-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UTf8FNHb2GWgrMbAodeq26xxm4LK/reBkrAEyIhGiPIxc8LfSl6TKDAidaryxPqk FrHSeNuBPQc4FqtFkLFTqg== 0000912057-96-003636.txt : 19960304 0000912057-96-003636.hdr.sgml : 19960304 ACCESSION NUMBER: 0000912057-96-003636 CONFORMED SUBMISSION TYPE: N-1A EL/A PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19960301 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREIGN FUND INC CENTRAL INDEX KEY: 0000930667 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MD FILING VALUES: FORM TYPE: N-1A EL/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-97598 FILM NUMBER: 96529575 FILING VALUES: FORM TYPE: N-1A EL/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-09102 FILM NUMBER: 96529576 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027912919 N-1A EL/A 1 N-1A EL/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1996 REGISTRATION NO. 33-97598 811-9102 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/ PRE-EFFECTIVE AMENDMENT NO. 2 /X/ POST-EFFECTIVE AMENDMENT NO. / / AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/ AMENDMENT NO. 2 /X/ (CHECK APPROPRIATE BOX OR BOXES) FOREIGN FUND, INC. (Exact name of registrant as specified in charter) C/O PFPC INC. 19809 400 BELLEVUE PARKWAY (Zip Code) WILMINGTON, DELAWARE (Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (302) 791-1700 JOHN E. PELLETIER PRESIDENT FOREIGN FUND, INC. C/O PFPC INC. 400 BELLEVUE PARKWAY WILMINGTON, DELAWARE 19809 (Name and Address of Agent for Service) COPIES TO: Donald R. Crawshaw Esq. Sullivan & Cromwell 125 Broad Street New York, New York 10004 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. It is proposed that this filing will become effective (check appropriate box) / / immediately upon filing pursuant to paragraph (b) / / on (date) pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a)(i) / / on (date) pursuant to paragraph (a)(i) / / 75 days after filing pursuant to paragraph (a)(ii) / / on (date) pursuant to paragraph (a)(ii) of rule 485. If appropriate, check the following box: / / this post-effective amendment designates a new effective date for a previously filed post-effective amendment. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CROSS REFERENCE SHEET (AS REQUIRED BY RULE 495)
N-1A ITEM NO. LOCATION - ------------- ------------------------------------------------ PART A Item 1. Cover Page...................................... Cover Page Item 2. Synopsis........................................ Summary Expenses Item 3. Condensed Financial Information................. Not Applicable Item 4. General Description of Registrant............... Cover Page; Foreign Fund, Inc. and Its Investment Objective; Investment Policies; General Information Item 5. Management of the Fund.......................... Summary Expenses; Management of the Fund Item 5A. Management's Discussion of Fund Performance..... Not Applicable Item 6. Capital Stock and Other Securities.............. World Equity Benchmark Shares: "WEBS"; Dividends and Capital Gains Distributions; General Information Item 7. Purchase of Securities Being Offered............ Management of the Fund; Exchange Listing and Trading of WEBS; Purchase and Issuance of WEBS in Creation Units Item 8. Redemption or Repurchase........................ Redemption of WEBS in Creation Units Item 9. Pending Legal Proceedings....................... Not Applicable PART B Item 10. Cover Page...................................... Cover Page Item 11. Table of Contents............................... Table of Contents Item 12. General Information and History................. General Description of the Fund Item 13. Investment Objectives and Policies.............. Investment Policies and Restrictions; Brokerage Transactions Item 14. Management of the Fund.......................... Management of the Fund; Investment Advisory, Management, Administrative and Distribution Services Item 15. Control Persons and Principal Holders of Securities..................................... Management of the Fund; Investment Advisory, Management, Administrative and Distribution Services Item 16. Investment Advisory and Other Services.......... Management of the Fund; Investment Advisory, Management, Administrative and Distribution Services; Counsel and Independent Accountants Item 17. Brokerage Allocation............................ Brokerage Transactions Item 18. Capital Stock and Other Securities.............. Capital Stock and Shareholder Reports; Taxes Item 19. Purchase, Redemption and Pricing of Securities Being Offered.................................. Purchase and Issuance of WEBS in Creation Units; Redemption of WEBS in Creation Units; Determining Net Asset Value
N-1A ITEM NO. LOCATION - ------------- ------------------------------------------------ Item 20. Tax Status...................................... Dividends and Distributions; Taxes Item 21. Underwriters.................................... Investment Advisory, Management, Administrative and Distribution Services; Purchase and Issuance of WEBS in Creation Units Item 22. Calculations of Performance Data................ Not Applicable Item 23. Financial Statements............................ Financial Statements PART C Information required to be included in Part C is set forth under the appropriate Item, so numbered in Part C of this Registration Statement.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PRELIMINARY PROSPECTUS [LOGO] SUBJECT TO COMPLETION, DATED MARCH 1, 1996 WORLD EQUITY BENCHMARK SHARES-SM- FOREIGN FUND, INC. Foreign Fund, Inc. (the "Fund") is an "index" fund consisting of separate series (each, an "Index Series"), each of which invests primarily in common stocks in an effort to track the performance of a specified foreign equity market index. The initial seventeen Index Series offered by this Prospectus are the Australia Index Series, the Austria Index Series, the Belgium Index Series, the Canada Index Series, the France Index Series, the Germany Index Series, the Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index Series, the Mexico (Free) Index Series, the Netherlands Index Series, the Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series, the Switzerland Index Series and the United Kingdom Index Series. The investment objective of each of the initial seventeen Index Series is to seek to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the aggregate in particular markets, as represented by a particular foreign equity securities index compiled by Morgan Stanley Capital International ("MSCI"). THE MSCI INDICES UTILIZED BY THE FUND REFLECT THE REINVESTMENT OF NET DIVIDENDS (EXCEPT FOR THE MSCI MEXICO (FREE) INDEX UTILIZED BY THE MEXICO (FREE) INDEX SERIES, WHICH REFLECTS THE REINVESTMENT OF GROSS DIVIDENDS). The shares of common stock of each Index Series are sometimes referred to as "World Equity Benchmark Shares-SM-" or "WEBS-SM-". Application has been made to list the WEBS for trading on the American Stock Exchange, Inc. (the "AMEX"). It is expected that the non-redeemable WEBS will trade on the AMEX during the day at prices that differ to some degree from their net asset value. There can be no assurance that an active trading market will develop for the WEBS. See "Investment Considerations and Risks" for a discussion of certain investment considerations and risks that should be considered by potential investors. The Fund will issue and redeem WEBS of each Index Series only in aggregations of a specified number of shares (each, a "Creation Unit") at net asset value. EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF THE FUND. The Fund will be managed and advised by BZW Barclays Global Fund Advisors (the "Adviser"). PFPC Inc. (the "Administrator") will provide certain administrative services to each Index Series of the Fund. Funds Distributor, Inc. (the "Distributor") will serve as the principal underwriter and distributor of the Fund's shares. The Distributor will not maintain a secondary market in WEBS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. This Prospectus sets forth the information about the Fund that an investor should know before investing. It should be read and retained for future reference. A Statement of Additional Information dated March , 1996, provides further discussion of certain topics referred to in this Prospectus and other matters which may be of interest to investors. The Statement of Additional Information has been filed with the Securities and Exchange Commission (the "SEC") and is incorporated herein by reference. The Statement of Additional Information may be obtained without charge by writing to the Fund or the Distributor. The Fund's and each Index Series' address is Foreign Fund, Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809. DISTRIBUTOR: FUNDS DISTRIBUTOR, INC. INVESTOR INFORMATION: 1-800-XXX-XXXX PROSPECTUS DATED , 1996 NOT FOR DISTRIBUTION--FOR INFORMATION ONLY NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER OF THE FUND'S SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SHARES IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY MAY NOT LAWFULLY BE MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. ------------------------ DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS. ------------------------ TABLE OF CONTENTS
PAGE ----- Prospectus Summary......................................................................................... 3 Summary of Fund Expenses................................................................................... 5 The Fund and its Index Series.............................................................................. 11 Foreign Fund, Inc. and its Investment Objective.......................................................... 11 World Equity Benchmark Shares: "WEBS".................................................................... 11 Who Should Invest?....................................................................................... 11 Investment Policies...................................................................................... 12 Implementation of Policies............................................................................... 13 Investment Limitations................................................................................... 15 The Benchmark MSCI Indices Utilized by the Index Series.................................................. 16 Management of the Fund................................................................................... 23 Exchange Listing and Trading of WEBS..................................................................... 25 Investment Considerations and Risks...................................................................... 26 Determination of Net Asset Value......................................................................... 28 Creation Units........................................................................................... 29 Purchase and Issuance of WEBS in Creation Units.......................................................... 29 Redemption of WEBS in Creation Units..................................................................... 30 Dividends and Capital Gains Distributions................................................................ 30 Tax Matters.............................................................................................. 31 Book-Entry Only System................................................................................... 32 Performance.............................................................................................. 33 General Information...................................................................................... 33 Available Information.................................................................................... 34
------------------------ "World Equity Benchmark Shares" and "WEBS" are service marks of Morgan Stanley Group Inc. "MSCI" and "MSCI Indices" are service marks of Morgan Stanley & Co. Incorporated used under license by the Fund. 2 PROSPECTUS SUMMARY The Fund and its Index Series......... Foreign Fund, Inc. (the "Fund") is an "index" fund consisting of separate series (each, an "Index Series"), the Australia Index Series, the Austria Index Series, the Belgium Index Series, the Canada Index Series, the France Index Series, the Germany Index Series, the Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index Series, the Mexico (Free) Index Series, the Netherlands Index Series, the Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series, the Switzerland Index Series and the United Kingdom Index Series. Investment Objective of the Index Series......................... The investment objective of each of the Index Series is to seek to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the aggregate in particular markets, as represented by a particular foreign equity securities index compiled by Morgan Stanley Capital International ("MSCI"). THE MSCI INDICES UTILIZED BY THE FUND REFLECT THE REINVESTMENT OF NET DIVIDENDS (EXCEPT FOR THE MSCI MEXICO (FREE) INDEX UTILIZED BY THE MEXICO (FREE) INDEX SERIES, WHICH REFLECTS THE REINVESTMENT OF GROSS DIVIDENDS). WEBS.................................. The shares issued in respect of each Index Series are referred to as "World Equity Benchmark Shares" or "WEBS". WEBS of an Index Series are issued by the Fund only in large aggregations of WEBS called "Creation Units" on a continuous basis through the Distributor at their net asset value next determined after receipt of an order. WEBS are not offered by the Fund in less than Creation Unit aggregations, but shares of WEBS may be bought or sold in the secondary market. EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF THE FUND. Exchange Listing and Trading of WEBS.. Application has been made to list the WEBS for secondary market trading on the American Stock Exchange. A "round lot" of WEBS is 100 shares. The initial price per share of the WEBS of each Index Series is expected to be between $10 and $20, although there can be no assurance of this price range or that an active trading market will develop for WEBS of a particular Index Series. Who Should Invest?.................... WEBS are designed for investors who seek a relatively low-cost "passive" approach for investing in a portfolio of equity securities of companies located in the country of the subject MSCI Index. Unlike equity mutual funds that seek to "beat" market averages with unpredictable results, the Index Series seek to provide investment results that correspond generally to the price and yield performance of their respective benchmark indices. See "Investment Considerations and Risks" for a discussion of certain investment considerations and risks that should be considered by potential investors. Fund Management....................... ADVISER. BZW Barclays Global Fund Advisors is the Adviser to the Fund and, subject to the supervision of the Board of Directors of the Fund, will be responsible for the investment management of each Index Series. ADMINISTRATOR. PFPC Inc. is the Administrator of the Fund, and will perform certain clerical, fund accounting, recordkeeping and bookkeeping services in such capacity. DISTRIBUTOR. Funds Distributor, Inc. is the Distributor of WEBS in Creation Unit aggregations. CUSTODIAN AND LENDING AGENT. Morgan Stanley Trust Company serves as the Custodian for the cash and portfolio securities of each Index Series, as well as Lending Agent of the portfolio securities of each Index Series.
3 THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED ("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY FOREIGN FUND, INC. THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL INTERNATIONAL S.A. WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY INDEX SERIES OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE WEBS OF ANY INDEX SERIES PARTICULARLY OR THE ABILITY OF THE INDICES IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK ("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND CALCULATED WITHOUT REGARD TO THE WEBS OF ANY INDEX SERIES OR THE ISSUER THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OF THE WEBS OF ANY INDEX SERIES OR THE OWNERS OF THE WEBS OF ANY INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE WEBS OF ANY INDEX SERIES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY INDEX SERIES IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY INDEX SERIES. ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE, NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MSCI INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR CIPSA HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. ------------------------ The information contained herein regarding MSCI, the MSCI Indices, local securities markets and DTC was obtained from publicly available sources. 4 SUMMARY OF FUND EXPENSES The purpose of the following tables is to assist investors in understanding the various costs and expenses an investor will bear directly and indirectly in respect of each Index Series of the Fund. The tables show all expenses and fees the Fund is expected to incur. "Other Expenses" are based on estimated amounts for the current fiscal year expressed as a percent of average net assets. The examples set forth below are presented for an investment of $1,000 (see next paragraph) as required by rules of the SEC. THE EXAMPLES IN THE TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The notes to the tables and the information under "Explanation of Tables" should be carefully reviewed when reading the tables. As of February 22, 1996, the approximate minimum value of a portfolio of index securities comprising a deposit of a designated portfolio of equity securities constituting an optimized representation of the subject MSCI Index ("Deposit Securities") for an in-kind purchase or redemption of a Creation Unit of WEBS of each Index Series would have been as follows: the Australia Index Series, $1,945,445; the Austria Index Series, $1,106,474; the Belgium Index Series, $592,238; the Canada Index Series, $1,007,589; the France Index Series, $2,515,209; the Germany Index Series, $4,016,230; the Hong Kong Index Series, $1,046,255; the Italy Index Series, $2,050,122; the Japan Index Series, $8,922,139; the Malaysia Index Series, $1,002,350; the Mexico (Free) Index Series, $984,512; the Netherlands Index Series, $793,960; the Singapore (Free) Index Series, $1,312,727; the Spain Index Series, $1,063,685; the Sweden Index Series, $1,026,640; the Switzerland Index Series, $1,619,444; and the United Kingdom Index Series, $2,499,129. The foregoing values are estimates based on information available on February 22, 1996, 1996. The actual dollar value on any particular day will fluctuate and may be greater or less than such values. 5
AUSTRALIA AUSTRIA BELGIUM CANADA INDEX FRANCE INDEX INDEX SERIES INDEX SERIES INDEX SERIES SERIES SERIES ------------ ------------ ------------ ------------ ------------ A. Shareholder Transaction Expenses Maximum Sales Load Imposed on Purchases of Creation Units of WEBS (as a percentage of amount of investment).................. None None None None None Maximum Transaction Fee (a) for Purchase of one Creation Unit of WEBS: In-kind and Cash Purchases (b)........................... $3,830 $1,750 $1,500 $4,000 $4,200 Additional Variable Charge for Cash Purchases (NOTE - The Fund will not ordinarily permit cash purchases.)(b).... .60% .67% .30% .18% .22% Deferred Sales Load.............. None None None None None Maximum Redemption Transaction Fee (a) for Redemption of one Creation Unit of WEBS: In-kind and Cash Redemptions (c)........................... $3,830 $1,750 $1,500 $4,000 $4,200 Additional Variable Charge for Cash Redemptions (NOTE - The Fund will not ordinarily permit cash redemptions.)(c).............. .60% .67% .30% .18% .22% B. Annual Series Operating Expenses (as a percentage of average net assets) Management Fees.................. .27% .27% .27% .27% .27% 12b-1 Fees (d)................... .25% .25% .25% .25% .25% Other Expenses*.................. .35% .35% .35% .32% .35% Total Operating Expenses......... .87% .87% .87% .84% .87% GERMANY HONG KONG ITALY JAPAN INDEX INDEX SERIES INDEX SERIES INDEX SERIES SERIES ------------ ------------ ------------ ------------ A. Shareholder Transaction Expenses Maximum Sales Load Imposed on Purchases of Creation Units of WEBS (as a percentage of amount of investment).................. None None None None Maximum Transaction Fee (a) for Purchase of one Creation Unit of WEBS: In-kind and Cash Purchases (b)........................... $2,800 $4,650 $2,400 $ 8,000 Additional Variable Charge for Cash Purchases (NOTE - The Fund will not ordinarily permit cash purchases.)(b).... .19% .60% .30% .11% Deferred Sales Load.............. None None None None Maximum Redemption Transaction Fee (a) for Redemption of one Creation Unit of WEBS: In-kind and Cash Redemptions (c)........................... $2,800 $4,650 $2,400 $ 8,000 Additional Variable Charge for Cash Redemptions (NOTE - The Fund will not ordinarily permit cash redemptions.)(c).............. .19% .60% .30% .11% B. Annual Series Operating Expenses (as a percentage of average net assets) Management Fees.................. .27% .27% .27% .27% 12b-1 Fees (d)................... .25% .25% .25% .25% Other Expenses*.................. .35% .37% .34% .31% Total Operating Expenses......... .87% .89% .86% .83%
* Other Expenses are estimates only. NOTE: ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE AMOUNTS SHOWN. 6
MEXICO SINGAPORE MALAYSIA (FREE) INDEX NETHERLANDS (FREE) INDEX INDEX SERIES SERIES INDEX SERIES SERIES ------------ ------------ ------------ ------------ A. Shareholder Transaction Expenses Maximum Sales Load Imposed on Purchases of Creation Units of WEBS (as a percentage of amount of investment).................. None None None None Maximum Transaction Fee (a) for Purchase of one Creation Unit of WEBS: In-kind and Cash Purchases (b)........................... $8,120 $2,750 $1,900 $5,200 Additional Variable Charge for Cash Purchases (NOTE - The Fund will not ordinarily permit cash purchases.) (b)... 1.07% .24% .25% 1.30% Deferred Sales Load.............. None None None None Maximum Redemption Transaction Fee (a) for Redemption of one Creation Unit of WEBS: In-kind and Cash Redemptions (c)........................... $5,200 $2,750 $1,900 $2,100 Additional Variable Charge for Cash Redemptions (NOTE - The Fund will not ordinarily permit cash redemptions.) (c)........................... 1.07% .24% .25% 1.30% B. Annual Series Operating Expenses (as a percentage of average net assets) Management Fees.................. .27% .27% .27% .27% 12b-1 Fees (d)................... .25% .25% .25% .25% Other Expenses*.................. .37% .50% .35% .35% Total Operating Expenses......... .89% 1.02% .87% .87% UNITED SPAIN INDEX SWEDEN INDEX SWITZERLAND KINGDOM SERIES SERIES INDEX SERIES INDEX SERIES ------------ ------------ ------------ ------------ A. Shareholder Transaction Expenses Maximum Sales Load Imposed on Purchases of Creation Units of WEBS (as a percentage of amount of investment).................. None None None None Maximum Transaction Fee (a) for Purchase of one Creation Unit of WEBS: In-kind and Cash Purchases (b)........................... $4,300 $2,150 $4,030 $6,000 Additional Variable Charge for Cash Purchases (NOTE - The Fund will not ordinarily permit cash purchases.) (b)... .25% .25% .33% .25% Deferred Sales Load.............. None None None None Maximum Redemption Transaction Fee (a) for Redemption of one Creation Unit of WEBS: In-kind and Cash Redemptions (c)........................... $2,400 $2,150 $4,030 $6,000 Additional Variable Charge for Cash Redemptions (NOTE - The Fund will not ordinarily permit cash redemptions.) (c)........................... .45% .25% .33% .75% B. Annual Series Operating Expenses (as a percentage of average net assets) Management Fees.................. .27% .27% .27% .27% 12b-1 Fees (d)................... .25% .25% .25% .25% Other Expenses*.................. .35% .35% .35% .32% Total Operating Expenses......... .87% .87% .87% .84%
* Other Expenses are estimates only. NOTE: ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THE AMOUNTS SHOWN. 7 - ------------------------ (a) In addition to Transaction Fees shown, an investor purchasing a Creation Unit of WEBS will bear the costs of transferring the securities in the Portfolio Deposit (defined herein) to the Fund and an investor redeeming Creation Units will bear the costs of transferring securities in the Portfolio Deposit from the Fund to the investor. In each case, such costs will include settlement and custody charges, registration costs, transfer taxes and similar charges. As some of such costs are fixed, the cost of transferring Deposit Securities relating to multiple Creation Units of WEBS of the same Index Series may be proportionally less than the cost of transferring Deposit Securities relating to one Creation Unit. See "Purchase and Issuance of WEBS in Creation Units" and "Redemption of WEBS in Creation Units". (b) Paid to the Fund to offset transaction costs incurred by each Index Series in connection with the issuance of a Creation Unit. The purchase transaction fee is not a sales charge. The purchase transaction fees listed are the fees expected to be imposed in connection with the purchase of Creation Units of a given Index Series. The basic purchase transaction fees for in-kind and cash purchases are the same no matter how many Creation Units of a given Index Series are being purchased pursuant to any one purchase order except in the case of the Malaysia, Singapore (Free) and Spain Index Series where the amount shown reflects inclusion of a variable charge based on the total market value of one Creation Unit of the relevant Index Series. The variable charge represents stamp duty or "put through" fees imposed when securities are delivered in the local market. The charges are calculated as follows: Malaysia - .30% of market value; Singapore - .20% of market value; and Spain - .10% of market value. The Fund may adjust such fees from time to time based upon actual experience. Cash purchases of Creation Units, when available, are also subject to an Additional Variable Charge, expressed as a percentage of the value of the Portfolio Deposit. The Fund will not ordinarily permit cash purchases. See "Purchase and Issuance of WEBS in Creation Units". (c) Paid to the Fund to offset transaction costs incurred by each Index Series in connection with the redemption of a Creation Unit. The redemption transaction fees listed are the fees expected to be imposed in connection with the redemption of Creation Units of a given Index Series. The basic redemption transaction fees are the same no matter how many Creations Units of a given Index Series are being redeemed pursuant to any one redemption request. The Fund may adjust such fees from time to time based upon actual experience. Cash redemptions of Creation Units, when available, are also subject to an Additional Variable Charge, expressed as a percentage of the value of the Creation Unit(s) being redeemed. The Fund will not ordinarily permit cash redemptions. See "Redemption of WEBS in Creation Units". (d) All payments to the Distributor of the Fund to compensate the Distributor will be made pursuant to the Fund's 12b-1 Plan. All amounts payable under the 12b-1 Plan will not exceed, on an annualized basis, .25% of the Fund's average daily net assets. See "Management of the Fund -- Distributor". A long-term shareholder of an Index Series may pay more in total sales charges than the economic equivalent of the maximum front-end sales charges otherwise permitted by the rules of the National Association of Securities Dealers, Inc. C. Examples of Expenses (a) WEBS in less than Creation Units are not redeemable. The Fund expects to redeem Creation Units principally on an in-kind basis for Deposit Securities. See "Redemption of WEBS in Creation Units" herein and in the SAI. If an investor were permitted to purchase and redeem less than a Creation Unit of WEBS on an in-kind basis, such investor would pay the following 8 expenses on a $1,000 investment (payment with a deposit of Deposit Securities), assuming (1) a 5% annual return and (2) redemption (delivery of Deposit Securities), at the end of each indicated time period:
1 YEAR 3 YEARS ($) ($) ----------- ----------- Australia Index Series................................................................. 10 30 Austria Index Series................................................................... 11 30 Belgium Index Series................................................................... 12 31 Canada Index Series.................................................................... 13 32 France Index Series.................................................................... 11 30 Germany Index Series................................................................... 10 29 Hong Kong Index Series................................................................. 12 32 Italy Index Series..................................................................... 10 29 Japan Index Series..................................................................... 10 28 Malaysia Index Series.................................................................. 15 35 Mexico (Free) Index Series............................................................. 14 36 Netherlands Index Series............................................................... 12 31 Singapore (Free) Index Series.......................................................... 11 30 Spain Index Series..................................................................... 11 31 Sweden Index Series.................................................................... 11 31 Switzerland Index Series............................................................... 11 30 United Kingdom Index Series............................................................ 11 30
(b) Such an investor would pay the following expenses on the same investment, assuming no redemptions:
1 YEAR 3 YEARS ($) ($) ----------- ----------- Australia Index Series................................................................. 9 29 Austria Index Series................................................................... 9 29 Belgium Index Series................................................................... 9 28 Canada Index Series.................................................................... 9 28 France Index Series.................................................................... 9 29 Germany Index Series................................................................... 9 29 Hong Kong Index Series................................................................. 9 29 Italy Index Series..................................................................... 9 28 Japan Index Series..................................................................... 9 27 Malaysia Index Series.................................................................. 9 29 Mexico (Free) Index Series............................................................. 11 33 Netherlands Index Series............................................................... 9 29 Singapore (Free) Index Series.......................................................... 9 29 Spain Index Series..................................................................... 9 29 Sweden Index Series.................................................................... 9 29 Switzerland Index Series............................................................... 9 29 United Kingdom Index Series............................................................ 9 28
EXPLANATION OF TABLES A. Shareholder Transaction Expenses are charges that investors pay to buy or sell Creation Units of the Fund. The figures in the table are estimates and actual shareholder transaction expenses may vary from such estimates. See "Purchase and Issuance of WEBS in Creation Units" and "Redemption of WEBS in Creation Units" in this Prospectus and "Purchase and Issuance of WEBS in Creation Units" and "Redemption of WEBS in Creation Units" in the Statement of Additional Information for an explanation of how these charges apply. 9 B. Annual Series Operating Expenses are based on estimated expenses. Actual expenses may vary from these estimates and will be affected by, among other things, the levels of average net assets of an Index Series and the Fund. Management fees are paid to the Adviser to provide each Index Series with investment advisory, management and certain administrative services. Fees paid to PFPC Inc. to provide the Fund with administrative and fund accounting services are included in "Other Expenses", and are estimated on average daily net assets of each Index Series of $100 million. Distribution fees are paid to the Distributor, to compensate the Distributor and/or reimburse it for certain expenses and for payments made to dealers and other persons providing distribution, marketing and shareholder services to the Fund. See "Management of the Fund" for additional information. C. Examples of Expenses. The examples illustrate the estimated expenses associated with a $1,000 investment in a Creation Unit of WEBS on an in-kind basis over periods of 1 and 3 years, based on the expenses in the table and an assumed annual rate of return of 5%. The presentation of a $1,000 investment in a Creation Unit is for illustration purposes only, as WEBS may only be purchased from the Fund or redeemed by the Fund in Creation Units. Further, the return of 5% and estimated expenses are for illustration purposes only and should not be considered indications of expected Index Series expenses or performance, both of which may vary. The expenses associated with a $1,000 investment in WEBS include a pro rata portion of shareholder transaction expenses associated with the purchase or sale of a Creation Unit, which would have been valued as of February 22, 1996 at between $592,000 and $8,923,000, depending on the Index Series, assuming for this purpose that the net asset value of a Creation Unit was the same as the value of the Deposit Securities as of such date. See the second paragraph under Summary of Fund Expenses. 10 THE FUND AND ITS INDEX SERIES FOREIGN FUND, INC. AND ITS INVESTMENT OBJECTIVE The Fund is an open-end management investment company registered under the Investment Company Act of 1940 (the "1940 Act"), organized as a series fund. Initially, seventeen Index Series of the Fund will issue shares: the Australia Index Series, the Austria Index Series, the Belgium Index Series, the Canada Index Series, the France Index Series, the Germany Index Series, the Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index Series, the Mexico (Free) Index Series, the Netherlands Index Series, the Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series, the Switzerland Index Series and the United Kingdom Index Series. Each of the Canada Index Series, the France Index Series, the Japan Index Series and the United Kingdom Index Series is classified as a "diversified" investment company under the 1940 Act. Each of the other Index Series offered hereby is classified as a "non-diversified" investment company under the 1940 Act. The Board of Directors of the Fund may authorize additional Index Series in the future. The investment objective of each of the initial seventeen Index Series is to seek to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the aggregate in particular markets, as represented by a particular foreign equity securities index. Each of the Index Series utilizes an MSCI Index that reflects the reinvestment of net dividends as its benchmark index (except for the MSCI Mexico (Free) Index utilized by the Mexico (Free) Index Series, which reflects the reinvestment of gross dividends). See "The Benchmark MSCI Indices Utilized by the Index Series" below. Each MSCI Index is a market capital weighted index of equity securities traded on the principal securities exchange(s) and, in some cases, the over-the- counter market, of the respective country. The investment objective of each Index Series is a fundamental policy and cannot be changed without the approval of the holders of a majority of the respective Index Series' voting securities (as defined in the 1940 Act). There can be no assurance that the investment objective of any Index Series will be achieved. In this regard, it should be noted that the benchmark indices are unmanaged and bear no management, administration, distribution, transaction or other expenses or taxes, while each Index Series must bear these expenses and are also subject to a number of limitations on their investment flexibility. In addition, certain Index Series are subject to foreign tax withholding at rates different than those assumed by the relevant benchmark index. See "The Benchmark MSCI Indices Utilized by the Index Series". Investing in WEBS of an Index Series involves special risks of investing in securities of the relevant foreign country. For a discussion of certain special considerations and risk factors relevant to an investment in WEBS, see "Investment Considerations and Risks". WORLD EQUITY BENCHMARK SHARES: "WEBS" The shares of common stock, par value $.001 per share, of each Index Series are referred to herein as "World Equity Benchmark Shares" or "WEBS". EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF THE FUND. Application has been made to list the WEBS for trading on the American Stock Exchange, Inc. (the "AMEX"). It is expected that the non-redeemable WEBS will trade on the AMEX during the day at prices that differ to some degree from their net asset value. See "Determination of Net Asset Value", "Exchange Listing and Trading", "Investment Considerations and Risks" and "Redemption of WEBS in Creation Units". WHO SHOULD INVEST? The WEBS of each Index Series of the Fund are designed for investors who seek a relatively low-cost "passive" approach for investing in a portfolio of equity securities of companies located in the country of the subject MSCI Index. Unlike equity mutual funds that seek to "beat" market averages with unpredictable results, the Index Series seek to provide investment results that correspond generally to the price and yield performance of their respective benchmark indices. 11 It is generally recognized that international diversification of an investment portfolio reduces risk. Many of the foreign equity securities held by the Index Series are difficult to purchase or hold, or are, as a practical matter, not available to retail investors. The Fund offers investors a convenient way to obtain indexed exposure to the equity markets of specific foreign countries. It should be noted, however, that the prices of WEBS of a particular Index Series are expected to be volatile, and investors should be able to tolerate sudden, sometimes substantial fluctuations in the value of their investment. No assurance can be given that any Index Series will achieve its stated objective and shareholders should understand that they will be exposed to the risks inherent in international equity investing. Because of the risks associated with international equity investments, an Index Series is intended to be a long-term investment vehicle and is not designed to provide investors with a means of speculating on short-term market movements. See "Investment Considerations and Risks". INVESTMENT POLICIES The Fund is not managed according to traditional methods of "active" investment management, which involve the buying and selling of securities based upon economic, financial and market analysis and investment judgment. Instead, each Index Series of the Fund, utilizing a "passive" or indexing investment approach, attempts to approximate the investment performance of its benchmark index through quantitative analytical procedures. Stocks are selected for inclusion in an Index Series in order to have aggregate investment characteristics (based on market capitalization and industry weightings), fundamental characteristics (such as return variability, earnings valuation and yield) and liquidity measures similar to those of the subject MSCI Index taken in its entirety. Index Series generally will not hold all of the stocks in their respective benchmark indices but will typically hold a representative subset of such stocks selected through the Adviser's application of portfolio sampling techniques. However, each Index Series reserves the right to invest in all of the stocks in its benchmark index and where an Index Series benchmark index is comprised of relatively few securities it may do so on a regular basis. Each Index Series has the policy to remain as fully invested as practicable in a pool of equity securities the performance of which will approximate the performance of the subject MSCI Index taken in its entirety. An Index Series will normally invest at least 95% of its total assets in stocks that are represented in the relevant MSCI Index and will at all times invest at least 90% of its total assets in such stocks. An Index Series may invest its remaining assets in Short-Term Investments (defined below) and/or in combinations of certain stock index futures contracts, options on such futures contracts, stock index options, stock index swaps, forward currency exchange contracts and Short- Term Investments (defined below) that are intended to provide the Index Series with exposure to such stocks (the Index Series will not use such instruments to leverage their investment portfolios). "Short-Term Investments" are short-term high quality debt securities that include: obligations of the United States Government and its agencies or instrumentalities; commercial paper (rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's Corporation), bank certificates of deposit and bankers' acceptances; repurchase agreements collateralized by the foregoing securities; participation interests in such securities; shares of money market funds (subject to applicable limits under the Investment Company Act). An Index Series will not invest in cash reserves or Short-Term Investments or utilize futures contracts, options or swap agreements as part of a temporary defensive strategy to protect against potential stock market declines. An Index Series may enter into forward currency exchange contracts in order to facilitate settlements in local markets, in connection with positions in stock index futures, and to protect against currency exposure in connection with its distributions to shareholders, but not as part of a defensive strategy to protect against fluctuations in exchange rates. See "Implementation of Policies" for a description of these and other investment practices of the Fund. Each Index Series has a policy to concentrate its investments in an industry or industries if, and to the extent that, its benchmark index concentrates in such industry or industries, except where the concentration of the relevant index is the result of a single stock. As a result of this policy, an Index 12 Series will maintain at least 25% of the value of its assets in securities of issuers in each industry for which its benchmark index has a concentration of more than 25% (except where the concentration of the index is the result of a single stock). No Index Series will concentrate its investments otherwise. If the benchmark index for an Index Series has a concentration of more than 25% because of a single stock (i.e., if one stock in the benchmark index accounts for more than 25% of the index and it is the only stock in the index in its industry), the Index Series will invest less than 25% of its assets in such stock and will reallocate the excess to stocks in other industries. Changes in an Index Series' concentration (if any) and non-concentration would be made "passively" -- that is, any such changes would be made solely as a result of changes in the concentrations of the benchmark index's constituents. At the date of this Prospectus, as a result of this policy, the Austria Index Series concentrates in the Banking industry, the Hong Kong Index Series concentrates in the Real Estate industry, the Singapore (Free) Index Series concentrates in the Banking industry, the Spain Index Series concentrates in the Utilities (Electrical & Gas) and Banking industries, and the Switzerland Index Series concentrates in the Health & Personal Care industry. Since the concentration of each Index Series is based on that of its benchmark index, changes in the market values of the Index Series' portfolio securities will not necessarily trigger changes in the portfolio of such Index Series. The concentration policy of each Index Series is a fundamental policy that may be changed only with shareholder approval. Each of the other investment policies of each Index Series is a nonfundamental policy that may be changed by the Board of Directors without shareholder approval. However, shareholders would be notified prior to any material change in these policies. See "Investment Limitations" herein and "Investment Policies and Restrictions" in the Statement of Additional Information for a listing of limitations on investment practices that may only be changed with shareholder approval. IMPLEMENTATION OF POLICIES An Index Series generally will not hold all of the issues that comprise the subject MSCI Index, due in part to the costs involved and, in certain instances, the potential illiquidity of certain securities. Instead, each Index Series will attempt to hold a representative sample of the securities in the Index, which will be selected by the Adviser utilizing quantitative analytical models in a technique known as "portfolio sampling". Under this technique, each stock is considered for inclusion in the Index Series based on its contribution to certain capitalization, industry and fundamental investment characteristics. The Adviser will seek to construct the portfolio of each Index Series so that, in the aggregate, its capitalization, industry and fundamental investment characteristics perform like those of the subject MSCI Index. Over time, the portfolio composition of an Index Series may be altered (or "rebalanced") to reflect changes in the characteristics of the subject MSCI Index or with a view to bringing the performance and characteristics of the Index Series more in line with that of the relevant MSCI Index. Such rebalancings will require the Index Series to incur transaction costs and other expenses. As noted above, each Index Series reserves the right to invest in all of the securities in the benchmark index, and Index Series with benchmark indices comprised of relatively few stocks may do so on a regular basis. Due to the use of this portfolio sampling technique, an Index Series is not expected to track its benchmark index with the same degree of accuracy as would an investment vehicle that invested in every component security of the subject index. The Adviser expects that, over time, the "expected tracking error" of an Index Series relative to the performance of its benchmark index will be less than 5% and that the tracking error will generally be greater for Index Series that have benchmark indices with fewer rather than greater numbers of component stocks. An expected tracking error of 5% means that there is a 68% probability that the net asset value of the Index Series will be between 95% and 105% of the subject MSCI Index level after one year, without rebalancing the portfolio composition. A tracking error of 0% would indicate perfect tracking, which would be achieved when the net asset value of the Index Series increases or decreases in exact proportion to changes in its benchmark index. Factors such as expenses of the Fund, taxes, the need to comply with the diversification and other 13 requirements of the Internal Revenue Code of 1986 (the "Internal Revenue Code") and other requirements may adversely impact the tracking of the performance of an Index Series to that of its benchmark index. The Adviser will monitor the tracking error of each Index Series on an ongoing basis and will seek to minimize tracking error to the maximum extent possible. See also the discussion of portfolio sampling in the preceding paragraph. There can be no assurance that any Index Series will achieve any particular level of tracking error relative to the performance of the relevant benchmark index. Semiannual and annual reports of the Fund will disclose tracking error over the previous six month periods, and in the event that tracking error exceeds 5%, the Board of Directors of the Fund will consider what action might be appropriate. Although the policy of each Index Series of the Fund is to remain substantially fully invested in equity securities, an Index Series may also invest in combinations of certain stock index futures contracts, options on such futures contracts, stock index options, stock index swaps and cash and Short-Term Investments that are intended to provide the Index Series with exposure to such equity securities, and in certain Short-Term Investments that are not associated with related positions in stock index futures contracts, options on such futures contracts, stock index options or stock index swaps. Such investments may be made to invest uncommitted cash balances or, in limited circumstances, to assist in meeting shareholder redemptions of Creation Units of WEBS. An Index Series may purchase stock index futures contracts, options on such futures contracts and stock index options and may enter into stock index swaps to simulate full investment in the underlying index to a limited extent. This may be done to facilitate trading (e.g., to rapidly gain exposure to a market in anticipation of purchasing the underlying equities over time), to reduce transaction costs or because the Adviser has determined that the use of such instruments permits the Index Series to gain exposure to the underlying equities at a lower cost than by making direct investments in the cash market. While each of these instruments can be used to leverage an investment portfolio, no Index Series may use them to leverage its net assets. An Index Series may enter into foreign currency forward and foreign currency futures contracts to facilitate settlements in local markets, in connection with stock index futures positions, and to protect against currency exposure in connection with its distributions to shareholders, but may not enter into such contracts for speculative purposes or as a way of protecting against anticipated adverse changes in exchange rates between foreign currencies and the U.S. dollar. A foreign currency forward contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. The Fund may lend securities from the portfolio of an Index Series to brokers, dealers and other financial institutions desiring to borrow securities to complete transactions and for other purposes. Because the cash, government securities or other assets that are pledged as collateral to the Fund in connection with these loans generate income, securities lending enables an Index Series to earn income that may partially offset the expenses of the Index Series, and thereby reduce the effect that expenses have on an Index Series' ability to provide investment results that correspond generally to the price and yield performance of its benchmark index. These loans may not exceed 33% of an Index Series' total assets. The documentation for these loans will provide that the Index Series will receive collateral equal to at least 100% of the current market value of the loaned securities, as marked to market each day that the net asset value of the Index Series is determined, consisting of cash, government securities or other assets permitted by applicable regulations and interpretations. An Index Series will pay reasonable administrative and custodial fees in connection with the loan of securities. The Index Series will invest cash collateral in Short-Term Investments, and the Index Series will bear the risk of loss of the invested collateral. Morgan Stanley Trust Company serves as Lending Agent of the Fund and, in such capacity, will share equally with the respective Index Series any net income earned on invested collateral. An Index Series' share of income from the loan collateral will be included in the Index Series' gross investment income. The Fund will comply with the conditions for securities lending established by the SEC staff. 