanley & Co. 7.87%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
Salomon Smith Barney Inc. 7.60%
333 West 34th Street, 3rd Floor
New York, NY 10001
Merrill Lynch Pierce 6.02%
Fenner & Smith
Safekeeping
101 Hudson Street
Jersey City, NJ 07302
National Financial 5.74%
Services Corporation
1 World Financial Center,
Tower A
New York, NY 10281
SPAIN
The Bank of New York 18.14%
One Wall Street
New York, NY 10286
Brown Bros. Harriman & Co. 11.88%
59 Wall Street
New York, NY 10005
Morgan Stanley & Co. 11.08%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
Citibank, N.A. 7.67%
1410 Westshore Blvd.
Tampa, FL 33607
SWEDEN
The Bank of New York 18.78%
One Wall Street
New York, NY 10286
Brown Bros. Harriman & Co. 9.91%
59 Wall Street
New York, NY 10005
Citibank, N.A. 9.05%
1410 Westshore Blvd.
Tampa, FL 33607
Merrill Lynch Pierce 7.26%
Fenner & Smith Safekeeping
101 Hudson Street
Jersey City, NJ 07302
Spear, Leeds & Kellogg 5.25%
120 Broadway
New York, NY 10271
SWITZERLAND
Morgan Stanley & Co. 14.22%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
Brown Bros. Harriman & Co. 13.30%
59 Wall Street
New York, NY 10005
Wells Fargo Bank, N.A. 12.28%
464 California Street
San Francisco, CA 94104
Citibank, N.A. 8.41%
1410 Westshore Blvd.
Tampa, FL 33607
State Street Bank & Trust 6.28%
Company
1776 Heritage Drive
Quincy, MA 02171
The Bank of New York 6.27%
One Wall Street
New York, NY 10286
UNITED KINGDOM
Brown Bros. Harriman & Co. 10.87%
59 Wall Street
New York, NY 10005
The Bank of New York 9.60%
One Wall Street
New York, NY 10286
State Street Bank & Trust 8.64%
Company
1776 Heritage Drive
Quincy, MA 02171
Citibank, N.A. 8.53%
1410 Westshore Blvd.
Tampa, FL 33607
Morgan Stanley & Co. 7.83%
Incorporated
One Pierrepont Plaza
Brooklyn, NY 11201
Prudential Securities 5.52%
Incorporated
1 New York Plaza, 9th Floor
New York, NY 10292
The Fund does not have information concerning the beneficial
ownership of the WEBS held in the names of such DTC Participants.
As of March 6, 2000, the Directors and Officers of the Fund owned
less than 1% of the outstanding Shares of each WEBS Index Series
of the Fund.
INFORMATION ABOUT THE ADVISER, ADMINISTRATOR,
SUB-ADMINISTRATOR AND DISTRIBUTOR
Barclays Global Fund Advisors serves as the Fund's investment
adviser. The Adviser is located at 45 Fremont Street, San
Francisco, California 94105.
PFPC Inc. (the "Administrator") serves as the Fund's
administrator and transfer agent. The Administrator is located
at 400 Bellevue Parkway, Wilmington, Delaware 19809.
Morgan Stanley & Co. Incorporated (the "Sub-Administrator")
serves as the Fund's sub-administrator. The Sub-Administrator is
located at 1585 Broadway, New York, New York 10036.
SEI Investments Distribution Company (the "Distributor") has
been approved to serve as the Fund's distributor, effective on or
about March 28, 2000. The Distributor is located at One Freedom
Valley Drive, Oaks, Pennsylvania 19456.
SHAREHOLDER PROPOSALS
A shareholder proposal intended to be represented at any meeting
hereafter called must be received by the Fund within a reasonable
time before the solicitation relating thereto is made in order to
be included in the notice of meeting, proxy statement and form of
proxy relating to such meeting. As noted above, it is not
anticipated that shareholder meetings will be held on an annual
basis. The submission by a shareholder of a proposal for
inclusion in the proxy statement does not guarantee that it will
be included. Shareholder proposals are subject to certain
regulations under federal law.
OTHER MATTERS
No business other than the matters described above is expected to
come before the Meeting with respect to the Fund. Should any
other matter requiring a vote of shareholders arise, the persons
named in the enclosed form of Proxy will vote thereon according
to their best judgment in the interests of the Fund, except that
they will vote Proxies for or against any proposed adjournment of
the Meeting as discussed under "Voting Information ? Quorum"
above.