14 Although each Index Series generally seeks to invest for the long term, the Index Series retain the right to sell securities irrespective of how long they have been held. However, because of the "passive" investment management approach of the Fund, the portfolio turnover rate for each Index Series is expected to be under 50%, a generally lower turnover rate than for many other investment companies. A portfolio turnover rate of 50% would occur if one half of an Index Series' securities were sold within one year. (For purposes of calculating portfolio turnover rate, the Fund does not take into account "sales" of securities by means of in-kind redemptions, since such transactions do not impact an Index Series' portfolio composition or weighting.) Ordinarily, securities will be sold from an Index Series only to reflect certain administrative changes in an Index (including mergers or changes in the composition of the Index) or to accommodate cash flows out of the Index Series while seeking to keep the performance of the Index Series in line with that of its benchmark index. In addition, securities may be sold from an Index Series in certain circumstances to ensure the Index Series' compliance with the diversification and other requirements of the Internal Revenue Code and with other requirements, which would tend to raise the portfolio turnover rate of such Index Series. Purchases and sales of securities in connection with such compliance will involve transaction costs which will be borne by the respective Index Series. An Index Series may borrow money from a bank up to a limit of 33% of the market value of its assets, but only for temporary or emergency purposes (e.g., to facilitate distributions to shareholders or to meet redemption requests (in connection with Creation Units of WEBS that the Fund agrees to redeem for cash) prior to the settlement of securities already sold or in the process of being sold by the Index Series). To the extent that an Index Series borrows money prior to receiving distributions on its portfolio securities or prior to selling securities in connection with a redemption, it may be leveraged; at such times, the Index Series may appreciate or depreciate in value more rapidly than its benchmark index. An Index Series will not make cash purchases of securities when the amount of money borrowed exceeds 5% of the market value of its total assets. INVESTMENT LIMITATIONS Each Index Series of the Fund intends to observe certain limitations on its investment practices. Specifically, an Index Series may not: (i) lend any funds or other assets except through the purchase of all or a portion of an issue of securities or obligations of the type in which it is permitted to invest (including participation interests in such securities or obligations) and except that an Index Series may lend its portfolio securities in an amount not to exceed 33% of the value of its total assets; (ii) issue senior securities or borrow money, except borrowings from banks for temporary or emergency purposes in an amount up to 33% of the value of the Index Series' total assets (including the amount borrowed), valued at the lesser of cost or market, less liabilities (not including the amount borrowed) valued at the time the borrowing is made, and the Index Series will not purchase securities while borrowings in excess of 5% of the Index Series' total assets are outstanding, provided, that for purposes of this restriction, short-term credits necessary for the clearance of transactions are not considered borrowings; (iii) pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure permitted borrowings; or (iv) purchase a security (other than obligations of the United States Government, its agencies or instrumentalities) if as a result 25% or more of its total assets would be invested in a single issuer. Except with regard to an Index Series' borrowing policy and illiquid securities policy, all percentage limitations apply immediately after a purchase or initial investment, and any subsequent change in any applicable percentage resulting from market fluctuations or other changes in total or net assets 15 does not require elimination of any security from the Index Series' portfolio. The investment limitations described in (i) through (iv) above and the preceding paragraph, and certain additional limitations described in the Statement of Additional Information, may be changed with respect to an Index Series only with the approval of the holders of a majority of the outstanding voting securities (as defined in the 1940 Act) of such Index Series. THE BENCHMARK MSCI INDICES UTILIZED BY THE INDEX SERIES Each Index Series uses the corresponding MSCI Index listed below as its benchmark (the Australia Index Series uses the MSCI Australia Index, etc.). MSCI publishes several versions of each stock index that it compiles. With the exception of the MSCI Mexico (Free) Index, the MSCI Indices used by Index Series as benchmarks reflect the reinvestment of net dividends. "Net dividends" means dividends after reduction for taxes withheld at source at the rate applicable to holders of the underlying stocks that are resident in Luxembourg. Such withholding rate currently differs from that applicable to the Australia, Malaysia and Singapore (Free) Index Series. Australian companies generally withhold tax on dividends paid to U.S. persons (such as the Fund) at a 15% rate (as opposed to 25% for Luxembourg persons). The rate of withholding on dividends paid to U.S. persons is currently 30% for Malaysia and 27% for Singapore, whereas the withholding rate in such countries on payments to persons in Luxembourg is 25%. The Mexico (Free) Index Series' benchmark index, the MSCI Mexico (Free) Index, reflects the reinvestment of gross dividends. "Gross dividends" means dividends before reduction for taxes withheld at source. Mexican companies do not withhold tax to U.S. investors. The stocks included in an MSCI Index are chosen by Morgan Stanley Capital International on a statistical basis. Each stock in an MSCI Index is weighted according to its market value as a percentage of the total market value of all stocks in the Index. (A stock's market value equals the number of shares outstanding times the most recent price of the security.) The inclusion of a stock in an MSCI Index in no way implies that Morgan Stanley Capital International believes the stock to be an attractive investment. IN GENERAL The Indices were founded in 1969 by Capital International S.A. as the first international performance benchmarks constructed to facilitate accurate comparison of world markets. Morgan Stanley acquired rights to the Indices in 1986. The MSCI Indices have covered the world's developed markets since 1969, and in 1988, MSCI commenced coverage of the emerging markets. Although local stock exchanges have traditionally calculated their own indices, these are generally not comparable with one another, due to differences in the representation of the local market, mathematical formulas, base dates and methods of adjusting for capital changes. MSCI applies the same criteria and calculation methodology across all markets for all indices, developed and emerging. MSCI Indices are notable for the depth and breadth of their coverage. MSCI generally seeks to have 60% of the capitalization of a country's stock market reflected in the MSCI index for such country. Thus, the MSCI Indices balance the inclusiveness of an "all share" index against the replicability of a "blue chip" index. WEIGHTING All single-country MSCI Indices are market capitalization weighted, i.e., companies are included in the indices at their full market value (total number of shares issued and paid up, multiplied by price). MSCI believes full market capitalization weighting is preferable to other weighting schemes for both theoretical and practical reasons. MSCI calculates two indices in some countries in order to address the issue of restrictions on foreign ownership in such countries. The additional indices are called "Free" indices, and they exclude companies and share classes not purchasable by foreigners. Free indices are currently calculated for Singapore, Mexico, the Philippines and Venezuela, and for those regional and international indices which include such markets. 16 Market capitalization weighting, combined with a consistent target of 60% of market capitalization, helps ensure that each country's weight in regional and international indices approximates its weight in the total universe of developing and emerging markets. Maintaining consistent policy among MSCI developed and emerging market indices is also critical to the calculation of certain combined developed and emerging market indices published by MSCI. THE MSCI AUSTRALIA INDEX ("MSCI AUSTRALIA"). The MSCI Australia consists primarily of stocks that are traded on the Australian Stock Exchange. On January 31, 1996, the MSCI Australia consisted of 49 stocks. The three largest constituents of the MSCI Australia and the respective approximate percentages of the MSCI Australia represented thereby were Broken Hill Proprietary Company Ltd. (19.8%), News Corp. (11.1%) and National Australia Bank (9.9%), for a total of approximately 40.8% of the MSCI Australia. As of January 31, 1996, the ten largest constituents comprised approximately 67.4% of the market capitalization of the MSCI Australia. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Australia, and the approximate percentages of the MSCI Australia represented thereby, were Energy Sources (22.6%), Banking (16.5%) and Metals -- Non-Ferrous (12.0%), for a total of approximately 51.1% of the MSCI Australia. The MSCI Australia represented approximately 55.1% of the aggregate capitalization of the Australian equity markets at January 31, 1996. THE MSCI AUSTRIA INDEX ("MSCI AUSTRIA"). The MSCI Austria consists primarily of stocks that are traded on the Vienna Stock Exchange. On January 31, 1996, the MSCI Austria consisted of 24 stocks. The three largest constituents of the MSCI Austria and the respective approximate percentages of the MSCI Austria represented thereby were Bank of Austria (19.1%), Creditanstalt, (11.3%), and EA-Generali (10.7%) for a total of approximately 41.3% of the MSCI Austria. As of January 31, 1996, the ten largest constituents comprised approximately 87.0% of the market capitalization of the MSCI Austria. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Austria, and the approximate percentages of the MSCI Austria represented thereby, were Banking (30.4%), Insurance (10.9%) and Energy Sources (10.7%), for a total of approximately 52.0% of the MSCI Austria. The MSCI Austria represented approximately 61.5% of the aggregate capitalization of the Austrian equity markets at January 31, 1996. THE MSCI BELGIUM INDEX ("MSCI BELGIUM"). The MSCI Belgium consists primarily of stocks that are traded on the Brussels Stock Exchange. On January 31, 1996, the MSCI Belgium consisted of 20 stocks. As of January 31, 1996, the three largest constituents of the MSCI Belgium and the respective approximate percentages of the MSCI Belgium represented thereby were Electrabel (21.4%), Petrofina (11.2%) and Tractebel (9.7%), for a total of approximately 42.3% of the MSCI Belgium. As of January 31, 1996, the ten largest constituents comprised approximately 87.1% of the market capitalization of the MSCI Belgium. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Belgium, and the approximate percentages of the MSCI Belgium represented thereby, were Utilities -- Electrical & Gas (21.4%), Multi-Industry (17.5%) and Banking (15.9%), for a total of approximately 54.8% of the MSCI Belgium. The MSCI Belgium represented approximately 59.9% of the aggregate capitalization of the Belgian equity markets at January 31, 1996. THE MSCI CANADA INDEX ("MSCI CANADA"). The MSCI Canada consists primarily of stocks that are traded on the Toronto Stock Exchange. On January 31, 1996, the MSCI Canada consisted of 84 stocks. The three largest constituents of the MSCI Canada and the respective approximate percentages of the MSCI Canada represented thereby were Seagram (6.4%), Northern Telecom (5.4%) and BCE Inc. (5.4%), for a total of approximately 17.2% of the MSCI Canada. As of January 31, 1996, the ten largest constituents comprised approximately 43.0% of the market capitalization of the MSCI Canada. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Canada, and the approximate percentages of the MSCI Canada represented thereby, were Banking (13.0%), Energy Sources (11.5%) and Metals -- Non-Ferrous (11.0%), for a total of approximately 35.5% of the MSCI Canada. The MSCI Canada represented approximately 60.4% of the aggregate capitalization of the Canadian equity markets at January 31, 1996. 17 THE MSCI FRANCE INDEX ("MSCI FRANCE"). The MSCI France consists primarily of stocks that are traded on the Paris Stock Exchange. On January 31, 1996, the MSCI France consisted of 74 stocks. The three largest constituents of the MSCI France and the respective approximate percentages of the MSCI France represented thereby were Elf Aquitaine (6.0%), LVMH (Moet Vuitton) (5.7%) and L'Oreal (5.1%), for a total of approximately 16.8% of the MSCI France. As of January 31, 1996, the ten largest constituents comprised approximately 44.3% of the market capitalization of the MSCI France. As of January 31, 1996, the three most highly represented industry sectors in the MSCI France, and the approximate percentages of the MSCI France represented thereby, were Energy Sources (10.7%), Merchandising (9.6%) and Banking (9.5%), for a total of approximately 29.8% of the MSCI France. The MSCI France represented approximately 65.1% of the aggregate capitalization of the French equity markets at January 31, 1996. THE MSCI GERMANY INDEX ("MSCI GERMANY"). The MSCI Germany consists primarily of stocks that are traded on the Frankfurt Stock Exchange. On January 31, 1996, the MSCI Germany consisted of 69 stocks. The three largest constituents of the MSCI Germany and the respective approximate percentages of the MSCI Germany represented thereby were Allianz Holding (11.5%), Siemens (8.4%) and Daimler-Benz (7.5%), for a total of approximately 27.5% of the MSCI Germany. As of January 31, 1996, the ten largest constituents comprised approximately 63.1% of the market capitalization of the MSCI Germany. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Germany, and the approximate percentages of the MSCI Germany represented thereby, were Insurance (17.9%), Banking (13.7%) and Utilities -- Electrical & Gas (10.8%), for a total of approximately 42.4% of the MSCI Germany. The MSCI Germany represented approximately 62.7% of the aggregate capitalization of the German equity markets at January 31, 1996. THE MSCI HONG KONG INDEX ("MSCI HONG KONG"). The MSCI Hong Kong consists primarily of stocks that are traded on The Stock Exchange of Hong Kong Limited (SEHK). On January 31, 1996, the MSCI Hong Kong consisted of 38 stocks. The three largest constituents of the MSCI Hong Kong and the respective approximate percentages of the MSCI Hong Kong represented thereby were Hutchison Whampoa (12.8%), Sun Hung Kai Properties (12.4%) and Hong Kong Telecom (11.5%), for a total of approximately 36.7% of the MSCI Hong Kong. As of January 31, 1996, the ten largest constituents comprised approximately 80.7% of the market capitalization of the MSCI Hong Kong. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Hong Kong, and the approximate percentages of the MSCI Hong Kong represented thereby, were Real Estate (37.0%), Multi-Industry (20.4%) and Banking (12.8%), for a total of approximately 70.2% of the MSCI Hong Kong. The MSCI Hong Kong represented approximately 59.2% of the aggregate capitalization of the Hong Kong equity markets at January 31, 1996. THE MSCI ITALY INDEX ("MSCI ITALY"). The MSCI Italy consists primarily of stocks that are traded on the Milan Stock Exchange. On January 31, 1996, the MSCI Italy consisted of 55 stocks. The three largest constituents of the MSCI Italy and the respective approximate percentages of the MSCI Italy represented thereby were Assicurazioni Generali (16.3%), Fiat (11.5%) and Telecom Italia Mobile (11.2%), for a total of approximately 39.0% of the MSCI Italy. As of January 31, 1996, the ten largest constituents comprised approximately 71.7% of the market capitalization of the MSCI Italy. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Italy, and the approximate percentages of the MSCI Italy represented thereby, were Insurance (26.1%), Telecommunications (22.0%) and Banking (17.9%), for a total of approximately 66.0% of the MSCI Italy. The MSCI Italy represented approximately 65.4% of the aggregate capitalization of the Italian equity markets at January 31, 1996. THE MSCI JAPAN INDEX ("MSCI JAPAN"). The MSCI Japan consists primarily of stocks that are traded on the Tokyo Stock Exchange. On January 31, 1996, the MSCI Japan consisted of 317 stocks. The three largest constituents of the MSCI Japan and the respective approximate percentages of the MSCI Japan represented thereby were Toyota Motor Corp. (3.8%), Fuji Bank (3.1%) and Industrial Bank of Japan (3.1%), for a total of approximately 10.0% of the MSCI Japan. As of January 31, 1996, the ten largest constituents comprised approximately 24.3% of the market capitalization of the MSCI 18 Japan. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Japan, and the approximate percentages of the MSCI Japan represented thereby, were Banking (22.3%), Automobiles (5.7%) and Merchandising (4.7%), for a total of approximately 32.7% of the MSCI Japan. The MSCI Japan represented approximately 60.1% of the aggregate capitalization of the Japanese equity markets at January 31, 1996. THE MSCI MALAYSIA INDEX ("MSCI MALAYSIA"). The MSCI Malaysia consists primarily of stocks that are traded on the Kuala Lumpur Stock Exchange. On January 31, 1996, the MSCI Malaysia consisted of 76 stocks. As of January 31, 1996, the three largest constituents of the MSCI Malaysia and the respective approximate percentages of the MSCI Malaysia represented thereby were Telekom Malaysia (13.9%), Tenaga Nasional (9.5%) and Malayan Banking (8.5%), for a total of approximately 31.9% of the MSCI Malaysia. As of January 31, 1996, the ten largest constituents comprised approximately 52.5% of the market capitalization of the MSCI Malaysia. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Malaysia, and the approximate percentages of the MSCI Malaysia represented thereby, were Telecommunications (15.6%), Banking (13.1%) and Utilities -- Electrical & Gas (9.5%), for a total of approximately 38.2% of the MSCI Malaysia. The MSCI Malaysia represented approximately 56.3% of the aggregate capitalization of the Malaysian equity markets at January 31, 1996. THE MSCI MEXICO (FREE) INDEX ("MSCI MEXICO (FREE)"). The MSCI Mexico (Free) consists primarily of stocks that are traded on the Mexican Stock Exchange. On January 31, 1996, the MSCI Mexico (Free) consisted of 41 stocks. As of January 31, 1996, the three largest constituents of the MSCI Mexico (Free) and the respective approximate percentages of the MSCI Mexico (Free) represented thereby were Telmex Telefonos Mex (28.2%), Cemex (7.3%) and Grupo Televisa (6.90%), for a total of approximately 42.44% of the MSCI Mexico (Free). As of January 31, 1996, the ten largest constituents comprised approximately 74.3% of the market capitalization of the MSCI Mexico (Free). As of January 31, 1996, the three most highly represented industry sectors in the MSCI Mexico (Free), and the approximate percentages of the MSCI Mexico (Free) represented thereby, were Telecommunications (28.2%), Beverages & Tobacco (12.4%) and Building Materials (9.6%), for a total of approximately 50.2% of the MSCI Mexico (Free). The MSCI Mexico (Free) represented approximately 59.4% of the aggregate capitalization of the Mexican equity markets at January 31, 1996. THE MSCI NETHERLANDS INDEX ("MSCI NETHERLANDS"). The MSCI Netherlands consists primarily of stocks that are traded on the Amsterdam Stock Exchange. On January 31, 1996, the MSCI Netherlands consisted of 22 stocks. The three largest constituents of the MSCI Netherlands and the respective approximate percentages of the MSCI Netherlands represented thereby were Royal Dutch Petroleum (35.1%), Unilever NV (10.9%) and ING GROEP (9.0%), for a total of approximately 54.9% of the MSCI Netherlands. As of January 31, 1996, the ten largest constituents comprised approximately 91.5% of the market capitalization of the MSCI Netherlands. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Netherlands, and the approximate percentages of the MSCI Netherlands represented thereby, were Energy Sources (35.1%), Food & Household Products (10.9%) and Financial Services (9.0%), for a total of approximately 54.9% of the MSCI Netherlands. The MSCI Netherlands represented approximately 71.7% of the aggregate capitalization of the Dutch equity markets at January 31, 1996. THE MSCI SINGAPORE (FREE) INDEX ("MSCI SINGAPORE (FREE)"). The MSCI Singapore (Free) consists primarily of stocks that are traded on the Singapore Stock Exchange. On January 31, 1996, the MSCI Singapore (Free) consisted of 32 stocks. The three largest constituents of the MSCI Singapore (Free) and the respective approximate percentages of the MSCI Singapore (Free) represented thereby were Singapore Airlines (15.4%), Oversea-Chinese Banking Corp. (14.2%) and United Overseas Bank (11.2%), for a total of approximately 40.8% of the MSCI Singapore (Free). As of January 31, 1996, the ten largest constituents comprised approximately 83.0% of the market capitalization of the MSCI Singapore (Free). As of January 31, 1996, the three most highly represented industry sectors in the MSCI Singapore (Free), and the approximate percentages of the MSCI Singapore (Free) represented thereby, were Banking (36.4%), Real Estate (18.5%) and Transportation -- Airlines (15.4%), 19 for a total of approximately 70.3% of the MSCI Singapore (Free). The MSCI Singapore (Free) represented approximately 56.0% of the aggregate capitalization of the Singaporean equity markets at January 31, 1996. THE MSCI SPAIN INDEX ("MSCI SPAIN"). The MSCI Spain consists primarily of stocks that are traded on the Madrid Stock Exchange. On January 31, 1996, the MSCI Spain consisted of 31 stocks. The three largest constituents of the MSCI Spain and the respective approximate percentages of the MSCI Spain represented thereby were Endesa (15.1%), Telefonica de Espana (14.5%) and Repsol (11.0%), for a total of approximately 40.5% of the MSCI Spain. As of January 31, 1996, the ten largest constituents comprised approximately 83.6% of the market capitalization of the MSCI Spain. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Spain, and the approximate percentages of the MSCI Spain represented thereby, were Utilities -- Electrical & Gas (31.6%), Banking (25.8%) and Telecommunications (14.5%), for a total of approximately 71.9% of the MSCI Spain. The MSCI Spain represented approximately 62.0% of the aggregate capitalization of the Spanish equity markets at January 31, 1996. THE MSCI SWEDEN INDEX ("MSCI SWEDEN"). The MSCI Sweden consists primarily of stocks that are traded on the Stockholm Stock Exchange. On January 31, 1996, the MSCI Sweden consisted of 30 stocks. As of January 31, 1996, the three largest constituents of the MSCI Sweden and the respective approximate percentages of the MSCI Sweden represented thereby were Astra (24.0%), Ericsson (LM) (18.5%) and Volvo (8.4%), for a total of approximately 50.8% of the MSCI Sweden. As of January 31, 1996, the ten largest constituents comprised approximately 79.9% of the market capitalization of the MSCI Sweden. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Sweden, and the approximate percentages of the MSCI Sweden represented thereby, were Electrical & Electronics (26.8%), Health & Personal Care (24.0%) and Automobiles (8.4%), for a total of approximately 59.2% of the MSCI Sweden. The MSCI Sweden represented approximately 60.6% of the aggregate capitalization of the Swedish equity markets at January 31, 1996. THE MSCI SWITZERLAND INDEX ("MSCI SWITZERLAND"). The MSCI Switzerland consists primarily of stocks that are traded on the Zurich Stock Exchange. On January 31, 1996, the MSCI Switzerland consisted of 43 stocks. The three largest constituents of the MSCI Switzerland and the respective approximate percentages of the MSCI Switzerland represented thereby were Roche Holding (24.8%), Nestle (14.1%) and Sandoz Ltd. (11.2%), for a total of approximately 50.1% of the MSCI Switzerland. As of January 31, 1996, the ten largest constituents comprised approximately 90.3% of the market capitalization of the MSCI Switzerland. As of January 31, 1996, the three most highly represented industry sectors in the MSCI Switzerland, and the approximate percentages of the MSCI Switzerland represented thereby, were Health & Personal Care (36.0%), Banking (19.7%) and Food & Household Products (14.1%), for a total of approximately 69.7% of the MSCI Switzerland. The MSCI Switzerland represented approximately 78.2% of the aggregate capitalization of the Swiss equity markets at January 31, 1996. THE MSCI UNITED KINGDOM INDEX ("MSCI UK"). The MSCI UK consists primarily of stocks that are traded on the London Stock Exchange. On January 31, 1996, the MSCI UK consisted of 144 stocks. The three largest constituents of the MSCI UK and the respective approximate percentages of the MSCI UK represented thereby were Glaxo Wellcome (5.7%), British Petroleum (5.0%) and HSBC Holdings (5.0%), for a total of approximately 15.7% of the MSCI UK. As of January 31, 1996, the ten largest constituents comprised approximately 35.4% of the market capitalization of the MSCI UK. As of January 31, 1996, the three most highly represented industry sectors in the MSCI UK, and the approximate percentages of the MSCI UK represented thereby, were Banking (12.1%), Health & Personal Care (11.2%) and Merchandising (8.7%), or a total of approximately 32.0% of the MSCI UK. The MSCI UK represented approximately 64.8% of the aggregate capitalization of the United Kingdom equity markets at January 31, 1996. 20 The graphs below present certain historical performance information, as calculated by MSCI, for the MSCI Indices that will be the benchmark indices for each of the seventeen Index Series of the Fund. This information should not be considered to be a representation of how the Index Series might have performed during the relevant time periods had the Fund been in operation at such times. The MSCI Indices are unmanaged securities indices and do not bear transactional or operating costs and expenses, whereas the Index Series will bear fees and expenses as described herein. See "Summary of Fund Expenses". Such fees and expenses will reduce the return of each Index Series in comparison with its benchmark index. In addition, because each Index Series will not invest in all the securities in its benchmark index, the investment results will not necessarily correspond to those of its benchmark index. Moreover, the Index Series are subject to various limitations on their investment flexibility and these limits will adversely affect their ability to meet their investment objective. See "Investment Policies" and "Implementation of Policies". The graphs measure total return based on the period's change in price, dividends paid on stocks in the index, and the effect of reinvesting dividends with adjustments for dividend withholding by foreign governments (except for the graph relating to the MSCI Mexico (Free), which reflects the reinvestment of dividends without adjustments for dividend withholding). The withholding tax rates applicable to the Australia, Malaysia and Singapore (Free) Index Series vary from the rates utilized by MSCI in computing the benchmark indices for such Index Series. See the first paragraph of this section. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI AUSTRALIA INDEX 1984 (13.69%) 1985 19.56% 1986 42.28% 1987 9.25% 1988 36.40% 1989 9.30% 1990 (17.54%) 1991 33.64% 1992 (10.82%) 1993 35.17% 1994 5.40% 1995 11.19%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI AUSTRIA INDEX 1984 (4.91%) 1985 176.26% 1986 34.74% 1987 2.23% 1988 0.57% 1989 103.91% 1990 6.33% 1991 (12.23%) 1992 (10.65%) 1993 28.09% 1994 (6.28%) 1995 (4.72%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI BELGIUM INDEX 1984 11.36% 1985 76.61% 1986 78.37% 1987 7.88% 1988 53.63% 1989 17.29% 1990 (10.98%) 1991 13.77% 1992 (1.47%) 1993 23.51% 1994 8.24% 1995 25.88%
21 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI CANADA INDEX 1984 (8.43%) 1985 15.05% 1986 9.94% 1987 13.91% 1988 17.07% 1989 24.30% 1990 (13.00%) 1991 11.08% 1992 (12.15%) 1993 17.58% 1994 (3.04%) 1995 18.31%
22 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI FRANCE INDEX 1984 4.33% 1985 82.01% 1986 78.35% 1987 (13.81%) 1988 37.87% 1989 36.15% 1990 (13.83%) 1991 17.83% 1992 2.81% 1993 20.91% 1994 (5.18%) 1995 14.12%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI GERMANY INDEX 1984 (5.71%) 1985 135.19% 1986 35.29% 1987 (24.75%) 1988 20.60% 1989 46.26% 1990 (9.36%) 1991 8.16% 1992 (10.27%) 1993 35.64% 1994 4.66% 1995 16.41%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI HONG KONG INDEX 1984 46.99% 1985 51.69% 1986 56.11% 1987 (4.11%) 1988 28.12% 1989 8.39% 1990 9.17% 1991 49.52% 1992 32.29% 1993 116.70% 1994 (28.90%) 1995 22.57%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI ITALY INDEX 1984 8.12% 1985 131.74% 1986 108.28% 1987 (21.30%) 1988 11.46% 1989 19.42% 1990 (19.19%) 1991 (1.82%) 1992 (22.22%) 1993 28.53% 1994 11.56% 1995 1.05%
23 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI JAPAN INDEX 1984 16.85% 1985 43.07% 1986 99.41% 1987 43.03% 1988 35.39% 1989 1.71% 1990 (36.10%) 1991 8.92% 1992 (21.45%) 1993 25.48% 1994 21.44% 1995 0.69%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI MALAYSIA INDEX 1988 26.54% 1989 55.76% 1990 (7.91%) 1991 4.95% 1992 17.76% 1993 110.00% 1994 (19.94%) 1995 5.16%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI MEXICO (FREE) INDEX 1988 71.98% 1989 89.20% 1990 62.65% 1991 126.04% 1992 24.98% 1993 49.35% 1994 (40.55%) 1995 (20.37%)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI NETHERLANDS INDEX 1984 10.23% 1985 59.62% 1986 40.74% 1987 7.07% 1988 14.19% 1989 35.79% 1990 (3.19%) 1991 17.80% 1992 2.30% 1993 35.28% 1994 11.70% 1995 27.71%
24 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI SINGAPORE (FREE) INDEX 1988 34.18% 1989 44.88% 1990 (14.59%) 1991 43.61% 1992 4.49% 1993 73.41% 1994 5.81% 1995 12.19%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI SPAIN INDEX 1984 39.05% 1985 54.75% 1986 121.24% 1987 36.91% 1988 13.53% 1989 9.76% 1990 (13.85%) 1991 15.63% 1992 (21.87%) 1993 29.78% 1994 (4.80%) 1995 29.83%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI SWEDEN INDEX 1984 (21.71%) 1985 56.96% 1986 65.59% 1987 1.99% 1988 48.33% 1989 31.79% 1990 (20.99%) 1991 14.42% 1992 (14.41%) 1993 36.99% 1994 18.34% 1995 33.36%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI SWITZERLAND INDEX 1984 (11.95%) 1985 105.72% 1986 33.37% 1987 (9.45%) 1988 6.18% 1989 26.21% 1990 (6.23%) 1991 15.77% 1992 17.23% 1993 45.79% 1994 3.54% 1995 44.12%
25 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
MSCI UNITED KINGDOM INDEX 1984 5.31% 1985 53.02% 1986 26.95% 1987 35.09% 1988 5.95% 1989 21.87% 1990 10.29% 1991 16.02% 1992 (3.65%) 1993 24.44% 1994 (1.63%) 1995 21.27%
MANAGEMENT OF THE FUND BOARD OF DIRECTORS. The Board of Directors of the Fund has responsibility for the overall management of the Fund, including general supervision of the duties performed by the Adviser and other service providers. Additional information about the Board of Directors and the officers of the Fund appears in the Statement of Additional Information under the heading "Management of the Fund". ADVISER. BZW Barclays Global Fund Advisors is the Adviser to the Fund and, subject to the supervision of the Board of Directors of the Fund, will be responsible for the investment management of each Index Series, which will include application of portfolio optimization techniques. It is located at 45 Fremont Street, San Francisco, California 94105. The Adviser is a California Corporation indirectly owned by Barclays Bank PLC and is registered as an investment adviser under the Investment Advisers Act of 1940. The Adviser and its parent, BZW Barclays Global Investors, N.A., are responsible for managing or providing investment advice for assets aggregating in excess of $220 billion as of December 31, 1995. For its investment management services to each Index Series, the Adviser will be paid management fees equal to each Index Series' allocable portion of: .27% per annum of the aggregate net assets of the Fund less than or equal to $1.7 billion, plus .15% per annum of the aggregate net assets of the Fund between $1.7 billion and $7 billion, plus .12% per annum of the aggregate net assets of the Fund between $7 billion and $10 billion, plus .08% per annum of the aggregate net assets of the Fund in excess of $10 billion. The management fees will be accrued daily and paid by the Fund as soon as practical after the last day of each calendar quarter. From time to time, an Index Series, to the extent consistent with its investment objective, policies and restrictions, may invest in the securities of companies with which the Adviser has a lending relationship. Effective January 1, 1996, through the reorganization of Wells Fargo Nikko Investment Advisors with and into an affiliate of BZW Barclays Global Investors, N.A., the Adviser became an indirect wholly owned subsidiary of Barclays Bank PLC. ADMINISTRATOR. PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp., is the Administrator of the Fund, and will be responsible for certain clerical, recordkeeping and bookkeeping services, except those to be performed by the Adviser, by Morgan Stanley Trust Company in its capacity as Custodian, or by PNC Bank, N.A. in its capacity as Transfer Agent. PFPC, as Administrator, has no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. For the administrative and fund accounting services PFPC provides to the Fund, PFPC will be paid aggregate fees equal to each Index Series' allocable portion of: .10% per annum of the aggregate net assets of the Fund less than $3 billion, plus .09% per annum of the aggregate net assets of the Fund between $3 billion and $5 billion, plus .08% per annum of the aggregate net assets of the Fund between $5 billion and $7.5 billion, plus .065% per annum of the aggregate net assets of the Fund between $7.5 billion and $10 billion, plus .05% per annum of the aggregate net assets of the Fund in excess of $10 billion. From time to time PFPC may waive all or a portion of its fees. For the first year of the Fund's operations, PFPC has agreed to waive a portion of its fees. During the first year of the Fund's operations. PFPC will charge the Fund an administrative and accounting service fee equal to $4,167 per month for each Index Series, plus .05% of aggregate average daily net assets of all Index Series in excess of $850 million per annum. However, if during the first 26 three years of the Fund's operations the Fund removes PFPC as the administrator, the Fund will pay the cost of deconversion and PFPC will be entitled to recoup 100% of the fees waived during the first year. The principal business address of PFPC is 400 Bellevue Parkway, Wilmington, Delaware 19809. DISTRIBUTOR. Funds Distributor, Inc. (the "Distributor") is the distributor of WEBS. Its address is One Exchange Place, 10th Floor, Boston, MA 02109. Investor information can be obtained by calling 1-800-xxx-xxxx. WEBS will be sold by the Fund and distributed only in Creation Units, as described below under "Purchase and Issuance of WEBS in Creation Units." WEBS in less than Creation Units will not be distributed by the Distributor. The Distributor is a registered broker-dealer under the Securities Exchange Act of 1934 and a member of the National Association of Securities Dealers, Inc. (the "NASD"). The Fund has a distribution plan pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1 Plan"). Each Index Series intends to operate the Rule 12b-1 Plan in accordance with its terms and the NASD Rules concerning maximum sales charges. Under the Rule 12b-1 Plan, the Distributor is paid an annual fee as compensation in connection with the offering and sale of shares of each Index Series. The fees to be paid to the Distributor under the Rule 12b-1 Plan are calculated and paid monthly with respect to each Index Series at an annual rate of up to .25% of the average daily net assets of such Index Series. From time to time the Distributor may waive all or a portion of the fees. These fees may be used to cover the expenses of the Distributor primarily intended to result in the sale of shares of each Index Series including payments for any activities or expenses primarily intended to result in or required for the sale of the Index Series' shares, including promotional and marketing activities related to the sale of shares of the Index Series, expenses related to the preparation, printing and distribution of prospectuses and sales literature, certain communications to and with shareholders, advertisements, and payments made to representatives or others for selling shares of Index Series or for providing ongoing shareholder services and/or maintenance of shareholder accounts. The Distributor may retain any amount of its fee that is not so expended. The amount of such fee is not dependent upon the distribution expenses actually incurred by the Distributor. Funds Distributor, Inc., as Distributor, has no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. See "Investment Advisory, Management, Administrative and Distribution Services" in the Statement of Additional Information. CUSTODIAN AND LENDING AGENT. Morgan Stanley Trust Company ("MSTC") serves as the Custodian for the cash and portfolio securities of each Index Series of the Fund. MSTC also serves as Lending Agent of the portfolio securities of each Index Series. As Lending Agent, MSTC will cause the delivery of loaned securities from the Fund to borrowers, arrange for the return of loaned securities to the Fund at the termination of the loans, request deposit of collateral, monitor daily the value of the loaned securities and collateral, request that borrowers add to the collateral when required by the loan agreements, and provide recordkeeping and accounting services necessary for the operation of the program. For its services as Lending Agent, the Fund will pay MSTC, in respect of each Index Series, 50% of the net investment income earned on the collateral for securities loaned. MSTC, as Custodian and Lending Agent, has no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. The principal business address of MSTC is One Pierrepont Plaza, Brooklyn, New York 11201. TRANSFER AGENT. PNC Bank, N.A. ("PNC"), an indirect wholly owned subsidiary of PNC Bank Corp., provides transfer agency services to the Fund. PNC, as transfer agent (the "Transfer Agent"), has no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. The principal business address of PNC is Broad and Chestnut Streets, Philadelphia, PA 19110. The Glass-Steagall Act and other applicable laws may limit the ability of a bank or other depositary institution to become an underwriter or distributor of securities. However, in the opinion of the Fund, these laws do not prohibit such depository institutions from providing services for investment companies such as the administrative, accounting and other services. In the event that a change in these laws prevented a bank from providing such services, it is expected that other services arrangements would be made and that shareholders would not be adversely affected. 27 In addition to the fees described above, the Fund will be responsible for the payment of expenses that will include, among other things, organizational expenses, compensation of the Directors of the Fund, reimbursement of out-of-pocket expenses incurred by the Administrator, exchange listing fees, brokerage and other costs (including costs incurred by an Index Series in connection with any rebalancing of its portfolio), legal and audit fees, and litigation and extraordinary expenses. EXCHANGE LISTING AND TRADING OF WEBS Application has been made to list the WEBS of each Index Series for trading on the AMEX. WEBS are expected to trade on the AMEX at prices that differ to some degree from their net asset value. See "Investment Considerations and Risks" and "Determination of Net Asset Value". However, given that WEBS can be created or redeemed in Creation Unit aggregations, the Fund believes that large discounts or premiums to the net asset value of WEBS should not be sustainable. There can be no assurance that the requirements of the AMEX necessary to maintain the listing of WEBS will continue to be met or will remain unchanged or that an active trading market will develop for the WEBS of any particular Index Series. The AMEX may remove the WEBS of an Index Series from listing if (1) following the initial twelve-month period beginning upon the commencement of trading of an Index Series, there are fewer than 50 beneficial holders of the WEBS of such Index Series for 30 or more consecutive trading days, (2) the value of the underlying index or portfolio of securities on which such Index Series is based is no longer calculated or available or (3) such other event occurs or condition exists that, in the opinion of the AMEX, makes further dealings on the AMEX inadvisable. In addition, the AMEX will remove the WEBS from listing and trading upon termination of the Fund. INVESTMENT CONSIDERATIONS AND RISKS An investment in the WEBS of an Index Series involves risks similar to those of investing in a broadly-based portfolio of equity securities traded on exchanges in the relevant foreign securities market, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. Investing in WEBS generally involves certain risks and considerations not typically associated with investing in a fund that invests in the securities of U.S. issuers. These risks could include generally less liquid and less efficient securities markets; generally greater price volatility; exchange rate fluctuations and exchange controls; less publicly available information about issuers; the imposition of withholding or other taxes; restrictions on the expatriation of funds or other assets of an Index Series; higher transaction and custody costs; delays attendant in settlement procedures; difficulties in enforcing contractual obligations; lesser liquidity and the significantly smaller market capitalization of most non-U.S. securities markets; lesser levels of regulation of the securities markets; different accounting, disclosure and reporting requirements; more substantial government involvement in the economy; higher rates of inflation; greater social, economic, and political uncertainty and the risk of nationalization or expropriation of assets and risk of war. Certain Index Series-specific considerations are set forth in the Statement of Additional Information. VOLATILITY OF FOREIGN EQUITY MARKETS The U.S. dollar performance of foreign equity markets, particularly emerging markets, has generally been substantially more volatile than that of U.S. markets. For example, from 1991-1995, the average price volatility of the Standard and Poor's 500 Index, a broad measure of the U.S. equity market, was 9.9%. In contrast, during the same period, the average price volatility of the respective MSCI Indices was as follows: the MSCI Australia (15.7%), the MSCI Austria (18.5%), the MSCI Belgium (14.4%), the MSCI Canada (10.6%), the MSCI France (17.0%), the MSCI Germany (17.4%), the MSCI Hong Kong (22.9%), the MSCI Italy (24.5%), the MSCI Japan (21.7%), the MSCI Malaysia (19.9%), the MSCI Mexico (Free) (38.4%), the MSCI Netherlands (12.4%), the MSCI Singapore (Free) (14.0%), the MSCI Spain (18.4%), the MSCI Sweden (21.1%), the MSCI Switzerland (15.4%), and the MSCI United Kingdom (14.8%). Short-term volatility in these markets can be significantly greater. 28 FOREIGN CURRENCY FLUCTUATIONS Because each Index Series' assets will generally be invested in non-U.S. securities, and because a substantial portion of the revenues and income of each Index Series will be received in a foreign currency, while Index Series dividends and other distributions are paid in US dollars, the dollar value of an Index Series' net assets will be adversely affected by reductions in the value of subject foreign currency relative to the dollar and would be positively affected by increases in the value of such currency relative to the dollar. Also, government or monetary authorities have imposed and may in the future impose exchange controls that could adversely affect exchange rates. Any such currency fluctuations will affect the net asset value of an Index Series irrespective of the performance of its underlying portfolio. Other than to facilitate settlements in local markets or to protect against currency exposure in connection with its distributions to shareholders or borrowings, the Fund does not expect to engage in currency transactions for the purpose of hedging against the decline in value of any foreign currencies. CONCENTRATION AND LACK OF DIVERSIFICATION OF CERTAIN INDEX SERIES Each Index Series of the Fund (except for the Canada Index Series, the France Index Series, the Japan Index Series and the United Kingdom Index Series) is classified as "non-diversified" for purposes of the 1940 Act, which means each of those Index Series is not limited by the 1940 Act with regard to the portion of its assets that may be invested in the securities of a single issuer. In addition, a number of Index Series concentrate their investments in particular industries. See "Investment Policies" herein. However, each Index Series, regardless of whether classified as non-diversified, intends to maintain the required level of diversification and otherwise conduct its operations so as to qualify as a "regulated investment company" for purposes of the Internal Revenue Code, in order to 29 relieve the Index Series of any liability for Federal income tax to the extent that its earnings are distributed to shareholders. See "Dividends and Capital Gains Distributions" and "Tax Matters" in this Prospectus. Compliance with the diversification requirements of the Internal Revenue Code will severely limit the investment flexibility of certain Index Series and will make it less likely that such Index Series will meet their investment objectives. The stocks of particular issuers, or of issuers in particular industries, may dominate the benchmark indices of certain Index Series and, consequently, the investment portfolios of such Index Series, which may adversely affect the performance of such Index Series or subject such Index Series to greater price volatility than that experienced by more diversified investment companies. The WEBS of an Index Series may be more susceptible to any single economic, political or regulatory occurrence than the portfolio securities of an investment company that is more broadly invested than the subject Index Series in the equity securities of the relevant market. Information concerning the companies and industry sectors that represent the largest components of the various benchmark indices is set forth above under "The Benchmark MSCI Indices Utilized by the Index Series". ABSENCE OF PRIOR ACTIVE MARKET The Fund is a newly organized investment company with no previous operating history. As indicated above, application has been made to list WEBS on the AMEX. There can be no assurance that active trading markets for the WEBS will develop. The Distributor will not maintain a secondary market in WEBS. Trading in WEBS on the AMEX may be halted due to market conditions or for reasons that, in the view of the AMEX, make trading in WEBS inadvisable. In addition, trading in WEBS on the AMEX will be subject to trading halts caused by extraordinary market volatility pursuant to AMEX "circuit breaker" rules that require trading in securities on the AMEX to be halted in the event of specified market moves. There can be no assurance that the requirements of the AMEX necessary to maintain the listing of WEBS of any Series will continue to be met or will remain unchanged. See "Exchange Listing and Trading". The net asset value of the WEBS of an Index Series will fluctuate with changes in the market value of the portfolio securities of the Index Series and changes in the market rate of exchange between the US dollar and the subject foreign currency. The market prices of WEBS are expected to fluctuate in accordance with changes in net asset value and supply and demand on the AMEX. The Fund cannot predict whether WEBS will trade below, at or above their net asset value. Price differences may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for WEBS will be closely related to, but not identical to, the same forces influencing the prices of the stocks of the subject MSCI Index trading individually or in the aggregate at any point in time. However, given that WEBS can be created and redeemed in Creation Unit aggregations (unlike shares of many closed-end funds, which frequently trade at appreciable discounts from, and sometimes at premiums to, their net asset value), the Fund believes that large discounts or premiums to the net asset value of WEBS should not be sustainable. USE OF CERTAIN INSTRUMENTS The risk of loss associated with futures contracts is potentially unlimited due both to the low margin deposits required and the extremely high degree of leverage involved in futures pricing. As a result, a relatively small price movement in a futures contract may result in an immediate and substantial loss or gain. However, no Index Series will use futures contracts, options or swap agreements for speculative purposes or to leverage its net assets and each Index Series will comply with applicable SEC requirements regarding the segregation of assets in connection with futures positions. Accordingly, the primary risks associated with the use of futures contracts, options and swap agreements by an Index Series are: (i) imperfect correlation between the change in market value of the stocks in the benchmark index or held by the Index Series and the prices of futures contracts, options and swap agreements; (ii) possible lack of a liquid secondary market for a futures contract or listed option and the resulting inability to close futures or listed option positions prior to their maturity date; and (iii) the risk of the counterparty or guaranteeing agent defaulting. Over-the-counter options 27 and swap agreements are generally less liquid than exchange traded securities and the SEC staff considers most over-the-counter options to be illiquid. The Fund will treat such options as illiquid to the extent required by applicable SEC staff positions. Illiquid assets may not represent more than 15% of the net assets of an Index Series. Since there are generally no futures traded on the MSCI Indices, it may be necessary for an Index Series to utilize other futures contracts or combinations thereof to simulate the performance of the relevant MSCI Index. This process may magnify the "tracking error" of the Index Series' performance compared to that of the MSCI Index, due to the lower correlation of the selected futures with the MSCI Index. The Adviser will attempt to reduce this tracking error by investing in futures contracts whose behavior is expected to represent the market performance of the Index Series' underlying securities, although there can be no assurance that these selected futures will in fact correlate with the performance of the relevant MSCI Index. Certain foreign stock index futures contracts and options thereon are not currently available to U.S. persons such as the Fund under applicable law. See also "Special Considerations and Risks" in the Statement of Additional Information. DETERMINATION OF NET ASSET VALUE Net asset value per share for each Index Series of the Fund is computed by dividing the value of the net assets of such Index Series (i.e., the value of its total assets less total liabilities) by the total number of WEBS outstanding, rounded to the nearest cent. Expenses and fees, including the management, administration and distribution fees, are accrued daily and taken into account for purposes of determining net asset value. The net asset value of each Index Series is determined as of the close of the regular trading session on the New York Stock Exchange, Inc. (ordinarily 4:00 p.m., New York City time) on each day that such exchange is open. In computing an Index Series' net asset value, the Index Series' portfolio securities are valued based on their last quoted current price. Price information on listed securities is taken from the exchange where the security is primarily traded. Securities regularly traded in the over-the-counter market are valued at the latest quoted bid price. Other portfolio securities and assets for which market quotations are not readily available are valued based on fair value as determined in good faith by the Adviser in accordance with procedures adopted by the Board of Directors of the Fund. The values of portfolio securities are converted into US dollars at the relevant foreign exchange rate for each Index Series in effect as of the time that the foreign currency values of the securities are determined. 28 CREATION UNITS The Fund will issue and redeem WEBS of each Index Series only in aggregations of WEBS specified for each Index Series. The following table sets forth the number of WEBS of an Index Series that constitute a Creation Unit for such Index Series and the estimated value of such Creation Unit at February 22, 1996:
ESTIMATED VALUE PER INDEX SERIES WEBS PER CREATION UNIT CREATION UNIT - ------------------------------------------------------------ ---------------------- ------------------- (IN DOLLARS) Australia Index Series...................................... 200,000 1,945,000 Austria Index Series........................................ 100,000 1,106,000 Belgium Index Series........................................ 40,000 592,000 Canada Index Series......................................... 100,000 1,008,000 France Index Series......................................... 200,000 2,515,000 Germany Index Series........................................ 300,000 4,016,000 Hong Kong Index Series...................................... 75,000 1,046,000 Italy Index Series.......................................... 150,000 2,050,000 Japan Index Series.......................................... 600,000 8,922,000 Malaysia Index Series....................................... 75,000 1,002,000 Mexico (Free) Index Series.................................. 100,000 985,000 Netherlands Index Series.................................... 50,000 794,000 Singapore (Free) Index Series............................... 100,000 1,313,000 Spain Index Series.......................................... 75,000 1,064,000 Sweden Index Series......................................... 75,000 1,027,000 Switzerland Index Series.................................... 125,000 1,619,000 United Kingdom Index Series................................. 200,000 2,499,000
See "Purchase and Issuance of WEBS in Creation Units" and "Redemption of WEBS in Creation Units". The Board of Directors of the Fund reserves the right to declare a split in the number of WEBS outstanding of any Index Series of the Fund, and to make a corresponding change in the number of WEBS constituting a Creation Unit, in the event that the per WEBS price in the secondary market rises to an amount that exceeds the range deemed desirable by the Board. The estimated value per Creation Unit shown above is based on the Adviser's view of what a Creation Unit would consist of had the particular Index Series been in existence on February 22, 1996. PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS THE FUND WILL ISSUE AND SELL WEBS OF AN INDEX SERIES ONLY IN CREATION UNITS ON A CONTINUOUS BASIS THROUGH THE DISTRIBUTOR AT THEIR NET ASSET VALUE NEXT DETERMINED AFTER RECEIPT OF AN ORDER IN PROPER FORM, WITHOUT AN INITIAL SALES LOAD. The consideration for purchase of a Creation Unit of WEBS of an Index Series will be the in-kind deposit of a designated portfolio of equity securities constituting an optimized representation of the corresponding MSCI Index (the "Deposit Securities") and an amount of cash computed as described below (the "Cash Component"). The Cash Component is a balancing amount to cover accrued dividends and to equalize any difference between the value of the Deposit Securities and the net asset value of a Creation Unit of WEBS as determined on the date on which WEBS are to be purchased and issued. Together, the Deposit Securities and the Cash Component constitute the "Portfolio Deposit" which represents the minimum initial and subsequent investment amount for shares of any Index Series from the Fund. Tendered securities in the Portfolio Deposit will be valued in the same manner as the relevant Index Series values its portfolio securities. WEBS may also be issued and sold in Creation Units for cash in certain circumstances; however, the Fund will not ordinarily permit cash purchases of Creation Units and any Index Series that permits cash sales reserves the right to suspend such sales at any time. The Deposit Securities for each Index Series will generally change with changes in the corresponding MSCI Index. In addition, the Adviser reserves the right to permit or require the substitution of an amount of cash to be added to the Cash Component to replace any security in the portfolio 29 constituting the Deposit Securities which may not be available in sufficient quantity for delivery or for other similar reasons. The Deposit Securities must be delivered for receipt in an account of the Fund maintained at the applicable local subcustodian. A purchase transaction fee payable to the Fund is imposed to compensate the Fund for the transaction costs of each Index Series associated with issuance of Creation Units of WEBS. The purchase transaction fees for in-kind purchases and cash purchases (when available) are listed in the Shareholder Transaction Expenses table in "Summary of Fund Expenses". Investors are also responsible for payment of the costs of transferring the Deposit Securities to the Fund. The foregoing description of the issuance of Creation Units of WEBS is only a summary. Investors interested in purchasing Creations Units of WEBS from the Fund will need to refer to "Purchase and Issuance of WEBS in Creation Units" in the Statement of Additional Information for additional details. REDEMPTION OF WEBS IN CREATION UNITS WEBS OF AN INDEX SERIES MAY BE REDEEMED BY THE FUND ONLY IN CREATION UNITS AT THEIR NET ASSET VALUE NEXT DETERMINED AFTER RECEIPT OF A REDEMPTION REQUEST IN PROPER FORM BY THE DISTRIBUTOR. WEBS IN AMOUNTS LESS THAN CREATION UNITS ARE NOT REDEEMABLE. The Fund generally will redeem a Creation Unit of WEBS principally on an in-kind basis for Deposit Securities as announced by the Distributor, plus cash in an amount equal to the difference between the net asset value of the WEBS being redeemed, as next determined after receipt of a request in proper form, and the value of the Deposit Securities, less the redemption transaction fee described below. An Index Series may also redeem Creation Units for cash in certain circumstances; however, the Fund will not ordinarily permit cash redemptions and any Index Series that permits cash redemptions reserves the right to suspend such redemptions at any time. Investors may purchase WEBS in the secondary market and aggregate such purchases into a Creation Unit for redemption. There can be no assurance, however, that there always will be sufficient liquidity in the public trading market to permit assembly of a Creation Unit of WEBS. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of WEBS to constitute a redeemable Creation Unit. The approximate cost of a Creation Unit of each Index Series, based on estimated values at February 22, 1996, is indicated under the heading "Creation Units". A redemption transaction fee payable to the Fund is imposed to offset transaction costs that may be incurred by an Index Series in connection with redemption of Creation Units of WEBS. The redemption transaction fee for redemptions in kind and for cash (when available) are listed in the Shareholder Transaction Expenses table in "Summary of Fund Expenses". Investors will also bear the costs of transferring the Portfolio Deposit from the Fund to their account or on their order. Because the portfolio securities of an Index Series may trade on the relevant exchange(s) on days that the AMEX is closed, shareholders may not be able to redeem their Creation Units of such Index Series, or to purchase or sell WEBS on the AMEX, on days when the net asset value of such Index Series could be significantly affected by events in the relevant foreign markets. The foregoing description of the redemption of Creation Units of WEBS is only a summary. Investors interested in redeeming Creation Units of WEBS will need to refer to "Redemption of WEBS in Creation Units" in the Statement of Additional Information for additional details. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS Dividends from net investment income, including net foreign currency gains, if any, will be declared and paid at least annually and net realized securities gains, if any, will be distributed at least annually. Dividends may be declared and paid more frequently than annually for certain Index Series to improve tracking error or to comply with the distribution requirements of the Internal Revenue Code. In addition, the Fund intends to distribute at least annually amounts representing the full dividend yield on the underlying portfolio securities of each Index Series, as if such Index Series owned 30 such underlying portfolio securities for the entire dividend period. As a result, some portion of each distribution may result in a return of capital. See "Tax Matters". Dividends and securities gains distributions will be distributed in US dollars and cannot be automatically reinvested in additional WEBS. The Fund will inform shareholders within 60 days after the close of the Index Series' taxable year of the amount and nature of all distributions made to them. TAX MATTERS A person other than a tax-exempt entity who exchanges securities for Creation Units of WEBS generally will recognize gain and generally should recognize loss equal to the difference between the market value of the Creation Units and the sum of his aggregate basis in the securities surrendered and the Cash Component paid. It is possible, however, that the Internal Revenue Service may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing "wash sales", and persons exchanging securities should consult their own tax advisors with respect to when such a loss might be deductible. Each Index Series of the Fund intends to qualify for and to elect treatment as a "regulated investment company" under Subchapter M of the Internal Revenue Code. As a regulated investment company, an Index Series will not be subject to U.S. federal income tax on its income and gains that it distributes to shareholders, provided that it distributes annually at least 90% of its investment company taxable income. Investment company taxable income generally includes income from dividends and interest and gains and losses from currency transactions net of operating expenses plus the Index Series' net short-term capital gains in excess of its net long-term capital losses. Each Index Series intends to distribute to its shareholders at least annually all of its investment company taxable income and any realized net long-term capital gains. Dividends paid out of an Index Series' investment company taxable income are taxable to a U.S. investor as ordinary income. Distributions of net long-term capital gains, if any, in excess of net short-term capital losses are taxable to a U.S. investor as long-term capital gains, regardless of how long the investor has held the WEBS. Dividends paid by an Index Series generally will not qualify for the deduction for dividends received by corporations. Distributions in excess of an Index Series' current and accumulated earnings and profits will be treated as a tax-free return of capital to each of the Index Series' investors to the extent of the investor's basis in its WEBS, and as capital gain thereafter. Any dividend declared by an Index Series in October, November or December of any calendar year and payable to investors of record on a specified date in such a month shall be deemed to have been received by each investor on December 31 of such calendar year and to have been paid by the Index Series not later than such December 31 so long as the dividend is actually paid by the Index Series during January of the following calendar year. A distribution by an Index Series will reduce its net asset value per share and may be taxable to the investor as ordinary income or net capital gain as described above even though, from an investment standpoint, it may constitute a return of capital and this phenomenon may be more pronounced given the Index Series' policy of making distributions in excess of the sum of its investment company taxable income and its net long-term capital gains. Any gain or loss realized upon a sale or redemption of WEBS by a shareholder that is not a dealer in securities will generally be treated as a long-term capital gain or loss if the WEBS have been held for more than one year, and otherwise as a short-term capital gain or loss. However, if WEBS on which a long-term capital gain distribution has been received are subsequently sold or redeemed and such WEBS have been held for six months or less, any loss realized will be treated as a long-term capital loss to the extent that it offsets the long-term capital gain distribution. Moreover, any loss realized on a sale or exchange of WEBS will be disallowed to the extent that the shares disposed of are replaced within a 61-day period beginning 30 days before and ending 30 days after the disposition of the shares, in which case the basis of the shares acquired will be adjusted upward to reflect the disallowed loss. Each Index Series may be subject to foreign income taxes withheld at source. As more than 50% of the value of the total assets of each Index Series at the close of its taxable year will consist of stock or securities of foreign corporations, an Index Series will be eligible (and intends) to file an election with 31 the Internal Revenue Service to "pass through" to its investors the amount of foreign income taxes (including withholding taxes) paid by the Index Series. Subject to certain limitations, the foreign income taxes passed through may qualify as a deduction in calculating U.S. taxable income or as a credit in calculating U.S. federal income tax. Each investor will be notified of the investor's portion of the foreign income taxes paid to each country and the portion of dividends that represents income derived from sources within each country. The Fund may be required to withhold for U.S. federal income tax purposes 31% of the dividends and distributions payable to investors who fail to provide the Fund with their correct taxpayer identification number or to make required certifications, or who have been notified by the U.S. Internal Revenue Service that they are subject to backup withholding. Backup withholding is not an additional tax; amounts withheld may be credited against the investor's U.S. federal income tax liability. For further information on taxes see "Taxes" in the Statement of Additional Information. BOOK-ENTRY ONLY SYSTEM The Depository Trust Company ("DTC") will act as securities depositary for the WEBS. WEBS will be represented by global securities, which will be registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. DTC has advised the Fund as follows: DTC was created to hold securities of its participants (the "DTC Participants") and to facilitate the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect Participants"). Beneficial ownership of WEBS will be limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in WEBS (owners of such beneficial interests are referred to herein as "Beneficial Owners") will be shown on, and the transfer of ownership will be effected only through, records maintained by DTC (with respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners are expected to receive from or through the DTC Participant a written confirmation relating to their purchase of WEBS. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability of certain investors to acquire beneficial interests in WEBS. Beneficial Owners of WEBS will not be entitled to have WEBS registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered the registered holders thereof. Accordingly, each Beneficial Owner must rely on the procedures of DTC, the DTC Participant and any Indirect Participant through which such Beneficial Owner holds its interests, to exercise any rights of a holder of WEBS. WEBS distributions will be made to DTC or its nominee, Cede & Co., as the registered holder of all WEBS. The Fund expects that DTC or its nominee, upon receipt of any such distributions, will immediately credit DTC Participants' accounts with payments in amounts proportionate to their respective beneficial interests in WEBS as shown on the records of DTC or its nominee. The Fund also expects that payments by DTC Participants to Indirect Participants and Beneficial Owners of WEBS 32 held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a "street name," and will be the responsibility of such DTC Participants. See "Book-Entry Only System" in the Statement of Additional Information for additional details. PERFORMANCE The performance of the Index Series may be quoted in advertisements, sales literature or reports to shareholders in terms of average annual total return, cumulative total return and yield. Quotations of average annual total return will be expressed in terms of average annual rate of return of a hypothetical investment in an Index Series over periods of 1, 5 and 10 years (or the life of the Index Series, if shorter). Such total return figures will reflect the deduction of a proportional share of such Index Series' expenses on an annual basis, and will assume that all dividends and distributions are reinvested when paid. Quotations of a cumulative total return will be calculated for any specified period by assuming a hypothetical investment in an Index Series on the date of the commencement of the period and will assume that all dividends and distributions are reinvested when paid. The net increase or decrease in the value of the investment over the period will be divided by its beginning value to arrive at cumulative total return. Total return calculated in this manner will differ from the calculation of average annual total return in that it is not expressed in terms of an average rate of return. The yield of an Index Series refers to income generated by an investment in such Index Series over a specified 30-day (one month) period. Yields for the Index Series are expressed as annualized percentages. Quotations of average annual total return, cumulative total return or yield reflect only the performance of a hypothetical investment in an Index Series during the particular time period on which the calculations are based. Such quotations for an Index Series will vary based on changes in market conditions and the level of such Index Series' expenses, and no reported performance figure should be considered an indication of performance which may be expected in the future. GENERAL INFORMATION The Fund is organized as a Maryland corporation. The Articles of Incorporation currently permit the Fund to issue 6 billion shares of common stock with a par value of $.001 per share. Fractional shares will not be issued. In addition to the seventeen Index Series described herein, the Board of Directors of the Fund may designate additional series of common stock and classify shares of a particular series into one or more classes of that series. Any such additional series may seek to track the investment results represented by an equity securities index compiled by MSCI or by another index compiler. The shares of each series are fully paid and non-assessable; have no preference as to conversion, exchange, dividends, retirement or other features; and have no pre-emptive rights. Each share has one vote with respect to matters upon which a shareholder vote is required; shareholders have no cumulative voting rights with respect to their shares. Shares of all series vote together as a single class except that if the matter being voted on affects only a particular Index Series it will be voted on only by that Index Series and if a matter affects a particular Index Series differently from other Index Series, that Index Series will vote separately on such matter. Annual meetings of shareholders will not be held except as required by the 1940 Act and other applicable law. The Fund expects that, immediately prior to the commencement of trading of the WEBS, each Index Series will have a shareholder or shareholders holding more than 5% of the outstanding shares of such Index Series in Creation Units. The Fund cannot predict the length of time that such person(s) will remain control persons of each Index Series. As of the date of this Prospectus, the sole shareholder of each Index Series is Funds Distributor, Inc. and Funds Distributor, Inc. is accordingly a "control" person of the Fund and each Index Series as of such date. 33 Absent an applicable exemption, beneficial owners of 10% of the WEBS of an Index Series will be subject to the insider reporting, short-swing profit and short sale provisions under the Securities Exchange Act of 1934 (the "1934 Act"). The 1934 Act provides that, with certain exceptions, any gain realized by any such beneficial owner from any purchase and sale or sale and purchase of WEBS within any period of less than six months is recoverable by the Index Series. Additionally, every such beneficial owner must file with the SEC a statement showing ownership and change in ownership of WEBS within ten days after the end of any calendar month in which there has been a change in such beneficial owner's ownership of WEBS. Ernst & Young, LLP serves as independent accountants for the Fund and will audit its financial statements annually. AVAILABLE INFORMATION This Prospectus does not contain all the information included in the Registration Statement filed with the SEC under the Securities Act of 1933 with respect to the securities offered hereby, certain portions of which have been omitted pursuant to the rules and regulations of the SEC. The Registration Statement, including the exhibits filed therewith and the Statement of Additional Information, may be examined at the offices of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. Such documents and other information concerning the Fund may also be inspected at the offices of the American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006. Statements contained in this Prospectus as to the contents of any agreement or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of such agreement or other document filed as an exhibit to the Registration Statement of which this Prospectus forms a part, each such statement being qualified in all respects by such reference. Shareholder inquiries may be directed to the Fund in writing, to c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809. 34 [LOGO] SUBJECT TO COMPLETION, DATED MARCH , 1996 FOREIGN FUND, INC. STATEMENT OF ADDITIONAL INFORMATION , 1996 This Statement of Additional Information is not a Prospectus, and should be read in conjunction with the Prospectus dated , 1996 (the "Prospectus") for Foreign Fund, Inc. (the "Fund"), as it may be revised from time to time. A copy of the Prospectus for the Fund may be obtained without charge by writing to the Fund or the Distributor. The Fund's address is Foreign Fund, Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. TABLE OF CONTENTS
PAGE ----- General Description of the Fund............................................................................ 1 Investment Policies and Restrictions....................................................................... 1 Special Considerations and Risks........................................................................... 15 The MSCI Indices........................................................................................... 27 Exchange Listing and Trading............................................................................... 45 Management of the Fund..................................................................................... 46 Investment Advisory, Management, Administrative and Distribution Services.................................. 47 Brokerage Transactions..................................................................................... 50 Book Entry Only System..................................................................................... 50 Purchase and Issuance of WEBS in Creation Units............................................................ 52 Redemption of WEBS in Creation Units....................................................................... 56 Determining Net Asset Value................................................................................ 58 Dividends and Distributions................................................................................ 59 Taxes...................................................................................................... 59 Capital Stock and Shareholder Reports...................................................................... 61 Performance Information.................................................................................... 62 Counsel and Independent Accountants........................................................................ 62 Financial Statements....................................................................................... 64 Report of Independent Accountants.......................................................................... 63 APPENDICES................................................................................................. A-1
------------------------ THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED ("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY FOREIGN FUND, INC. THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL INTERNATIONAL S.A. WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY INDEX SERIES OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE WEBS OF ANY INDEX SERIES PARTICULARLY OR THE ABILITY OF THE INDICES IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK ("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND CALCULATED WITHOUT REGARD TO THE WEBS OF ANY INDEX SERIES OR THE ISSUER THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OF THE WEBS OF ANY INDEX SERIES OR THE OWNERS OF THE WEBS OF ANY INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE WEBS OF ANY INDEX SERIES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY INDEX SERIES ARE i REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY INDEX SERIES IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY INDEX SERIES. ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE, NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MSCI INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR CIPSA HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. The information contained herein regarding MSCI, the MSCI Indices, local securities markets and DTC was obtained from publicly available sources. Unless otherwise specified, all references in this Statement of Additional Information to "dollars", "USD", "US$" or "$" are to United States Dollars, all references to "AUD", or "A$" are to Australian Dollars, all references to "ATS" are to Austrian Schillings, all references to "BEF" are to Belgian Francs, all references to "CAD" or "CA$" are to Canadian Dollars, all references to "FRF" or "FF" are to French Francs, all references to "DEM" or "DM" are to the German Deutsche Mark, all references to "HKD" or "HK$" are to Hong Kong Dollars, all references to "ITL" or "LL" are to Italian Lira, all references to "JPY" or "Y" are to Japanese Yen, all references to "MYR" are to Malaysian Ringgits, all references to "MXN" are to Mexican Nuevo Pesos, all references to "NLG" are to Netherlands Guilders, all references to "SGD" are to Singapore Dollars, all references to "ESP" are to Spanish Pesetas, all references to "SEK" are to Swedish Krona, all references to "CHF" are to Swiss Francs, and all references to "GBP", "L" or "L" are to British Pounds Sterling. On February 29, 1996, the noon buying rates in New York City for cable transfers payable in the applicable currency, as certified for customs purposes by the Federal Reserve Bank of New York, were as follows for each US$1.00: AUD 0.7643, ATS 10.34, BEF 30.22, CAD 1.37285, FRF 5.0425, DEM 1.4703, HKD 7.7315, ITL 1558.50, JPY 105.13, MYR 2.549, MXN 7.635, NLG 1.6458, SGD 1.4122, ESP 123.75, SEK 6.754, CHF 1.199 and GBP 1.532. Some numbers in this Statement of Additional Information have been rounded. All US Dollar equivalents provided in this Statement of Additional Information are calculated at the exchange rate prevailing on the date to which the corresponding foreign currency amount refers. ii GENERAL DESCRIPTION OF THE FUND Foreign Fund, Inc. (the "Fund") is a management investment company organized as a series fund. The Fund initially consists of seventeen series (each, an "Index Series"), each of which invests in a portfolio of common stocks (the "Portfolio Securities") consisting of some or all of the component securities of a specified foreign securities index, selected to reflect the performance thereof. The Fund was incorporated under the laws of the State of Maryland on September 1, 1994. The shares of each Index Series are referred to herein as "World Equity Benchmark Shares-SM-" or "WEBS-SM-". The seventeen Index Series offered by the Fund are the Australia Index Series, the Austria Index Series, the Belgium Index Series, the Canada Index Series, the France Index Series, the Germany Index Series, the Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index Series, the Mexico (Free) Index Series, the Netherlands Index Series, the Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series, the Switzerland Index Series and the United Kingdom Index Series. Each Index Series will offer and issue WEBS at their net asset value only in aggregations of a specified number of shares (each, a "Creation Unit"), usually in exchange for a basket of Portfolio Securities (together with the deposit of a specified cash payment). Such Creation Units of WEBS are separable upon issue into identical shares which will be listed and traded on the American Stock Exchange (the "AMEX"). WEBS will also be redeemable only in Creation Units, also usually in exchange for Portfolio Securities and a specified cash payment. The Fund reserves the right to offer a "cash" option for sales and redemptions of WEBS (subject to applicable legal requirements), as well as the option to offer WEBS on a "cash only" basis. In each instance of such cash sales or redemptions, the Fund will impose transaction fees based on transaction expenses in the particular country that will be higher than the transaction fees associated with in-kind purchases or redemptions. In all cases, such fees will be limited in accordance with requirements of the Securities and Exchange Commission applicable to management investment companies offering redeemable securities. INVESTMENT POLICIES AND RESTRICTIONS The following information supplements and should be read in conjunction with the sections entitled "Investment Policies" and "Investment Restrictions of the Fund" in the Prospectus. Each of the seventeen Index Series has the policy to remain as fully invested as practicable in a pool of equity securities the performance of which will approximate the performance of the subject MSCI Index taken in its entirety. An Index Series will normally invest at least 95% of its total assets in stocks that are represented in the relevant MSCI Index and will at all times invest at least 90% of its total assets in such stocks. An Index Series may invest its remaining assets in Short-Term Investments (defined below) and/or in combinations of certain stock index futures contracts, options on such futures contracts, stock index options, stock index swaps, cash, forward currency exchange contracts and Short-Term Investments that are intended to provide the Index Series with exposure to such stocks (the Index Series will not use such instruments to leverage their investment portfolios). "Short-Term Investments" are short-term high quality debt securities that include: obligations of the United States Government and its agencies or instrumentalities; commercial paper (rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's Corporation), bank certificates of deposit and bankers' acceptances; repurchase agreements collateralized by the foregoing securities; and participation interests in such securities; and shares of money market funds (subject to applicable limits under the Investment Company Act). An Index Series will not invest in cash reserves or Short-Term Investments, or utilize futures contracts, options on futures contracts, options or swap agreements as part of a temporary defensive strategy to protect against potential stock market declines. An Index Series may enter into forward currency exchange contracts and foreign currency futures contracts in order to facilitate settlements 1 in local markets in connection with stock index futures, and to protect against currency exposure in connection with its distributions to shareholders, but not as part of a defensive strategy to protect against fluctuations in exchange rates. INVESTMENTS IN SUBJECT EQUITY MARKETS Brief descriptions of the equity markets in which the respective Index Series will be invested are provided below. THE AUSTRALIAN EQUITY MARKETS GENERAL BACKGROUND. Trading shares has taken place in Australia since 1828, but did not become significant until the latter half of the nineteenth century when there was strong demand for equity capital to support the growth of mining activities. A stock market was first formed in Melbourne in 1865. In 1885, the Melbourne market became the stock exchange of Melbourne, in which form it has remained until recently. Other stock exchanges were also established in Sydney (1871), Brisbane (1884), Adelaide (1887), Hobart (1891) and Perth (1891). In 1937, the six capital city stock exchanges established the Australian Associated Stock Exchanges (AASE) to represent them at a national level. In 1987, the regional exchanges merged to create the single entity -- The Australian Stock Exchange (ASX). Trading is done via a computer link-up called "SEATS". SEATS enables all exchanges to quote uniform prices. All the exchanges are members of the ASX and are subject to the Securities Industry Act, which regulates the major aspects of stock exchange operations. Although there are stock exchanges in all six states, the Melbourne and Sydney Stock Exchanges are the major centers, covering 90% of all trades. REPORTING, ACCOUNTING AND AUDITING. Australian reporting accounting and auditing standards differ substantially from U.S. standards. In general Australian corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Australian equity markets was approximately AUD 338.6 billion or US$252.2 billion. THE AUSTRIAN EQUITY MARKETS GENERAL BACKGROUND. Relative to international standards, the Vienna stock market is small in terms of total capitalization and yearly turnover. The Vienna Stock Exchange (VSE) is one of the oldest in the world and was founded in 1771 as a state institution to provide a market for state-issued bonds, as well as for exchange transactions. The Stock Exchange Act of 1875 established the VSE as an autonomous institution. The Act is still in force, placing control and administration of the exchange in the hands of the Borsekammer (Board of Governors), chosen from among the members of the exchange. The Borsekammer consists of 25 individuals with the title of Borserat (stock exchange councillor). Some are elected by members and some are designated by organizations of the securities industry for a period of five years. The councillors must be members of the exchange and they elect from amongst themselves a President and three Vice Presidents. Shares account for about 80% and investment fund certificate for about 20% of total listed securities on the VSE. Business of the exchange can be transacted only by members. Almost all the credit institutions in Vienna, some in the Austrian provinces and the joint stock banks are represented on the stock exchange, as well as the private banks, savings banks and other credit institutions. Certain securities which do not have an official listing may be dealt in on the floor of the stock exchange with permission of the management. This unlisted trading is the main activity of the free brokers (Frei Makeler), of whom there are three. REPORTING, ACCOUNTING AND AUDITING. Austrian reporting, accounting and auditing standards differ from U.S. standards. In general, Austrian corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. 2 SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Austrian equity markets was approximately ATS 405.9 billion or US$38.8 billion. THE BELGIAN EQUITY MARKETS GENERAL BACKGROUND. The Brussels Stock Exchange (BSE) was founded by Napoleanic decree in 1801. Since January 1, 1991 the BSE has been officially organized as the "Societe de la Bourse de Valeurs Mobileres de Bruxelles" (SBVM) the shareholders of which are Belgian securities houses. The law of December 4, 1990 on financial operations and markets terminated the monopoly of the individual brokers. Now only securities houses are allowed to carry out stock exchange orders. Brokers, banks, brokerage firms and insurance companies can participate in the capital of a securities house. Its management is composed of a majority of qualified people bearing the title of stockbroker. The Banking and Finance Commission was granted the power to approve securities houses by this law. The Board of Directors of the SBVM, the Stock Exchange Committee (the "SEC") organizes and supervises the different markets and ensures market transparency. The SEC also admits or dismisses brokerage firms and ensures compliance with all regulations. It is also in charge of the admission to listing and suspension of listing. On the Brussels Stock Exchange equities are traded on three different markets: the Official Market, which includes a Cash and a Forward Market, the Second Market and an "Over the Counter Market". REPORTING, ACCOUNTING AND AUDITING. Belgian reporting accounting and auditing standards differ substantially from U.S. standards. In general Belgian corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Belgian equity markets was approximately BEF 3,135.5 billion or US$102.5 billion. THE CANADIAN EQUITY MARKETS GENERAL BACKGROUND. The first Canadian stock exchange appeared in the 1870's. Today, Canada is the world's fourth largest public equity market by trading volume and the fifth largest by market capitalization. There are five stock exchanges across Canada, located in Toronto, Montreal, Vancouver, Calgary and Winnipeg. Of these, the Toronto Stock Exchange is the largest, accounting for almost 80% of Canadian trading volumes. Measured by the value of shares traded, the Toronto Stock Exchange is the second largest in North America and among the ten largest in the world. REPORTING, ACCOUNTING AND AUDITING. As recognized by the Securities and Exchange Commission in one of the proposing releases relating to the Multijurisdictional Disclosure System, Canadian reporting, accounting and auditing practices are closer to U.S. standards than those of any other foreign jurisdiction. Every issuer that qualifies an offering of securities for distribution in Canada becomes subject to periodic disclosure requirements. Authoritative accounting and auditing standards, which are uniform across Canada, are developed by a national body, the Canadian Institute of Chartered Accountants ("CICA"). Although promulgated auditing standards in Canada differ from U.S. standards in some respects, generally accepted practices in Canada routinely encompasses all significant auditing procedures required by U.S. standards. Further, CICA periodically evaluates new auditing standards adopted by the American Institute of Certified Public Accountants, CICA's U.S. counterpart, to determine whether similar guidelines may be appropriate for Canadian auditors. Canadian GAAP are similar to their U.S. counterparts, although there are some differences in measurement and disclosure. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Canadian markets was approximately CAD 480.8 billion or US$349.4 billion. THE FRENCH EQUITY MARKETS GENERAL BACKGROUND. Trading of securities in France is subject to the monopoly of the Societe de Bourse, which replaced the individual agents de change in 1991 in order to increase the cohesion of the 3 French equity market. All purchases or sales of equity securities in listed companies on any one of the French exchanges must be executed through the Societe de Bourse. There are three different markets on which French securities may be listed: (1) the official list (La Cote Officielle), comprised of equity securities of large French and foreign companies and most bond issues; (2) the second market (Le Second Marche), designed for the trading of equity securities of smaller companies; and (3) the "Hors-Cote" Market. Securities may only be traded on the official list and the second market after they have been admitted for the listing by the Conseil des Bourses de Valeurs (the "CBV"). By contrast, the Hors-Cote Market has no prerequisites to listing, and shares of otherwise unlisted companies may be freely traded there, once they have been introduced on the market by the Societe De Bourse. Although the Hors-Cote Market is frequently referred to as an over-the-counter market, this term is inaccurate in that, like the official list and the second market, it is supervised by Societes des Bourses Francaises and regulated by the CBV. Although there are seven stock exchanges in France (located in Paris, Bordeaux, Lille, Lyon, Marseille, Nancy and Nantes), the Paris Stock Exchange handles more than 95% of transactions in the country. All bonds and shares, whether listed or unlisted, must be traded on one of the seven exchanges. Trading in most of the Paris exchange-listed stocks takes place through the computer order-driven trading system CAC, launched in 1988. French market capitalization constitutes approximately 30% of the French Gross Domestic Product. Securities are denominated in the official unit of currency, the French Franc. Unless otherwise provided by a double tax treaty, dividends on French shares are subject to a withholding tax of 25%. REPORTING, ACCOUNTING AND AUDITING. Although French reporting, accounting and auditing standards are considered rather rigorous by European standards, they differ from U.S. standards in certain material respects. In general, French corporations are not required to provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the French equity markets was approximately FF 2,679.0 billion or US$524.5 billion. THE GERMAN EQUITY MARKETS GENERAL BACKGROUND. The history of Frankfurt as a financial center can be traced back to the early Middle Ages. Frankfurt had the right to issue coins as early as 1180; the first exchange office was opened in 1402. Germany has been without a central stock exchange, the position formerly held by the Berlin exchange, since 1945. Today there are eight independent stock exchanges, of which Dusseldorf and Frankfurt account for over three-quarters of the total volume. Frankfurt is the main exchange in Germany. Exchange securities are denominated in German Marks, the official currency of Germany. Equities may be traded in Germany in one of three markets: (i) the official market, comprised of trading in shares which have been formally admitted to official listing by the admissions committee of the relevant stock exchange, based on disclosure in the listing application; (ii) the "semi-official" unlisted market, comprised of trading in shares not in the official listing; and (iii) the unofficial, over- the-counter market, which is governed by the provisions of the Civil Code and the Merchant Code and not by the provisions of any stock exchange. There is no stamp duty in Germany, but a nonresident capital gains tax may apply in certain circumstances. REPORTING, ACCOUNTING AND AUDITING. German reporting, accounting and auditing standards differ substantially from U.S. standards. In general, German corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Germany equity markets was approximately DM 894.8 billion or US$601.4 billion. 4 THE HONG KONG EQUITY MARKETS GENERAL BACKGROUND. Trading in equity securities in Hong Kong began in 1891 with the formation of the Association of Stockbrokers, which was changed in 1914 to the Hong Kong Stock Exchange. In 1921, a second stock exchange, The Hong Kong Stockbrokers' Association, was established. In 1947, these two exchanges were merged under the name The Hong Kong Stock Exchange Limited. Three additional exchanges, the Far East Exchange Limited (1969), The Kam Ngan Stock Exchange Limited (1971) and The Kowloon Stock Exchange (1972) also commenced trading activities. These four exchanges were unified in 1986 to form The Stock Exchange of Hong Kong Limited (the "SEHK"). The value of the SEHK constitutes more than 100% of Hong Kong's Gross Domestic Product. Trading on the SEHK is conducted in the post trading method, matching buyers and sellers through public outcry. Securities are denominated in the official unit of currency, the Hong Kong Dollar. Foreign investment in Hong Kong is generally unrestricted. All investors are subject to a small stamp duty and a stock exchange levy, but capital gains are tax-exempt. REPORTING, ACCOUNTING AND AUDITING. Hong Kong has significantly upgraded the required presentation of financial information in the past decade. Nevertheless, reporting, accounting and auditing practices remain significantly less rigorous than U.S. standards. In general, Hong Kong corporations are not required to provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Hong Kong equity markets was approximately HKD 2,400.8 billion or US$310.5 billion. THE ITALIAN EQUITY MARKETS GENERAL BACKGROUND. The first formal exchange was created in Italy in 1808 with the establishment of the Milan Stock Exchange. Since then nine other exchanges have been founded. Milan is the most important exchange, accounting for 90% of total equity volume and about 80% of turnover in fixed income securities. After the Milan Stock Exchange the other exchanges, in order of importance are: Rome, Turin, Genoa, Bologna, Florence, Naples, Palermo, Trieste and Venice. By law the only persons allowed to trade in the official posts of the stock exchange are the stockbrokers, who must act as brokers and not trade for their own account. Banks and intermediaries are allowed to enter the trading post as observers. In 1991, the Parliament passed legislation creating Societa di intermediazone mobiliare (SIMs). SIMs were created to regulate brokerage activities in the securities market and are allowed to trade on their own and for customers' accounts. In 1986, the Centro Elaboraizione Dati (C.E.D. Borsa), a subsidiary of the Milan Stock Exchange, developed a supporting service called Borsamat. The Borsamat records all trading floor orders, links all Italian exchanges, checks transaction details and issues confirmations. Italy has the world's largest government securities market after the United States and Japan. At the end of 1993, issues of treasury bills, notes and bonds outstanding totalled US$1,133 billion. REPORTING, ACCOUNTING AND AUDITING. Italian reporting, accounting and auditing practices are regulated by Italy's National Control Commission. These practices bear some similarities to United States standards, but differ significantly in many important respects. In general, Italian corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely, less frequent and less consistent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Italian markets was approximately ITL 299,512.6 billion or US$187.9 billion. THE JAPANESE EQUITY MARKETS GENERAL BACKGROUND. The Japanese stock market has a history of over 100 years beginning with the establishment of the Tokyo Stock Exchange Company Ltd. in 1878. Stock exchanges are located in eight cities in Japan (Tokyo, Osaka, Nagoya, Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo). There is also an over-the-counter market. There are three distinct sections on the main Japanese stock exchanges. The First Section trades in over 1,100 of the largest and most active stocks, which 5 account for over 95% of total market capitalization. The Second Section consists of over 400 issues with lower turnover than the First Section, which are newly quoted on the exchange or which are not listed and would otherwise be traded over-the-counter. The Third Section consists of foreign stocks which are traded over-the-counter. The main activity of the regular exchange members is the buying and selling of securities on the floor of an exchange, both for their customers and for their own account. Japan is second only to the United States in aggregate stock market capitalization. Securities are denominated in the official unit of currency, the Japanese Yen. Takeover activity is negligible in Tokyo, and although foreign investors play a significant role, the trend of the market is set by the domestic investor. The statutory at-source withholding is 20% on dividends. There also is a transaction tax on share trades and a small stamp duty. REPORTING, ACCOUNTING AND AUDITING. Although some Japanese reporting, accounting and auditing practices are based substantially on U.S. principles, they are not identical to U.S. standards in some important respects, particularly with regard to unconsolidated subsidiaries and related structures. In general, Japanese corporations are not required to provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Japanese equity markets was approximately JPY 377,880.4 billion or US$3,534.4 billion. THE MALAYSIAN EQUITY MARKETS GENERAL BACKGROUND. The securities industry in Malaysia dates back to the early 1930's. Kuala Lumpur and Singapore were a single exchange until 1973 when they separated and the Kuala Lumpur Stock Exchange (KLSE) was formed. The KLSE operated under a provisional set of rules until 1983 when a new Securities Industry Act came into force. As of April 30, 1993, 320 companies were listed on the KLSE main board. A Second Board, established in 1988, allows smaller companies to tap additional capital. Fifty-seven companies were listed on the Second Board as of April 30, 1993. Over the years, the KLSE's close links with the Stock Exchange of Singapore (SES) has rendered it very vulnerable to developments in Singapore. Consequently, the Government decided, as a matter of national policy, on a delisting of Malaysian incorporated companies from the SES. This was effected on January 1, 1990. A similar move was made by Singapore, resulting in the delisting of all Singapore companies on the KLSE on January 1, 1990. There are two main stock indices in Malaysia. The wider ranging KLSE Composite represents 80 counters. The New Straits Times Industrial Index is an average of 30 industrial stocks. REPORTING, ACCOUNTING AND AUDITING. Malaysian reporting, accounting and auditing standards differ substantially from U.S. standards. In general, Malaysian corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Malaysian equity markets was approximately MYR 543.5 billion or US$212.3 billion. THE MEXICAN EQUITY MARKETS GENERAL BACKGROUND. There is only one stock exchange in Mexico, the Bolsa Mexicana de Valores (BMV), which was established in 1894 and is located in Mexico City. The stock exchange is a private corporation whose shares are owned solely by its authorized members and operates under the stock market laws passed by the government. The National Securities Commission (CNV) supervises the stock exchange. The Mexican exchange operates primarily via the open outcry method. However, firm orders in writing can supersede this system, provided there is a perfect match of the details of a buy and sell order. Executions on the exchange can be done by members only. Membership of the stock exchange is restricted to "Casas de Bolsa" ("brokerage houses") and "Especialistas Bursatiles" (stock exchange specialists). 6 REPORTING, ACCOUNTING AND AUDITING. Mexican reporting, accounting and auditing standards differ substantially from U.S. standards. In general, Mexican corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Mexican equity markets was approximately MXN 791.5 billion or US$107.4 billion. THE NETHERLANDS EQUITY MARKETS GENERAL BACKGROUND. Trading securities on the Amsterdam Stock Exchange (ASE) started at the beginning of the seventeenth century. The United East India Company was the first company in the world financed by an issue of shares, and such issue was effected through the exchange. The Netherlands claims the honor of having the oldest established stock exchange in existence. In 1611 a stock market began trading in the coffee houses along the Dam Square. A more formal establishment, the Amsterdam Stock Exchange Association, began trading industrial stocks in 1876 and until World War II, Amsterdam ranked after New York and London as the third most important stock market in the world. After the war, the Amsterdam Stock Exchange only gradually began to resume its activities, as members felt threatened by what they saw as an impending socialist order which would leave little of the stock market intact. Since the end of the war, the Dutch market has remained relatively neglected, as local companies have found it more favorable to use bank financing to meet their capital requirements. Trading in shares on the ASE may take place on the official market or on the parallel market, which is available to medium-sized and smaller companies that cannot yet meet the requirements demanded for the official market. REPORTING, ACCOUNTING AND AUDITING. Dutch reporting, accounting and auditing standards differ substantially from U.S. standards. In general, Dutch corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Dutch equity markets was approximately NLG 492.8 billion or US$295.8 billion. THE SINGAPOREAN EQUITY MARKETS GENERAL BACKGROUND. The Stock Exchange of Singapore (SES) was formed in 1973 with the separation of the joint stock exchange with Malaysia, which had been in existence since 1938. The linkage between the SES and the Kuala Lumpur Stock Exchange (KLSE) remained strong as many companies in Singapore and Malaysia jointly listed on both exchanges, until December 1989 when the dual listing was terminated. SES has a tiered market, with the formation of the second securities market, SESDAQ (Stock Exchange of Singapore Dealing and Automated Quotation System) in 1987. SESDAQ was designed to provide an avenue for small and medium-sized companies to raise funds for expansion. In 1990, SES introduced an over-the-counter (OTC) market known as CLOB International, to allow investors access to international securities listed on foreign exchanges. SES also has a direct link with the National Association of Securities Dealers Automated Quotation (NASDAQ) system, which was set up in March 1988 to allow traders in the Asian time zone access to selected securities on the U.S. OTC markets. This is made possible through a daily exchange of trading prices and volumes of the stocks quoted on NASDAQ. The Singapore Stock Exchange is one of the most developed in Asia and has a strong international orientation. REPORTING, ACCOUNTING AND AUDITING. Singaporean reporting, accounting and auditing standards differ substantially from U.S. standards. In general, Singaporean corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Singaporean markets was approximately SGD 222.1 billion or US$156.5 billion. 7 THE SPANISH EQUITY MARKETS GENERAL BACKGROUND. The trading of shares in Spain dates back to 1831 when the Madrid Stock Exchange was founded. Since that time other exchanges have been established in Barcelona, Bilbao and Valencia, although the latter remains purely a local market. Madrid is by far the most active and the most international market exchange, accounting for nearly 50% of total market capitalization of both bonds and stocks. The next largest exchange is Barcelona, founded in 1915. Membership at each stock exchange in Spain is restricted to stockbrokers nominated by the Ministry of Finance. In order to practice their profession, a broker must belong to the Association of Brokers. In November 1986, the Madrid Stock Exchange opened the new second market, or unlisted securities market, as part of an effort to expand the range of Spanish companies whose shares are publicly quoted. The second market provides small and medium-sized companies with access to the trading market of the Madrid Stock Exchange. REPORTING, ACCOUNTING AND AUDITING. Spanish reporting, accounting and auditing standards differ substantially from U.S. standards. In general, Spanish corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Spanish equity markets was approximately ESP 19,230.2 billion or US$153.4 billion. THE SWEDISH EQUITY MARKETS GENERAL BACKGROUND. Organized trading of securities in Sweden can be traced back to 1776. Although the Stockholm Stock Exchange was founded in 1864, the real formation of a stock exchange in an international sense took place in 1901. The statutes of the stock exchange were modified in 1906 and, from the beginning of 1907, commercial banks were admitted as members. During the 1970's the Stockholm market was characterized by limited turnover and dull trading conditions. In 1980 the market started to climb and for several years Stockholm was one of the best performing stock markets in both price and volume growth. This regeneration of a market for risk capital was reflected in the large number of companies introduced in the early 1980's. The Stockholm Stock Exchange is structured on a membership basis, with the Bank Inspection Board being the supervising authority. The board consists of 11 directors and one chief executive. The directors of the board are elected by the Swedish government, and the Association of the Swedish Chamber of Commerce, the Federation of Swedish Industries and the member companies of the Stock Exchange. There are three different markets for trading shares in Sweden. The dominant market is the A1 list, for the largest and most heavily traded companies. The second distinct market is the Over-the-Counter Market, which is more loosely regulated than the official market and caters to small and medium sized companies. The other market is the unofficial parallel market which deals in unlisted shares, both on and off the exchange floor. The shares most frequently traded on this market are those which have been delisted from the other markets and those which are only occasionally available for trading. There are also two independent markets for options -- the Swedish Options Market (OM) and the Swedish Options and Futures Exchange (SOFE). They offer calls, puts and forwards on Swedish stocks and stock market index. REPORTING, ACCOUNTING AND AUDITING. Swedish reporting, accounting and auditing standards differ substantially from U.S. standards. In general, Swedish corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Swedish equity markets was approximately SEK 1,192.9 billion or US$171.7 billion. 