Dated: March 18, 2000
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND
WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
[TEXT SURROUNDED BY < > INDICATES DELETIONS
CAPITALIZED TEXT INDICATES ADDITIONS]
ADVISORY AGREEMENT
AGREEMENT made as of the <5th> __TH day of <March,
1996>_______, 2000 between <BZW> Barclays Global Fund Advisors, a
corporation organized under the laws of the State of California
(the "Adviser"), and <Foreign> WEBS INDEX Fund, Inc., a Maryland
corporation (the "Company").
WHEREAS, the Adviser is engaged principally in the business
of rendering investment management services and is registered as
an investment adviser under the Investment Advisers Act of 1940,
as amended <(the "1940 Act")>; and
WHEREAS, the Company <proposes to engage> ENGAGES in the
business of an open-end management investment company and is
registered as such under the <1940 Act> INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE "1940 ACT"); and
WHEREAS, the Company is authorized to issue shares of
beneficial interest in separate series with each such series
representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Company intends initially to offer shares
representing interests in each of the separate portfolios
identified on Schedule A hereto (each, <an "Initial Fund" and
collectively, the "Initial Funds> A "SERIES"); and
WHEREAS, the Company desires to appoint the Adviser to serve
as the investment adviser with respect to each< of the Initial
Funds> SERIES; and
WHEREAS, the Company may, from time to time, offer shares
representing interests in one or more additional portfolios
(each, an "Additional <Fund" and collectively, the "Additional
Funds> SERIES"); and
WHEREAS, the Company may desire to appoint the Adviser as
the investment adviser with respect to one or more< of the
"Additional Funds" (each such Additional Fund and Initial Fund
being referred to herein individually as a "Fund" and
collectively as the "Funds");> ADDITIONAL SERIES;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. APPOINTMENT OF ADVISER
a. <Initial Funds> SERIES. The Company hereby appoints
the Adviser to act as investment adviser for the
<Initial Funds> SERIES LISTED ON SCHEDULE A for the
period and on the terms herein set forth. The Adviser
accepts such appointment and agrees to render the
services herein set forth, for the compensation herein
provided.
b. Additional <Funds> SERIES. In the event the Company
desires to retain the Adviser to render investment
advisory services hereunder with respect to any
Additional <Fund> SERIES, it shall so notify the
Adviser in writing, indicating the advisory fee to be
payable with respect to the Additional <Fund,> SERIES.
If the Adviser is willing to render such services for
such fee and on the terms provided for herein, it shall
so notify the Company in writing, whereupon such
Additional <Fund> SERIES shall become a <Fund> SERIES
hereunder.
2. DUTIES OF THE ADVISER
THE ADVISER SHALL BE RESPONSIBLE FOR THE GENERAL MANAGEMENT
OF THE COMPANY'S AFFAIRS. The Adviser, at its own expense
(subject to the overall supervision and review of the Board
of Directors of the Company), shall (i) furnish continuously
an investment program for each <Fund> SERIES in compliance
with that <Fund's> SERIES' investment objective and
policies, as set forth in the then-current prospectus and
statement of additional information for such <Fund> SERIES
contained in the Company's Registration Statement on Form
N-lA, as such prospectus and statement of additional
information is amended or supplemented from time to time,
(ii) determine what investments shall be purchased, held,
sold or exchanged for each <Fund> SERIES and what portion,
if any, of the assets of each <Fund> SERIES shall be held
uninvested, (iii) make changes on behalf of the Company in
the investments for each <Fund> SERIES and (iv) provide the
Company with records concerning the Adviser's activities
that the Company is required to maintain and render reports
to the Company's officers and Board of Directors concerning
the Adviser's discharge of the foregoing responsibilities.
The Adviser shall furnish to the Company all office
facilities, equipment, services and executive and
administrative personnel necessary for managing the
investment program of the Company for each Fund.