8 THE SWISS EQUITY MARKETS GENERAL BACKGROUND. There are three principal stock exchanges in Switzerland, the largest of which is Zurich, followed by Geneva and Basle. The Geneva exchange is the oldest and was formally organized in 1850. The Basle and the Zurich exchanges were founded in 1876 and 1877, respectively. The Geneva Exchange is a corporation under public law and in Zurich and Basle the exchanges are institutions under public law. There are three different market segments for the trading of equities in Switzerland. The first is the official market, the second is the semi-official market, and the third is the unofficial market. On the official market, trading takes place among members of the exchange on the official trading floors. Trading in the semi-official market also takes place on the floors of the exchanges, but this market has traditionally been reserved for smaller companies not yet officially accepted on the exchange. Unofficial market trading is conducted by members and non-members alike. Typical trading on this market involves shares with small turnover. Both listed and unlisted securities can, however, be traded on this market. REPORTING, ACCOUNTING AND AUDITING. Swiss reporting, accounting and auditing standards differ substantially from U.S. standards. In general, Swiss corporations do not provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the total market capitalization of the Swiss equity markets was approximately CHF 454.0 billion or US$375.2 billion. THE UNITED KINGDOM EQUITY MARKETS GENERAL BACKGROUND. The United Kingdom is Europe's largest equity market in terms of aggregate market capitalization. Trading is fully computerized under the Stock Exchange Automated Quotation System. There are 14 stock exchanges in the United Kingdom and Ireland which comprise the Associated Stock Exchange. The most important exchange and the one that has the major share of the business is the London Stock Exchange. The London Stock Exchange has the largest volume of trading in international equities in the world. REPORTING, ACCOUNTING AND AUDITING. Although UK reporting, accounting and auditing standards are among the most stringent outside the United States, such standards are not identical to U.S. standards in important respects. Some UK corporations are not required to provide all of the disclosure required by U.S. law and accounting practice, and such disclosure may, in certain cases, be less timely and less frequent than that required of U.S. corporations. SIZE OF EQUITY MARKETS. As of January 31, 1996, the aggregate capitalization of the United Kingdom equity markets was approximately L898.9 billion or US$1,358.2 billion. OTHER FUND INVESTMENTS Although the policy of each Index Series of the Fund is to remain substantially fully invested in equity securities, an Index Series may also invest in combinations of certain stock index futures contracts, options on such futures contracts, stock index options, stock index swaps and cash and Short-Term Investments that are intended to provide the Index Series with exposure to such equity securities, an Index Series may invest temporarily in certain Short-Term Investments. Such securities may be used to invest uncommitted cash balances or, in limited circumstances, to assist in meeting shareholder redemptions of Creation Units of WEBS. Although each Index Series generally seeks to invest for the long term, the Index Series retain the right to sell securities irrespective of how long they have been held. However, because of the "passive" investment management approach of the Fund, the portfolio turnover rate for each Index Series is expected to be under 50%, a generally lower turnover rate than for many other investment companies. A portfolio turnover rate of 50% would occur if one half of an Index Series' securities were sold within one year. (For purposes of calculating portfolio turnover rate, the Fund does not take into account "sales" of securities by means of in-kind redemptions, since such transactions do not impact an Index 9 Series' portfolio composition or weighting.) Ordinarily, securities will be sold from an Index Series only to reflect certain administrative changes in an Index (including mergers or changes in the composition of the Index) or to accommodate cash flows out of the Index Series while seeking to keep the performance of the Index Series in line with that of its benchmark index. In addition, securities may be sold from an Index Series in certain circumstances to ensure the Index Series' compliance with the diversification and other requirements of the Internal Revenue Code of 1986 (the "Internal Revenue Code") and with other requirements, which would tend to raise the portfolio turnover rate of such Index Series. Purchases and sales of securities will involve transaction costs which will be borne by the respective Index Series. An Index Series may borrow money from a bank up to a limit of 33% of the market value of its assets, but only for temporary or emergency purposes. An Index Series may borrow money only to facilitate distributions to shareholders or meet redemption requests (in connection with Creation Units of WEBS that the Fund agrees to redeem for cash) prior to the settlement of securities already sold or in the process of being sold by such Index Series. To the extent that an Index Series borrows money prior to receiving distributions on its portfolio securities or prior to selling securities in connection with a redemption, it may be leveraged; at such times, the Index Series may appreciate or depreciate in value more rapidly than its benchmark index. An Index Series will not make cash purchases of securities when the amount of money borrowed exceeds 5% of the market value of its total assets. LENDING PORTFOLIO SECURITIES The Fund may lend portfolio securities to brokers, dealers and other financial institutions needing to borrow securities to complete transactions and for other purposes. Because the cash, government securities or other assets that are pledged as collateral to the Fund in connection with these loans generate income, securities lending enables an Index Series to earn additional income that may partially offset the expenses of such Index Series, and thereby reduce the effect that expenses have on such Index Series' ability to provide investment results that substantially correspond to the price and yield performance of its respective MSCI Index. These loans may not exceed 33% of an Index Series' total assets. The documentation for these loans will provide that the Index Series will receive collateral equal to at least 100% of the current market value of the loaned securities, as marked to market each day that the net asset value of the Index Series is determined, consisting of cash, government securities or other assets permitted by applicable regulations and interpretations. An Index Series will pay reasonable administrative and custodial fees in connection with the loan of securities. The Index Series will invest cash collateral in Short-Term Investments. Morgan Stanley Trust Company ("MSTC") serves as Lending Agent of the Fund and, in such capacity, will share equally with the respective Index Series any net income earned on invested collateral. An Index Series' share of income from the loan collateral is included in the Index Series' gross investment income. The Fund will comply with the conditions for lending established by the Securities and Exchange Commission (the "Commission"). The Commission currently requires that the following conditions be met whenever portfolio securities are loaned: (1) the Index Series must receive at least 100% collateral from the borrower; (2) the borrower must increase such collateral whenever the market value of the securities lent rises above the level of the collateral; (3) the Index Series must be able to terminate the loan at any time; (4) the Index Series must receive reasonable interest on the loan, as well as any dividends, interest or other distributions on the loaned securities, and any increase in market value; (5) the Index Series may pay only reasonable custodian fees in connection with the loan and will pay no finders fees; and (6) while voting rights on the loaned securities may pass to the borrower, the Fund's Board of Directors (the "Board" or the "Directors") must terminate the loan and regain the right to vote the securities if a material event adversely affecting the investment occurs. 10 CURRENCY TRANSACTIONS The investment policy of each Index Series is to remain as fully invested as practicable in the equity securities of the relevant MSCI Index. Hence, no Index Series of the Fund expects to engage in currency transactions for the purpose of hedging against declines in the value of the Index Series' currency. An Index Series may enter into foreign currency forward and foreign currency futures contracts to facilitate local securities settlement to protect against currency exposure in connection with its distributions to shareholders, but may not enter into such contracts for speculative purposes or as a way of protecting against anticipated adverse changes in exchange rates between foreign currencies and the U.S. dollar. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. A currency futures contract is a contract involving an obligation to deliver or acquire the specified amount of currency at a specified price at a specified future time. Futures contracts may be settled on a net cash payment basis rather than by the sale and delivery of the underlying currency. REPURCHASE AGREEMENTS Each Index Series may invest in repurchase agreements with commercial banks, brokers or dealers to generate income from its excess cash balances. A repurchase agreement is an agreement under which an Index Series acquires a money market instrument (generally a security issued by the U.S. Government or an agency thereof, a banker's acceptance or a certificate of deposit) from a seller, subject to resale to the seller at an agreed upon price and date (normally, the next business day). A repurchase agreement may be considered a loan collateralized by securities. The resale price reflects an agreed upon interest rate effective for the period the instrument is held by an Index Series and is unrelated to the interest rate on the underlying instrument. In these transactions, the securities acquired by an Index Series (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and are held by the Fund's custodian bank until repurchased. In addition, the Fund's Board of Directors will monitor the Fund's repurchase agreement transactions generally and will establish guidelines and standards for review of the creditworthiness of any bank, broker or dealer counterparty to a repurchase agreement with an Index Series. No more than an aggregate of 15% of the Index Series' net assets will be invested in repurchase agreements having maturities longer than seven days and securities subject to legal or contractual restrictions on resale, or for which there are no readily available market quotations. An Index Series will enter into repurchase agreements only with Federal Reserve member banks with minimum assets of at least $2 billion or registered securities dealers. The use of repurchase agreements involves certain risks. For example, if the other party to the agreement defaults on its obligation to repurchase the underlying security at a time when the value of the security has declined, the Fund may incur a loss upon disposition of the security. If the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by an Index Series not within the control of the Index Series and therefore the Index Series may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement. While the Fund's management acknowledges these risks, it is expected that they can be controlled through careful monitoring procedures. FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS Each Index Series may utilize futures contracts, options and swap agreements to the extent described in the Prospectus. Futures contracts generally provide for the future sale by one party and purchase by another party of a specified commodity at a specified future time and at a specified price. Stock index futures contracts are settled by the payment by one party to the other of a cash amount based on the difference between the level of the stock index specified in the contract and at maturity of the contract. Futures contracts are standardized as to maturity date and underlying commodity and 11 are traded on futures exchanges. At the present time, there are no liquid futures contracts traded on most of the benchmark indices of the Index Series. In such circumstances an Index Series may use futures contracts, and options on futures contracts, based on other local market indices or may utilize futures contracts, and options on such contracts, on other indices or combinations of indices that the Adviser believes to be representative of the relevant benchmark index. Although futures contracts (other than cash settled futures contracts including most stock index futures contracts) by their terms call for actual delivery or acceptance of the underlying commodity, in most cases the contracts are closed out before the settlement date without the making or taking of delivery. Closing out an open futures position is done by taking an opposite position ("buying" a contract which has previously been "sold", or "selling" a contract previously "purchased") in an identical contract to terminate the position. Brokerage commissions are incurred when a futures contract position is opened or closed. Futures traders are required to make a good faith margin deposit in cash or government securities with a broker or custodian to initiate and maintain open positions in futures contracts. A margin deposit is intended to assure completion of the contract (delivery or acceptance of the underlying commodity or payment of the cash settlement amount) if it is not terminated prior to the specified delivery date. Relatively low initial margin requirements are established by the futures exchanges and may be changed. Brokers may establish deposit requirements which are higher than the exchange minimums. Futures contracts are customarily purchased and sold on margin deposits which may range upward from less than 5% of the value of the contract being traded. After a futures contract position is opened, the value of the contract is marked to market daily. If the futures contract price changes to the extent that the margin on deposit does not satisfy margin requirements, payment of additional "variation" margin will be required. Conversely, change in the contract value may reduce the required margin, resulting in a repayment of excess margin to the contract holder. Variation margin payments are made to and from the futures broker for as long as the contract remains open. The Fund expects to earn interest income on its margin deposits. Each Index Series may use futures contracts and options thereon, together with positions in cash and Short-Term Investments, to simulate full investment in the underlying index. As noted above, liquid futures contracts are not currently available for the benchmark indices of many Index Series. In addition, the Fund is not permitted to utilize certain stock index futures under applicable law. Under such circumstances, the Adviser may seek to utilize other instruments that it believes to be correlated to the underlying index. RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS An Index Series will not enter into futures contract transactions for purposes other than hedging to the extent that, immediately thereafter, the sum of its initial margin deposits on open contracts exceeds 5% of the market value of an Index Series' total assets. Assets committed to initial margin deposits for futures and options on futures will be held in a segregated account at the Fund's custodian bank. Each Index Series will take steps to prevent its futures positions from "leveraging" its portfolio. When it has a long futures position, it will maintain in a segregated account with its custodian bank, cash or high quality debt securities having a value equal to the purchase price of the contract (less any margin deposited in connection with the position). When it has a short futures position, it will maintain in a segregated account with its custodian bank assets substantially identical to those underlying the contract or cash and high quality debt securities (or a combination of the foregoing) having a value equal to its obligations under the contract (less the value of any margin deposits in connection with the position). SWAP AGREEMENTS Swap agreements are contracts between parties in which one party agrees to make payments to the other party based on the change in market value or level of a specified index or asset. In return, the other party agrees to make payments to the first party based on the return of a different specified 12 index or asset. Although swap agreements entail the risk that a party will default on its payment obligations thereunder, each Index Series would seek to reduce this risk by entering into agreements that involve payments no less frequently than quarterly. The net amount of the excess, if any, of an Index Series' obligations over its entitlements with respect to each swap will be accrued on a daily basis and an amount of cash or high quality debt securities having an aggregate value at least equal to the accrued excess will be maintained in a segregated account at the Fund's custodian bank. FUTURE DEVELOPMENTS Each Index Series may take advantage of opportunities in the area of options, and futures contracts, options on futures contracts, warrants, swaps and any other investments which are not presently contemplated for use by such Index Series or which are not currently available but which may be developed, to the extent such opportunities are both consistent with an Index Series' investment objective and legally permissible for the Index Series. Before entering into such transactions or making any such investment, the Index Series will provide appropriate disclosure. INVESTMENT RESTRICTIONS The Fund has adopted the following investment restrictions as fundamental policies with respect to each Index Series. These restrictions cannot be changed with respect to an Index Series without the approval of the holders of a majority of such Index Series' outstanding voting securities. For purposes of the Investment Company Act of 1940, as amended (the "1940 Act"), a majority of the outstanding voting securities of an Index Series means the vote, at an annual or a special meeting of the security holders of the Fund, of the lesser of (1) 67% or more of the voting securities of the Index Series present at such meeting, if the holders of more than 50% of the outstanding voting securities of such Index Series are present or represented by proxy, or (2) more than 50% of the outstanding voting securities of the Index Series. An Index Series may not: 1. Change its investment objective; 2. Lend any funds or other assets except through the purchase of all or a portion of an issue of securities or obligations of the type in which it is permitted to invest (including participation interests in such securities or obligations) and except that an Index Series may lend its portfolio securities in an amount not to exceed 33% of the value of its total assets; 3. Issue senior securities or borrow money, except borrowings from banks for temporary or emergency purposes in an amount up to 33% of the value of the Index Series' total assets (including the amount borrowed), valued at the lesser of cost or market, less liabilities (not including the amount borrowed) valued at the time the borrowing is made, and the Index Series will not purchase securities while borrowings in excess of 5% of the Index Series' total assets are outstanding, provided, that for purposes of this restriction, short-term credits necessary for the clearance of transactions are not considered borrowings; 4. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure permitted borrowings. (The deposit of underlying securities and other assets in escrow and collateral arrangements with respect to initial or variation margin for currency transactions and futures contracts will not be deemed to be pledges of the Index Series' assets); 5. Purchase a security (other than obligations of the United States Government, its agencies or instrumentalities) if as a result 25% or more of its total assets would be invested in a single issuer; 6. Purchase, hold or deal in real estate, or oil, gas or mineral interests or leases, but an Index Series may purchase and sell securities that are issued by companies that invest or deal in such assets; 7. Act as an underwriter of securities of other issuers, except to the extent the Index Series may be deemed an underwriter in connection with the sale of securities in its portfolio; 13 8. Purchase securities on margin, except for such short-term credits as are necessary for the clearance of transactions, except that an Index Series may make margin deposits in connection with transactions in currencies, options, futures and options on futures; 9. Sell securities short; or 10. Invest in commodities or commodity contracts, except that an Index Series may buy and sell currencies and forward contracts with respect thereto, and may transact in futures contracts on securities, stock indices and currencies and options on such futures contracts and make margin deposits in connection with such contracts. In addition to the investment restrictions adopted as fundamental policies as set forth above, each Index Series will observe the following restrictions, which may be changed by the Board without a shareholder vote. An Index Series will not: 1. Invest in the securities of a company for the purpose of exercising management or control, or in any event purchase and hold more than 10% of the securities of a single issuer, provided that the Fund may vote the investment securities owned by each Index Series in accordance with its views; or 2. Hold illiquid assets in excess of 15% of its net assets. An illiquid asset is any asset which may not be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the Index Series has valued the investment. For purposes of the percentage limitation on each Index Series' investments in illiquid securities, with respect to each Index Series, foreign equity securities, though not registered under the Securities Act of 1933 (the "Securities Act"), will not be deemed illiquid if they are otherwise readily marketable. Such securities will ordinarily be considered "readily marketable" if they are traded on an exchange or other organized market and are not legally restricted from sale by the Index Series. The Adviser will monitor the liquidity of restricted securities in each Index Series' portfolio under the supervision of the Fund's Board of Directors. In reaching liquidity decisions, the Adviser will consider, inter alia, the following factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (3) dealer undertakings to make a market in the security; and (4) the nature of the security and the nature of the marketplace in which it trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). If a percentage limitation is adhered to at the time of investment or contract, a later increase or decrease in percentage resulting from any change in value or total or net assets will not result in a violation of such restriction, except that the percentage limitations with respect to the borrowing of money and illiquid securities will be observed continuously. 14 SPECIAL CONSIDERATIONS AND RISKS A discussion of the risks associated with an investment in the Fund is contained in the Prospectus under the heading "Investment Considerations and Risks". The discussion below supplements, and should be read in conjunction with, such section of the Prospectus. NON-U.S. EQUITY PORTFOLIOS An investment in WEBS involves risks similar to those of investing in a broadly-based portfolio of equity securities traded on exchanges in the respective countries covered by the individual Index Series. These risks include market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in stock prices. Investing in securities issued by companies domiciled in countries other than the domicile of the investor and denominated in currencies other than an investor's local currency entails certain considerations and risks not typically encountered by the investor in making investments in its home country and in that country's currency. These considerations include favorable or unfavorable changes in interest rates, currency exchange rates and exchange control regulations, and the costs that may be incurred in connection with conversions between various currencies. Investing in an Index Series whose portfolios contain non-U.S. issuers involves certain risks and considerations not typically associated with investing in the securities of U.S. issuers. These risks include generally less liquid and less efficient securities markets; generally greater price volatility; less publicly available information about issuers; the imposition of withholding or other taxes; restrictions on the expatriation of funds or other assets of an Index Series; higher transaction and custody costs; delays attendant in settlement procedures; difficulties in enforcing contractual obligations; lesser liquidity and significantly smaller market capitalization of most non-U.S. securities markets; lesser levels of regulation of the securities markets; more substantial government involvement in the economy; higher rates of inflation; greater social, economic, and political uncertainty and the risk of nationalization or expropriation of assets and risk of war. CURRENCY TRANSACTIONS Foreign exchange transactions involve a significant degree of risk and the markets in which foreign exchange transactions are effected are highly volatile, highly specialized and highly technical. Significant changes, including changes in liquidity and prices, can occur in such markets within very short periods of time, often within minutes. Foreign exchange trading risks include, but are not limited to, exchange rate risk, maturity gaps, interest rate risk and potential interference by foreign governments through regulation of local exchange markets, foreign investment, or particular transactions in foreign currency. If the Adviser utilizes foreign exchange transactions at an inappropriate time or judges market conditions, trends or correlations incorrectly, foreign exchange transactions may not serve their intended purpose of improving the correlation of an Index Series' return with the performance of the corresponding MSCI Index and may lower the Index Series' return. The Index Series could experience losses if the values of its currency forwards, options and futures positions were poorly correlated with its other investments or if it could not close out its positions because of an illiquid market. In addition, each Index Series will incur transaction costs, including trading commissions, in connection with certain of its foreign currency transactions. FUTURES TRANSACTIONS Positions in futures contracts and options thereon may be closed out only on an exchange which provides a secondary market for such futures. However, there can be no assurance that a liquid secondary market will exist for any particular futures contract or option at any specific time. Thus, it may not be possible to close a futures or options position. In the event of adverse price movements, an Index Series would continue to be required to make daily cash payments to maintain its required margin. In such situations, if an Index Series has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, an Index Series may be required to make delivery of the instruments underlying futures contracts it holds. 15 An Index Series will minimize the risks that it will be unable to close out a futures or options contract by only entering into futures and options for which there appears to be a liquid secondary market. The risk of loss in trading futures contracts in some strategies is potentially unlimited, due both to the low margin deposits required, and the extremely high degree of leverage involved in futures pricing. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss (as well as gain) to the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit if the contract were closed out. Thus, entering into long or short futures positions may result in losses well in excess of the amount initially paid. However, given the limited purposes for which future contracts will be used, and the fact that steps will be taken to eliminate the leverage of any futures positions, an Index Series would presumably have sustained comparable losses if, instead of the futures contracts, it had invested in the underlying financial instrument and sold it after the decline. Utilization of futures transactions by an Index Series involves the risk of imperfect or no correlation to the benchmark index where the index underlying the futures contracts being used differs from the benchmark index. There is also the risk of loss by the Fund of margin deposits in the event of bankruptcy of a broker with whom an Index Series has an open position in the futures contract or related option. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of future positions and subjecting some futures traders to substantial losses. FEDERAL TAX TREATMENT OF FUTURES CONTRACTS Each Index Series is required for federal income tax purposes to recognize as income for each taxable year its net unrealized gains and losses on certain futures contracts as of the end of the year as well as those actually realized during the year. In most cases, any gain or loss recognized with respect to the futures contract is considered to be 60% long-term capital gain or loss and 40% short-term capital gain or loss, without regard to the holding period of the contract. Furthermore, sales of futures contracts which hedge against a change in the value of securities held by an Index Series may affect the holding period of such securities and, consequently, the nature of the gain or loss on such securities upon disposition. An Index Series may be required to defer the recognition of losses on futures contracts to the extent of any unrecognized gains on related positions held by the Index Series. In order for an Index Series to continue to qualify for Federal income tax treatment as a regulated investment company, at least 90% of its gross income for a taxable year must be derived from qualifying income; i.e., dividends, interest, income derived from loans of securities, gains from the sale of securities or of foreign currencies or other income derived with respect to the Index Series' business of investing in securities. In addition, gains realized on the sale or other disposition of securities held for less than three months must be limited to less than 30% of the Index Series' annual gross income. It is anticipated that any net gain realized from the closing out of futures contracts will be considered gain from the sale of securities and therefore be qualifying income for purposes of the 90% requirement. In order to avoid realizing excessive gains on securities held less than three months, an Index Series may be required to defer the closing out of futures contracts beyond the time when it would 16 otherwise be advantageous to do so. It is anticipated that unrealized gains on futures contracts, which have been open for less than three months as of the end of the Index Series' fiscal year and which are recognized for tax purposes, will not be considered gains on sales of securities held less than three months for the purpose of the 30% test. Each Index Series will distribute to shareholders annually any net capital gains which have been recognized for federal income tax purposes (including unrealized gains at the end of the Index Series' fiscal year) on futures transactions. Such distributions will be combined with distributions of capital gains realized on the Index Series' other investments and shareholders will be advised on the nature of the distributions. CONTINUOUS OFFERING The proposed method by which Creation Units of WEBS will be created and traded may raise certain issues under applicable securities laws. Because new Creation Units of WEBS may be issued and sold by the Fund on an ongoing basis, at any point a "distribution", as such term is used in the Securities Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the Securities Act. For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Distributor, breaks them down into constituent WEBS, and sells such WEBS directly to customers, or if it chooses to couple the creation of a supply of new WEBS with an active selling effort involving solicitation of secondary market demand for WEBS. A determination of whether one is an underwriter for the purposes of the Securities Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that could lead to a categorization as an underwriter. In any event, broker-dealer firms should also note that dealers who are not "underwriters" but are effecting transactions in WEBS, whether or not participating in the distribution of WEBS, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(3) of the Securities Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. Firms that incur a prospectus-delivery obligation with respect to WEBS are reminded that under Securities Act Rule 153 a prospectus delivery obligation under Section 5(b)(2) of the Securities Act owed to an exchange member in connection with a sale on the exchange is satisfied by the fact that the Index Series' prospectus is available at the exchange (i.e., the AMEX) upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange and not with respect to "upstairs" transactions. REGIONAL AND COUNTRY-SPECIFIC ECONOMIC CONSIDERATIONS EUROPE In 1986, the member states of the European Community (the "Member States") signed the "Single European Act", an agreement to establish a free market. Since September 1992, however, Europe's monetary policy has been affected by fluctuating currencies. In addition, although developing a unified common European market has promoted the free flow of goods and services, in 1993 tight monetary policies and high inflation caused Europe's economies to ebb into recession. The 1995 General Agreement on Trade and Tariffs (GATT) has attempted to resist protectionism and Europe's economies improved fueled by increased exports. This recovery was aided by the U.S. dollar's recovery in the spring of 1995. While interest rates have continued to decline, some countries' tight monetary conditions remain an obstacle to stronger growth and a threat to exchange market stability. 17 The Maastricht Treaty on economic and monetary union (the "EMU") is intended to provide its members with a stable monetary framework. Until the EMU takes effect sometime between 1997 and 1999, however, the community will be challenged to enforce monetary cooperation and reduce conflicts between domestic and external policies among the European countries. AUSTRIA. Austria's small population and limited domestic market is insufficient to support single large industrial sectors. Also, raw materials are limited and the terrain supports only a small agricultural sector. With its skilled labor force, however, Austria has focused on special niche industries for export, with high value added through technological applications. In addition, a vibrant services sector, based initially on tourism, has emerged and accounts for 64% of Gross Domestic Product ("GDP"). As a result of the second world war, much of the Austrian industrial sector was converted to public ownership. Austria had established the Austrian Industrial Administration Company ("OIAG") to function as a holding company for these nationalized industries. With the global recession and the troublesome state of public finance in Austria, the government, attempting to reduce the drain of the OIAG on the country's budget, reduced the OIAG's labor force and reorganized the OIAG into seven separate holding companies. The reorganization of the OIAG, along with public asset sales, helped to reduce the budget deficit from 5.1% of GDP in 1986 to 3.3% of GDP in 1992. Losses in 1993, however, caused the government to begin selling the group to the private sector. Along with the steady trend toward privatizations, the importance of foreign capital has increased. BELGIUM. Rising new industries in Belgium include light engineering, chemicals and food processing and services, with the service industry sector accounting for approximately 70% of GDP. Although the agricultural sector is small, accounting for only 2% of GDP, its importance is reflected in Belgium's thriving food processing business. Some of Belgium's traditional industries have experienced a steep decline over the past two decades, such as coal, steel, textiles and heavy engineering, but this decline has, in part, been offset by the rising new industries. Company ownership is held by a few large private sector groups through a web of holding and operating companies. Belgium's open trade policy has resulted in record surpluses in each of the four years from 1991 to 1994. Exports are running at approximately 77% of GDP and imports at 74%. High unemployment and a large government deficit continue to occupy the government's attention. Through a series of expenditure reductions and tax increases, the government was able to reduce the deficit to 5.9% of GDP in 1990, but this trend reversed itself in 1991. The rise in the deficit was fueled by economic slowdown followed by a recession in 1993, while social security and interest payments continued to rise. By 1993, the recessive economy coupled with rising social security and interest payments caused the deficit to increase to 7.2% of GDP. However, with the return to economic growth in 1994 and the corresponding rise of tax receipts, the deficit was reduced to 5.4% of GDP. FRANCE. France is a leading industrial and agricultural country. Its large service sector, accounting for approximately two-thirds of GDP, includes tourism, transportation and computer consultancy. The once dominant iron and steel and textiles and clothing industries have given way to the fast growing aerospace, chemicals and pharmaceuticals, plastics and telecommunications industries. The automobile industry, however, is still the most important industry in France, accounting for one-twelfth of the labor force and one-sixth of exports. The two economic concerns that have plagued France for the past decade are a large budget deficit and high unemployment (currently approximately 12%). In May 1993, the government, in an effort to correct these problems, imposed excise duties and implemented government expenditure cuts. Soon thereafter, the government imposed additional measures to foster employment creation and conducted the largest government bond issue to date. In addition, in 1993, the government restarted privatizing state-owned enterprises. 18 In 1995, the government attempted to strike a balance between reducing the budget deficit and stimulating growth. In May 1995, the government imposed tax increases to reduce the budget deficit consisting of a 2% increase in value-added tax and a 10% surcharge on corporate income tax. These measures, while termed temporary, will remain in effect until at least 1997. The economic challenges facing the government for the next few years include reducing the budget deficit to a level acceptable under the EMU, curbing high unemployment and controlling social security spending. GERMANY. Germany, the third largest economy in the world, has faced substantial economic challenges from the reunification of East and West Germany. The former East Germany had been insulated from any real competition, was under-invested in housing and infrastructure and, generally, was not geared to handle full economic and political union with West Germany. In addition, while the West German government intended to finance the costs of reunification with increased taxes, the costs proved to be much greater than anticipated due to the high cost of social security transfers, extensive environmental damage and a generally worse economic condition than expected. As a result, in 1993, the public sector deficit rose from 0% to 7.5% and the Bundesbank (central bank) sharply raised interest rates, which, in turn, caused the economy to recess. In 1994, Germany began to recover from recession, but rising interest rates restricted market advances. Eastern Germany has also experienced an upturn in its economy with GDP rates running in excess of 7%, which has enhanced cost competitiveness. Much of Germany's fiscal health and prosperity over the next few years will depend on the continued growth of capitalism in eastern Germany. In addition, to comply with the Maastricht Treaty, Germany must cut government debt from a projected 64% of GDP next year to less than 60%. The failure, either political or economic, of Germany's ability to cut spending while also funding the restoration of the east to fiscal health could negatively impact the German stock market. ITALY. Italy is a net importer of agricultural products and imports most of its energy products. Aside from tourism and design, Italy is not very competitive in the service sector. Through networks of small and medium-sized companies, Italy's strengths lie in its manufacturing sector, particularly machine tools and consumer goods. In the early 1990s, industry began to struggle to compete as a result of wage increases and an exchange rate policy designed to limit the effect of government borrowing on the inflation rate. Since the collapse of the lira in September 1992, however, exports have recovered. The Bank of Italy, operating autonomously, has historically followed a tough monetary policy in an effort to prevent government borrowing from causing inflation. Since May 1994, the Bank of Italy has raised the official discount rate twice to defend the lira's exchange rate and curb rising inflation. By May 1995, the nominal effective rate of exchange of the lira depreciated over 6% compared to December 1994 and 31% compared to August 1992. From 1992 through 1995 the government has sought to implement a fiscal policy that would reduce government borrowings through tax measures and government spending cuts. The 1993 budget included provisions for structural reforms of the pension system, public sector employment, local government finance and health services. In addition, the 1993 budget introduced new revenue enhancement measures, including certain tax increases. However, high interest rates and a shortfall in revenue resulted in a severe recession. The 1994 budget was based on expenditure cuts, including reductions in the health, welfare and education budgets, but lower than expected tax receipts were received due to the recession. The 1995 budget included some temporary revenue raising measures and cuts to the pension system, health service, local government and defense. In 1992, Italy also began a privatization program by transferring major state holdings to joint-stock companies as an intermediate step to total or, at least partial, floatation on the stock exchange. Although the privatization program was somewhat curbed in 1994, the government in 1995 has expressed an interest in revitalizing the program. 19 THE NETHERLANDS. The Netherlands boasts one of the highest GDP per capita at $20,244. Although its most important sector is industrial, the Netherlands also benefits from agricultural and natural gas resources. Foreign trade is vital to the Netherlands, accounting for over 50% of GDP. The recovery of exports by the end of the 1980s was fueled by government policies on wage moderation, although such policies resulted in increased unemployment. In addition, the reunification of Germany resulted in a surge in demand for exports. Public spending has exceeded 50% of GDP, including transfer payments. The public-sector deficit has been a political and economic problem and has received heightened government attention. While the deficit has been reduced recently, further reduction remains a key government objective. SPAIN. Spain's entry into the European Community in 1986 was followed by a period of rapid economic growth. Economic growth did not continue, however, and the government's restrictive monetary policy and the overvalued peseta contributed to a downturn in investment and a rise in unemployment in the early 1990s. Currently, the government faces the challenges of addressing the domestic concerns of controlling inflation, reducing a large government deficit and effecting labor reform against the competing interests of maintaining a monetary policy suitable for Spain's participation in the EMU. In June 1989, Spain joined the Exchange Rate Mechanism of the European Monetary System with the aim of maintaining a stable currency. The resulting huge inflows of foreign capital caused the Spanish economy to lose some of its competitiveness. With the devaluation of the peseta and the easing of monetary policy in 1993, Spain slipped into its worst recession in 30 years. The resulting falling tax receipts coupled with greater social spending caused the deficit to increase to 7.5 % of GDP. Although a large increase in exports and a substantial decrease in imports somewhat mitigated the effect of the 1993 recession, inflation had risen to 4.7% due to the peseta devaluation. The rise in inflation has caused higher interest rates, which threaten to slow economic recovery. The government has also displayed an inability to control government spending, particularly in the area of social spending, and prospects for future spending cuts are limited. The pension system, perhaps the biggest challenge facing the government in this area, now accounts for 23% of public-sector spending, which will continue to grow by 10% annually in the absence of structural reform. In June of 1994, Spain experienced a general strike by the trade unions. The strike, while unsuccessful, has led to reforms in the labor market to ease rigid regulations that govern permanent job contracts. SWEDEN. Sweden has a highly developed and successful industrial sector. The chief industries, most of which are under private ownership, include textiles, furniture, electronics, dairy, metals, ship building, clothing, engineering, chemicals, food processing, fishing, paper, oil and gas, automobiles, and shipping. Productivity, as measured by GDP per capita, is well above the European average, although two-thirds of GDP passes through the public sector. Sweden recently suffered a severe recession with a total fall in GDP of 5% from 1990 to 1993. However, economic recovery in 1994 resulted in a 2% increase in GDP. Real GDP in Sweden is expected to increase by 2.5% for 1995. The result of the recession and the slow growth of GDP thereafter has been a drop in the standard of living in Sweden. The government has traditionally afforded its citizens generous benefits for unemployment, sick leave, child care, elder care, and general public welfare, along with state-provided medical care. This extensive social welfare system, however, has proved to be extremely costly during recent decades, resulting in growing government deficits. In addition, Sweden has a history of supporting an inefficient agricultural sector with subsidies ranging up to 75% (the recent average for Europe has been approximately 35%-45%). Also, unemployment has remained fairly high and, because the income scale 20 tends to be flat, little income advantage results from career advancement. Almost half of personal disposable income received by Swedes was the result of transfer payments, a system for redistributing wealth. Sweden, which recently agreed to join the European Community, will be under strong pressure to reduce government spending, especially when the full terms of the EMU and other union agreements are implemented. National debts, which are high in Sweden, will also need to be reduced. How well these goals can be accomplished without reversing the long-awaited growth trends that are now emerging remains to be seen. SWITZERLAND. Swizterland's lack of raw materials has caused it to base economic growth on its highly skilled labor market and technological expertise in manufacturing. Swizterland's strengths lie in chemicals and pharmaceuticals, watches and precision instruments, engineering, food, financial services and tourism. In addition, its small domestic market has caused substantial reliance on exports, which accounted for 36% of GDP in 1994. With a heavy dependence on foreign labor to supplement its labor force, Switzerland has historically experienced low unemployment levels. From 1990 through the first half of 1995, however, unemployment rose substantially, peaking at 5% in 1994. In addition, high labor costs tend to reduce price competitiveness, although this has been partially offset by low inflation and moves to higher value-added products and services. UNITED KINGDOM. Following a long recession that ended in 1992, the United Kingdom saw 2% growth in GDP in 1993 amidst the global recession. The reduced demand from foreign markets stemming from the global recession of 1993-94 hurt the United Kingdom's economy. In addition, foreign investment is crucial to the continued economic recovery, but the United Kingdom is facing heavy competition for foreign investment from its European neighbors. The Conservative Party has lost a great deal of its power and a strong possibility exists that it will lose control of the government to the Labor Party in the next election. Accordingly, a shift may occur in current government policies, particularly concerning certain social employment policies of the European Community which had been rejected by the Conservative Party. Anti-union sentiment exists in the United Kingdom and the failed attempt to tie the pound to the European Currency Unit has resulted in higher inflation. Accordingly, the United Kingdom has not been as active a participant in formulating European Community policies as it might have been. In addition, like other European countries, inflation continues to remain high, which tends to hinder economic growth. It is expected that high inflation will continue in the United Kingdom. REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1994 1993 1992 1991 1990 ----- --------- --------- --------- ----- Austria............................................... 2.8 -0.1 1.8 3.0 4.2 Belgium............................................... 2.3 -1.7 1.9 2.3 3.2 France................................................ 2.5 -1.0 1.2 0.8 2.5 Germany............................................... 2.9 -1.1 2.2 2.8 -- Italy................................................. 2.5 -0.7 0.7 1.2 2.1 Netherlands........................................... 2.4 0.4 1.3 2.3 4.1 Spain................................................. 1.9 -1.0 0.8 2.2 3.6 Sweden................................................ 2.2 -2.1 -1.9 -1.1 1.4 Switzerland........................................... 2.0 -0.9 -0.3 -- 2.3 United Kingdom........................................ 3.8 2.2 -0.5 -2.0 0.4
Source:World Economic Outlook, May 1995 (International Monetary Fund) 21 JAPAN, THE PACIFIC BASIN, AND SOUTHEAST ASIA Many Asian countries may be subject to a greater degree of social, political and economic instability than is the case in the United States and Western European countries. Such instability may result from (i) authoritarian governments or military involvement in political and economic decision-making; (ii) popular unrest associated with demands for improved political, economic, and social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; and (v) ethnic, religious, and racial disaffection. The economies of most of the Asian countries continue to depend heavily upon international trade and are accordingly affected by protective trade barriers and the economic conditions of their trading partners, principally the United States, Japan, China and the European Community. The enactment by the United States or other principal trading partners of projectionist trade legislation, reduction of foreign investment in the local economies, and general declines in the international securities markets could have a significant adverse effect upon the economies and securities markets of the Asian countries. The success of market reforms and a surge in infrastructure spending have fueled rapid growth in many developing countries in Asia. Rapidly rising household incomes have fostered large middle classes and new waves of consumer spending. Increases in infrastructure spending and consumer spending have made domestic demand the growth engine for these countries. Thus their growth now depends less upon exports. While exports may no longer be the sole source of growth for developing economies, improved competitiveness in export markets has contributed to growth in many of these nations. The increased productivity of many Asian countries has enabled them to achieve, or continue, their status as top exporters while improving their national living standards. AUSTRALIA. Australia has a prosperous Western-style capitalist economy, with a per capita GDP comparable to levels in industrialized Western European countries. Economic growth accelerated markedly in 1994 as robust domestic spending boosted activity. Australia is rich in natural resources and is the world's largest exporter of beef and wool, the second-largest exporter of mutton, and among the top wheat exporters. Australia is also a major exporter of minerals, metals and fossil fuels. Due to the nature of Australia's exports, a downturn in world commodity prices may have a big impact on its economy. The government is in the process of developing policies to promote foreign investment, expand research and development, increase funding for national landcare and reform public housing policy. Also, the government is supportive of continuing privatization of state-owned enterprises. While economic data suggest an easing from the unsustainable rates of growth reached during 1994, the outlook is for continued, but moderate economic growth. GDP is forecast to grow by 4.75% in 1994-95 and 3.75% in 1995-96, but debt is also expected to continue to rise. Notwithstanding the intensification of the severe drought in eastern Australia, economic growth was strong in 1994-95 with improvements made in reducing unemployment, which is currently in excess of 8%. The drought also contributed to inflation by causing food prices to rise in 1995. In addition, the government's increased taxes on tobacco and motor vehicles contributed to an inflation rate that reached 5.1% in 1995. HONG KONG. Hong Kong's impending return to Chinese dominion in 1997 has not initially had a positive effect on its economic growth, which was vigorous in the 1980s. Although China has committed by treaty to preserve Hong Kong's economic and social freedoms, the continuation of the current form of the economic system in Hong Kong will depend on the actions of the Chinese government. Business confidence in Hong Kong, therefore, can be significantly affected by such developments, which in turn can affect markets and business performance. In preparation for 1997, Hong Kong has continued to develop trade with China, where it is the largest foreign investor, while also maintaining its long-standing export relationship with the United States. Spending on infrastructure improvements is a significant priority of the colonial government while the private sector continues to 22 diversify abroad based on its position as an established international trade center in the Far East. It is important to note that a substantial portion of the companies listed on the Hong Kong Stock Exchange are involved in real estate related business. Much speculation centers around what China will do when it comes back into possession of Hong Kong. The answer will depend in large part on who is in power in China at that time, which is unknown. However, tensions that have arisen between the current governor, Chris Patten, and the Chinese government have led to speculation that China may try to punish Hong Kong by sabotaging it economically, an option which is considered a real possibility even though it would not necessarily be to China's economic advantage to do so. The Hong Kong market's growth over the past decade has not come without much volatility, and there is no doubt that volatility will continue to characterize the market, not only because of political uncertainties but because the market has traditionally been dominated by the actions of a few large trading blocs. JAPAN. Japan's economy, amounting to the second-largest GDP in the world, has grown substantially over the last three decades. However, in 1994, the growth rate in Japan slowed to 0.6% and its budget showed a deficit of 7.8% of GDP. The boom in Japan's equity and property markets during the expansion of the late 1980's supported high rates of investment and consumer spending on durable goods, but both of these components of demand have now retreated sharply following the decline in asset prices. It is suffering through its worst recession in two decades. Profits have fallen sharply, unemployment has reached a historical high of 3.2% and consumer confidence is low. The banking sector continues to suffer from non-performing loans. Nine discount-rate cuts since its 6% peak in 1991, a succession of fiscal stimulus packages, support plans for the debt-burdened financial system and spending for reconstruction following the Kobe earthquake may help to contain the recessionary forces, but substantial uncertainties remain. In addition to a cyclical downturn, Japan is suffering through structural adjustments. Like the Europeans, the Japanese have seen a deterioration of their competitiveness due to high wages, a strong currency and structural rigidities. Japan has also become a mature industrial economy and, as a result, will see its long-term growth rate slow down over the next ten years. Finally, Japan is reforming its political process and deregulating its economy. This has brought about turmoil, uncertainty and a crisis of confidence. While the Japanese governmental system itself seems stable, the dynamics of the country's politics have been unpredictable in recent years. The economic crisis of 1990-92 brought the downfall of the conservative Liberal Democratic Party, which had ruled since 1955. Since then, the country has seen a series of unstable multi-party coalitions and several prime ministers come and go, because of politics as well as personal scandals. While there appears to be no reason for anticipating civic unrest, it is impossible to know when the political instability will end and what trade and fiscal policies might be pursued by the government that emerges. Japan's heavy dependence on international trade has been adversely affected by trade barriers and other protectionist measures as well as the economic condition of its trading partners. While Japan subsidizes its agricultural industry, only 19% of its land is suitable for cultivation and it is only 50% self-sufficient in food production. Accordingly, it is highly dependent on large imports of wheat, sorghum and soybeans. In addition, industry, its most important economic sector, depends on imported raw materials and fuels, including iron ore, copper, oil and many forest products. Japan's high volume of exports, such as automobiles, machine tools and semiconductors, have caused trade tensions, particularly with the United States. Some trade agreements, however, have been implemented to reduce these tensions. The relaxing of official and de facto barriers to imports, or hardships created by any pressures brought by trading partners, could adversely affect Japan's economy. A substantial rise in world oil or commodity prices could also have a negative affect. The strength of the yen itself may prove an impediment to strong continued exports and economic recovery, because it makes 23 Japanese goods sold in other countries more expensive and reduces the value of foreign earnings repatriated to Japan. Because the Japanese economy is so dependent on exports, any fall-off in exports may be seen as a sign of economic weakness, which may adversely affect the market. Geologically, Japan is located in a volatile area of the world, and has historically been vulnerable to earthquakes, volcanoes and other natural disasters. As demonstrated by the Kobe earthquake in January of 1995, in which 5,000 people were killed and billions of dollars of damage was sustained, these natural disasters can be significant enough to affect the country's economy. MALAYSIA. Over the last two decades, Malaysia has experienced rapid industrialization transposing a once commodity driven economy to one dominated by the manufacturing sector. Although commodities remain important to the Malaysian economy, where the country has played a leading role in tin, rubber, palm oil, timber, oil and gas, the electronics sector is now, by far, the fastest growing and most important segment. In fact, Malaysia has become the world's third-largest producer of semiconductor devices (after the U.S. and Japan) and the world's largest exporter of semiconductor devices. The high rates of investment that have been required to sustain Malaysia's rapid growth have been met with high rates of domestic savings and significant inflows of foreign direct investment. This combination has been instrumental in maintaining fast growth while simultaneously limiting inflationary pressures. Although free repatriation of profits are allowed, Malaysia has experienced a high rate of reinvestment of profits on foreign direct investment. The Bank Negara Malaysia (central bank) has followed a strict monetary policy in an effort to restrain inflationary pressures. There has been limited intervention, however, as the ringgit has remained strong. Inflationary pressures include increasing demands on natural resources and speculative international funds. The central bank took measures in 1994 to discourage speculative investment from abroad, including segregation of non-resident funds and strict limits on banks' activities across frontiers. As a result, share prices on the national exchange fell and the value of the ringgit dropped. Although these monetary policies were subsequently rescinded, the threat of such future action may deter capital inflows. While inflation has been kept in check, in part through government intervention to control prices, inflationary pressures still exist. Rapid economic growth has led to shortages, some inefficiencies and rising imports. The government, however, has been reluctant to take certain deflationary steps because of the fear of endangering the private investment needed for economic growth. Malaysia's rapid development has not been without costs. The potential now exists for repatriation of profits from foreign direct investment and the resulting vulnerability to changes in the relative attractions of different countries as locations for investment. In addition, the high import content of its exports, which increases its vulnerability to world commodity pricing, may lead to trade imbalances and impact on economic performance. Also, its high export dependence leaves it vulnerable to recessions abroad. SINGAPORE. Singapore has become highly industrialized with rapid growth in its manufacturing sector due in large part to significant foreign investment. Of particular importance is the electronics industry where Singapore is the leading producer of disk drives. The financial and business services sector has also experienced recent growth, while mining and agriculture are of minimal importance. The oil refining and chemicals industry has long been important and a significant pharmaceuticals sector has emerged. Since 1987, annual growth has been high, ultimately reaching 10% in 1993 and 1994. This sustained annual growth can be attributable to the continuing expansion in investments and exports, coupled with the relatively small increase in personal consumption. The government has followed an interventionist economic policy with respect to its individual industries. To instill faith in its interventionist policies, the government has sought to maintain economic stability. It has done this by, among other measures, allowing the singapore dollar to appreciate to reduce imported inflation and setting taxes relatively high, but keeping rates stable. On the other hand, there has been little attempt to use monetary policy to modify economic growth. The 24 government has instead focused on regulating the supply of foreign labor by setting limits on the percentage of foreign labor employed and applying levies on employers of foreign labor. In addition, the government, recognizing that land use is a constraint on growth, has sought to make existing land use more efficient. The government directly holds stakes in individual companies across the board from high-tech defence contractors to low-tech service businesses. The government also holds indirect stakes in firms through a number of agencies. Such government ownership interests may discourage the development of private firms due to fears that the government entities may be given certain advantages not available to private entities. Some privatization of state-owned businesses is ongoing, however, such as the telephone business and certain other utilities. Singapore is heavily dependent on foreign trade with the total value of trade goods and services reaching 278% of GDP in 1994. The country has also seen a large volume of re-export trade. The industrial base is dominated by foreign multinationals, with only a few large domestic firms. While foreign investment is a key to the continued prosperity of Singapore, several factors raise concerns about future prospects. Productivity growth has not been consistent over the years. In addition, business costs remain high reflective in part of the expense of labor. Also, the appreciating currency, while countering domestic pressures, does not afford advantages to exporters. REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)
1994 1993 1992 1991 1990 ----- --------- ----- --------- ----- Australia............................................... 4.7 3.7 2.1 -1.3 1.3 Hong Kong............................................... 5.7 5.8 6.0 5.1 3.4 Japan................................................... 0.6 -0.2 1.1 4.3 4.8 Malaysia................................................ 8.5 8.3 7.8 8.7 9.7 Singapore............................................... 7.0 9.9 6.0 6.7 8.8
Source:World Economic Outlook, May 1995 (International Monetary Fund) CANADA Due to its vast geographic area, ranking second in the world only to Russia, Canada has successfully developed into a modern industrial country supplemented by significant agricultural activities and natural resource exploitation, such as oil, gas and timber. With exports amounting to over 25% of Canadian production, Canada is highly dependent on the U.S. market as a source of demand for manufacturing, agricultural, energy and other raw material products. Approximately 75% of Canada's external trade is with the U.S. and close ties exists between U.S. and Canadian manufacturers. Both the Free Trade Agreement with the U.S. and the North American Free Trade Agreement significantly increased Canada's market and should solidify these ties. In late 1990, due to reduced domestic demand and problems with the U.S. market, the economy ebbed into recession. The recession hit the manufacturing sector the hardest, but real investment in machinery and equipment indicated that important restructuring steps were underway with a view toward improving productivity. As a result of the recession, tax receipts dwindled and government deficits mushroomed. In addition, the poor export performance during the recession displayed a perhaps reduced competitiveness internationally. The economy showed signs of a modest recovery in 1992 that continued into 1993 due to lower interest rates and an upswing in U.S. demand. The continued strength in investment in machinery and equipment along with a lower Canadian dollar indicate that Canada may have brighter prospects in the short run. The government will be challenged to maintain advances it makes in competitiveness over the long run. Other problems faced by the Canadian economy include persistent high budget deficits at the Federal level and in some provinces (notably Ontario and Quebec) and the drag on the economy caused by the ongoing uncertainty caused by the separatist movement in Quebec, Canada's second largest and second most populous province. 25 CANADIAN REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE) 1994 4.5 1993 2.2 1992 0.6 1991 -1.8 1990 -0.2
Source:World Economic Outlook, May 1995 (International Marketing Fund) MEXICO During the period from 1982 through 1994, Mexico pursued far-reaching and comprehensive adjustment policies designed to reform its economy and achieve a return to sustained economic growth. These policies included fiscal discipline, tax reform, trade liberalization, opening the economy to foreign investment, reform of certain public sector prices to conform to market conditions, deregulation, privatization of certain non-strategic public sector enterprises and an exchange rate and monetary policy aimed at slowing the rate of inflation in Mexico to levels approximating those of its major trading partners. While successful in reducing inflation from 159.2% in 1987 to 7.1% in 1994 and achieving real GDP growth averaging 3.0% over the 1990-1994 period, the Mexican economy had certain weaknesses by 1994 that made it unable to withstand the severe internal and external political and economic shocks that occurred in 1994, resulting in the destabilization of the Mexican economy at the end of 1994, a crisis of confidence on the part of foreign portfolio investors and the economic and financial crisis facing the government since the beginning of 1995. Weaknesses of the economy that became apparent in 1994 included a reduced level of domestic savings and a government exchange rate policy that over time resulted in the progressive overvaluation of the new peso. During 1994, internal and external events combined to complicate the management of the Mexican economy. Progressive increases in interest rates in the United States, and prospects of further such increases, made Mexican investments relatively less attractive to foreign portfolio investors. In addition, a series of internal disruptions and political events, including the insurgents' attack in the southern state of Chiapas, the assassinations of certain political leaders and the resulting uncertainty regarding the fairness of elections and the kidnapping of several prominent businessmen, caused some investors to believe that the Mexican political system was less stable than had been believed. In December 1994, after the government allowed the new peso to float freely against the dollar, a sharp and rapid devaluation of the new peso ensued. The new peso's devaluation, which increased the cost of imported goods and services, caused the inflation rate in Mexico to rise (the government expects the inflation rate for the period from December 1994 to December 1995 to be 51.45). In addition, the devaluation raised concerns about Mexico's ability to repay its short-term obligations and the stability of the Mexican banking system. These concerns have led to sharply higher interest rates on Mexican public and private sector debt and sharply reduced opportunities for refinancing or refunding debt issues. Throughout 1995, however, the government, through various initiatives and programs, has sought to restore stability to Mexico's financial and foreign exchange markets, lower inflation rates, enahance international competitiveness, protect the solvency of the banking system and stimulate economic recovery and job creation. It is unclear whether these initiatives will be successful in dealing with Mexico's severe economic problems. 26 MEXICO REAL GDP RATE OF GROWTH (ANNUAL % CHANGE) 1994 3.5 1993 0.6 1992 2.8 1991 3.6 1990 4.4
Source:World Economic Outlook, May 1995 (International Marketing Fund) THE MSCI INDICES IN GENERAL The Indices were founded in 1969 by Capital International S.A. as the first international performance benchmarks constructed to facilitate accurate comparison of world markets. Morgan Stanley acquired rights to the Indices in 1986. The MSCI Indices have covered the world's developed markets since 1969, and in 1988, MSCI commenced coverage of the emerging markets. Although local stock exchanges have traditionally calculated their own indices, these are generally not comparable with one another, due to differences in the representation of the local market, mathematical formulas, base dates and methods of adjusting for capital changes. MSCI applies the same criteria and calculation methodology across all markets for all indices, developed and emerging. MSCI Indices are notable for the depth and breadth of their coverage. MSCI generally seeks to have 60% of the capitalization of a country's stock market reflected in the MSCI index for such country. Thus, the MSCI Indices balance the inclusiveness of an "all share" index against the replicability of a "blue chip" index. WEIGHTING All single-country MSCI Indices are market capitalization weighted, i.e., companies are included in the indices at their full market value (total number of shares issued and paid up, multiplied by price). MSCI believes full market capitalization weighting is preferable to other weighting schemes for both theoretical and practical reasons. MSCI calculates two indices in some countries in order to address the issue of restrictions on foreign ownership in such countries. The additional indices are called "free" indices, and they exclude companies and share classes not purchasable by foreigners. Free indices are currently calculated for Singapore, Mexico, the Philippines and Venezuela, and for those regional and international indices which include such markets. REGIONAL WEIGHTS. Market capitalization weighting, combined with a consistent target of 60% of market capitalization, helps ensure that each country's weight in regional and international indices approximates its weight in the total universe of developing and emerging markets. Maintaining consistent policy among MSCI developed and emerging market indices is also critical to the calculation of certain combined developed and emerging market indices published by MSCI. SELECTION CRITERIA THE UNIVERSE OF SECURITIES. The constituents of a country index are selected from the full range of securities available in the market, excluding issues which are either small or highly illiquid. Non-domiciled companies and investment trusts are also excluded from consideration. After the index constituents are chosen, they are reclassified using MSCI's schema of 38 industries and 8 economic sectors in order to facilitate cross-country comparisons. THE OPTIMIZATION PROCESS. The process of choosing index constituents from the universe of available securities is consistent among indices. Determining the constituents of an index is an 27 optimization process which involves maximizing float and liquidity, reflecting accurately the market's size and industry profiles, and minimizing cross-ownership. The optimization variables and their targets are: Market Coverage TARGET 60% OF MARKET Industry Representation MIRROR THE LOCAL MARKET Liquidity MAXIMIZE Float MAXIMIZE Cross-Ownership AVOID/MINIMIZE Size SAMPLE WITH SIZE CHARACTERISTICS OF UNIVERSE
COVERAGE. To reflect accurately country-wide performance as well as the performance of industry groups, MSCI aims to capture 60% of total market capitalization at both the country and industry level. To reflect local market performance, an index should contain a percentage of the market's overall capitalization sufficient to achieve a high level of tracking. The greater the coverage, however, the greater the risk of including securities which are illiquid or have restricted float. MSCI's 60% coverage target reflects a balance of these considerations. INDUSTRY REPRESENTATION. Within the overall target of 60% market coverage, MSCI aims to capture 60% of the capitalization of each industry group, as defined by local practice. MSCI believes this target assures that the index reflects the industry characteristics of the overall market and permits the construction of accurate industry indices. MSCI may exceed the 60% of market capitalization target in the index for a particular country because, E.G., one or two large companies dominate an industry. Similarly, MSCI may underweight an industry in an index if, E.G., the companies in such industry lack good liquidity and float, or because of extensive cross-ownership. LIQUIDITY. Liquidity is measured by trading value, as reported by the local exchanges. Trading value is monitored over time in order to determine "normal" levels exclusive of short-term peaks and troughs. A stock's liquidity is significant not only in absolute terms (i.e., a determination of the market's most actively traded stocks), but also relative to its market capitalization and to average liquidity for the country as a whole. FLOAT. Float, or the percentage of shares freely tradeable, is one measure of potential short-term supply. Low float raises the risk of insufficient liquidity. MSCI monitors float for every security in its coverage, and low float may exclude a stock from consideration. However, float can be difficult to determine. In some markets good sources are generally not available. In other markets, information on smaller and less prominent issues can be subject to error and time lags. Government ownership and cross-ownership positions can change over time, and are not always made public. Float also tends to be defined differently depending on the source. MSCI seeks to maximize float. As with liquidity, float is an important determinant, but not a hard-and-fast screen for inclusion of a stock in, or exclusion of a stock from, a particular index. CROSS-OWNERSHIP. Cross-ownership occurs when one company has an ownership position in another. In situations where cross-ownership is substantial, including both companies in an index can skew industry weights, distort country-level valuations and over-represent buyable opportunities. An integral part of MSCI's country research is identifying cross-ownerships in order to avoid or minimize them. Cross-ownership cannot always be avoided, especially in markets where it is prevalent. When MSCI makes exceptions, it strives to select situations where the constituents operate in different economic sectors, or where the subsidiary company makes only a minor contribution to the parent company's results. SIZE. MSCI attempts to meet its 60% coverage target by including a representative sample of large, medium and small capitalization stocks, in order to capture the sometimes disparate performance of these sectors. In the emerging markets, the liquidity of smaller issues can be a constraint. At 28 the same time, properly representing the lower capitalization end of the market risks overwhelming the index with names. Within these constraints, MSCI strives to include smaller capitalization stocks, provided they exhibit sufficient liquidity. CALCULATION METHODOLOGY All MSCI Indices are calculated daily using Laspeyres' concept of a weighted arithmetic average together with the concept of "chain-linking," a classical method of calculating stock market indices. The Laspeyres method weights stocks in an index by their beginning-of-period market capitalization. Share prices are "swept clean" daily and adjusted for any rights issues, stock dividends or splits. Most MSCI Indices are currently calculated in local currency and in U.S. dollars, without dividends , with gross dividends reinvested and with net dividends reinvested. With the exception of the Mexico (Free) Index Series, the Fund's Index Series utilize MSCI Indices calculated with net dividends reinvested. "Net dividends" means dividends after reduction for taxes withheld at source at the rate applicable to holders of the underlying stock that are resident in Luxembourg. With respect to the Australia, Malaysia and Singapore (Free) Index Series, such withholding rate currently differs from that applicable to United States residents. Australian companies generally withhold tax on dividends paid to U.S. persons at a 15% rate (as opposed to 25% for Luxembourg persons). The rate of withholding on dividends paid to U.S. persons is 30% for Malaysia and 27% for Singapore, whereas the withholding rate in such countries on payments to persons in Luxembourg is 25%. The Mexico (Free) Index Series' benchmark Index, the MSCI Mexico (Free) Index, reflects the reinvestment of gross dividends. "Gross dividends" means dividends before reduction for taxes withheld at source. DIVIDEND TREATMENT In respect of developed markets, MSCI Indices with dividends reinvested constitute an estimate of total return arrived at by reinvesting one twelfth of the month end yield at every month end. In respect of emerging markets, MSCI has constructed its indices with dividends reinvested as follows: - In the period between the ex date and the date of dividend reinvestment, a dividend receivable is a component of the index return. - Dividends are deemed received on the payment date. - To determine the payment date, a fixed time lag is assumed to exist between the ex date and the payment date. This time lag varies by country, and is determined in accordance with general practice within that market. - Reinvestment of dividends occurs at the end of the month in which the payment date falls. PRICE AND EXCHANGE RATES PRICES. Prices used to calculate the MSCI Indices are the official exchange closing prices. All prices are taken from the dominant exchange in each market. In countries where there are foreign ownership limits, MSCI uses the price quoted on the official exchange, regardless of whether the limit has been reached. EXCHANGE RATES. MSCI uses WM/Reuters Closing Spot Rates for all developed and emerging markets except those in Latin America. The WM/Reuters Closing Spot Rates were established by a committee of investment managers and data providers, including MSCI, whose object was to standardize exchange rates used by the investment community. Exchange rates are taken daily at 4 PM London time by the WM Company and are sourced whenever possible from multi-contributor quotes on Reuters. Representative rates are selected for each currency based on a number of "snapshots" of the latest contributed quotations taken from the Reuters service at short intervals around 4 PM. WM/ Reuters provides closing bid and offer rates. MSCI uses these to calculate the mid-point to 5 decimal places. 29 MSCI continues to monitor exchange rates independently and may, under exceptional circumstances, elect to use an alternative exchange rate if the WM/Reuters rate is believed not to be representative for a given currency on a particular day. Because of the high volatility of currencies in some Latin American countries, MSCI continues to use its own timing and sources for these markets. CHANGES TO THE INDICES In changing the constituents of the indices, MSCI attempts to balance representativeness versus undue turnover. An index must represent the current state of an evolving marketplace, yet at the same time minimize turnover, which is costly as well as inconvenient for managers. There are two broad categories of changes to the MSCI Indices. The first consists of market-driven changes such as mergers, acquisitions, bankruptcies, etc. These are announced and implemented as they occur. The second category consists of structural changes to reflect the evolution of a market, for example due to changes in industry composition or regulations. In the emerging markets, index restructurings generally take place every one year to eighteen months. Structural changes may occur only on four dates throughout the year: the first business day of March, June, September and December. They are preannounced at least two weeks in advance. ADDITIONS. Restructuring an index involves a balancing of additions and deletions. To maintain continuity and minimize turnover, MSCI is reluctant to delete index constituents, and its approach to additions is correspondingly stringent. As markets grow because of privatizations, investor interest, or the relaxation of regulations, index additions (with or without corresponding deletions) may be needed to bring industry representations up to the 60% target. Companies are considered not only with respect to their broad industry, but also with respect to their sub-sector, in order to achieve if possible a broader range of economic activity. Beyond industry representativeness, new constituents are selected based on the criteria discussed above, i.e. float, liquidity, cross-ownership, etc. NEW ISSUES. In general, new issues are not eligible for immediate inclusion in the MSCI Indices because their liquidity remains unproven. Usually, new issues undergo a "seasoning" period of one year to eighteen months between index restructurings until a trading pattern and volume are established. After that time, they are eligible for inclusion, subject to the criteria discussed above (industry representation, float, cross-ownership, etc.). In the emerging markets, however, it is not uncommon that a large new issue, usually a privatization, comes to market and substantially changes the country's industry profile. In exceptional circumstances, where the issue's size, visibility and investor interest assure high liquidity, and where excluding it would distort the characteristics of the market, MSCI may decide to include it immediately in the indices. In other cases, MSCI may decide not to include a large new issue even in the normal process of restructuring, and in spite of substantial size and liquidity. DELETIONS. MSCI's primary concern when considering deletions is the continuity of the indices. Of secondary concern are the turnover costs associated with deletions. The indices must represent the full investment cycle, including bear as well as bull markets. Out-of-favor stocks may exhibit declining price, market capitalization or liquidity, and yet continue to be good representatives of their industry. Companies may be deleted because they have diversified away from their industry classification, because the industry has evolved in a different direction from the company's thrust, or because a better industry representative exists (either a new issue or an existing company). In addition, in order not to exceed the 60% target coverage of industries and countries, adding new index companies may entail corresponding deletions. Usually such deletions take place within the same industry, but there are occasional exceptions. Each of the MSCI Indices utilized as the benchmark for an Index Series of the Fund is calculated reflecting dividends reinvested. With the exception of the Mexico (Free) Index Series, the Fund's 30 Index Series utilize MSCI Indices calculated with net dividends reinvested. MSCI refers to each of its Indices calculated reflecting net dividends reinvested as the "MSCI [relevant country] Index (with net dividends reinvested)". THE MSCI AUSTRALIA INDEX On January 31, 1996, the MSCI Australia Index (with net dividends reinvested) (the "MSCI Australia") consisted of 49 stocks with an aggregate market capitalization of approximately AUD186.4 billion or US$138.8 billion. In percentage terms, the MSCI Australia represented approximately 55.1% of the total market capitalization of Australia. The ten largest constituents of the MSCI Australia and the respective approximate percentages of the MSCI Australia represented by such constituents were, in order: 1. Broken Hill Prop. Co...................................... 19.78% 2. News Corp................................................. 11.14% 3. National Bank Australia................................... 9.92% 4. Westpac Banking........................................... 6.54% 5. Western Mining............................................ 4.91% 6. CRA....................................................... 3.36% 7. Coca-Cola Amatil.......................................... 3.33% 8. Amcor..................................................... 3.33% 9. Lend Lease................................................ 2.57% 10. Coles Myer................................................ 2.49%
As of January 31, 1996, the largest five constituents together comprised approximately 52.29% of the market capitalization of the MSCI Australia; the largest ten constituents comprised approximately 67.37% of the market capitalization of the MSCI Australia and the largest 20 constituents comprised approximately 85.41% of the market capitalization of the MSCI Australia. The ten most highly represented industry sectors in the MSCI Australia, and the approximate percentages of the MSCI Australia represented thereby as of January 31, 1996 were: 1. Energy Sources.............................................. 22.6% 2. Banking..................................................... 16.5% 3. Metals -- Non Ferrous....................................... 12.0% 4. Broadcasting & Publishing................................... 11.1% 5. Multi-Industry.............................................. 6.2% 6. Beverages & Tobacco......................................... 6.1% 7. Real Estate................................................. 5.8% 8. Building Materials & Components............................. 4.4% 9. Forest Products & Paper..................................... 3.3% 10. Merchandising............................................... 2.5%
Appendix A hereto contains a complete list of the securities in the MSCI Australia Index as of January 31, 1996. THE MSCI AUSTRIA INDEX On January 31, 1996, the MSCI Austria Index (with net dividends reinvested) (the "MSCI Austria") consisted of 24 stocks with an aggregate market capitalization of approximately ATS250.0 billion or US$23.9 billion. In percentage terms, the MSCI Austria represented approximately 61.5% of the total market capitalization of Austria. 31 The ten largest constituents of the MSCI Austria and the respective approximate percentages of the MSCI Austria represented by such constituents were, in order: 1. Bank of Austria........................................... 19.08% 2. Creditanstalt............................................. 11.33% 3. EA-Generali............................................... 10.87% 4. OMV AG.................................................... 10.70% 5. Verbund................................................... 8.32% 6. VA Technologie............................................ 8.24% 7. Wienerberger Baustoff..................................... 6.57% 8. Flughafen Wien............................................ 5.74% 9. Boehler-Uddeholm.......................................... 3.63% 10. Mayr Melnhof.............................................. 2.50%
As of January 31, 1996, the largest five constituents together comprised approximately 60.30% of the market capitalization of the MSCI Austria; and the largest ten constituents comprised approximately 86.98% of the market capitalization of the MSCI. The ten most highly represented industry sectors in the MSCI Austria, and the approximate percentages of the MSCI Austria represented thereby as of January 31, 1996 were: 1. Banking..................................................... 30.4% 2. Insurance................................................... 10.9% 3. Energy Sources.............................................. 10.7% 4. Machinery & Engineering..................................... 9.7% 5. Utilities -- Electrical & Gas............................... 8.3% 6. Building Materials & Components............................. 6.6% 7. Business & Public Services.................................. 5.7% 8. Misc. Materials & Commodities............................... 4.5% 9. Metals -- Steel............................................. 3.6% 10. Construction & Housing...................................... 2.3%
Appendix A hereto contains a complete list of the securities in the MSCI Austria Index as of January 31, 1996. THE MSCI BELGIUM INDEX On January 31, 1996, the MSCI Belgium Index (with net dividends reinvested) (the "MSCI Belgium") consisted of 20 stocks with an aggregate market capitalization of approximately BEF1,878.2 billion or US$61.4 billion. In percentage terms, the MSCI Belgium represented approximately 59.9% of the total market capitalization of Belgium. On January 31, 1996, the ten largest constituents of the MSCI Belgium and the respective approximate percentages of the MSCI Belgium represented by such constituents were, in order: 1. Electrabel................................................ 21.42% 2. Petrofina................................................. 11.15% 3. Tractebel................................................. 9.72% 4. Generale Banque Groupe.................................... 9.10% 5. Solvay.................................................... 7.55% 6. Fortis AG................................................. 7.24% 7. Kredietbank............................................... 6.77% 8. Royale Belge.............................................. 5.47% 9. Groupe Bruxelles Lambert.................................. 5.16% 10. Delhaize-Le Lioh.......................................... 3.52%
32 As of January 31, 1996, the largest five constituents together comprised approximately 58.94% of the market capitalization of the MSCI Belgium; the largest ten constituents comprised approximately 87.10% of the market capitalization of the MSCI Belgium and the largest 15 constituents comprised approximately 100.0% of the market capitalization of the MSCI Belgium. The ten most highly represented industry sectors in the MSCI Belgium, and the approximate percentages of the MSCI Belgium represented thereby as of January 31, 1996 were: 1. Utilities -- Electrical & Gas............................... 21.4% 2. Multi-Industry.............................................. 17.5% 3. Banking..................................................... 15.9% 4. Insurance................................................... 12.7% 5. Energy Sources.............................................. 11.1% 6. Chemicals................................................... 7.6% 7. Merchandising............................................... 3.5% 8. Industrial Components....................................... 3.3% 9. Metals -- Non Ferrous....................................... 3.0% 10. Building Materials & Components............................. 2.9%
Appendix A hereto contains a complete list of the securities in the MSCI Belgium Index as of January 31, 1996. THE MSCI CANADA INDEX On January 31, 1996, the MSCI Canada Index (with net dividends reinvested) (the "MSCI Canada") consisted of 84 stocks with an aggregate market capitalization of approximately CAD290.6 billion or US$211.2 billion. In percentage terms, the MSCI Canada represented approximately 60.4% of the total market capitalization in Canada. The ten largest constituents of the MSCI Canada and the respective approximate percentages of the MSCI Canada represented by such constituents were, in order: 1. Seagram................................................... 6.40% 2. Northern Telecom.......................................... 5.40% 3. BCE Inc................................................... 5.35% 4. Barrick Gold Corp......................................... 4.94% 5. Thomson Corp.............................................. 4.26% 6. Royal Bank of Canada...................................... 3.69% 7. Alcan Aluminum............................................ 3.39% 8. Imperial Oil.............................................. 3.25% 9. Placer Dome............................................... 3.18% 10. Canadian Pacific Ltd...................................... 3.17%
As of January 31, 1996, the largest five constituents together comprised approximately 26.35% of the market capitalization of the MSCI Canada; the largest ten constituents comprised approximately 43.03% of the market capitalization of the MSCI Canada; and the largest 20 constituents comprised approximately 65.88% of the market capitalization of the MSCI Canada. 33 The ten most highly represented industry sectors in the MSCI Canada, and the approximate percentages of the MSCI Canada represented thereby as of January 31, 1996 were: 1. Banking..................................................... 13.0% 2. Energy Sources.............................................. 11.5% 3. Metals -- Non-Ferrous....................................... 11.0% 4. Gold Mines.................................................. 9.8% 5. Beverages & Tobacco......................................... 7.1% 6. Multi-Industry.............................................. 6.5% 7. Telecommunications.......................................... 6.2% 8. Broadcasting & Publishing................................... 6.1% 9. Electrical & Electronics.................................... 5.4% 10. Utilities -- Electrical & Gas............................... 4.9%
Appendix A hereto contains a complete list of the securities in the MSCI Canada Index as of January 31, 1996. THE MSCI FRANCE INDEX On January 31, 1996, the MSCI France Index (with net dividends reinvested) (the "MSCI France") consisted of 74 stocks with an aggregate market capitalization of approximately FRF1,744.3 billion or US$341.5 billion. In percentage terms, the MSCI France represented approximately 65.1% of the total market capitalization in France. The ten largest constituents of the MSCI France and the respective approximate percentages of the MSCI France represented by such constituents were, in order: 1. Elf Aquitaine............................................. 5.95% 2. LVMH (Moet Vuitton)....................................... 5.70% 3. L'Oreal................................................... 5.10% 4. Carrefour................................................. 4.83% 5. Total SA.................................................. 4.71% 6. Alcatel Alsthom........................................... 4.02% 7. Generale Eaux (CIE)....................................... 3.68% 8. Air Liquide............................................... 3.50% 9. AXA....................................................... 3.45% 10. Danone (Groupe)........................................... 3.31%
As of January 31, 1996, the largest five constituents together comprised approximately 26.29% of the market capitalization of the MSCI France; the largest ten constituents comprised approximately 44.25% of the market capitalization of the MSCI France; and the largest 20 constituents comprised approximately 66.58% of the market capitalization of MSCI France. The ten most highly represented industry sectors in the MSCI France, and the approximate percentages of the MSCI France represented thereby as of January 31, 1996 were: 1. Energy Sources.............................................. 10.7% 2. Merchandising............................................... 9.6% 3. Banking..................................................... 9.5% 4. Health & Personal Care...................................... 7.7% 5. Electrical & Electronics.................................... 7.6% 6. Beverages & Tobacco......................................... 7.3% 7. Business & Public Services.................................. 6.4% 8. Chemicals................................................... 5.7% 9. Insurance................................................... 5.6% 10. Food & Household Products................................... 5.0%
Appendix A hereto contains a complete list of the securities in the MSCI France Index as of January 31, 1996. 34 THE MSCI GERMANY INDEX On January 31, 1996, the MSCI Germany Index (with net dividends reinvested) (the "MSCI Germany") consisted of 69 stocks with an aggregate market capitalization of approximately DEM561.1 billion or US$377.1 billion. In percentage terms, the MSCI Germany represented approximately 62.7% of the total market capitalization in Germany. The ten largest constituents of the MSCI Germany and the respective approximate percentages of the MSCI Germany represented by such constituents were, in order: 1. Allianz Holding............... 11.51% 2. Siemens....................... 8.44% 3. Daimler-Benz.................. 7.51% 4. Deutsche Bank................. 6.61% 5. Veba.......................... 5.73% 6. Bayer......................... 5.48% 7. RWE........................... 5.08% 8. Munchener Ruck................ 4.75% 9. SAP........................... 4.13% 10. BASF.......................... 3.86%
As of January 31, 1996, the largest five constituents together comprised approximately 39.80% of the market capitalization of the MSCI Germany; the largest ten constituents comprised approximately 63.10% of the market capitalization of the MSCI Germany; and the largest 20 constituents comprised approximately 85.28% of the market capitalization of MSCI Germany. The ten most highly represented industry sectors in the MSCI Germany, and the approximate percentages of the MSCI Germany represented thereby as of January 31, 1996 were: 1. Insurance..................... 17.9% 2. Banking....................... 13.7% 3. Utilities -- Electrical & 10.8% Gas........................... 4. Automobiles................... 10.7% 5. Chemicals..................... 9.3% 6. Electrical & Electronics...... 8.4% 7. Machinery & Engineering....... 6.2% 8. Business & Public Services.... 4.3% 9. Health & Personal Care........ 3.9% 10. Multi-Industry................ 3.7%
Appendix A hereto contains a complete list of the securities in the MSCI Germany Index as of January 31, 1996. THE MSCI HONG KONG INDEX On January 31, 1996, the MSCI Hong Kong Index (with net dividends reinvested) (the "MSCI Hong Kong") consisted of 38 stocks with an aggregate market capitalization of approximately HKD1,421.1 billion or US$183.8 billion. In percentage terms, the MSCI Hong Kong represented approximately 59.2% of the total market capitalization in Hong Kong. 35 The ten largest constituents of the MSCI Hong Kong and the respective approximate percentages of the MSCI Hong Kong represented by such constituents were, in order: 1. Hutchison Whampoa............. 12.78% 2. Sun Hung Kai Properties....... 12.36% 3. Hong Kong Telecom............. 11.54% 4. Hang Seng Bank................ 10.16% 5. Cheung Kong................... 8.89% 6. Swire Pacific A............... 7.53% 7. China Light & Power........... 5.25% 8. Wharf (Holdings).............. 4.66% 9. New World Development......... 4.61% 10. Cathay Pacific Airways........ 2.89%
As of January 31, 1996, the largest five constituents together comprised approximately 55.73% of the market capitalization of the MSCI Hong Kong; the largest ten constituents comprised approximately 80.67% of the market capitalization of the MSCI Hong Kong; and the largest 20 constituents comprised approximately 94.27% of the market capitalization of MSCI Hong Kong. The ten most highly represented industry sectors in the MSCI Hong Kong, and the approximate percentages of the MSCI Hong Kong represented thereby as of January 31, 1996 were: 1. Real Estate................... 37.0% 2. Multi-Industry................ 20.4% 3. Banking....................... 12.8% 4. Telecommunications............ 11.5% 5. Utilities -- Electrical & 7.7% Gas........................... 6. Transportation -- Airlines.... 2.9% 7. Leisure & Tourism............. 2.5% 8. Broadcasting & Publishing..... 1.7% 9. Merchandising................. 0.8% 10. Transportation -- Shipping.... 0.6%
Appendix A hereto contains a complete list of the securities in the MSCI Hong Kong Index as of January 31, 1996. THE MSCI ITALY INDEX On January 31, 1996, the MSCI Italy Index (with net dividends reinvested) (the "MSCI Italy") consisted of 55 stocks with an aggregate market capitalization of approximately ITL196,062.0 billion or US$123.0 billion. In percentage terms, the MSCI Italy represented approximately 65.4% of the total market capitalization of Italy. The ten largest constituents of the MSCI Italy and the respective approximate percentages of the MSCI Italy represented by such constituents were, in order: 1. Assicurazioni Generali........ 16.31% 2. Fiat.......................... 11.53% 3. Telecom Italia Mobile......... 11.15% 4. Telecom Italia................ 10.81% 5. INA........................... 4.65% 6. San Paolo de Torino........... 4.08% 7. RAS........................... 3.50% 8. IMI Istituto Mobiliare........ 3.33% 9. Banca Comerciale.............. 3.31% 10. Montedison.................... 3.03%
36 As of January 31, 1996, the largest five constituents together comprised approximately 54.45% of the market capitalization of the MSCI Italy; the largest ten constituents comprised approximately 71.70% of the market capitalization of the MSCI Italy; and the largest 20 constituents comprised approximately 90.05% of the market capitalization of MSCI Italy. The ten most highly represented industry sectors in the MSCI Italy, and the approximate percentages of the MSCI Italy represented thereby as of January 31, 1996 were: 1. Insurance..................... 26.1% 2. Telecommunications............ 22.0% 3. Banking....................... 17.9% 4. Automobiles................... 11.5% 5. Multi-Industry................ 4.5% 6. Utilities -- Electrical & 4.3% Gas........................... 7. Industrial Components......... 2.2% 8. Textiles & Apparel............ 2.0% 9. Data Processing & 1.8% Reproduction.................. 10. Construction & Housing........ 1.4%
Appendix A hereto contains a complete list of the securities constituting the MSCI Italy Index as of January 31, 1996. THE MSCI JAPAN INDEX On January 31, 1996, the MSCI Japan Index (with net dividends reinvested) (the "MSCI Japan") consisted of 317 stocks with an aggregate market capitalization of approximately JPY227,098.2 billion or US$2,124.1 billion. In percentage terms, the MSCI Japan represented approximately 60.1% of the total market capitalization in Japan. The ten largest constituents of the MSCI Japan and the respective approximate percentages of the MSCI Japan represented by such constituents were, in order: 1. Toyota Motor Corp......................................... 3.79% 2. Fuji Bank................................................. 3.10% 3. Industrial Bank of Japan.................................. 3.08% 4. Sumitomo Bank............................................. 2.84% 5. Dai-Ichi Kangyo Bank...................................... 2.76% 6. Nomura Securities Co...................................... 2.01% 7. Sakura Bank............................................... 1.88% 8. Matsushita Electric Ind'l................................. 1.64% 9. Tokyo Electric Power Co................................... 1.62% 10. Hitachi................................................... 1.58%
As of January 31, 1996, the largest five constituents together comprised approximately 15.57% of the market capitalization of the MSCI Japan; the largest ten constituents comprised approximately 24.30% of the market capitalization of the MSCI Japan; and the largest 20 constituents comprised approximately 36.34% of the market capitalization of the MSCI Japan. 37 The ten most highly represented industry sectors in the MSCI Japan, and the approximate percentages of the MSCI Japan represented thereby as of January 31, 1996 were: 1. Banking................................................... 22.3% 2. Automobiles............................................... 5.7% 3. Merchandising............................................. 4.7% 4. Appliances & Household Durables........................... 4.4% 5. Utilities -- Electrical & Gas............................. 4.2% 6. Machinery & Engineering................................... 4.0% 7. Chemicals................................................. 4.0% 8. Construction & Housing.................................... 4.0% 9. Financial Services........................................ 3.9% 10. Electrical & Electronics.................................. 3.6%
Appendix A hereto contains a complete list of the securities constituting the MSCI Japan Index as of January 31, 1996. THE MSCI MALAYSIA INDEX On January 31, 1996, the MSCI Malaysia Index (with net dividends reinvested) (the "MSCI Malaysia") consisted of 76 stocks with an aggregate market capitalization of approximately MYR306.2 billion or US$119.6 billion. In percentage terms, the MSCI Malaysia represented approximately 56.3% of the total market capitalization of Malaysia. The ten largest constituents of the MSCI Malaysia and the respective approximate percentages of the MSCI Malaysia represented by such constituents were, in order: 1. Telekom Malaysia.......................................... 13.85% 2. Tenaga Nasional........................................... 9.54% 3. Malayan Banking........................................... 8.54% 4. Resorts World............................................. 4.85% 5. Sime Darby................................................ 4.73% 6. United Engineers (Malaysia)............................... 2.98% 7. Malaysia Int'l Shipping................................... 2.24% 8. Rothmans Pall Mall (Mal).................................. 1.97% 9. DCB Holdings.............................................. 1.93% 10. YTL Corp.................................................. 1.88%
As of January 31, 1996, the largest five constituents together comprised approximately 41.51% of the market capitalization of the MSCI Malaysia; the largest ten constituents comprised approximately 52.51% of the market capitalization of the MSCI Malaysia and the largest 20 constituents comprised approximately 68.08% of the market capitalization of the MSCI Malaysia. The ten most highly represented industry sectors in the MSCI Malaysia, and the approximate percentages of the MSCI Malaysia represented thereby as of January 31, 1996 were: 1. Telecommunications........................................ 15.6% 2. Banking................................................... 13.1% 3. Utilities -- Electrical & Gas............................. 9.5% 4. Multi-Industry............................................ 9.1% 5. Leisure & Tourism......................................... 7.4% 6. Miscellaneous Materials & Commodities..................... 5.9% 7. Financial Services........................................ 4.4% 8. Automobiles............................................... 4.4% 9. Machinery & Engineering................................... 4.1% 10. Real Estate............................................... 3.6%
38 Appendix A hereto contains a complete list of the securities constituting the MSCI Malaysia Index as of January 31, 1996. THE MSCI MEXICO (FREE) INDEX On January 31, 1996, the MSCI Mexico (Free) Index (with gross dividends reinvested) (the "MSCI Mexico (Free)") consisted of 41 stocks with an aggregate market capitalization of approximately MXN470.2 billion or US$63.8 billion. In percentage terms, the MSCI Mexico (Free) represented approximately 59.4% of the total market capitalization of Mexico. On January 31, 1996, the ten largest constituents of the MSCI Mexico (Free) and the respective approximate percentages of the MSCI Mexico (Free) represented by such constituents were, in order: 1. Telmex Telefonos Mex...................................... 28.24% 2. Cemex..................................................... 7.30% 3. Grupo Televisa............................................ 6.90% 4. Cifra..................................................... 6.48% 5. Grupo Medelo.............................................. 5.96% 6. Kimberly Clark Mexico..................................... 5.25% 7. Grupo Mexico.............................................. 4.42% 8. Alfa...................................................... 3.67% 9. Empresas Moderna.......................................... 3.30% 10. Industrias Penoles........................................ 2.79%
As of January 31, 1996, the largest five constituents together comprised approximately 54.88% of the market capitalization of the MSCI Mexico (Free); the largest ten constituents comprised approximately 74.33% of the market capitalization of the MSCI Mexico (Free) and the largest 20 constituents comprised approximately 93.16% of the market capitalization of the MSCI Mexico (Free). The ten most highly represented industry sectors in the MSCI Mexico (Free), and the approximate percentages of the MSCI Mexico (Free) represented thereby as of January 31, 1996 were: 1. Telecommunications........................................ 28.2% 2. Beverages & Tobacco....................................... 12.4% 3. Building Materials & Components........................... 9.6% 4. Merchandising............................................. 9.5% 5. Metals -- Non Ferrous..................................... 7.2% 6. Broadcasting & Publishing................................. 6.9% 7. Multi-Industry............................................ 5.4% 8. Health & Personal......................................... 5.3% 9. Banking................................................... 4.5% 10. Food and Household Products............................... 3.4%
Appendix A hereto contains a complete list of the securities constituting the MSCI Mexico (Free) Index as of January 31, 1996. THE MSCI NETHERLANDS INDEX On January 31, 1996, the MSCI Netherlands Index (with net dividends reinvested) (the "MSCI Netherlands") consisted of 22 stocks with an aggregate market capitalization of approximately NLG353.2 billion or US$212.0 billion. In percentage terms, the MSCI Netherlands represented approximately 71.7% of the total market capitalization of the Netherlands. 39 The ten largest constituents of the MSCI Netherlands and the respective approximate percentages of the MSCI Netherlands represented by such constituents were, in order: 1. Royal Dutch Petroleum..................................... 35.05% 2. Unilever NV............................................... 10.88% 3. Internationale Nederlanden Groep.......................... 9.01% 4. Koninklijke PTT Nederland................................. 8.38% 5. ABN Amro Holdings......................................... 6.51% 6. Phillips Electronics...................................... 6.49% 7. Elsevier NV............................................... 4.34% 8. Heineken NV............................................... 4.21% 9. Akzo Nobel NV............................................. 3.56% 10. Wolters Kluwer............................................ 3.10%