3. ALLOCATION OF EXPENSES
<Except for expenses incurred by the Adviser in providing
the services set forth in Paragraph 2 above, the Company
assumes and shall> SUBJECT TO SECTION 4 BELOW, THE COMPANY
SHALL BE RESPONSIBLE FOR AND pay all expenses for <all
other> Company operations and activities. <The expenses to
be borne by the Company shall include, without limitation:>
<(1) all expenses of organizing the Company or forming any series
thereof;>
<(2) all expenses (including information, materials and services
other than services of the Adviser) of preparing, printing and
mailing all annual. semiannual and periodic reports, proxy
materials and other communications (including registration
statements, prospectuses and amendments and revisions thereto)
furnished to existing shareholders of the Company and/or
regulatory authorities;>
<(3) fees involved in registering and maintaining registration of
the Company and its shares with the Securities and Exchange
Commission and state regulatory authorities;>
<(4) any other registration, filing or other fees in connection
with requirements of regulatory authorities;>
<(5) expenses, including the cost of printing of certificates
relating to the issuance of shares of the Company;>
<(6) to the extent not paid by the Company's distributor, the
expenses of maintaining a shareholder account and furnishing, or
causing to be furnished, to each shareholder a statement of
account, including the expense of mailing such statements;>
<(7) taxes and similar fees payable by the Company;>
<(8) expenses related to the redemption of its shares;>
<(9) all issue and transfer taxes, brokers' commissions and other
costs chargeable to the Company in connection with securities
transactions to which the Company is a party, including any
portion of such commissions attributable to research and
brokerage services as defined by Section 28(e) of the Securities
Exchange Act of 1934, as amended from time to time (the "1934
Act");>
<(10) the charges and expenses of the custodian appointed by the
Company, or any depository utilized by such custodian, for the
safekeeping of its property;>
<(11) the charges and expenses of any lending agent appointed by
the Company and all borrowers' rebates and similar fees payable
by the Company in connection with any loan transaction;>
<(12) charges and expenses of any administrator and/or accounting
and recordkeeping agent appointed by the Company;>
<(13) charges and expenses of any shareholder servicing agent,
transfer agent and registrar appointed by the Company, including
costs of servicing shareholder investment accounts;>
<(14) charges and expenses of independent accountants retained by
the Company;>
<(15) legal fees and expenses in connection with the affairs of
the Company, including legal fees and expenses in connection with
registering and qualifying its shares with federal and state
regulatory authorities;>
<(16) compensation and expenses of Directors of the Company who
are not "affiliated persons" (as defined in the 1940 Act) of the
Adviser;>
<(17) expenses of shareholders' and Directors' meetings;>
<(18) membership dues in, and assessments of, the Investment
Company Institute or similar organizations;>
<(19) insurance premiums on fidelity, errors and omissions and
other coverages;>
<(20) expenses incurred in connection with any distribution plan
adopted by the Company in compliance with Rule 12b-1 of the 1940
Act; and>
<(21) such other non-recurring expenses of the Company as may
arise, including expenses of actions, suits, or proceedings to
which the Company is a party and the legal obligation which the
Company may have to indemnify its Directors or shareholders with
respect thereto.>
4. ADVISORY FEE
For the services to be provided by the Adviser hereunder
with respect to each <Fund> SERIES, the Company shall pay to
the Adviser an annual gross investment advisory fee equal to
the amount set forth on Schedule A attached hereto;
PROVIDED, HOWEVER, THAT THE FEE PAID TO THE ADVISER WITH
RESPECT TO EACH SERIES SHALL BE REDUCED BY THE AGGREGATE OF
SUCH SERIES' FEES AND EXPENSES, OTHER THAN (I) EXPENSES OF
THE SERIES INCURRED IN CONNECTION WITH THE EXECUTION OF
PORTFOLIO SECURITIES TRANSACTIONS ON BEHALF OF SUCH SERIES,
(II) EXPENSES INCURRED IN CONNECTION WITH ANY DISTRIBUTION
PLAN ADOPTED BY THE COMPANY IN COMPLIANCE WITH RULE 12B-1
UNDER THE 1940 ACT, (III) LITIGATION EXPENSES, (IV) TAXES
(INCLUDING, BUT NOT LIMITED TO, INCOME, EXCISE, TRANSFER AND
WITHHOLDING TAXES), (V) ANY COST OR EXPENSE THAT A MAJORITY
OF THE DIRECTORS OF THE COMPANY WHO ARE NOT "INTERESTED
PERSONS" (AS DEFINED IN THE 1940 ACT) DEEMS TO BE AN
EXTRAORDINARY EXPENSE AND (VI) THE ADVISORY FEE PAYABLE TO
THE ADVISER HEREUNDER; AND PROVIDED, FURTHER, THAT THE
ADVISER SHALL REIMBURSE THE COMPANY TO THE EXTENT THAT THE
EXPENSES OF ANY SERIES (OTHER THAN THE EXPENSES SET FORTH IN
THE FOREGOING PROVISO) EXCEED THE AMOUNT SET FORTH IN
SCHEDULE A WITH RESPECT TO SUCH SERIES.