As of January 31, 1996, the largest five constituents together comprised approximately 69.83% of the market capitalization of the MSCI Netherlands; the largest ten constituents comprised approximately 91.53% of the market capitalization of the MSCI Netherlands; and the largest 20 constituents comprised approximately 99.56% of the market capitalization of MSCI Netherlands. The ten most highly represented industry sectors in the MSCI Netherlands, and the approximate percentages of the MSCI Netherlands represented thereby as of January 31, 1996 were: 1. Energy Sources............................................ 35.0% 2. Food & Household Products................................. 10.9% 3. Financial Services........................................ 9.0% 4. Telecommunications........................................ 8.4% 5. Broadcasting & Publishing................................. 7.4% 6. Banking................................................... 6.5% 7. Appliances & Household Durables........................... 6.5% 8. Beverages & Tobacco....................................... 4.2% 9. Chemicals................................................. 3.6% 10. Merchandising............................................. 2.4%
Appendix A hereto contains a complete list of the securities in the MSCI Netherlands as of January 31, 1996. THE MSCI SINGAPORE (FREE) INDEX The MSCI Singapore (Free) Index (with net dividends reinvested) (the "MSCI Singapore (Free)") is a "free" index in that excludes companies and share classes that are not purchasable by foreigners. On January 31, 1996, the MSCI Singapore (Free) consisted of 32 stocks with an aggregate market capitalization of approximately SGD124.3 billion or US$87.6 billion. In percentage terms, the MSCI Singapore (Free) represented approximately 56.0% of the total market capitalization of Singapore. The ten largest constituents of the MSCI Singapore (Free) and the respective approximate percentages of the MSCI Singapore (Free) represented by such constituents were, in order: 1. Singapore Airlines........................................ 15.37% 2. OCBC Bank................................................. 14.22% 3. United Overseas Bank...................................... 11.22% 4. Development Bank of Singapore............................. 10.92% 5. Singapore Press Holdings.................................. 7.50% 6. City Developments......................................... 7.26% 7. Keppel Corp............................................... 5.53% 8. DBS Land.................................................. 4.14% 9. Fraser & Neave............................................ 3.81% 10. Cycle & Carriage.......................................... 3.04%
40 As of January 31, 1996, the largest five constituents together comprised approximately 59.23% of the market capitalization of the MSCI Singapore (Free); the largest ten constituents comprised approximately 83.01% of the market capitalization of the MSCI Singapore (Free); and the largest 20 constituents comprised approximately 94.75% of the market capitalization of the MSCI Singapore (Free). The ten most highly represented industry sectors in the MSCI Singapore (Free), and the approximate percentages of the MSCI Singapore (Free) represented thereby as of January 31, 1996 were: 1. Banking................................................... 36.4% 2. Real Estate............................................... 18.5% 3. Transportation -- Airlines................................ 15.4% 4. Broadcasting & Publishing................................. 7.5% 5. Machinery & Engineering................................... 6.5% 6. Beverages & Tobacco....................................... 3.8% 7. Automobiles............................................... 3.0% 8. Leisure & Tourism......................................... 2.2% 9. Multi-Industry............................................ 1.5% 10. Transportation -- Shipping................................ 1.3%
Appendix A hereto contains a complete list of the securities in the MSCI Singapore (Free) as of January 31, 1996. THE MSCI SPAIN INDEX On January 31, 1996, the MSCI Spain Index (with net dividends reinvested) (the "MSCI Spain") consisted of 31 stocks with an aggregate market capitalization of approximately ESP11,921.7 billion or US$95.1 billion. In percentage terms, the MSCI Spain represented approximately 62.0% of the total market capitalization of Spain The ten largest constituents of the MSCI Spain and the respective approximate percentages of the MSCI Spain represented by such constituents were, in order: 1. Endesa.................................................... 15.05% 2. Telefonica de Espana...................................... 14.50% 3. Repsol.................................................... 10.97% 4. Iberdrola................................................. 9.15% 5. Banco Bilbao Vizcaya...................................... 8.66% 6. Banco Santander........................................... 8.08% 7. Gas Natural SGD........................................... 5.68% 8. Argentaria Corp Bancaria.................................. 5.54% 9. Banco Central Hispanoamericano............................ 3.57% 10. Autopistas Cesa........................................... 2.40%
As of January 31, 1996, the largest five constituents together comprised approximately 58.33% of the market capitalization of the MSCI Spain; the largest ten constituents comprised approximately 83.60% of the market capitalization of the MSCI Spain and the largest 20 constituents comprised approximately 96.04% of the market capitalization of MSCI Spain. 41 The ten most highly represented industry sectors in the MSCI Spain and the approximate percentages of the MSCI Spain represented thereby as of January 31, 1996 were: 1. Utilities -- Electrical & Gas............................. 31.6% 2. Banking................................................... 25.8% 3. Telecommunications........................................ 14.5% 4. Energy Sources............................................ 11.0% 5. Business & Public Services................................ 4.2% 6. Construction & Housing.................................... 2.1% 7. Real Estate............................................... 1.8% 8. Beverages & Tobacco....................................... 1.6% 9. Insurance................................................. 1.6% 10. Metals -- Steel........................................... 1.2%
Appendix A hereto contains a complete list of the securities in the MSCI Spain as of January 31, 1996. THE MSCI SWEDEN INDEX On January 31, 1996, the MSCI Sweden Index (with net dividends reinvested) (the "MSCI Sweden") consisted of 30 stocks with an aggregate market capitalization of approximately SEK722.5 billion or US$104.0 billion. In percentage terms, the MSCI Sweden represented approximately 60.6% of the total market capitalization of Sweden. The ten largest constituents of the MSCI Sweden and the respective approximate percentages of the MSCI Sweden represented by such constituents were, in order: 1. Astra..................................................... 24.00% 2. Ericsson (LM)............................................. 18.48% 3. Volvo..................................................... 8.36% 4. Asea...................................................... 8.32% 5. Svenska Handelsbk......................................... 4.12% 6. Skand. Enskilda........................................... 3.79% 7. Skanska................................................... 3.75% 8. Stora Kopparberg.......................................... 3.32% 9. AGA....................................................... 3.23% 10. Electrolux................................................ 2.97%
As of January 31, 1996, the largest five constituents together comprised approximately 63.28% of the market capitalization of the MSCI Sweden; the largest ten constituents comprised approximately 80.34% of the market capitalization of the MSCI Sweden. The ten most highly represented industry sectors in the MSCI Sweden, and the approximate percentages of the MSCI Sweden represented thereby as of January 31, 1996 were: 1. Electrical & Electronics.................................. 26.8% 2. Health & Personal Care.................................... 24.0% 3. Automobiles............................................... 8.4% 4. Banking................................................... 7.9% 5. Forest Products & Paper................................... 6.1% 6. Construction & Housing.................................... 3.7% 7. Industrial Components..................................... 3.3% 8. Chemicals................................................. 3.2% 9. Appliances & Household Durables........................... 3.0% 10. Machinery & Engineering................................... 2.6%
Appendix A hereto contains a complete list of the securities in the MSCI Sweden as of January 31, 1996. 42 THE MSCI SWITZERLAND INDEX On January 31, 1996, the MSCI Switzerland Index (with net dividends reinvested) (the "MSCI Switzerland") consisted of 43 stocks with an aggregate market capitalization of approximately CHF355.0 billion or US$293.4 billion. In percentage terms, the MSCI Switzerland represented approximately 78.2% of the total market capitalization in Switzerland. The ten largest constituents of the MSCI Switzerland and the respective approximate percentages of the MSCI Switzerland represented by such constituents were, in order: 1. Roche Holding............................................. 24.80% 2. Nestle.................................................... 14.05% 3. Sandoz Ltd................................................ 11.21% 4. Schweiz Bankgesell........................................ 9.10% 5. Ciba-Geigy................................................ 8.01% 6. CS Holdings............................................... 5.91% 7. Schweiz Reuckvers......................................... 4.92% 8. Schweiz Bankverein........................................ 4.66% 9. Zuerich Versicherung...................................... 4.22% 10. BBC Brown Boveri.......................................... 3.45%
As of January 31, 1996, the largest five constituents together comprised approximately 67.17% of the market capitalization of the MSCI Switzerland; the largest ten constituents comprised approximately 90.33% of the market capitalization of the MSCI Switzerland; and the largest 20 constituents comprised approximately 98.95% of the market capitalization of the MSCI Switzerland. The ten most highly represented industry sectors in the MSCI Switzerland, and the approximate percentages of the MSCI Switzerland represented thereby as of January 31, 1996 were: 1. Health & Personal Care.................................... 36.0% 2. Banking................................................... 19.7% 3. Food & Household Products................................. 14.0% 4. Insurance................................................. 9.1% 5. Chemicals................................................. 8.0% 6. Electrical & Electronics.................................. 3.5% 7. Building Materials & Components........................... 2.1% 8. Business & Public Services................................ 1.7% 9. Multi-Industry............................................ 1.6% 10. Machinery & Engineering................................... 1.5%
Appendix A hereto contains a complete list of the securities in the MSCI Switzerland as of January 31, 1996. THE MSCI UK INDEX On January 31, 1996, the MSCI United Kingdom Index (with net dividends reinvested) (the "MSCI UK") consisted of 144 stocks with an aggregate market capitalization of approximately L582.8 billion or US$880.6 billion. In percentage terms, the MSCI UK represented approximately 64.8% of the aggregate capitalization of the United Kingdom markets. 43 The ten largest constituents of the MSCI UK and the respective approximate percentages of the MSCI UK represented by such constituents were, in order: 1. Glaxo Wellcome............................................ 5.72% 2. British Petroleum......................................... 5.04% 3. HSBC Holdings............................................. 4.98% 4. British Telecom........................................... 3.81% 5. Smithkline Beecham........................................ 3.37% 6. BAT Industries............................................ 3.10% 7. Lloyds TSB Group.......................................... 2.84% 8. BTR....................................................... 2.21% 9. Barclays.................................................. 2.20% 10. Zeneca Group.............................................. 2.09%
As of January 31, 1996, the largest five constituents together comprised approximately 22.92% of the market capitalization of the MSCI UK; the largest ten constituents comprised approximately 35.35% of the market capitalization of the MSCI UK; and the largest 20 constituents comprised approximately 52.93% of the market capitalization of MSCI UK. The ten most highly represented industry sectors in the MSCI UK, and the approximate percentages of the MSCI UK represented thereby as of January 31, 1996 were: 1. Banking..................................................... 12.1% 2. Health & Personal Care...................................... 11.2% 3. Merchandising............................................... 8.7% 4. Multi-Industry.............................................. 8.4% 5. Telecommunications.......................................... 6.7% 6. Energy Sources.............................................. 5.7% 7. Food & Household Products................................... 5.7% 8. Utilities -- Electrical & Gas............................... 4.6% 9. Insurance................................................... 4.3% 10. Business & Public Services.................................. 3.7%
Appendix A hereto contains a complete list of the securities in the MSCI UK as of January 31, 1996. REGIONAL INDEX REPLICATIONS The MSCI single-country indices effectively serve as components of various MSCI regional and international (i.e., multi-country) indices. For example the MSCI EAFE Index -- covering European, Australasian and the Far Eastern markets - -- is comprised of a weighted allocation of the MSCI indices for Japan (40.3%), the United Kingdom (16.7%), Germany (7.2%), France (6.5%), Switzerland (5.6%), Netherlands (4.0%), Hong Kong (3.5%), Singapore (1.2%), Belgium (1.2%), Malaysia (2.3%), Australia (2.6%), Spain (1.8%), Italy (2.3%), Sweden (2.0%), Denmark (0.8%), Finland (0.5%), Norway (0.4%), New Zealand (0.4%), Austria (0.5%) and Ireland (0.3%). The weightings shown parenthetically are based on the EAFE Index as of January 31, 1996. Investors may purchase WEBS of different Index Series of the Fund in various proportions for the purpose of achieving regional or international market exposure approximating that of certain of the MSCI regional and international indices. For example, assuming the estimated values per Creation 44 Unit listed in the Fund's prospectus under the heading "Creation Units", an investor might approximate the representation and weighting of the MSCI EAFE Index by investing in the numbers of Creation Units specified for the following 14 Index Series, in order to achieve the basket weightings listed below:
NUMBER OF % OF VALUE OF INDEX SERIES CREATION UNITS BASKET - -------------------------- -------------- ------------- Japan 5 41.1 United Kingdom 7 17.0 Germany 2 7.3 France 2 6.6 Switzerland 3 5.6 Netherlands 5 4.1 Hong Kong 1 3.6 Australia 2 2.7 Malaysia 1 2.4 Italy 1 2.4 Sweden 2 2.0 Spain 2 1.8 Singapore (Free) 2 1.7 Belgium 2 1.2 Austria 1 0.5
The total cost of the above basket of Creation Units of WEBS, again using the estimated values per Creation Unit in the Prospectus, would be $99,751,000. It should be noted that the WEBS basket set forth above does not include representation of six countries included in the MSCI EAFE Index, representing 2.4% of the value of such index on January 31, 1996. EXCHANGE LISTING AND TRADING Application has been made to list the WEBS of each Index Series for trading on the AMEX. The AMEX has approved modifications to its Rules to permit the listing of WEBS. The non-redeemable WEBS are expected to trade on the AMEX at prices that may differ to some degree from their net asset value. See "Special Considerations and Risks" and "Determining Net Asset Value". There can be no assurance that the requirements of the AMEX necessary to maintain the listing of WEBS of any Index Series will continue to be met. The AMEX may remove the WEBS of an Index Series from listing if (1) following the initial twelve-month period beginning upon the commencement of trading of an Index Series of WEBS, there are fewer than 50 beneficial holders of the WEBS for 30 or more consecutive trading days, (2) the value of the underlying index or portfolio of securities on which such Index Series is based is no longer calculated or available or (3) such other event shall occur or condition exist that, in the opinion of the AMEX, makes further dealings on the AMEX inadvisable. In addition, the AMEX will remove the shares from listing and trading upon termination of the Fund. The size of Creation Units for each Index Series and the related number of WEBS per Creation Unit is designed to provide an initial net asset value per WEBS, depending on the Index Series, of between $10 and $20. Because of the range of initial net asset values, it is expected that initial trading of WEBS of the various Index Series on the AMEX will commence at market prices also within this range. The Adviser anticipates that the movements in the price of WEBS will track with the value of the respective MSCI Index. As in the case of other stocks traded on the AMEX, the brokers commission on transactions will be based on negotiated commission rates at customary levels for retail customers and rates which are anticipated to range between $.015 to $.12 per share for institutions and high net worth individuals. 45 MANAGEMENT OF THE FUND DIRECTORS AND OFFICERS OF THE FUND The Board of Directors of the Fund has responsibility for the overall management and operations of the Fund, including general supervision of the duties performed by the Adviser and other service providers. The Board of Directors currently consists of one Director. [Election of officers; addresses, principal occupations, present positions, affiliations with Adviser and Administrator; ownership of shares; interested persons as defined in the 1940 Act.]
PRINCIPAL OCCUPATIONS NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS - ------------------------------------ ------------------------------------ ------------------------------------
REMUNERATION OF DIRECTORS AND OFFICERS The following table sets forth the remuneration of Directors and officers of the Fund.
PENSION OR RETIREMENT TOTAL COMPENSATION FROM BENEFITS ACCRUED ESTIMATED ANNUAL REGISTRANT AND FUND NAME OF PERSON, AGGREGATE COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID TO POSITION FROM REGISTRANT EXPENSES RETIREMENT DIRECTORS - ----------------------- ----------------------- ------------------ ---------------- ----------------------- , $ per $ per Director [and annum $ per annum $ per [President] [Chairman Directors' meeting Director's meeting of the Board]] attended NONE NONE attended , $ per $ per Director annum $ per annum $ per Directors' meeting Director's meeting attended NONE NONE attended , $ per $ per Director annum $ per annum $ per Directors' meeting Director's meeting attended NONE NONE attended , $ per $ per Director annum $ per annum $ per Directors' meeting Director's meeting attended NONE NONE attended , $ per $ per Director annum $ per annum $ per Directors' meeting Director's meeting attended NONE NONE attended , [President] NONE NONE NONE NONE , [Treasurer] NONE NONE NONE NONE , [Secretary] NONE NONE NONE NONE
46 CERTAIN AFFILIATED RELATIONSHIPS [Disclose, as necessary, affiliations of officers/directors with service providers.] INVESTMENT ADVISORY, MANAGEMENT, ADMINISTRATIVE AND DISTRIBUTION SERVICES The following information supplements and should be read in conjunction with the sections in the Prospectus entitled "Management of the Fund". THE INVESTMENT ADVISER BZW Barclays Global Fund Advisors (the "Adviser") will act as investment adviser to the Fund and, subject to the supervision of the Board of Directors of the Fund, will be responsible for the investment management of each Index Series. The Adviser is a California corporation indirectly owned by Barclays Bank PLC, and is registered as an investment adviser under the Investment Advisers Act of 1940. The Adviser and its parent, BZW Barclays Global Investors, N.A., are responsible for managing or providing investment advice for assets aggregating in excess of $220 billion as of December 30, 1995. The Adviser serves as investment adviser to each Index Series pursuant to an Investment Management Agreement (the "Management Agreement") between the Fund and the Adviser. Under the Management Agreement, the Adviser, subject to the supervision of the Fund's Board of Directors and in conformity with the stated investment policies of each Index Series, will manage the investment of each Index Series' assets. The Adviser may enter into subadvisory agreements with additional investment advisers to act as subadvisers with respect to particular Index Series. The Adviser will pay subadvisers, if any, out of the fees received by the Adviser. The Adviser will be responsible for placing purchase and sale orders and providing continuous supervision of the investment portfolio of each Index Series. For its investment management services to each Index Series the Adviser will be paid management fees equal to each Index Series' allocable portion of: .27% per annum of the aggregate net assets of the Fund less than or equal to $1.7 billion, plus .15% of the aggregate net assets of the Fund between $1.7 billion and $7 billion, plus .12% per annum of the aggregate net assets of the Fund between $7 billion and $10 billion, plus .08% per annum of the aggregate net assets of the Fund in excess of $10 billion. The management fees will be accrued daily and paid by the Fund as soon as practical after the last day of each calendar quarter. The Fund's management fees, like those paid by most index funds, are lower than those paid by many actively managed funds. One reason for the difference in fee levels is that passive management requires fewer investment, research and trading decisions, thereby justifying lower fees. Pursuant to the Management Agreement, the Adviser will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund, and the Fund has agreed to indemnify the Adviser for certain liabilities, including certain liabilities arising under the federal securities laws, unless such loss or liability results from willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties. The Management Agreement will continue in effect for two years from its effective date, and thereafter will be subject to annual approval by (1) the Fund's Board or (2) vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund, provided that in either event the continuance also is approved by a majority of the Fund's Board who are not interested persons (as defined in the 1940 Act) of the Fund by vote cast in person at a meeting called for the purpose of voting on such approval. The Management Agreement is terminable without penalty, on 60 days' notice, by the Fund's Board or by vote of the holders of a majority (as defined in the 1940 Act) of the Fund's outstanding voting securities. The Management Agreement is also terminable upon 60 days' notice by the Adviser and will terminate automatically in the event of its assignment (as defined in the 1940 Act). THE ADMINISTRATOR PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp. (the "Administrator") will act as administration and accounting agent of the Fund pursuant to an Administration and 47 Accounting Services Agreement with the Fund and will be responsible for certain clerical, recordkeeping and bookkeeping services, except those to be performed by the Adviser, by Morgan Stanley Trust Company in its capacity as Custodian, or by PNC Bank, N.A. ("PNC") in its capacity as Transfer Agent. PFPC, as Administrator, has no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. The principal business address of PFPC is 400 Bellevue Parkway, Wilmington, DE 19809. For the administrative and fund accounting services PFPC provides to the Fund, PFPC will be paid aggregate fees equal to each Index Series' allocable portion of: .10% per annum of the aggregate net assets of the Fund less than $3 billion, plus .09% per annum of the aggregate net assets of the Fund between $3 billion and $5 billion, plus .08% per annum of the aggregate net assets of the Fund between $5 billion and $7.5 billion, plus .065% per annum of the aggregate net assets of the Fund between $7.5 billion and $10 billion, plus .05% per annum of the aggregate net assets of the Fund in excess of $10 billion. PFPC may from time to time waive all or a portion of its fees. For the first year of the Fund's operations, PFPC has agreed to waive a portion of its fees. During the first year of the Fund's operations, PFPC will charge the Fund an administrative and accounting service fee equal to $4,167 per month for each Index Series, plus .05% of aggregate average daily net assets of all Index Series in excess of $850 million per annum. However, if during the first three years of the Fund's operations the Fund removes PFPC as the administrator, the Fund will pay the cost of deconversion and PFPC will be entitled to recoup 100% of the fees waived during the first year. Pursuant to the Administration Agreement, the Administrator will be liable for damages arising of its failure to perform its duties due to willful misfeasance, bad faith, gross negligence or reckless disregard of such duties. The Fund will indemnify the Administrator for certain liabilities, including certain liabilities arising under federal securities laws, except for liabilities arising out of the Administrator's willful misfeasance, bad faith, gross negligence or reckless disregard of its duties. THE DISTRIBUTOR Funds Distributor, Inc. (the "Distributor") is the principal underwriter and distributor of WEBS. Its address is One Exchange Place, 10th Floor, Boston, MA 02109, and investor information can be obtained by calling 1-800-xxx-xxxx. The Distributor has entered into an agreement with the Fund which will continue until , and which is renewable annually thereafter (the "Distribution Agreement"), pursuant to which it will distribute Fund shares. WEBS will be continuously offered for sale by the Fund through the Distributor only in Creation Units, as described below under "Purchase and Issuance of WEBS in Creation Units." WEBS in less than Creation Units will not be distributed by the Distributor. The Distributor will also act as agent for the Fund. The Distributor will deliver a prospectus to persons purchasing WEBS in Creation Units and will maintain records of both orders placed with it and confirmations of acceptance furnished by it. The Distributor is a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of the National Association of Securities Dealers, Inc. Funds Distributor, Inc., as Distributor, has no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. To compensate the Distributor for the distribution-related services it provides, and broker-dealers authorized by the Distributor for distribution services they provide, the Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act. Under the Fund's Plan, for each Index Series the Distributor will be entitled to receive a distribution fee, accrued daily and paid monthly, calculated with respect to each Index Series at the annual rate of up to .25% of the average daily net assets of such Index Series. From time to time the Distributor may waive all or a portion of these fees. The Plan is designed to enable the Distributor to be compensated by the Fund for distribution services provided by it with respect to each Index Series. Payments under the Plan are not tied exclusively to the distribution expenses actually incurred by the Distributor. The Board of Directors, including a majority of the Directors who are not interested persons of the Fund and who have no 48 direct or indirect financial interest in the operation of the Plan ("Independent Directors"), will evaluate the appropriateness of the Plan and its payment terms on a continuing basis and in doing so will consider all relevant factors, including expenses borne by the Distributor in the current year and in prior years and amounts received under the Plan. Under its terms, the Plan remains in effect from year to year, provided such continuance is approved annually by vote of the Board of Directors, including a majority of the Independent Directors. The Plan may not be amended to increase materially the amount to be spent for the services provided by the Distributor without approval by the shareholders of the Index Series of the Fund to which the Plan applies, and all material amendments of the Plan also require Board approval. The Plan may be terminated at any time, without penalty, by vote of a majority of the Independent Directors, or, with respect to any Index Series of the Fund, by a vote of a majority of the outstanding voting securities of such Index Series of the Fund (as such vote is defined in the Investment Company Act). If a Plan is terminated (or not renewed) with respect to any one or more Index Series of the Fund, it may continue in effect with respect to any Index Series of the Fund as to which it has not been terminated (or has been renewed). Pursuant to the Distribution Agreement, the Distributor will provide the Board of Directors periodic reports of any amounts expended under the Plan and the purpose for which such expenditures were made. The Distribution Agreement will provide that it may be terminated at any time, without the payment of any penalty, (i) by vote of a majority of the Directors who are not interested persons of the Fund (as defined under the 1940 Act) or (ii) by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the relevant Index Series, on at least 60 days' written notice to the Distributor. The Distribution Agreement is also terminable upon 60 days' notice by the Distributor and will terminate automatically in the event of its assignment (as defined in the 1940 Act). THE CUSTODIAN AND LENDING AGENT Morgan Stanley Trust Company serves as the Custodian for the cash and portfolio securities of each Index Series of the Fund pursuant to a Custodian Agreement between Morgan Stanley Trust Company and the Fund. MSTC also serves as Lending Agent of the portfolio securities of each Index Series. As Lending Agent, MSTC will cause the delivery of loaned securities from the Fund to borrowers, arrange for the return of loaned securities to the Fund at the termination of the loans, request deposit of collateral, monitor daily the value of the loaned securities and collateral, request that borrowers add to the collateral when required by the loan agreements, and provide recordkeeping and accounting services necessary for the operation of the program. MSTC, as Custodian and Lending Agent, has no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. The principal business address of MSTC is One Pierrepont Plaza, Brooklyn, New York. For its custody services to each Index Series, MSTC will be paid per annum fees based on the aggregate net assets of the Index Series as follows: Australia Index Series (.10%); Austria Index Series (.10%); Belgium Index Series (.10%); Canada Index Series (.07%); France Index Series (.11%); Germany Index Series (.10%); Hong Kong Index Series (.12%); Italy Index Series (.09%); Japan Index Series (.07%); Malaysia Index Series (.13%); Mexico (Free) Index Series (.25%); Netherlands Index Series (.10%); Singapore (Free) Index Series (.10%); Spain Index Series (.10%); Sweden Index Series (.10%); Switzerland Index Series (.10%); and United Kingdom Index Series (.08%). As remuneration for its services in connection with lending portfolio securities of the Index Series, MSTC will be paid by the Fund, in respect of each Index Series, 50% of the net investment income earned on the collateral for securities loaned. TRANSFER AGENT PNC (the "Transfer Agent"), an indirect wholly owned subsidiary of PNC Bank Corp., provides transfer agency services pursuant to an agreement with the Fund. PNC, as Transfer Agent, has no 49 role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund. The principal business address of PNC is Broad and Chestnut Streets, Philadelphia, PA 19110. ADDITIONAL EXPENSES In addition to the fees described above, the Fund will be responsible for the payment of expenses that will include, among other things, organizational expenses, compensation of the Directors of the Fund, reimbursement of out-of-pocket expenses incurred by the Administrator, exchange listing fees, license fees, brokerage costs, legal and audit fees, and litigation and extraordinary expenses. For the use of the relevant MSCI index, each Index Series will pay a license fee to Morgan Stanley & Co. Incorporated equal to .03% per annum of the aggregate net assets of the Index Series. BROKERAGE TRANSACTIONS When selecting brokers and dealers to handle the purchase and sale of portfolio securities, the Adviser looks for prompt execution of the order at a favorable price. Generally, the Adviser works with recognized dealers in these securities, except when a better price and execution of the order can be obtained elsewhere. The Fund will not deal with affiliates in principal transactions unless permitted by exemptive order or applicable rule or regulation. Since the investment objective of each Index Series is investment performance that corresponds to that of an index, the Adviser does not intend to select brokers and dealers for the purpose of receiving research services in addition to a favorable price and prompt execution either from that broker or an unaffiliated third party. Subject to allocating brokerage to receive a favorable price and prompt execution, the Adviser may select brokers who are willing to provide payments to third party service suppliers to an Index Series, to reduce expenses of the Index Series. The Adviser will assume general supervision over placing orders on behalf of the Fund for the purchase or sale of portfolio securities. If purchases or sales of portfolio securities of the Fund and one or more other investment companies or clients supervised by the Adviser are considered at or about the same time, transactions in such securities will be allocated among the several investment companies and clients in a manner deemed equitable to all by the Adviser, taking into account the sizes of such other investment companies and clients and the amount of securities to be purchased or sold. In some cases this procedure could have a detrimental effect on the price or volume of the security so far as the Fund is concerned. However, in other cases it is possible that the ability to participate in volume transactions and to negotiate lower brokerage commissions will be beneficial to the Fund. The primary consideration is prompt execution of orders at the most favorable net price. Portfolio turnover may vary from year to year, as well as within a year. High turnover rates are likely to result in comparatively greater brokerage expenses. The portfolio turnover rate for each Index Series is expected to be under 50%. See "Investment Policies" in the Prospectus. The overall reasonableness of brokerage commissions is evaluated by the Adviser based upon its knowledge of available information as to the general level of commissions paid by other institutional investors for comparable services. BOOK ENTRY ONLY SYSTEM DTC will act as securities depositary for the WEBS. WEBS will be represented by global securities, which will be registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. Except as provided below, certificates will not be issued for WEBS. DTC has advised the Fund as follows: it is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities of its participants (the "DTC Participants") and to facilitate the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic 50 book-entry changes in accounts of the DTC Participants, thereby eliminating the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (the "Indirect Participants"). DTC agrees with and represents to its Participants that it will administer its book-entry system in accordance with its rules and by-laws and requirements of law. Beneficial ownership of WEBS will be limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in WEBS (owners of such beneficial interests are referred to herein as "Beneficial Owners") will be shown on, and the transfer of ownership will be effected only through, records maintained by DTC (with respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial Owners are expected to receive from or through the DTC Participant a written confirmation relating to their purchase of WEBS. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability of certain investors to acquire beneficial interests in WEBS. Beneficial Owners of WEBS will not be entitled to have WEBS registered in their names, will not receive or be entitled to receive physical delivery of certificates in definitive form and will not be considered the registered holder thereof. Accordingly, each Beneficial Owner must rely on the procedures of DTC, the DTC Participant and any Indirect Participant through which such Beneficial Owner holds its interests, to exercise any rights of a holder of WEBS. The Fund understands that under existing industry practice, in the event the Fund requests any action of holders of WEBS, or a Beneficial Owner desires to take any action that DTC, as the record owner of all outstanding WEBS, is entitled to take, DTC would authorize the DTC Participants to take such action and that the DTC Participants would authorize the Indirect Participants and Beneficial Owners acting through such DTC Participants to take such action and would otherwise act upon the instructions of Beneficial Owners owning through them. As described above, the Fund recognizes DTC or its nominee as the owner of all WEBS for all purposes. Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the Fund and DTC, DTC is required to make available to the Fund upon request and for a fee to be charged to the Fund a listing of the WEBS holdings of each DTC Participant. The Fund shall inquire of each such DTC Participant as to the number of Beneficial Owners holding WEBS, directly or indirectly, through such DTC Participant. The Fund shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC Participant, directly or indirectly, to such Beneficial Owners. In addition, the Fund shall pay to each such DTC Participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements. WEBS distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all WEBS. The Fund expects that DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC Participants' accounts with payments in amounts proportionate to their respective beneficial interests in WEBS as shown on the records of DTC or its nominee. The Fund also expects that payments by DTC Participants to Indirect Participants and Beneficial Owners of WEBS held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a "street name," and will be the responsibility of such DTC Participants. The Fund will have no responsibility or liability for any aspects of the records relating to or notices to Beneficial Owners, or 51 payments made on account of beneficial ownership interests in such WEBS, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between DTC and the DTC Participants or the relationship between such DTC Participants and the Indirect Participants and Beneficial Owners owning through such DTC Participants. DTC may determine to discontinue providing its service with respect to WEBS at any time by giving reasonable notice to the Fund and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Fund shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing ownership of WEBS, unless the Fund makes other arrangements with respect thereto satisfactory to the AMEX (or such other exchange on which WEBS may be listed). PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE SECTION IN THE PROSPECTUS ENTITLED "PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS". GENERAL The Fund will issue and sell WEBS only in Creation Units on a continuous basis through the Distributor, without an initial sales load, at their net asset value next determined after receipt, on any Business Day (as defined herein), of an order in proper form. The value of a Creation Unit will vary from one Index Series to another, and is expected to range initially from approximately $450,000 to $10,000,000. A "Business Day" with respect to each Index Series is any day on which (i) the New York Stock Exchange ("NYSE") and (ii) the stock exchange(s) and Fund subcustodian(s) relevant to such Index Series are open for business. As of the date of this Prospectus, the NYSE observes the following holidays: New Year's Day, President's Day (Washington's Birthday), Good Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The stock exchange and/or subcustodian holidays relevant to each Index Series are set forth in Appendix B to this Statement of Additional Information. PORTFOLIO DEPOSIT The consideration for purchase of a Creation Unit of WEBS of an Index Series generally will be the in-kind deposit of a designated portfolio of equity securities (the "Deposit Securities") constituting an optimized representation of the Index Series' benchmark foreign securities index and an amount of cash computed as described below (the "Cash Component"). Together, the Deposit Securities and the Cash Component constitute the "Portfolio Deposit", which represents the minimum initial and subsequent investment amount for shares of any Index Series of the Fund. The Cash Component is an amount equal to the Dividend Equivalent Payment (as defined below), plus or minus, as the case may be, a Balancing Amount (as defined below). The "Dividend Equivalent Payment" will enable the Fund to make a complete distribution of dividends on the next dividend payment date, and is an amount equal, on a per Creation Unit basis, to the dividends on all the Portfolio Securities with ex-dividend dates within the accumulation period for such distribution (the "Accumulation Period"), net of expenses and liabilities for such period, as if all of the Portfolio Securities had been held by the Fund for the entire Accumulation Period. The "Balancing Amount" is an amount equal to the difference between (x) the net asset value (per Creation Unit) of the Index Series and (y) the sum of (i) the Dividend Equivalent Payment and (ii) the market value (per Creation Unit) of the securities deposited with the Fund (the sum of (i) and (ii) is referred to as the "Deposit Amount"). The Balancing Amount serves the function of compensating for any differences between the net asset value per Creation Unit and the Deposit Amount. 52 The Adviser will make available through the Distributor on each Business Day, immediately prior to the opening of business on the AMEX (currently 9:30 a.m., New York time), the list of the names and the required number of shares of each Deposit Security to be included in the current Portfolio Deposit (based on information at the end of the previous Business Day) for each Index Series. Such Portfolio Deposit will be applicable, subject to any adjustments as described below, in order to effect purchases of Creation Units of WEBS of a given Index Series until such time as the next-announced Portfolio Deposit composition is made available. The identity and number of shares of the Deposit Securities required for a Portfolio Deposit for each Index Series will change as rebalancing adjustments and corporate action events are reflected from time to time by the Adviser with a view to the investment objective of the Index Series. The composition of the Deposit Securities may also change in response to adjustments to the weighting or composition of the securities constituting the relevant securities index. In addition, the Fund reserves the right to permit or require the substitution of an amount of cash (i.e., a "cash in lieu" amount) to be added to the Cash Component to replace any Deposit Security which may not be available in sufficient quantity for delivery or for other similar reasons. The adjustments described above will reflect changes, known to the Adviser on the date of announcement to be in effect by the time of delivery of the Portfolio Deposit, in the composition of the subject index being tracked by the relevant Index Series, or resulting from stock splits and other corporate actions. In addition to the list of names and numbers of securities constituting the current Deposit Securities of a Portfolio Deposit, the Distributor also will make available (i) on each Business Day, the Dividend Equivalent Payment effective through and including the previous Business Day, per outstanding WEBS of each Index Series, and (ii) on a continuous basis throughout the day, the sum of the Dividend Equivalent Payment effective through and including the close of the previous trading session in the relevant foreign market, plus the current value of the requisite Deposit Securities as in effect on such day. ROLE OF THE AUTHORIZED PARTICIPANT Creation Units of WEBS may be purchased only by or through a DTC Participant that has entered into an Authorized Participant Agreement with the Fund and the Distributor ("Authorized Participant"). Such Authorized Participant will agree pursuant to the terms of such Authorized Participant Agreement on behalf of itself or any investor on whose behalf it will act, as the case may be, to certain conditions, including that such Authorized Participant will make available in advance of each purchase of WEBS an amount of cash sufficient to pay the Cash Component, once the net asset value of a Creation Unit is next determined after receipt of the purchase order in proper form, together with the transaction fee described below. The Authorized Participant may require the investor to enter into an agreement with such Authorized Participant with respect to certain matters, including payment of the Cash Component. Investors who are not Authorized Participants must make appropriate arrangements with an Authorized Participant. Investors should be aware that their particular broker may not be a DTC Participant or may not have executed an Authorized Participant Agreement, and that therefore orders to purchase Creation Units of Fund shares may have to be placed by the investor's broker through an Authorized Participant. As a result, purchase orders placed through an Authorized Participant may result in additional charges to such investor. The Fund does not expect to enter into an Authorized Participant Agreement with more than a small number of DTC Participants that have international capabilities. A list of the Authorized DTC Participants may be obtained from the Distributor. PURCHASE ORDER To initiate an order for a Creation Unit of WEBS, the Authorized Participant must give notice to the Distributor of its intent to submit an order to purchase WEBS not later than 4:00 p.m., New York time on the relevant Business Day. The Distributor shall cause the Adviser and the Custodian to be informed of such advice. The Custodian will then provide such information to the appropriate subcustodian. For each Index Series, the Custodian shall cause the subcustodian of the Index Series to 53 maintain an account into which the Authorized Participant shall deliver, on behalf of itself or the party on whose behalf it is acting, the securities included in the designated Portfolio Deposit (or the cash value of all or a part of such securities, in the case of a permitted or required cash purchase or "cash in lieu" amount), with any appropriate adjustments as advised by the Fund. DEPOSIT SECURITIES MUST BE DELIVERED TO AN ACCOUNT MAINTAINED AT THE APPLICABLE LOCAL SUBCUSTODIAN. Following the notice of intention, an irrevocable order to purchase Creation Units, in the form required by the Fund, must be received by the Distributor from an Authorized Participant on its own or another investor's behalf by the closing time of the regular trading session on the AMEX (currently 4:00 p.m., New York time) on the relevant Business Day. (The required form of an order to purchase is available on request from the Distributor.) Those placing orders to purchase Creation Units through an Authorized Participant should afford sufficient time to permit proper submission of the purchase order to the Distributor by the cut-off time on such Business Day. Orders must be transmitted by the Authorized Participant to the Distributor by facsimile or electronic transmission as provided in the Authorized Participant Agreement. The Authorized Participant must also make available on or before the contractual settlement date, by means satisfactory to the Fund, immediately available or same day funds estimated by the Fund to be sufficient to pay the Cash Component next determined after acceptance of the purchase order, together with the applicable purchase transaction fee. Any excess funds will be returned following settlement of the issue of the Creation Unit of WEBS. Those placing orders should ascertain the applicable deadline for cash transfers by contacting the operations department of the broker or depositary institution effectuating the transfer of the Cash Component. This deadline is likely to be significantly earlier than the closing time of the regular trading session on the AMEX. Investors should be aware that an Authorized Participant may require orders for purchases of WEBS placed with it to be in the form required by the individual Authorized Participant, which form will not be the same as the form of purchase order specified by the Fund, which the Authorized Participant must deliver to the Distributor. ACCEPTANCE OF PURCHASE ORDER Subject to the conditions that (I) a properly completed irrevocable purchase order has been submitted by the Authorized Participant (either on its own or another investor's behalf) not later than the closing time of the regular trading session on the AMEX, and (II) arrangements satisfactory to the Fund are in place for payment of the Cash Component and any other cash amounts which may be due, the Fund will accept the order, subject to its right (and the right of the Distributor and the Adviser) to reject any order until acceptance. Once the Fund has accepted an order, upon next determination of the net asset value of the shares, the Fund will confirm the issuance, against receipt of payment, of a Creation Unit of WEBS of the Index Series at such net asset value. The Distributor will then transmit a confirmation of acceptance to the Authorized Participant that placed the order. The Fund reserves the absolute right to reject a purchase order transmitted to it by the Distributor in respect of any Index Series if (a) the purchaser or group of purchasers, upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of any Index Series; (b) the Deposit Securities delivered are not as specified by the Adviser, as described above; (c) acceptance of the Deposit Securities would have certain adverse tax consequences to the Index Series; (d) the acceptance of the Portfolio Deposit would, in the opinion of counsel, be unlawful; (e) the acceptance of the Portfolio Deposit would otherwise, in the discretion of the Fund or the Adviser, have an adverse effect on the Fund or the rights of beneficial owners; or (f) in the event that circumstances outside the control of the Fund, the Distributor and the Adviser make it for all practical purposes impossible to process purchase orders. The Fund shall notify a prospective purchaser of its rejection of 54 the order of such person. The Fund and the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of Portfolio Deposits nor shall either of them incur any liability for the failure to give any such notification. ISSUANCE OF A CREATION UNIT A Creation Unit of WEBS of an Index Series will not be issued until the transfer of good title to the Fund of the Deposit Securities and the payment of the Cash Component have been completed. When the subcustodian has confirmed to the Custodian that the required securities included in the Portfolio Deposit (or the cash value thereof) have been delivered to the account of the relevant subcustodian, the Custodian shall notify the Distributor and the Adviser, and the Fund will issue and cause the delivery of the Creation Unit of WEBS. The Authorized Participant Agreement provides that in the event that a Portfolio Deposit is incomplete on the settlement date for a Creation Unit of WEBS because certain Deposit Securities are missing, the Fund may, in its sole discretion, issue the Creation Unit of WEBS notwithstanding such deficiency in reliance on the undertaking of the Authorized Participant to deliver the missing Deposit Securities as soon as possible, which undertaking shall be secured by such Authorized Participant's delivery and maintenance of collateral consisting of cash or Short-Term Investments having a value at least equal to 105% of the value of the missing Deposit Securities. The Authorized Participant Agreement will permit the Fund to buy the missing Deposit Securities at any time and will subject the Authorized Participant to liability for any shortfall between the cost to the Fund of purchasing such securities and the value of the collateral. All questions as to the number of shares of each security in the Deposit Securities and the validity, form, eligibility and acceptance for deposit of any securities to be delivered shall be determined by the Fund, and the Fund's determination shall be final and binding. CASH PURCHASE METHOD Although the Fund does not ordinarily intend to permit cash purchases of Creation Units, when cash purchases of Creation Units of WEBS are available or specified for an Index Series, they will be effected in essentially the same manner as in-kind purchases thereof. In the case of a cash purchase, the investor must pay the cash equivalent of the Deposit Securities it would otherwise be required to provide through an in-kind purchase, plus the same Cash Component required to be paid by an in-kind purchaser. In addition, to offset the Fund's brokerage and other transaction costs associated with using the cash to purchase the requisite Deposit Securities, the investor will be required to pay a fixed purchase transaction fee, plus an additional variable charge for cash purchases, which is expressed as a percentage of the value of the Deposit Securities. The transaction fees for in-kind and cash purchases of Creation Units of WEBS are described below. PURCHASE TRANSACTION FEE A purchase transaction fee payable to the Fund is imposed to compensate the Fund for the transfer and other transaction costs of an Index Series. THE PURCHASE TRANSACTION FEE FOR IN-KIND AND CASH PURCHASES AND THE ADDITIONAL VARIABLE CHARGE FOR CASH PURCHASES (WHEN CASH PURCHASES ARE AVAILABLE OR SPECIFIED) ARE LISTED FOR THE RELEVANT INDEX SERIES IN THE SHAREHOLDER TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND EXPENSES". Where the Fund permits an in-kind purchaser to substitute cash in lieu of depositing a portion of the Deposit Securities, the purchaser will be assessed the additional variable charge for cash purchases on the "cash in lieu" portion of its investment. Purchasers of WEBS in Creation Units are responsible for the costs of transferring the securities constituting the Deposit Securities to the account of the Fund. See "Summary of Fund Expenses" in the Prospectus. 55 EXAMPLE A hypothetical example of the costs of creating a Creation Unit of WEBS of the Japan Index Series is set forth below for illustrative purposes only. The exchange rate reflected in the table is Y101.5 per US$1.