Schedule A shall be amended from time to time to reflect the
addition and/or termination of any <Fund> Series as a <Fund>
SERIES hereunder and to reflect any change in the advisory
fees payable with respect to any <Fund> SERIES duly approved
in accordance with Section 7(b) hereunder. All fees payable
hereunder shall be accrued daily and paid as soon as
practical practicable after the last day of each calendar
quarter.
In the case of commencement or termination of this Agreement
with respect to any <Fund> SERIES during any calendar
quarter, the fee with respect to such <Fund> SERIES for that
quarter shall be reduced proportionately based upon the
number of calendar days during which it is in effect, and
the fee shall be computed upon the average daily net assets
of such <Fund> SERIES for the days during which it is in
effect.
5. PORTFOLIO TRANSACTIONS
In connection with the management of the investment and
reinvestment of the assets of the Company, the Adviser,
acting by its own officers, directors or employees, is
authorized to select the brokers or dealers that will
execute purchase and sale transactions for the Company. In
executing portfolio transactions and selecting brokers or
dealers, if any, the Adviser will use its best efforts to
seek on behalf of a <Fund> SERIES the best overall terms
available. In assessing the best overall terms available for
any transaction, the Adviser shall consider all factors it
deems relevant, including the breadth of the market in and
the price of the security, the financial condition and
execution capability of the broker or dealer, and the
reasonableness of the commission, if any (for the specific
transaction and on a continuing basis). In evaluating the
best overall terms available, and in selecting the broker or
dealer, if any, to execute a particular transaction, the
Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the
1934 Act) provided to any <Fund> SERIES of the Company. The
Adviser may pay to a broker or dealer who provides such
brokerage and research services a commission for executing a
portfolio transaction which is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction if, but only if, the Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided. The Company acknowledges that any such
research may be useful to the Adviser in connection with
other accounts managed by it.
6. LIABILITY OF ADVISER
a. Neither the Adviser nor its officers, directors,
employees, agents or controlling persons or assigns shall be
liable for any error of judgment or mistake of law or for
any loss suffered by the Company or its shareholders in
connection with the matters to which this Agreement relates;
provided, HOWEVER, that no provision of this Agreement shall
be deemed to protect the Adviser against any liability to
the Company or its shareholders to which it might otherwise
be subject by reason of any willful misfeasance, bad faith
or gross negligence in the performance of its duties or the
reckless disregard of its obligations and duties under this
Agreement.
<b. The Company, on behalf of each Fund, hereby agrees to
indemnify and hold harmless the Adviser, its directors, officers
and employees and each person, if any, who controls the Adviser
(collectively, the "Indemnified Parties") against any and all
losses, claims, damages or liabilities (including reasonable
attorneys fees and expenses), joint or several, relating to a
Fund, to which any such Indemnified Party may become subject
under the Securities Act of 1933, as amended (the 1933 Act), the
1934 Act, the Investment Advisers Act of 1940, as amended, the
1940 Act or other federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission
to state a material fact required to be stated or necessary to
make the statements made not misleading in (x) the Registration
Statement or the prospectus, (y) any advertisement or sales
literature authorized by the Company for use in the offer and
sale of shares of the Fund, or (z) any application or other
document filed in connection with the qualification of the
Company or shares of the Fund under the Blue Sky or securities
laws of any jurisdiction, except insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission (1) in a document prepared
by the Adviser, or (2) made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the
Adviser pertaining to or originating with the Adviser for use in
connection with any document referred to in clauses (x), (y) or
(z), or (ii) subject in each case to clause (i) above, the
Adviser acting as investment adviser to the Company with respect
to the Fund;>
<c. It is understood, however, that nothing in this paragraph 6
shall protect any Indemnified Party against, or entitle any
Indemnified Party to, indemnification against any liability to
the Company or its shareholders to which such Indemnified Party
is subject, by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason
of any reckless disregard of its obligations and duties, under
this Agreement or otherwise to an extent or in a manner
inconsistent with Section 17(i) of the 1940 Act.>
7. DURATION AND TERMINATION OF THIS AGREEMENT
a. Duration. This Agreement shall become effective with
respect to each <Initial> <Fund> SERIES on the date
hereof and, with respect to any Additional <Fund>
SERIES, on the date specified in the written notice
received by the Company from the Adviser in accordance
with paragraph 1(b) hereof that the Adviser is willing
to serve as Adviser with respect to such <Fund> SERIES.