UNIT CREATION UNIT CREATION DAILY NAV CALCULATION CALCULATION CALCULATION ---------------- ------------- ------------- Execution............................................... Y856,438,324 $ 8,437,816 $ 8,437,816 Commissions............................................. 856,438 8,438 N/A Stamp Taxes............................................. 0 0 N/A Risk Premium............................................ 0 0 N/A Accued Income........................................... 2,911,890 28,689 28,689 Creation Charge......................................... 812,000 8,000 N/A WEBS Unit Value......................................... 861,018,652 8,482,943 8,466,505 Per WEBS................................................ 16.97 16.93 Shares.................................................. 500,000
See "Management of the Fund", in the Prospectus, and "Investment Advisory, Management, Administrative and Distribution Services" herein, for additional information concerning the distribution arrangements for WEBS. REDEMPTION OF WEBS IN CREATION UNITS THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN CONJUNCTION WITH THE SECTION IN THE PROSPECTUS ENTITLED "REDEMPTION OF WEBS IN CREATION UNITS". WEBS may be redeemed only in Creation Units at their net asset value next determined after receipt of a redemption request in proper form by the Distributor and only on a day on which the AMEX is open for trading. THE FUND WILL NOT REDEEM WEBS IN AMOUNTS LESS THAN CREATION UNITS. Beneficial Owners also may sell WEBS in the secondary market, but must accumulate enough WEBS to constitute a Creation Unit in order to have such shares redeemed by the Fund. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit of WEBS. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of WEBS to constitute a redeemable Creation Unit. See "Investment Considerations and Risks" in the Prospectus. With respect to each Index Series, the Adviser will make available through the Distributor immediately prior to the opening of business on the AMEX (currently 9:30 am, New York time) on each day that the AMEX is open for business the Portfolio Securities that will be applicable (subject to possible amendment or correction) to redemptions requests received in proper form (as defined below) on that day. Unless cash redemptions are available or specified for an Index Series, the redemption proceeds for a Creation Unit generally will consist of Deposit Securities as announced by the Distributor on the Business Day of the request for redemption, plus cash in an amount equal to the difference between the net asset value of the shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Deposit Securities, less the redemption transaction fee described below. The redemption transaction fee described below will be deducted from such redemption proceeds. In the case of a resident Australian holder, notwithstanding the foregoing, such holder is only entitled to receive cash, upon its redemption of Creation Units of WEBS. A redemption transaction fee payable to the Fund is imposed to offset transfer and other transaction costs that may be incurred by the relevant Index Series. THE REDEMPTION TRANSACTION FEE FOR REDEMPTIONS IN KIND AND FOR CASH AND THE ADDITIONAL VARIABLE CHARGE FOR CASH REDEMPTIONS (WHEN CASH REDEMPTIONS ARE AVAILABLE OR SPECIFIED) ARE LISTED FOR THE RELEVANT INDEX SERIES IN THE SHAREHOLDER TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND EXPENSES". Investors will also bear the costs of transferring the Portfolio Deposit from the Fund to their account or on their order. Investors who use the services of a broker or other such intermediary may be charged a fee for such services. 56 Redemption requests in respect of Creation Units of any Index Series must be submitted to the Distributor by or through an Authorized Participant on a day that the AMEX is open for business. Investors other than through Authorized Participants are responsible for making arrangements for a redemption request to be made through an Authorized Participant. The Distributor will provide a list of current Authorized Participants upon request. The Authorized Participant must transmit the request for redemption, in the form required by the Fund, to the Distributor in accordance with procedures set forth in the Authorized Participant Agreement. Investors should be aware that their particular broker may not have executed an Authorized Participant Agreement, and that, therefore, requests to redeem Creation Units may have to be placed by the investor's broker through an Authorized Participant who has executed an Authorized Participant Agreement. At any given time there may be only a limited number of broker-dealers that have executed an Authorized Participant Agreement. Investors making a redemption request should be aware that such request be in the form specified by such Authorized Participant. Investors making a request to redeem Creation Units should afford sufficient time to permit proper submission of the request by an Authorized Participant and transfer of the WEBS to the Fund's Transfer Agent; such investors should allow for the additional time that may be required to effect redemptions through their banks, brokers or other financial intermediaries if such intermediaries are not Authorized Participants. A redemption request will be considered to be in "proper form" if (i) an Authorized Participant has transferred or caused to be transferred to the Fund's Transfer Agent the Creation Unit of WEBS being redeemed through the book-entry system of DTC so as to be effective by the AMEX closing time New York time on a day on which the AMEX is open for business and (ii) a duly completed request form is received by the Distributor from the Authorized Participant on behalf of itself or another redeeming investor by the AMEX closing time New York time on such day. If the Transfer Agent does not receive the investor's WEBS through DTC facilities by the AMEX closing time on the same day that the redemption request is received, the redemption request shall be rejected and may be resubmitted the next day that the AMEX is open for business. Investors should be aware that the deadline for such transfers of shares through the DTC system may be significantly earlier than the close of business on the AMEX. Those making redemption requests should ascertain the deadline applicable to transfers of shares through the DTC system by contacting the operations department of the broker or depositary institution effecting the transfer of the WEBS. Upon receiving a redemption request, the Distributor shall notify the Fund and the Fund's Transfer Agent of such redemption request. The tender of an investor's WEBS for redemption and the distribution of the cash redemption payment in respect of Creation Units redeemed will be effected through DTC and the relevant Authorized Participant to the beneficial owner thereof as recorded on the book-entry system of DTC or the DTC Participant through which such investor holds WEBS, as the case may be, or by such other means specified by the Authorized Participant submitting the redemption request. See "Book-Entry System Only". IN CONNECTION WITH TAKING DELIVERY OF SHARES OF DEPOSIT SECURITIES UPON REDEMPTION OF WEBS, A REDEEMING BENEFICIAL OWNER OR AUTHORIZED PARTICIPANT ACTING ON BEHALF OF SUCH BENEFICIAL OWNER MUST MAINTAIN APPROPRIATE SECURITIES BROKER-DEALER, BANK OR OTHER CUSTODY ARRANGEMENTS IN EACH JURISDICTION IN WHICH ANY OF THE PORTFOLIO SECURITIES ARE CUSTOMARILY TRADED, TO WHICH ACCOUNT SUCH PORTFOLIO SECURITIES WILL BE DELIVERED. Deliveries of redemption proceeds by the Index Series relating to those countries generally will be made within three business days. Due to the schedule of holidays in certain countries, however, the delivery of in-kind redemption proceeds may take longer than three business days after the day on which the redemption request is received in proper form. For each country relating to an Index Series, Appendix B hereto identifies the instances where more than seven days would be needed to deliver redemption proceeds. PURSUANT TO AN ORDER OF THE SECURITIES AND EXCHANGE COMMISSION, IN RESPECT OF EACH INDEX SERIES, THE FUND WILL MAKE DELIVERY OF IN-KIND REDEMPTION PROCEEDS WITHIN THE NUMBER OF DAYS STATED IN APPENDIX B TO BE THE MAXIMUM NUMBER OF DAYS NECESSARY TO DELIVER REDEMPTION PROCEEDS. 57 If neither the redeeming Beneficial Owner nor the Authorized Participant acting on behalf of such redeeming Beneficial Owner has appropriate arrangements to take delivery of the Portfolio Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Portfolio Securities in such jurisdiction, the Fund may in its discretion exercise its option to redeem such shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In such case, the investor will receive a cash payment equal to the net asset value of its Shares based on the net asset value of WEBS of the relevant Index Series next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional variable charge for cash redemptions specified above, to offset the Fund's brokerage and other transaction costs associated with the disposition of Portfolio Securities of the Index Series). Redemptions of WEBS for Deposit Securities will be subject to compliance with applicable United States federal and state securities laws and each Index Series (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that the Index Series could not lawfully deliver specific Deposit Securities upon redemptions or could not do so without first registering the Deposit Securities under such laws. Although the Fund does not ordinarily intend to permit cash redemptions of Creation Units (except that, as noted above, resident Australian holders may redeem solely for cash), in the event that cash redemptions are permitted or required by the Fund, proceeds will be paid to the Authorized Participant redeeming shares on behalf of the redeeming investor as soon as practicable after the date of redemption (within seven calendar days thereafter, except for the instances listed in Appendix B hereto where more than seven calendar days would be needed). Because the Portfolio Securities of an Index Series may trade on the relevant exchange(s) on days that the AMEX is closed or are otherwise not Business Days for such Index Series, stockholders may not be able to redeem their shares of such Index Series, or to purchase or sell WEBS on the AMEX, on days when the net asset value of such Index Series could be significantly affected by events in the relevant foreign markets. The right of redemption may be suspended or the date of payment postponed with respect to any Index Series (1) for any period during which the New York Stock Exchange is closed (other than customary weekend and holiday closings); (2) for any period during which trading on the New York Stock Exchange is suspended or restricted; (3) for any period during which an emergency exists as a result of which disposal of the shares of the Index Series' portfolio securities or determination of its net asset value is not reasonably practicable; or (4) in such other circumstance as is permitted by the Securities and Exchange Commission. DETERMINING NET ASSET VALUE The following information supplements and should be read in conjunction with the section in the Prospectus entitled "Determination of Net Asset Value". Net asset value per share for each Index Series of the Fund is computed by dividing the value of the net assets of such Index Series (i.e., the value of its total assets less total liabilities) by the total number of WEBS outstanding, rounded to the nearest cent. Expenses and fees, including the management, administration and distribution fees, are accrued daily and taken into account for purposes of determining net asset value. The net asset value of each Index Series is determined as of the close of the regular trading session on the New York Stock Exchange, Inc. (ordinarily 4:00 p.m., New York City time) on each day that such exchange is open. 58 In computing an Index Series' net asset value, the Index Series' portfolio securities are valued based on their last quoted current price. Price information on listed securities is taken from the exchange where the security is primarily traded. Securities regularly traded in an over-the-counter market are valued at the latest quoted bid price in such market. Other portfolio securities and assets for which market quotations are not readily available are valued based on fair value as determined in good faith by the Adviser in accordance with procedures adopted by the Board of Directors of the Fund. The values of portfolio securities are converted into US dollars at the relevant foreign exchange rate for each Index Series in effect as of the time that the foreign-currency values of the securities are determined. DIVIDENDS AND DISTRIBUTIONS The following information supplements and should be read in conjunction with the section in the Prospectus entitled "Dividends and Capital Gains Distributions". Dividends from net investment income will be declared and paid at least annually by each Index Series. Distributions of net realized securities gains, if any, generally will be declared and paid once a year, but the Fund may make distributions on a more frequent basis for certain Index Series to improve tracking error or to comply with the distribution requirements of the Internal Revenue Code, in all events in a manner consistent with the provisions of the Act. In addition, the Fund intends to distribute at least annually amounts representing the full dividend yield on the underlying portfolio securities of each Index Series, as if such Index Series owned such underlying portfolio securities for the entire dividend period. As a result, some portion of each distribution may result in a return of capital. See "Tax Matters." Dividends and other distributions on WEBS will be distributed, as described below, on a pro rata basis to Beneficial Owners of such WEBS. Dividend payments will be made through the Depository and the Authorized Participants to Beneficial Owners then of record with proceeds received from the Fund. The Fund will make additional distributions to the minimum extent necessary (i) to distribute the entire annual investment company taxable income of the Fund, plus any net capital gains and (ii) to avoid imposition of the excise tax imposed by Section 4982 of the Internal Revenue Code. Management of the Fund reserves the right to declare special dividends if, in its reasonable discretion, such action is necessary or advisable to preserve the status of each Index Series as a RIC or to avoid imposition of income or excise taxes on undistributed income. TAXES The following information supplements and should be read in conjunction with the sections in the Prospectus entitled "Dividends and Capital Gains Distributions" and "Tax Matters". The Fund on behalf of each Index Series has the right to reject an order for a purchase of WEBS if the purchaser (or group of purchasers) would, upon obtaining the WEBS so ordered, own 80% or more of the outstanding WEBS of a given Index Series and if, pursuant to section 351 of the Internal Revenue Code, the respective Index Series would have a basis in the securities different from the market value of such securities on the date of deposit. The Fund also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination. See "Purchase and Issuance of WEBS in Creation Units". Each Index Series intends to qualify for and to elect treatment as a separate "regulated investment company" under Subchapter M of the Internal Revenue Code. To qualify for treatment as a RIC, a company must annually distribute at least 90 percent of its net investment company taxable income (which includes dividends, interest and net short-term capital gains) and meet several other requirements. Among such other requirements are the following: (1) at least 90 percent of the company's annual gross income must be derived from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies, or other income (including gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (2) at the close of each quarter of the 59 company's taxable year, (a) at least 50 percent of the market value of the company's total assets must be represented by cash and cash items, U.S. government securities, securities of other regulated investment companies and other securities, with such other securities limited for purposes of this calculation in respect of any one issuer to an amount not greater than 5% of the value of the company's assets and not greater than 10% of the outstanding voting securities of such issuer, and (b) not more than 25 percent of the value of its total assets may be invested in the securities of any one issuer or of two or more issuers that are controlled by the company (within the meaning of Section 851(b)(4)(B) of the Internal Revenue Code) and that are engaged in the same or similar trades or businesses or related trades or businesses (other than U.S. government securities or the securities of other regulated investment companies); and (3) the company must derive less than 30 percent of its annual gross income from the sale or other disposition, after a holding period of less than three months, of (i) stock or securities, (ii) options, futures or forward contracts (other than options, futures or forward contracts on foreign currencies) or (iii) foreign currencies (including options, futures and forward contracts on foreign currencies) not directly related to the company's principal business of investing in stock or securities (or options and futures with respect to stocks and securities). Each Index Series may be subject to foreign income taxes withheld at source. Each Index Series will elect to "pass through" to its investors the amount of foreign income taxes paid by the Index Series, with the result that each investor will (i) include in gross income, even though not actually received, the investor's pro rata share of the Index Series' foreign income taxes, and (ii) either deduct (in calculating U.S. taxable income) or credit (in calculating U.S. federal income tax) the investor's pro rata share of the Index Series' foreign income taxes. A foreign tax credit may not exceed the investor's U.S. federal income tax otherwise payable with respect to the investor's foreign source income. For this purpose, each shareholder must treat as foreign source gross income (i) his proportionate share of foreign taxes paid by the Index Series and (ii) the portion of any dividend paid by the Index Series which represents income derived from foreign sources; the Index Series' gain from the sale of securities will generally be treated as U.S. source income. This foreign tax credit limitation is applied separately to separate categories of income; dividends from the Index Series will be treated as "passive" or "financial services" income for this purpose. The effect of this limitation may be to prevent investors from claiming as a credit the full amount of their pro rata share of the Index Series' foreign income taxes. If any Index Series owns shares in certain foreign investment entities, referred to as "passive foreign investment companies", the Index Series will be subject to one of the following special tax regimes: (i) the Index Series is liable for U.S. federal income tax, and an additional charge in the nature of interest, on a portion of any "excess distribution" from such foreign entity or any gain from the disposition of such shares, even if the entire distribution or gain is paid out by the Index Series as a dividend to its shareholders; (ii) if the Index Series were able and elected to treat a passive foreign investment company as a "qualified electing fund", the Index Series would be required each year to include in income, and distribute to shareholders in accordance with the distribution requirements set forth above, the Index Series' pro rata share of the ordinary earnings and net capital gains of the passive foreign investment company, whether or not such earnings or gains are distributed to the Index Series or (iii) under certain proposed regulations not yet effective, the Index Series would be entitled to mark-to-market annually the shares of the passive foreign investment company, and would be required to distribute to shareholders any such mark-to-market gains in accordance with the distribution requirements set forth above. An Index Series will be subject to a 4 percent excise tax on certain undistributed income if it does not distribute to its shareholders in each calendar year at least 98 percent of its ordinary income for the calendar year plus 98 percent of its capital gain net income for the twelve months ended October 31 of such year. Each Index Series intends to declare and distribute dividends and distributions in the amounts and at the times necessary to avoid the application of this 4 percent excise tax. An investor in an Index Series that is a foreign corporation or an individual who is a nonresident alien for U.S. tax purposes will be subject to significant adverse U.S. tax consequences. For example, dividends paid out of an Index Series' investment company taxable income will generally be subject to 60 U.S. federal withholding tax at a rate of 30% (or lower treaty rate if the foreign investor is eligible for the benefits of an income tax treaty). Foreign investors are urged to consult their own tax advisors regarding the U.S. tax treatment, in their particular circumstances, of ownership of shares in an Index Series. The foregoing discussion is a summary only and is not intended as a substitute for careful tax planning. Purchasers of shares of the Fund should consult their own tax advisors as to the tax consequences of investing in such shares, including under state, local and other tax laws. Finally, the foregoing discussion is based on applicable provisions of the Internal Revenue Code, regulations, judicial authority and administrative interpretations in effect on the date hereof. Changes in applicable authority could materially affect the conclusions discussed above, and such changes often occur. CAPITAL STOCK AND SHAREHOLDER REPORTS The Fund currently is comprised of seventeen series of shares of common stock, par value $.001 per share, referred to herein as WEBS: the Australia Index Series, the Austria Index Series, the Belgium Index Series, the Canada Index Series, the France Index Series, the Germany Index Series, the Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index Series, the Mexico (Free) Index Series, the Netherlands Index Series, the Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series, the Switzerland Index Series, and the United Kingdom Index Series. Each Index Series has been issued a separate class of capital stock. The Board of Directors of the Fund may designate additional series of common stock and classify shares of a particular series into one or more classes of that series. Each WEBS issued by the Fund will have a pro rata interest in the assets of the corresponding Index Series. The Fund is currently authorized to issue 6 billion shares of common stock. The following number of shares is currently authorized for each Index Series: the Australia Index Series, 127.8 million shares; the Austria Index Series, 19.8 million shares; the Belgium Index Series, 136.2 million shares; the Canada Index Series, 340.2 million shares; the France Index Series, 340.2 million shares; the Germany Index Series, 382.2 million shares; the Hong Kong Index Series, 191.4 million shares; the Italy Index Series, 63.6 million shares; the Japan Index Series, 2,124.6 million shares; the Malaysia Index Series, 127.8 million shares; the Mexico (Free) Index Series, 255 million shares; the Netherlands Index Series, 255 million shares, the Singapore (Free) Index Series, 191.4 million shares; the Spain Index Series, 127.8 million shares; the Sweden Index Series, 63.6 million shares; the Switzerland Index Series, 318.625 million shares; and the United Kingdom Index Series, 934.2 million shares. Fractional shares will not be issued. Shares have no preemptive, exchange, subscription or conversion rights and are freely transferable. Each share is entitled to participate equally in dividends and distributions declared by the Board with respect to the relevant Index Series, and in the net distributable assets of such Index Series on liquidation. Shareholders are entitled to require the Fund to redeem Creation Units of their shares. Each WEBS has one vote with respect to matters upon which a stockholder vote is required consistent with the requirements of the 1940 Act and the rules promulgated thereunder and the Maryland General Corporation Law; stockholders have no cumulative voting rights with respect to their shares. Shares of all series vote together as a single class except that if the matter being voted on affects only a particular Index Series it will be voted on only by that Index Series and if a matter affects a particular Index Series differently from other Index Series, that Index Series will vote separately on such matter. Under Maryland law, the Fund is not required to hold an annual meeting of stockholders unless required to do so under the 1940 Act. The policy of the Fund is not to hold an annual meeting of stockholders unless required to do so under the 1940 Act. All shares of the Fund (regardless of Index Series) have noncumulative voting rights for the election of Directors. Under Maryland law, Directors of the Fund may be removed by vote of the stockholders. The Fund expects that, immediately prior to the commencement of trading of the WEBS, each Index Series will have one stockholder, Funds Distributor, Inc., who will hold more than 5% of the outstanding shares of each Index Series in Creation Units. The Fund cannot predict the length of time that such person will remain a control person of each Index Series. 61 The Fund will issue through the Authorized Participants to its stockholders semi-annual reports containing unaudited financial statements and annual reports containing financial statements audited by independent accountants approved by the Fund's Directors and by the stockholders when meetings are held and such other information as may be required by applicable laws, rules and regulations. Beneficial Owners also will receive annually notification as to the tax status of the Fund's distributions. Stockholder inquiries may be made by writing to the Fund, c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809. PERFORMANCE INFORMATION The performance of the Index Series may be quoted in advertisements, sales literature or reports to shareholders in terms of average annual total return, cumulative total return and yield. Quotations of average annual total return will be expressed in terms of the average annual rate of return of a hypothetical investment in an Index Series over periods of 1, 5 and 10 years (or the life of an Index Series, if shorter). Such total return figures will reflect the deduction of a proportional share of such Index Series' expenses on an annual basis, and will assume that all dividends and distributions are reinvested when paid. Total return is calculated according to the following formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1000, T = the average annual total return, n = the number of years, and ERV = the ending redeemable value of a hypothetical $1000 payment made at the beginning of the 1, 5 or 10 year period). Quotations of a cumulative total return will be calculated for any specified period by assuming a hypothetical investment in an Index Series on the date of the commencement of the period and will assume that all dividends and distributions are reinvested when paid. The net increase or decrease in the value of the investment over the period will be divided by its beginning value to arrive at cumulative total return. Total return calculated in this manner will differ from the calculation of average annual total return in that it is not expressed in terms of an average rate of return. The yield of an Index Series is the net annualized yield based on a specified 30-day (or one month) period assuming a semiannual compounding of income. Included in net investment income is the amortization of market premium or accretion of market and original issue discount. Yield is calculated by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period, according to the following formula: YIELD = 2[(a-b/cd + 1)(6) - 1] (where a = dividends and interest earned during the period, b = expenses accrued for the period (net of reimbursements), c = the average daily number of shares outstanding during the period that were entitled to receive dividends, and d = the maximum offering price per share on the last day of the period). Quotations of cumulative total return, average annual total return or yield reflect only the performance of a hypothetical investment in an Index Series during the particular time period on which the calculations are based. Such quotations for an Index Series will vary based on changes in market conditions and the level of such Index Series' expenses, and no reported performance figure should be considered an indication of performance which may be expected in the future. The cumulative and average total returns and yields do not take into account federal or state income taxes which may be payable; total returns and yields would, of course, be lower if such charges were taken into account. COUNSEL AND INDEPENDENT ACCOUNTANTS Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, are counsel to the Fund and have passed upon the validity of the Fund shares. Ernst & Young, LLP, , serves as the independent accountants of the Fund. 62 REPORT OF INDEPENDENT ACCOUNTANTS [To be completed by amendment] 63 STATEMENT OF ASSETS AND LIABILITIES FOREIGN FUND, INC. STATEMENT OF ASSETS AND LIABILITIES , 1995
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY HONG KONG ITALY JAPAN INDEX INDEX INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Assets Cash................ Deferred organiza- tion expenses...... ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Total Assets.......... ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Liabilities Organization ex- penses payable..... ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Total Liabilities..... ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Net Assets............ ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Shares outstanding ($.001 par value).... ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Net Asset Value per share................ ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Composition of net as- sets Capital stock....... Paid-in capital..... ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- Net Assets, , 1995................. ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- ----------- ----------- ----------- ----------- --------- ----------- --------- --------- --------- MEXICO SINGAPORE UNITED MALAYSIA (FREE) (FREE) SPAIN SWEDEN KINGDOM INDEX INDEX NETHERLANDS INDEX INDEX INDEX SWITZERLAND INDEX SERIES SERIES INDEX SERIES SERIES SERIES SERIES INDEX SERIES SERIES ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Assets Cash................ Deferred organiza- tion expenses...... ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Total Assets.......... ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Liabilities Organization ex- penses payable..... ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Total Liabilities..... ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Net Assets............ ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Shares outstanding ($.001 par value).... ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Net Asset Value per share................ ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Composition of net as- sets Capital stock....... Paid-in capital..... ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- Net Assets, , 1995................. ----------- ----------- ------------- ----------- --------- ----------- ------------- ----------- ----------- ----------- ------------- ----------- --------- ----------- ------------- -----------
See Notes to financial statements. 64 FOREIGN FUND, INC. NOTES TO STATEMENT OF ASSETS AND LIABILITIES , 1996 1. GENERAL Foreign Fund, Inc. (the "Fund") was incorporated under the laws of the State of Maryland on September 1, 1994. The Fund is registered under the Investment Company Act of 1940 (the "Act") as a management investment company. The Fund currently has seventeen common stock series: the Australia Index Series; the Austria Index Series; the Belgium Index Series; the Canada Index Series; the France Index Series; the Germany Index Series; the Hong Kong Index Series; the Italy Index Series; the Japan Index Series; the Malaysia Index Series; the Mexico (Free) Index Series; the Netherlands Index Series; the Singapore (Free) Index Series; the Spain Index Series; the Sweden Index Series; the Switzerland Index Series; and the United Kingdom Index Series (each, an "Index Series"). Wells Fargo Nikko Investment Advisors serves as investment adviser (the "Adviser") to the Fund. Funds Distributor, Inc. is the Distributor of the WEBS. PFPC Inc. serves as Administrator to the Fund. The Index Series have had no operations other than the sale of the following Index Series shares to for the noted amounts: Australia Index Series ( shares for proceeds of $ ); Austria Index Series ( ) shares for proceeds of $ ); Belgium Index Series ( ) shares for proceeds of $ ); Canada Index Series ( ) shares for proceeds of $ ); France Index Series ( shares for proceeds of $ ); Germany Index Series ( shares for proceeds of $ ); Hong Kong Index Series ( shares for proceeds of $ ); Italy Index Series ( shares for proceeds of $ ); Japan Index Series ( shares for proceeds of $ ); Malaysia Index Series ( shares for proceeds of $ ); Mexico (Free) Index Series ( shares for proceeds of $ ); Netherlands Index Series ( shares for proceeds of $ ); Singapore (Free) Index Series ( shares for proceeds of $ ); Spain Index Series ( shares for proceeds of $ ); Sweden Index Series ( shares for proceeds of $ ); Switzerland Index Series ( shares for proceeds of $ ); and United Kingdom Index Series ( shares for proceeds of $ ). The costs of organizing the Fund and registering its shares will be paid initially by and reimbursed by the Fund. These costs in turn will be allocated to each Index Series by the Fund's Board based on the expected net assets of each Index Series. Such organization costs have been deferred and will be amortized ratably on the straightline method over a period of sixty months from the commencement of operations of the Index Series. If any of the shares initially issued to Funds Distributor, Inc. are redeemed before the end of the amortization period, the proceeds of the redemption will be reduced by the pro rata share of the unamortized organization costs. The pro rata share by which the proceeds are reduced is derived by dividing the number of original shares redeemed by the total number of original shares outstanding at the time of redemption. 2. AGREEMENTS The Fund has an Investment Management Agreement (the "Management Agreement") with the Adviser. As investment adviser, the Adviser manages the investments of each of the Index Series. For its services to each Index Series, the Adviser is entitled to receive fees equal to: .50% per annum of the aggregate net assets of the Index Series up to aggregate net assets of $10 million, plus .30% per annum of the aggregate net assets of the Index Series in excess of $10 million up to $25 million, plus .20% per annum of the aggregate net assets of the Index Series in excess of $25 million up to $50 million, plus .05% per annum of the aggregate net assets of the Index Series in excess of $50 million. The Fund has an Administration and Accounting Services Agreement with PFPC Inc. Under the Administration and Accounting Services Agreement, PFPC Inc. assists in supervising the operations 65 2. AGREEMENTS (CONTINUED) of the Index Series. For its administrative services and fund accounting services, PFPC Inc. will be paid aggregate fees equal to each Index Series' allocable portion of: .10% per annum of the aggregate net assets of the Fund less than $3 billion, plus .09% per annum of the aggregate net assets of the Fund $3 billion and $5 billion, plus .08% per annum of the aggregate net assets of the Fund between $5 billion and $7.5 billion, plus .065% per annum of the aggregate net assets of the Fund between $7.5 billion and $10 billion, plus .05% per annum of the aggregate net assets of the Fund in excess of $10 billion. For the first year of the Fund's operations, PFPC has agreed to waive a portion of its fees. During the first year of the Fund's operations, PFPC will charge the Fund an administrative and accounting service fee equal to $4,167 per month for each Index Series, plus .05% of aggregate average daily net assets of all Index Series in excess of $850 million per annum. However, if during the first three years of the Fund's operations the Fund removes PFPC as the administrator, the Fund will pay the cost of deconversion and PFPC will be entitled to recoup 100% of the fees waived during the first year. From time to time PFPC may waive all or a portion of the fees. Each Index Series of the Fund has a distribution plan, pursuant to Rule 12b-1 Plan under the 1940 Act ("Rule 12b-1 Plan"). Under the Rule 12b-1 Plan, the Distributor is paid an annual fee as compensation in connection with the offering and sale of shares of each Index Series. The fees to be paid to the Distributor under Rule 12b-1 Plan are calculated and paid monthly with respect to each Index Series at an annual rate to .25% of the average daily net assets of such Index Series. From time to time the Distributor may waive all or a portion of the fees. 3. CAPITAL SHARES The Fund is currently authorized to issue 6 billion shares of common stock. The Board has created seventeen Index Series of stock and allocated the following number of shares to each Index Series: Australia Index Series (127.8 million shares); Austria Index Series (19.8 million shares); Belgium Index Series (136.2 million shares); Canada Index Series (340.2 million shares); France Index Series (340.2 million shares); Germany Index Series (382.2 million shares); Hong Kong Index Series (191.4 million shares); Italy Index Series (63.6 million shares); Japan Index Series (2,124.6 million shares); Malaysia Index Series (127.8 million shares); Mexico (Free) Index Series (255 million shares); Netherlands Index Series (255 million shares); Singapore (Free) Index Series (191.4 million shares); Spain Index Series (127.8 million shares); Sweden Index Series (63.6 million shares); Switzerland Index Series (318.625 million shares); and United Kingdom Index Series (934.2 million shares). Shares of each Index Series are offered at net asset value without an initial sales load, in exchange for an in-kind deposit of a designated portfolio of securities specified by the Distributor each day, plus a specified amount of cash. Redemptions of the shares of the Index Series are made in portfolio securities, plus or minus a specified amount of cash, and minus a specified redemption transaction fee. 66 APPENDIX A-1 MSCI AUSTRALIA INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- BROKEN HILL PROP CO Energy 27,471.38 19.78 NEWS CORP Services 15,465.41 7.77 NEWS CORP PLVO Services 15,465.41 3.37 NATIONAL AUSTRALIA BANK Finance 13,769.99 9.92 WESTPAC BANKING Finance 9,074.35 6.54 WMC (WESTERN MINING CORP) Materials 6,822.58 4.91 CRA Materials 4,670.19 3.36 COCA-COLA AMATIL Consumer Goods 4,630.46 3.33 AMCOR Materials 4,619.52 3.33 LEND LEASE Finance 3,570.48 2.57 COLES MYER Services 3,454.47 2.49 FOSTERS BREWING GROUP Consumer Goods 3,284.42 2.37 CSR Multi-Industry 3,126.16 2.25 BORAL Materials 2,800.27 2.02 PACIFIC DUNLOP Multi-Industry 2,617.49 1.89 BRAMBLES INDUSTRIES Services 2,600.47 1.87 PIONEER INTERNATIONAL Materials 2,489.23 1.79 ICI AUSTRALIA Materials 2,357.09 1.70 MIM HOLDINGS Materials 1,985.96 1.43 NORTH Materials 1,923.28 1.39 WESTFIELD TRUST Finance 1,842.42 1.33 SANTOS Energy 1,576.66 1.14 SOUTHCORP HOLDINGS Multi-Industry 1,403.69 1.01 GENERAL PROPERTY TRUST Finance 1,297.64 0.93 GOODMAN FIELDER Consumer Goods 1,203.39 0.87 BURNS, PHILP & CO Services 1,126.91 0.81 GOLD MINES OF KALGOORLIE Gold 1,066.72 0.77 NEWCREST MINING Gold 1,043.38 0.75 RGC (RENISON GOLDFIELDS) Materials 1,010.88 0.73 SMITH (HOWARD) Multi-Industry 880.47 0.63 TUBEMAKERS OF AUSTRALIA Capital Equipment 874.77 0.63 QCT RESOURCES Energy 782.57 0.56 CALTEX AUSTRALIA Energy 750.71 0.54 STOCKLAND TRUST Finance 750.62 0.54 AMPOLEX Energy 704.88 0.51 EMAIL Consumer Goods 696.40 0.50 HARDIE (JAMES) IND Materials 692.69 0.50 TNT Services 679.93 0.49 SCHRODERS PROPERTY FUND Finance 658.32 0.47 AUSTRALIAN NATIONAL IND Multi-Industry 573.58 0.41 ROTHMANS (AUSTRALIA) Consumer Goods 522.00 0.38 SONS OF GWALIA Gold 448.80 0.32 ASHTON MINING Materials 427.60 0.31