Unless terminated as herein provided, this Agreement
shall remain in full force and effect for two years ONE
YEAR from the date hereof with respect to each
<Initial> <Fund> SERIES and, with respect to each
Additional <Fund> SERIES, for two years from the date
on which such <Fund> SERIES becomes a <Fund> SERIES
hereunder. Subsequent to such initial periods of
effectiveness, this Agreement shall continue in full
force and effect for periods of one year thereafter
with respect to each <Fund> SERIES so long as such
continuance with respect to such <Fund> SERIES is
approved at least annually (i) by either the Directors
of the Company or by vote of a majority of the
outstanding voting securities (as defined in the 1940
Act) of such <Fund> SERIES, and (ii), in either event,
by the vote of a majority of the Directors of the
Company who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for
the purpose of voting on such approval.
b. Amendment. Any amendment to this Agreement shall
become effective with respect to a <Fund> SERIES upon
approval of the Adviser and of a majority of
<directors> DIRECTORS who are not parties to this
Agreement or "interested persons" (as defined in the
1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting such approval
and a majority of the outstanding voting securities (as
defined in the 1940 Act) of that <Fund> SERIES.
c. Termination. This Agreement may be terminated with
respect to any <Fund> SERIES at any time, without
payment of any penalty, by vote of the Directors or by
vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of that <Fund> SERIES, or
by the Adviser, in each case on sixty (60) days' prior
written notice to the other party; provided, that a
shorter notice period shall be permitted for a <Fund>
SERIES in the event its shares are no longer listed on
a national securities exchange.
d. Automatic Termination. This Agreement shall
automatically and immediately terminate in the event of
its "assignment" (as defined in the 1940 Act).
e. Approval, Amendment or Termination by a <Fund> SERIES.
Any approval, amendment or termination of this
Agreement by the holders of a "majority of the
outstanding voting securities" (as defined in the 1940
Act) of any <Fund> SERIES shall be effective to
continue, amend or terminate this Agreement with
respect to any such <Fund> SERIES notwithstanding (i)
that such action has not been approved by the holders
of a majority of the outstanding voting securities of
any other <Fund> SERIES affected thereby, and (ii) that
such action has not been approved by the vote of a
majority of the outstanding voting securities of the
Company, unless such action shall be required by any
applicable law or otherwise.
8. SERVICES NOT EXCLUSIVE
The services of the Adviser to the Company hereunder are not
to be deemed exclusive, and the Adviser shall be free to
render similar services to others so long as its services
hereunder are not impaired thereby.
9. MISCELLANEOUS
a. "ISHARES" NAME. THE COMPANY SHALL, AT THE REQUEST OF
THE ADVISER, STOP ALL USE OF THE "ISHARES" NAME IN THE
EVENT THAT THE ADVISER OR ITS AFFILIATES IS NO LONGER
THE COMPANY'S INVESTMENT ADVISER.
b. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage
prepaid, to the other party at such address as such
other party may designate in writing for the receipt of
such notices.
b. c. Severability. If any provision of this Agreement
shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder shall not be
thereby affected.
c d. Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of New York.
d e. Execution by Counterpart. This Agreement may be
executed in any number of counterparts, all of which
together shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
<FOREIGN> WEBS INDEX FUND, INC.
By:
_________________________
Name:
Title:
<BZW> BARCLAYS GLOBAL FUND ADVISORS
By:
_________________________
Name:
Title:
ANNEX A
Schedule A
Advisory Fee* for the <initial funds:> CATEGORY I SERIES:
<0.27%> 0.59% per annum of the aggregate net assets of the
<Initial Funds> CATEGORY I SERIES less than or equal to<
$1.7B> $7.0 BILLION
plus <0.15%> 0.54% per annum of the aggregate net assets of
the <Initial Funds between $l.7B and $7B> CATEGORY I SERIES
BETWEEN $7.0 BILLION AND $11.0 BILLION
<plus 0.12%> PLUS 0.49% per annum of the aggregate net
assets of the <Initial Funds between $7B and $l0B> CATEGORY
I SERIES IN EXCESS OF $11.0 BILLION
<plus 0.08%> CATEGORY I SERIES:
AUSTRALIA WEBS INDEX SERIES
AUSTRIA WEBS INDEX SERIES
BELGIUM WEBS INDEX SERIES
CANADA WEBS INDEX SERIES
EMU WEBS INDEX SERIES
FRANCE WEBS INDEX SERIES
GERMANY WEBS INDEX SERIES
HONG KONG WEBS INDEX SERIES
ITALY WEBS INDEX SERIES
JAPAN WEBS INDEX SERIES
MALAYSIA WEBS INDEX SERIES
MEXICO (FREE) WEBS INDEX SERIES
NETHERLANDS WEBS INDEX SERIES
SINGAPORE (FREE) WEBS INDEX SERIES
SPAIN WEBS INDEX SERIES
SWEDEN WEBS INDEX SERIES
SWITZERLAND WEBS INDEX SERIES
UNITED KINGDOM WEBS INDEX SERIES
USA WEBS INDEX SERIES
ADVISORY FEE* FOR CATEGORY II SERIES:
0.74% PER ANNUM OF THE AGGREGATE NET ASSETS OF THE CATEGORY
II SERIES INITIAL FUNDS IN EXCESS OF $L0B
LESS THAN OR EQUAL TO $2 BILLION
PLUS 0.69% PER ANNUM OF THE AGGREGATE NET ASSETS OF THE
CATEGORY II SERIES BETWEEN $2 BILLION AND $4 BILLION
PLUS 0.64% PER ANNUM OF THE AGGREGATE NET ASSETS OF THE
CATEGORY II SERIES GREATER THAN $6 BILLION
CATEGORY II SERIES:
BRAZIL WEBS INDEX SERIES
GREECE WEB WEBS INDEX SERIES
INDONESIA WEB WEBS INDEX SERIES
KOREA WEB WEBS INDEX SERIES
PORTUGAL WEB WEBS INDEX SERIES
SOUTH AFRICA WEB WEBS INDEX SERIES
THAILAND WEB WEBS INDEX SERIES
TAIWAN WEB WEBS INDEX SERIES
TURKEY WEB INDEX SERIES WEBS INDEX SERIES
* Pursuant to Section 4 of this Advisory Agreement, the fee rates for
a Series set forth in this Schedule A will be reduced, possibly to zero,
by the expenses of the Series.A-10
FORM OF PROXY
WEBS INDEX FUND, INC.
This Proxy is solicited on behalf of the Board of Directors
of WEBS Index Fund, Inc. (the "Fund") for use at a special
meeting of the Fund's shareholders to be held at the offices
of the Fund's administrator and fund accounting agent, PFPC
Inc., at 400 Bellevue Parkway, Wilmington, Delaware 19809,
on March 6, 2000, at 10:00 a.m. (Eastern Time).
The undersigned hereby appoints Gary M. Gardner, R. Sheldon
Johnson and John P. Falco, and each of them, with full power
of substitution, as proxies of the undersigned to vote at
the above-stated special meeting, and at all adjournments or
postponements thereof, casting votes according to the number
of shares of the WEBS Index Series indicated on the reverse
side of this proxy which the undersigned may be entitled to
vote with respect to the proposals set forth on the reverse
side.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS OF THE FUND AND THE PROXY
STATEMENT DATED MARCH 25, 2000.
Signature: ______________ Date: ___________________
Signature: ______________ Date: ___________________
Please sign above exactly as your name(s) appear(s) hereon.
Corporate or partnership proxies should be signed in full
corporate or partnership name by an authorized officer.
Each joint owner should sign personally. When signing as a
fiduciary, please give full title as such.
(Continued on Reverse)
FORM OF PROXY
This proxy will be voted as specified below with respect
to the action to be taken on the following proposals. In
the absence of any specification, this proxy will be voted
in favor of the proposals.
WEBS INDEX FUND, INC.
PROPOSAL 1: To approve amendments to the Fund's Advisory Agreement.
FOR ____ AGAINST ____ ABSTAIN ____
SHARES VOTED
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
_______________________________
CANADA WEBS INDEX SERIES
Proposal 2: To approve a change to the Canada WEBS Index
Series' subclassification from diversified to non-diversified.
FOR ____ AGAINST ____ ABSTAIN ____
SHARES VOTED ____________
JAPAN WEBS INDEX SERIES
Proposal 3: To approve a change to the Japan WEBS Index
Series' subclassification from diversified to non-diversified.
FOR ____ AGAINST ____ ABSTAIN ____
SHARES VOTED ___________
UNITED KINGDOM WEBS INDEX SERIES
Proposal 4: To approve a change to the United Kingdom WEBS
Index Series' subclassification from diversified to non-
diversified.
FOR ____ AGAINST ____ ABSTAIN ____
SHARES VOTED _____________________
In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Special
Meeting or any adjournment thereof.