A-1
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- ABERFOYLE Materials 253.68 0.18 OPSM PROTECTOR Consumer Goods 229.25 0.17 FAI INSURANCES Finance 171.02 0.12 EMPEROR MINES Gold 170.95 0.12 ADELAIDE BRIGHTON Materials 154.43 0.11 CRUSADER Energy 123.16 0.09
A-2 APPENDIX A-2 MSCI AUSTRIA INDEX AS OF JANUARY 31, 1996
INDEX MARKET WEIGHT IN CAPITALIZATION MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%) - ---------------------------------------- ----------------- ----------------- ---------- BANK AUSTRIA STAMM Finance 4,555.69 16.52 BANK AUSTRIA VORZUG Finance 4,555.69 1.45 BANK AUSTRIA PART Finance 4,555.69 1.11 CREDITANSTALT STAMM Finance 2,703.99 7.45 CREDITANSTALT VORZUG Finance 2,703.99 3.88 EA-GENERALI STAMM Finance 2,596.08 10.37 EA-GENERALI VORZUG Finance 2,596.08 0.50 OMV AG Energy 2,554.97 10.70 VERBUND (OSTERR ELEK) A Energy 1,985.55 8.32 VA TECHNOLOGIE Capital Equipment 1,967.13 8.24 WIENERBERGER BAUSTOFF Materials 1,567.58 6.57 FLUGHAFEN WIEN Services 1,368.96 5.74 BOEHLER-UDDEHOLM Materials 867.43 3.63 MAYR MELNHOF KARTON Materials 597.59 2.50 AUSTRIA MIKRO SYSTEME Capital Equipment 484.61 2.03 AUSTRIAN AIRLINES Services 484.61 2.03 RADEX-HERAKLITH INDUSTR. Materials 477.66 2.00 BBAG OESTERR BRAU STAMM Consumer Goods 449.38 1.88 BAU HOLDING STAMM Capital Equipment 335.06 1.09 BAU HOLDING VORZUG Capital Equipment 335.06 0.31 LENZING Materials 318.60 1.33 UNIVERSALE-BAU Capital Equipment 203.88 0.85 BWT STAMM Capital Equipment 186.10 0.78 STEYR-DAIMLER-PUCH Capital Equipment 164.41 0.69
A-3 APPENDIX A-3 MSCI BELGIUM INDEX AS OF JANUARY 31, 1996
INDEX MARKET WEIGHT IN CAPITALIZATION MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR (MILLIONS OF US$) (%) - ---------------------------------------- ----------------- ----------------- ---------- ELECTRABEL Energy 13,142.51 17.60 ELECTRABEL VVPR Energy 13,142.51 3.82 PETROFINA Energy 6,841.19 11.15 TRACTEBEL Multi-Industry 5,967.38 8.19 TRACTEBEL VVPR Multi-Industry 5,967.38 1.53 GENERALE BANQUE GROUPE Finance 5,585.50 9.10 SOLVAY Materials 4,635.32 7.55 FORTIS AG Finance 4,439.59 7.24 KREDIETBANK Finance 4,154.10 6.03 KREDIETBANK VVPR Finance 4,154.10 0.74 ROYALE BELGE Finance 3,359.75 4.54 ROYALE BELGE VVPR Finance 3,359.75 0.93 GROUPE BRUXELLES LAMBERT Multi-Industry 3,166.24 5.16 DELHAIZE-LE LION Services 2,157.26 3.52 BEKAERT Capital Equipment 1,998.69 3.26 UNION MINIERE Materials 1,816.00 2.96 CBR (CIMENTERIES) Materials 1,770.97 2.40 CBR (CIMENTERIES) VVPR Materials 1,770.97 0.49 GEVAERT Multi-Industry 1,618.07 2.64 GLAVERBEL (GROUPE) Materials 708.19 1.15
A-4 APPENDIX A-4 MSCI CANADA INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- SEAGRAM CO Consumer Goods 13,513.74 6.40 NORTHERN TELECOM Capital Equipment 11,402.84 5.40 BCE INC Services 11,297.27 5.35 BARRICK GOLD CORP Gold 10,439.35 4.94 THOMSON CORP Services 8,998.51 4.26 ROYAL BANK OF CANADA Finance 7,803.80 3.69 ALCAN ALUMINIUM Materials 7,158.38 3.39 IMPERIAL OIL Energy 6,872.48 3.25 PLACER DOME Gold 6,711.24 3.18 CANADIAN PACIFIC LTD Multi-Industry 6,684.59 3.17 CANADIAN IMPERIAL BANK Finance 6,572.33 3.11 BANK MONTREAL Finance 6,378.49 3.02 BANK NOVA SCOTIA Finance 5,317.11 2.52 BOMBARDIER B Capital Equipment 4,853.30 1.68 BOMBARDIER A Capital Equipment 4,853.30 0.62 NORANDA INC Materials 4,825.04 2.28 IMASCO Multi-Industry 4,583.67 2.17 NOVA CORP Energy 4,271.77 2.02 NEWBRIDGE NETWORKS CORP Capital Equipment 4,148.80 1.96 INCO Materials 4,107.55 1.94 POTASH CORP SASKATCHEWAN Materials 3,236.03 1.53 LAIDLAW B Services 3,065.18 1.22 LAIDLAW A Services 3,065.18 0.23 TRANSCANADA PIPELINES Energy 2,902.18 1.37 RENAISSANCE ENERGY Energy 2,629.89 1.25 CAMECO CORP Materials 2,591.72 1.23 MAGNA INTERNATIONAL A Capital Equipment 2,550.60 1.21 CANADIAN OCCIDENTAL Energy 2,149.99 1.02 TALISMAN ENERGY Energy 2,028.85 0.96 MOORE CORP Services 1,968.93 0.93 SUNCOR Energy 1,966.20 0.93 ROGERS COMMUNICATIONS B Services 1,895.95 0.90 TECK CORP B Materials 1,884.03 0.89 DUPONT CANADA Materials 1,752.26 0.83 POWER CORP OF CANADA Finance 1,745.23 0.83 COMINCO Materials 1,720.35 0.81 TRANSALTA CORP Energy 1,717.55 0.81 TELUS CORP Services 1,717.43 0.81 ECHO BAY MINES Gold 1,665.21 0.79 WESTON (GEORGE) Services 1,663.74 0.79 ALBERTA ENERGY CO Energy 1,647.34 0.78 MACMILLAN BLOEDEL Materials 1,637.88 0.78 BRASCAN A Multi-Industry 1,616.06 0.77 IPL ENERGY Energy 1,471.31 0.70 WESTCOAST ENERGY Energy 1,358.64 0.64 LOEWEN GROUP Services 1,345.17 0.64
A-5
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- NATIONAL BANK OF CANADA Finance 1,330.67 0.63 AVENOR Materials 1,243.98 0.59 DOFASCO Materials 1,220.65 0.58 NORCEN ENERGY RESOURCES Energy 1,213.48 0.57 ANDERSON EXPLORATION Energy 1,150.24 0.54 CANADIAN NAT RESOURCES Energy 1,109.26 0.53 QUEBECOR B Services 1,097.84 0.52 MOLSON COS A Consumer Goods 1,008.38 0.36 MOLSON COS B Consumer Goods 1,008.38 0.12 GULF CANADA RESOURCES Energy 955.42 0.45 RIO ALGOM Materials 950.75 0.45 DOMTAR Materials 949.67 0.45 CANADIAN TIRE A Services 947.67 0.45 SHERRITT Materials 874.72 0.41 EXTENDICARE COMMON Multi-Industry 832.93 0.39 CAE Capital Equipment 823.16 0.39 SOUTHAM Services 814.04 0.39 CAMBIOR Gold 708.42 0.34 PEGASUS GOLD Gold 650.24 0.31 OSHAWA GROUP A Services 635.16 0.30 RANGER OIL Energy 627.07 0.30 AGNICO-EAGLE MINES Gold 599.63 0.28 COREL CORP Services 555.36 0.26 AIR CANADA COMMON Services 552.26 0.26 REPAP ENTERPRISES Materials 531.73 0.25 CO-STEEL Materials 527.72 0.25 PROVIGO Services 496.07 0.23 STELCO A Materials 458.20 0.22 NUMAC ENERGY Energy 407.28 0.19 COTT CORP Consumer Goods 406.84 0.19 SCOTT'S HOSPITALITY SV Services 358.10 0.17 INT'L FOREST PRODUCTS A Materials 295.95 0.14 CCL INDUSTRIES B Materials 282.30 0.13 DOMINION TEXTILE Consumer Goods 212.42 0.10 SPAR AEROSPACE Capital Equipment 207.36 0.10 NOMA INDUSTRIES A Consumer Goods 139.70 0.07 TELE-METROPOLE B Services 114.75 0.05 INTER-CITY PRODUCTS CORP Capital Equipment 42.35 0.02
A-6 APPENDIX A-5 MSCI FRANCE INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION (MILLIONS OF WEIGHT IN CONSTITUENT NAME INDUSTRY SECTOR US$) MSCI INDEX (%) - ----------------------------------------- ---------------------- ---------------- --------------- ELF AQUITAINE Energy 20,316.87 5.95 LVMH Consumer Goods 19,454.55 5.70 L'OREAL Consumer Goods 17,423.40 5.10 CARREFOUR Services 16,495.72 4.83 TOTAL SA Energy 16,092.82 4.71 ALCATEL ALSTHOM Capital Equipment 13,746.86 4.02 GENERALE EAUX (CIE) Services 12,559.65 3.68 AIR LIQUIDE Materials 11,964.06 3.50 AXA Finance 11,772.12 3.45 DANONE (GROUPE) Consumer Goods 11,306.19 3.31 SAINT-GOBAIN Materials 10,451.29 3.06 SOCIETE GENERALE Finance 10,246.72 3.00 BNP ORD Finance 8,123.44 2.38 RHONE-POULENC ORD A Materials 7,479.81 2.19 PEUGEOT SA Consumer Goods 7,316.60 2.14 UAP (COMPAGNIE) Finance 7,199.60 2.11 SANOFI Consumer Goods 6,811.46 1.99 PARIBAS(CIE FINANCIERE)A Finance 6,324.95 1.85 LAFARGE (FRANCE) Materials 6,194.35 1.81 SUEZ (COMPAGNIE DE) Finance 6,146.83 1.80 LYONNAISE DES EAUX Multi-Industry 5,438.76 1.59 HAVAS Services 5,218.52 1.53 SCHNEIDER Capital Equipment 5,208.26 1.52 PINAULT-PRINT.-REDOUTE Services 5,136.44 1.50 LEGRAND Capital Equipment 4,955.85 1.45 PROMODES Services 4,801.83 1.41 MICHELIN B Capital Equipment 4,595.71 1.35 ERIDANIA BEGHIN-SAY Consumer Goods 4,542.75 1.33 CANAL + Services 4,456.20 1.30 ACCOR Services 3,775.98 1.11 USINOR SACILOR Materials 3,566.55 1.04 VALEO Capital Equipment 3,510.88 1.03 PERNOD RICARD Consumer Goods 3,438.78 1.01 BIC Consumer Goods 3,085.38 0.90 THOMSON-CSF Capital Equipment 2,953.59 0.86 COMPAGNIE BANCAIRE Finance 2,778.01 0.81 CASINO ORD Services 2,372.06 0.57 CASINO ADP Services 2,372.06 0.12 SAINT LOUIS Multi-Industry 2,334.63 0.68 BOUYGUES Capital Equipment 2,330.86 0.68 SODEXHO Services 2,268.26 0.66 DOCKS DE FRANCE Services 2,215.91 0.65 SAGEM Capital Equipment 2,128.76 0.62 SIDEL Capital Equipment 2,069.10 0.61 SEITA Consumer Goods 1,990.97 0.58 IMETAL Materials 1,978.94 0.58
A-7
INDEX MARKET CAPITALIZATION (MILLIONS OF WEIGHT IN CONSTITUENT NAME INDUSTRY SECTOR US$) MSCI INDEX (%) - ----------------------------------------- ---------------------- ---------------- --------------- LAGARDERE GROUPE Multi-Industry 1,956.22 0.57 ESSILOR INTERNATIONAL Consumer Goods 1,945.94 0.57 COMPTOIRS MODERNES Services 1,770.63 0.52 PRIMAGAZ Energy 1,765.96 0.52 CHARGEURS Multi-Industry 1,764.19 0.52 ECCO Services 1,743.97 0.51 SIMCO Finance 1,347.89 0.39 EURAFRANCE Finance 1,308.08 0.38 TECHNIP Capital Equipment 1,222.90 0.36 CLUB MEDITERRANEE Services 1,210.75 0.35 BONGRAIN Consumer Goods 1,103.60 0.32 SEFIMEG Finance 1,036.73 0.30 GTM-ENTREPOSE Capital Equipment 1,001.31 0.29 CREDIT NATIONAL Finance 998.40 0.29 UNIBAIL Finance 938.79 0.27 SALOMON SA Consumer Goods 878.44 0.26 CPR(CIE PARIS.REESCOMPTE Finance 805.08 0.24 UNION IMMOBILIERE FRANCE Finance 734.79 0.22 SOMMER-ALLIBERT Materials 644.33 0.19 CREDIT FONCIER DE FRANCE Finance 516.80 0.15 MOULINEX Consumer Goods 478.71 0.14 EUROPE 1 Services 374.58 0.11 NORD-EST Materials 356.87 0.10 SKIS ROSSIGNOL Consumer Goods 332.53 0.10 DMC DOLLFUS MIEG & CIE Consumer Goods 294.69 0.09 FINEXTEL Finance 165.00 0.05 GENERALE GEOPHYSIQUE Capital Equipment 140.93 0.04 RADIOTECHNIQUE Consumer Goods 133.37 0.04
A-8 APPENDIX A-6 MSCI GERMANY INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ---------------------------------------- ---------------------- ---------------- ------------- ALLIANZ HOLDING AKTIE Finance 43,422.58 11.51 SIEMENS STAMM Capital Equipment 31,816.37 8.44 DAIMLER-BENZ Consumer Goods 28,324.70 7.51 DEUTSCHE BANK Finance 24,919.16 6.61 VEBA Energy 21,623.95 5.73 BAYER Materials 20,671.00 5.48 RWE STAMM Energy 19,185.70 3.51 RWE VORZUG Energy 19,185.70 1.57 MUENCHENER RUECK NAM Finance 17,926.69 4.60 MUENCHENER RUECK INH Finance 17,926.69 0.15 SAP STAMM Services 15,569.85 2.49 SAP VORZUG Services 15,569.85 1.64 BASF Materials 14,544.88 3.86 MANNESMANN Capital Equipment 12,748.33 3.38 VOLKSWAGEN STAMM Consumer Goods 11,906.56 2.69 VOLKSWAGEN VORZUG Consumer Goods 11,906.56 0.47 DRESDNER BANK Finance 11,894.43 3.15 VIAG Multi-Industry 8,859.34 2.35 BAYER VEREINSBANK STAMM Finance 7,962.68 2.11 BAYER HYPOTHEKEN BANK Finance 6,763.87 1.79 MERCK KGAA Consumer Goods 6,720.44 1.78 THYSSEN Materials 6,037.64 1.60 LUFTHANSA STAMM Services 5,673.84 1.41 LUFTHANSA VORZUG Services 5,673.84 0.10 LINDE Capital Equipment 5,080.97 1.35 SCHERING Consumer Goods 4,947.03 1.31 PREUSSAG Multi-Industry 4,514.64 1.20 MAN STAMM Capital Equipment 4,253.14 0.86 MAN VORZUG Capital Equipment 4,253.14 0.26 AACHEN & MUNCH BET NAMEN Finance 3,621.66 0.81 AACHEN & MUNCH BET INH Finance 3,621.66 0.15 KARSTADT Services 3,339.45 0.89 BEIERSDORF Consumer Goods 3,215.07 0.85 KAUFHOF HOLDING STAMM Services 3,170.63 0.70 KAUFHOF HOLDING VORZUG Services 3,170.63 0.14 DEGUSSA Materials 3,139.46 0.83 HOCHTIEF Capital Equipment 3,133.38 0.83 HEIDELBERGER ZEMENT STAM Materials 2,794.64 0.74 ADIDAS Consumer Goods 2,590.77 0.69 ASKO DT KAUFHAUS STAMM Services 2,448.50 0.62 ASKO DT KAUFHAUS VORZUG Services 2,448.50 0.03 CKAG COLONIA KONZ STAMM Finance 2,431.90 0.56 CKAG COLONIA KONZ VORZUG Finance 2,431.90 0.08
A-9
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ---------------------------------------- ---------------------- ---------------- ------------- CONTINENTAL GUMMI-WERKE Capital Equipment 1,546.73 0.41 BILFINGER + BERGER Capital Equipment 1,427.56 0.38 PWA PAPIERWERKE WALDHOF Materials 1,024.82 0.27 DOUGLAS HOLDING Services 996.25 0.26 DYCKERHOFF STAMM Materials 823.91 0.14 DYCKERHOFF VORZUG Materials 823.91 0.08 AGIV AG IND & VERKEHR Multi-Industry 760.83 0.20 BRAU & BRUNNEN Consumer Goods 654.73 0.17 FAG KUGELFISCHER STAMM Capital Equipment 650.39 0.13 FAG KUGELFISCHER VORZUG Capital Equipment 650.39 0.04 HERLITZ STAMM Services 553.95 0.08 HERLITZ VORZUG Services 553.95 0.07 IWKA Capital Equipment 421.55 0.11 STRABAG STAMM Capital Equipment 401.57 0.10 STRABAG VORZUG Capital Equipment 401.57 0.01 KLOECKNER-HUMBOLDT-DEUT Capital Equipment 390.73 0.10 RHEINMETALL STAMM Capital Equipment 384.71 0.07 RHEINMETALL VORZUG Capital Equipment 384.71 0.03 ESCADA STAMM Consumer Goods 304.57 0.04 ESCADA VORZUG Consumer Goods 304.57 0.04 SALAMANDER Consumer Goods 303.24 0.08 BREMER VULKAN VERBUND Capital Equipment 297.16 0.08 LINOTYPE-HELL Capital Equipment 273.41 0.07 HOLSTEN-BRAUEREI Consumer Goods 249.15 0.07 DIDIER-WERKE Capital Equipment 209.91 0.06 DLW Materials 200.91 0.05
A-10 APPENDIX A-7 MSCI HONG KONG INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------------------- ---------------------- ---------------- ------------- HUTCHISON WHAMPOA Multi-Industry 23,492.05 12.78 SUN HUNG KAI PROPERTIES Finance 22,714.85 12.36 HONGKONG TELECOM Services 21,203.56 11.54 HANG SENG BANK Finance 18,673.01 10.16 CHEUNG KONG Finance 16,342.41 8.89 SWIRE PACIFIC A Multi-Industry 13,840.04 7.53 CHINA LIGHT & POWER CO Energy 9,654.63 5.25 WHARF HOLDINGS Finance 8,557.20 4.66 NEW WORLD DEVELOPMENT Finance 8,474.30 4.61 CATHAY PACIFIC AIRWAYS Services 5,316.31 2.89 HONGKONG CHINA GAS Energy 4,472.33 2.43 BANK EAST ASIA Finance 3,836.36 2.09 HYSAN DEVELOPMENT Finance 3,088.31 1.68 HOPEWELL HOLDINGS Finance 2,940.58 1.60 HANG LUNG DEVELOPMENT CO Finance 2,650.16 1.44 SHANGRI-LA ASIA Services 2,012.52 1.09 HONGKONG SHANGHAI HOTEL Services 1,737.23 0.95 CHINESE ESTATES HOLDINGS Finance 1,510.59 0.82 TELEVISION BROADCASTS Services 1,510.10 0.82 MIRAMAR HOTEL & INVEST. Finance 1,254.20 0.68 SHUN TAK HOLDINGS Services 1,097.96 0.60 PEREGRINE INVESTMENTS Finance 1,071.89 0.58 SOUTH CHINA MORNING POST Services 1,057.29 0.58 WING LUNG BANK Finance 1,038.53 0.57 JOHNSON ELECTRIC HLDGS Capital Equipment 818.41 0.45 REGAL HOTELS INT'L Services 816.27 0.44 DICKSON CONCEPTS INT'L Services 716.19 0.39 GIORDANO INTERNATIONAL Services 680.75 0.37 ORIENTAL PRESS GROUP Services 634.31 0.35 HONGKONG AIRCRAFT HAECO Capital Equipment 577.23 0.31 TAI CHEUNG HOLDINGS Finance 551.08 0.30 KUMAGAI GUMI (HK) Capital Equipment 328.06 0.18 LAI SUN GARMENT INT'L Consumer Goods 274.85 0.15 WINSOR INDUSTRIAL CORP Consumer Goods 253.57 0.14 STELUX HOLDINGS INT'L Multi-Industry 225.19 0.12 ELEC & ELTEK INT'L HLDGS Capital Equipment 196.56 0.11 PLAYMATES TOYS HOLDINGS Consumer Goods 115.44 0.06 APPLIED INT'L HOLDINGS Capital Equipment 68.22 0.04
A-11 APPENDIX A-8 MSCI ITALY INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------- ---------------------- ---------------- ------------- ASSICURAZIONI GENERALI Finance 20,059.23 16.31 FIAT ORD Consumer Goods 14,176.41 8.94 FIAT PRIV Consumer Goods 14,176.41 1.49 FIAT RNC Consumer Goods 14,176.41 1.10 TELECOM ITALIA MOB. ORD Services 13,710.14 9.72 TELECOM ITALIA MOB. RNC Services 13,710.14 1.43 TELECOM ITALIA ORD Services 13,293.59 9.07 TELECOM ITALIA RNC Services 13,293.59 1.74 INA Finance 5,716.44 4.65 SAN PAOLO DI TORINO ORD Finance 5,016.48 4.08 RAS ORD Finance 4,310.65 2.95 RAS RNC Finance 4,310.65 0.55 IMI ISTITUTO MOBILIARE Finance 4,088.96 3.33 BANCA COMMERCIALE ORD Finance 4,068.05 3.31 MONTEDISON ORD Multi-Industry 3,735.08 2.73 MONTEDISON RNC Multi-Industry 3,735.08 0.30 MEDIOBANCA Finance 3,329.91 2.71 EDISON ORD Energy 3,147.98 2.56 CREDITO ITALIANO ORD Finance 2,774.60 2.26 OLIVETTI ORD Capital Equipment 2,262.27 1.84 ITALGAS Energy 2,183.02 1.78 PIRELLI SPA ORD Capital Equipment 2,073.81 1.61 PIRELLI SPA RNC Capital Equipment 2,073.81 0.07 BENETTON Consumer Goods 2,040.33 1.66 BANCO AMBROSIANO VEN ORD Finance 1,791.86 1.19 BANCO AMBROSIANO VEN RNC Finance 1,791.86 0.27 SAI ORD Finance 1,600.12 1.09 SAI RNC Finance 1,600.12 0.21 ITALCEMENTI ORD Materials 1,359.24 0.88 ITALCEMENTI RNC Materials 1,359.24 0.22 SIRTI Capital Equipment 1,320.41 1.07 RINASCENTE ORD Services 1,255.48 0.82 RINASCENTE RNC Services 1,255.48 0.12 RINASCENTE PRIV Services 1,255.48 0.08 PARMALAT FINANZIARIA Consumer Goods 1,096.85 0.89 MONDADORI ORD Services 1,059.60 0.86 SAIPEM ORD Capital Equipment 997.74 0.81 BANCA POPOLARE MILANO Finance 910.52 0.74 FIDIS FIN. DI SVILUPPO Multi-Industry 843.16 0.69 SNIA BPD ORD Multi-Industry 653.51 0.49 SNIA BPD RNC Multi-Industry 653.51 0.04 MAGNETI MARELLI ORD Capital Equipment 642.07 0.52 CARTIERE BURGO ORD Materials 639.35 0.52 SASIB ORD Capital Equipment 503.75 0.29 SASIB RNC Capital Equipment 503.75 0.12
A-12
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------- ---------------------- ---------------- ------------- LANE G.MARZOTTO ORD Consumer Goods 456.12 0.29 LANE G.MARZOTTO RISP Consumer Goods 456.12 0.08 IMPREGILO ORD Capital Equipment 424.06 0.34 PREVIDENTE (LA) Finance 374.63 0.30 DANIELI ORD Capital Equipment 351.23 0.19 DANIELI RNC Capital Equipment 351.23 0.09 CEMENTIR Materials 205.09 0.17 FALCK ORD Materials 200.03 0.16 FRANCO TOSI Multi-Industry 165.69 0.13 SAFFA A ORD Materials 131.00 0.11
A-13 APPENDIX A-9 MSCI JAPAN INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION (MILLIONS OF WEIGHT IN MSCI CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%) - ----------------------------------------- ---------------------- ---------------- --------------- TOYOTA MOTOR CORP Consumer Goods 80,472.42 3.79 FUJI BANK Finance 65,850.97 3.10 INDUSTRIAL BANK OF JAPAN Finance 65,321.44 3.08 SUMITOMO BANK Finance 60,227.07 2.84 DAI-ICHI KANGYO BANK Finance 58,669.16 2.76 NOMURA SECURITIES CO Finance 42,595.58 2.01 SAKURA BANK Finance 39,953.55 1.88 MATSUSHITA ELECT IND'L Consumer Goods 34,916.79 1.64 TOKYO ELECTRIC POWER CO Energy 34,417.97 1.62 HITACHI Capital Equipment 33,655.63 1.58 BANK TOKYO Finance 33,012.17 1.55 ASAHI BANK Finance 27,798.51 1.31 TOKAI BANK Finance 27,707.17 1.30 MITSUBISHI HEAVY IND Capital Equipment 26,759.08 1.26 SEVEN-ELEVEN JAPAN CO Services 26,167.99 1.23 NIPPON STEEL CORP Materials 23,714.95 1.12 ITO-YOKADO CO Services 23,642.57 1.11 KANSAI ELECTRIC POWER CO Energy 22,975.07 1.08 SONY CORP Consumer Goods 22,909.71 1.08 HONDA MOTOR CO Consumer Goods 21,321.43 1.00 MITSUBISHI TRUST Finance 20,220.00 0.95 DAIWA SECURITIES CO Finance 20,118.76 0.95 NISSAN MOTOR CO Consumer Goods 19,859.25 0.93 FUJITSU Capital Equipment 19,804.49 0.93 TOKIO MARINE & FIRE Finance 19,409.16 0.91 MITSUBISHI CORP Services 19,346.48 0.91 NEC CORP Capital Equipment 18,799.73 0.89 SHARP CORP Consumer Goods 17,210.79 0.81 NIPPONDENSO CO Capital Equipment 16,832.02 0.79 CANON INC Capital Equipment 15,799.55 0.74 MITSUBISHI ESTATE CO Finance 15,797.04 0.74 MITSUBISHI ELECTRIC CORP Capital Equipment 15,562.78 0.73 FUJI PHOTO FILM CO Consumer Goods 14,536.48 0.68 TAKEDA CHEMICAL IND Consumer Goods 13,842.43 0.65 ASAHI GLASS CO Materials 13,520.37 0.64 MITSUI & CO Services 13,494.89 0.64 KYOCERA CORP Capital Equipment 13,271.83 0.62 MITSUI TRUST & BANK CO Finance 13,001.20 0.61 DAI NIPPON PRINTING CO Services 12,838.79 0.60 KIRIN BREWERY CO Consumer Goods 12,797.32 0.60 BRIDGESTONE CORP Capital Equipment 12,248.09 0.58 TOHOKU ELECTRIC POWER CO Energy 12,041.14 0.57 KINKI NIPPON RAILWAY CO Services 11,916.21 0.56 JAPAN AIRLINES CO Services 11,880.14 0.56 KAWASAKI STEEL CORP Materials 11,526.35 0.54 SANYO ELECTRIC CO Consumer Goods 11,496.07 0.54 MITSUBISHI CHEMICAL CORP Materials 11,270.52 0.53
A-14
INDEX MARKET CAPITALIZATION (MILLIONS OF WEIGHT IN MSCI CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%) - ----------------------------------------- ---------------------- ---------------- --------------- SUMITOMO CORP Services 11,050.82 0.52 SANKYO CO Consumer Goods 10,606.88 0.50 ASAHI CHEMICAL IND CO Materials 10,484.14 0.49 FANUC Capital Equipment 10,453.83 0.49 SUMITOMO METAL IND Materials 10,267.46 0.48 KAJIMA CORP Capital Equipment 10,160.24 0.48 NKK CORP Materials 10,051.84 0.47 NIPPON EXPRESS CO Services 10,048.16 0.47 TOKYO GAS CO Energy 9,961.04 0.47 SHIZUOKA BANK Finance 9,783.30 0.46 MITSUI FUDOSAN CO Finance 9,650.19 0.45 ITOCHU CORP Services 9,518.77 0.45 TOPPAN PRINTING CO Services 9,352.97 0.44 YAMAICHI SECURITIES CO Finance 9,326.51 0.44 TORAY INDUSTRIES Materials 9,123.42 0.43 OSAKA GAS CO Energy 9,032.95 0.43 KUBOTA CORP Capital Equipment 8,952.49 0.42 KOBE STEEL Materials 8,884.36 0.42 SUMITOMO ELECTRIC IND Capital Equipment 8,843.63 0.42 SEKISUI HOUSE Capital Equipment 8,809.91 0.41 BANK YOKOHAMA Finance 8,715.86 0.41 DAIEI Services 8,477.71 0.40 KOMATSU Capital Equipment 8,469.69 0.40 SHIMIZU CORP Capital Equipment 8,333.45 0.39 MURATA MANUFACTURING CO Capital Equipment 8,283.31 0.39 JUSCO CO Services 7,936.97 0.37 MARUBENI CORP Services 7,891.55 0.37 SUMITOMO CHEMICAL CO Materials 7,887.32 0.37 DAIWA HOUSE IND CO Capital Equipment 7,654.67 0.36 AJINOMOTO CO Consumer Goods 7,586.75 0.36 KAO CORP Consumer Goods 7,583.76 0.36 TOKYU CORP Services 7,447.89 0.35 SEKISUI CHEMICAL CO Materials 7,433.72 0.35 SECOM CO Services 7,432.22 0.35 NIPPON OIL CO Energy 7,235.81 0.34 TOSTEM CORP Materials 7,201.62 0.34 MARUI CO Services 7,200.20 0.34 YAMANOUCHI PHARM. Consumer Goods 7,076.73 0.33 RICOH CO Capital Equipment 6,949.77 0.33 TAISEI CORP Capital Equipment 6,905.11 0.33 NEW OJI PAPER CO Materials 6,789.21 0.32 NIPPON PAPER IND CO Materials 6,742.39 0.32 TAISHO PHARMACEUTICAL CO Consumer Goods 6,635.67 0.31 CHIBA BANK Finance 6,591.76 0.31 NIPPON YUSEN K.K Services 6,578.35 0.31 SHIN-ETSU CHEMICAL CO Materials 6,559.32 0.31 YASUDA TRUST & BANK CO Finance 6,397.91 0.30 TOYO SEIKAN KAISHA Materials 6,396.02 0.30 JOYO BANK Finance 6,362.70 0.30 ROHM CO Capital Equipment 6,227.70 0.29
A-15
INDEX MARKET CAPITALIZATION (MILLIONS OF WEIGHT IN MSCI CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%) - ----------------------------------------- ---------------------- ---------------- --------------- MITSUBISHI MATERIALS Materials 6,099.21 0.29 OBAYASHI CORP Capital Equipment 6,049.64 0.28 OMRON CORP Capital Equipment 5,785.49 0.27 SUMITOMO MARINE & FIRE Finance 5,624.91 0.26 TOKYO ELECTRON Capital Equipment 5,544.93 0.26 MITSUI MARINE & FIRE Finance 5,353.17 0.25 TOYODA AUTOMATIC LOOM Capital Equipment 5,276.77 0.25 GUNMA BANK Finance 5,266.28 0.25 SUMITOMO METAL MINING CO Materials 5,257.03 0.25 SEGA ENTREPRISES Consumer Goods 5,195.66 0.24 TOBU RAILWAY CO Services 5,180.22 0.24 TEIJIN Materials 5,122.28 0.24 ASAHI BREWERIES Consumer Goods 4,886.73 0.23 HANKYU CORP Services 4,808.94 0.23 ODAKYU ELECTRIC RAILWAY Services 4,782.22 0.23 TOTO Materials 4,676.16 0.22 EISAI CO Consumer Goods 4,643.16 0.22 TAKASHIMAYA CO Services 4,361.74 0.21 SHISEIDO CO Consumer Goods 4,342.23 0.20 MITSUKOSHI Services 4,301.10 0.20 YAMATO TRANSPORT CO Services 4,190.87 0.20 KINDEN CORP Capital Equipment 4,183.39 0.20 KYOWA HAKKO KOGYO CO Consumer Goods 4,149.70 0.20 EBARA CORP Capital Equipment 4,138.59 0.19 NSK Capital Equipment 4,104.02 0.19 NAGOYA RAILROAD CO Services 4,036.73 0.19 HOKURIKU BANK Finance 4,010.81 0.19 YAMAZAKI BAKING CO Consumer Goods 3,976.47 0.19 DAIICHI PHARMACEUTICAL Consumer Goods 3,942.53 0.19 MITSUBISHI OIL CO Energy 3,874.39 0.18 HOYA CORP Consumer Goods 3,801.47 0.18 DAINIPPON INK Materials 3,774.70 0.18 ASHIKAGA BANK Finance 3,735.10 0.18 NICHII CO Services 3,689.47 0.17 NIPPON FIRE & MARINE Finance 3,666.12 0.17 PIONEER ELECTRONIC CORP Consumer Goods 3,661.48 0.17 MITSUI OSK LINES Services 3,644.39 0.17 ADVANTEST CORP Capital Equipment 3,643.81 0.17 NGK INSULATORS Capital Equipment 3,590.73 0.17 YAMAHA CORP Consumer Goods 3,485.33 0.16 SEVENTY-SEVEN BANK Finance 3,482.24 0.16 JAPAN ENERGY CORP Energy 3,468.57 0.16 NIPPON MEAT PACKERS Consumer Goods 3,387.53 0.16 MINEBEA CO Capital Equipment 3,379.14 0.16 YAMAGUCHI BANK Finance 3,367.16 0.16 NICHIDO FIRE & MARINE Finance 3,365.95 0.16 SHOWA DENKO K.K Materials 3,349.60 0.16 CHICHIBU ONODA CEMENT Materials 3,319.15 0.16 KURARAY CO Materials 3,289.73 0.15 UBE INDUSTRIES Materials 3,275.72 0.15
A-16
INDEX MARKET CAPITALIZATION (MILLIONS OF WEIGHT IN MSCI CONSTITUENT NAME INDUSTRY SECTOR US$) INDEX (%) - ----------------------------------------- ---------------------- ---------------- --------------- NIPPON LIGHT METAL CO Materials 3,273.71 0.15 KOKUYO CO Services 3,264.09 0.15 COSMO OIL CO Energy 3,231.94 0.15 FURUKAWA ELECTRIC CO Capital Equipment 3,228.52 0.15 NISSIN FOOD PRODUCTS CO Consumer Goods 3,222.34 0.15 NISHIMATSU CONSTRUCTION Capital Equipment 3,204.03 0.15 MITSUI TOATSU CHEMICALS Materials 3,164.79 0.15 KURITA WATER INDUSTRIES Capital Equipment 3,127.85 0.15 NTN CORP Capital Equipment 3,105.37 0.15 SAPPORO BREWERIES Consumer Goods 3,103.49 0.15 NANKAI ELECTRIC RAILWAY Services 3,102.19 0.15 AMADA CO Capital Equipment 3,092.03 0.15 BANYU PHARMACEUTICAL CO Consumer Goods 3,086.47 0.15 KEIHIN ELECTRIC EXPRESS Services 3,004.95 0.14 SHIONOGI & CO Consumer Goods 2,998.52 0.14 CREDIT SAISON CO Finance 2,994.02 0.14 TOKYO DOME CORP Services 2,991.20 0.14 ISETAN CO Services 2,905.93 0.14 TBS TOKYO BROADCASTING Services 2,878.34 0.14 SUMITOMO FORESTRY CO Materials 2,854.03 0.13 SEIYU Services 2,846.90 0.13 MITSUBISHI WAREHOUSE Services 2,801.22 0.13 TOHO CO Services 2,772.22 0.13 KUMAGAI GUMI CO Capital Equipment 2,744.17 0.13 CASIO COMPUTER CO Consumer Goods 2,737.00 0.13 ORIX CORP Finance 2,730.35 0.13 TOSOH CORP Materials 2,691.10 0.13 OLYMPUS OPTICAL CO Consumer Goods 2,669.09 0.13 SHIMANO Consumer Goods 2,653.49 0.12 MAKITA CORP Capital Equipment 2,635.34 0.12 HANKYU DEPARTMENT STORES Services 2,627.04 0.12 TAKARA SHUZO CO Consumer Goods 2,626.79 0.12 KONICA CORP Consumer Goods 2,599.24 0.12 CITIZEN WATCH CO Consumer Goods 2,580.71 0.12 PENTA-OCEAN CONSTRUCTION Capital Equipment 2,573.53 0.12 FUJITA KANKO Services 2,569.02 0.12 DAIKIN INDUSTRIES Capital Equipment 2,566.20 0.12 NGK SPARK PLUG CO Capital Equipment 2,558.15 0.12 KAMIGUMI CO Services 2,554.57 0.12 TOYOBO CO Consumer Goods 2,539.99 0.12 SEINO TRANSPORTATION CO Services 2,526.39 0.12 YOKOGAWA ELECTRIC CORP Capital Equipment 2,449.60 0.12 ONWARD KASHIYAMA CO Consumer Goods 2,415.54 0.11 KANDENKO CO Capital Equipment 2,373.94 0.11 CHUGAI PHARMACEUTICAL CO Consumer Goods 2,351.29 0.11 MEIJI SEIKA KAISHA Consumer Goods 2,331.16 0.11 FUJITA CORP Capital Equipment 2,330.62 0.11
A-17
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------------------- ---------------------- ---------------- ------------- NIPPON SHINPAN CO Finance 2,310.72 0.11 MITSUI ENGINEERING & SHIP. Capital Equipment 2,285.09 0.11 MITSUBISHI GAS CHEMICAL Materials 2,280.22 0.11 SNOW BRAND MILK PRODUCTS Consumer Goods 2,273.54 0.11 KANEKA CORP Materials 2,271.69 0.11 OKUMURA CORP Capital Equipment 2,270.43 0.11 INAX CORP Materials 2,267.27 0.11 HONSHU PAPER CO Materials 2,249.69 0.11 ARABIAN OIL CO Energy 2,231.54 0.11 FUJIKURA Capital Equipment 2,230.75 0.11 NIHON CEMENT CO Materials 2,221.03 0.10 SUMITOMO HEAVY IND Capital Equipment 2,219.00 0.10 NISSHINBO INDUSTRIES Consumer Goods 2,211.47 0.10 NITTO DENKO CORP Materials 2,196.83 0.10 SUMITOMO OSAKA CEMENT CO Materials 2,193.70 0.10 MORI SEIKI CO Capital Equipment 2,182.48 0.10 HIROSE ELECTRIC CO Capital Equipment 2,144.50 0.10 AOYAMA TRADING CO Services 2,143.49 0.10 DAIDO STEEL CO Materials 2,137.43 0.10 CHIYODA CORP Capital Equipment 2,136.39 0.10 DAIMARU Services 2,127.83 0.10 NIPPON SHOKUBAI CO Materials 2,099.28 0.10 DAICEL CHEMICAL IND Materials 2,098.61 0.10 MITSUI MINING & SMELTING Materials 2,097.34 0.10 NIPPON SHEET GLASS CO Materials 2,096.30 0.10 KOMORI CORP Capital Equipment 2,088.84 0.10 NICHIREI CORP Consumer Goods 2,061.35 0.10 KAWASAKI KISEN KAISHA Services 2,053.62 0.10 MITSUBISHI PAPER MILLS Materials 2,046.49 0.10 JGC CORP Capital Equipment 2,045.78 0.10 HIGO BANK Finance 2,042.02 0.10 ORIENT CORP Finance 1,982.87 0.09 ALPS ELECTRIC CO Capital Equipment 1,977.08 0.09 MOCHIDA PHARMACEUTICAL Consumer Goods 1,961.06 0.09 HOUSE FOODS (HOUSE FD IND) Consumer Goods 1,939.69 0.09 SANWA SHUTTER CORP Materials 1,893.43 0.09 KOYO SEIKO CO Capital Equipment 1,871.43 0.09 MAEDA ROAD CONSTRUCTION Capital Equipment 1,854.13 0.09 CSK CORP Services 1,853.54 0.09 DENKI KAGAKU KOGYO K.K Materials 1,831.77 0.09 MEIJI MILK PRODUCTS CO Consumer Goods 1,803.50 0.08 AOKI CORP Capital Equipment 1,799.78 0.08 DAISHOWA PAPER MFG CO Materials 1,796.70 0.08 SKYLARK CO Services 1,763.15 0.08 SAGAMI RAILWAY CO Services 1,741.84 0.08 TANABE SEIYAKU CO Consumer Goods 1,731.04 0.08 LION CORP Consumer Goods 1,719.34 0.08 ITOHAM FOODS Consumer Goods 1,709.52 0.08 KISSEI PHARMACEUTICAL CO Consumer Goods 1,708.72 0.08 HASEKO CORP Capital Equipment 1,682.40 0.08
A-18
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------------------- ---------------------- ---------------- ------------- TEIKOKU OIL CO Energy 1,668.19 0.08 TOKYO STYLE CO Consumer Goods 1,645.32 0.08 DAITO TRUST CONSTRUCTION Capital Equipment 1,621.52 0.08 DAIWA KOSHO LEASE CO Finance 1,611.65 0.08 SHIMACHU CO Services 1,599.42 0.08 KIKKOMAN CORP Consumer Goods 1,567.80 0.07 DAIFUKU CO Capital Equipment 1,562.88 0.07 TAKARA STANDARD CO Consumer Goods 1,511.52 0.07 JACCS CO Finance 1,498.71 0.07 SANKYO ALUMINIUM IND CO Materials 1,490.24 0.07 UNI-CHARM CORP Consumer Goods 1,489.88 0.07 BROTHER INDUSTRIES Consumer Goods 1,475.36 0.07 DAINIPPON SCREEN MFG CO Capital Equipment 1,417.09 0.07 Q. P. CORP Consumer Goods 1,415.41 0.07 NORITAKE CO Consumer Goods 1,407.36 0.07 NAGASE & CO Materials 1,392.26 0.07 TOA CORP Capital Equipment 1,388.70 0.07 KANSAI PAINT CO Materials 1,381.08 0.07 UNITIKA Materials 1,380.07 0.06 NIPPON SHARYO Capital Equipment 1,345.12 0.06 IWATANI INTERNATIONAL Energy 1,344.81 0.06 OKUMA CORP Capital Equipment 1,334.08 0.06 HAZAMA CORP Capital Equipment 1,324.37 0.06 GUNZE Consumer Goods 1,312.00 0.06 KANEBO Consumer Goods 1,299.90 0.06 AMANO CORP Capital Equipment 1,299.59 0.06 DAIKYO Finance 1,277.43 0.06 NOF CORP Materials 1,265.89 0.06 TOYO EXTERIOR CO Materials 1,254.32 0.06 NIPPON SUISAN KAISHA Consumer Goods 1,239.82 0.06 TOKYOTOKEIBA CO Services 1,210.70 0.06 KATOKICHI CO Consumer Goods 1,193.36 0.06 EZAKI GLICO CO Consumer Goods 1,188.29 0.06 NIPPON COMSYS CORP Capital Equipment 1,184.40 0.06 JAPAN STEEL WORKS Capital Equipment 1,174.34 0.06 TAKUMA CO Capital Equipment 1,152.44 0.05 NIIGATA ENGINEERING CO Capital Equipment 1,149.55 0.05 KYUDENKO CORP Capital Equipment 1,144.87 0.05 TOYO ENGINEERING CORP Capital Equipment 1,133.87 0.05 TSUBAKIMOTO CHAIN CO Capital Equipment 1,129.99 0.05 KUREHA CHEMICAL IND CO Materials 1,129.61 0.05 KURABO INDUSTRIES Consumer Goods 1,128.54 0.05 TOKYO TATEMONO CO Finance 1,116.01 0.05 HOKKAIDO BANK Finance 1,109.95 0.05 MITSUI-SOKO CO Services 1,101.86 0.05 RENOWN Consumer Goods 1,089.95 0.05 MISAWA HOMES CO Capital Equipment 1,088.09 0.05 ISHIHARA SANGYO KAISHA Materials 1,082.65 0.05 TAIYO YUDEN CO Capital Equipment 1,076.04 0.05 OKAMOTO INDUSTRIES Multi-Industry 1,020.59 0.05
A-19
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------------------- ---------------------- ---------------- ------------- MARUHA CORP Consumer Goods 1,001.73 0.05 MARUDAI FOOD CO Consumer Goods 988.11 0.05 UNIDEN CORP Capital Equipment 977.13 0.05 SHOCHIKU CO Services 949.66 0.04 SANDEN CORP Capital Equipment 942.27 0.04 SEIKO CORP Consumer Goods 869.18 0.04 KONAMI CO Services 848.41 0.04 MAKINO MILLING MACHINE Capital Equipment 846.01 0.04 SANRIO CO Services 844.85 0.04 MITSUBISHI STEEL MFG Materials 824.28 0.04 SETTSU CORP Materials 792.63 0.04 KAKEN PHARMACEUTICAL CO Consumer Goods 789.93 0.04 AIDA ENGINEERING Capital Equipment 789.69 0.04 JAPAN METALS & CHEMICALS Materials 782.30 0.04 NIPPON BEET SUGAR MFG CO Consumer Goods 774.06 0.04 TOYO KANETSU K.K Capital Equipment 724.84 0.03 ASICS CORP Consumer Goods 678.42 0.03 GAKKEN CO Services 635.05 0.03 ASAHI OPTICAL CO Consumer Goods 605.37 0.03 SHOKUSAN JUTAKU SOGO CO Capital Equipment 513.50 0.02 JEOL Capital Equipment 512.75 0.02 TSUGAMI CORP Capital Equipment 504.25 0.02 NIPPON DENKO CO Materials 455.89 0.02
A-20 APPENDIX A-10 MSCI MALAYSIA INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------- ---------------------- ---------------- ------------- TELEKOM MALAYSIA Services 16,569.32 13.85 TENAGA NASIONAL Energy 11,410.18 9.54 MALAYAN BANKING Finance 10,209.23 8.54 RESORTS WORLD Services 5,799.96 4.85 SIME DARBY Multi-Industry 5,653.41 4.73 UNITED ENGINEERS (MAL) Capital Equipment 3,564.43 2.98 MALAYSIA INT'L SHIPPING Services 2,675.57 2.24 ROTHMANS PALL MALL (MAL) Consumer Goods 2,353.21 1.97 DCB HOLDINGS Finance 2,304.40 1.93 YTL CORP Capital Equipment 2,248.12 1.88 MALAYSIAN AIRLINE SYSTEM Services 2,228.34 1.86 AMMB HOLDINGS Finance 2,209.33 1.85 TECHNOLOGY RESOURCES IND Services 2,074.41 1.73 MAGNUM CORP Services 2,021.95 1.69 PROTON Consumer Goods 1,910.94 1.60 PUBLIC BANK Finance 1,839.14 1.54 EDARAN OTOMOBIL NASIONAL Consumer Goods 1,731.65 1.45 NESTLE (MALAYSIA) Consumer Goods 1,667.02 1.39 GOLDEN HOPE PLANTATIONS Materials 1,573.45 1.32 COMMERCE ASSET-HOLDING Finance 1,359.16 1.14 KUALA LUMPUR KEPONG Materials 1,345.68 1.13 HUME INDUSTRIES (MAL) Materials 1,171.06 0.98 MULTI-PURPOSE HOLDINGS Multi-Industry 1,161.75 0.97 MALAYSIAN RESOURCES CORP Finance 1,145.31 0.96 JAYA TIASA HOLDINGS Materials 1,119.93 0.94 MALAYAN UNITED IND Multi-Industry 1,073.89 0.90 RASHID HUSSAIN Finance 1,057.23 0.88 LEADER UNIVERSAL HLDGS Capital Equipment 1,013.44 0.85 AMSTEEL CORP Materials 984.18 0.82 PERLIS PLANTATIONS Materials 948.59 0.79 LAND & GENERAL Multi-Industry 921.25 0.77 HIGHLANDS & LOWLANDS Materials 906.43 0.76 SHELL REFINING CO (FOM) Energy 902.27 0.75 TA ENTERPRISE Finance 892.57 0.75 IOI CORP Materials 882.32 0.74 NEW STRAITS TIMES PRESS Services 875.37 0.73 MBF CAPITAL Finance 864.50 0.72 PAN MALAYSIA CEMENT WRKS Materials 860.76 0.72 TAN CHONG MOTOR HOLDINGS Consumer Goods 855.68 0.72
A-21
INDEX MARKET CAPITALIZATION WEIGHT (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------- ---------------------- ---------------- ------------- HONG LEONG PROPERTIES Finance 848.14 0.71 IDRIS HYDRAULIC (MAL) Finance 835.51 0.70 MULPHA INTERNATIONAL Multi-Industry 807.28 0.67 UMW HOLDINGS Capital Equipment 790.19 0.66 TIME ENGINEERING Capital Equipment 768.09 0.64 ORIENTAL HOLDINGS Consumer Goods 732.66 0.61 HONG LEONG INDUSTRIES Multi-Industry 723.54 0.60 METROPLEX Finance 721.61 0.60 MALAYSIAN PACIFIC IND Capital Equipment 704.46 0.59 MALAYAN CEMENT Materials 703.98 0.59 EKRAN Capital Equipment 693.03 0.58 SUNGEI WAY HOLDINGS Materials 655.17 0.55 RJ REYNOLDS Consumer Goods 618.03 0.52 MALAYSIA MINING CORP Materials 610.73 0.51 LANDMARKS Services 598.63 0.50 BERJAYA GROUP Multi-Industry 592.82 0.50 GUINNESS ANCHOR Consumer Goods 589.99 0.49 MALAYSIAN OXYGEN Materials 578.48 0.48 PROMET Capital Equipment 562.91 0.47 KEDAH CEMENT HOLDINGS Materials 540.48 0.45 KIAN JOO CAN FACTORY Materials 524.13 0.44 KEMAYAN CORP Materials 478.70 0.40 BERJAYA LEISURE Services 433.73 0.36 IGB CORP Finance 395.51 0.33 GOLDEN PLUS HOLDINGS Materials 389.55 0.33 MYCOM Finance 388.22 0.32 MALAYSIAN MOSAICS Services 371.85 0.31 AOKAM PERDANA Materials 355.98 0.30 SELANGOR PROPERTIES Finance 354.33 0.30 JOHAN HOLDINGS Capital Equipment 284.14 0.24 ANTAH HOLDINGS Finance 267.19 0.22 PALMCO HOLDINGS Finance 250.90 0.21 PILECON ENGINEERING Capital Equipment 233.43 0.20 MALAYAWATA STEEL Materials 219.42 0.18 PETALING GARDEN Finance 213.76 0.18 ALUMINIUM COMPANY OF MAL Materials 191.57 0.16 KELANAMAS INDUSTRIES Materials 190.45 0.16
A-22 APPENDIX A-11 MSCI MEXICO (FREE) INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - --------------------------------------------------- ---------------------- ---------------- ------------- TELMEX TELEFONOS MEX L Services 18,020.20 21.41 TELMEX TELEFONOS MEX A Services 18,020.20 6.83 CEMEX A Materials 4,662.11 3.41 CEMEX B Materials 4,662.11 2.78 CEMEX CPO Materials 4,662.11 1.11 GRUPO TELEVISA CPO Services 4,402.31 6.90 CIFRA B Services 4,133.51 4.89 CIFRA C Services 4,133.51 1.59 GRUPO MODELO C Consumer Goods 3,805.49 5.96 KIMBERLY-CLARK MEXICO A Consumer Goods 3,352.40 5.25 GRUPO MEXICO B Materials 2,818.25 4.42 ALFA Multi-Industry 2,341.48 3.67 EMPRESAS MODERNA ACP Consumer Goods 2,104.43 3.30 INDUSTRIAS PENOLES CP Materials 1,782.77 2.79 GRUPO FIN BANACCI B Finance 1,747.17 2.25 GRUPO FIN BANACCI L Finance 1,747.17 0.49 FOMENTO ECONOMICO MEX. Consumer Goods 1,520.57 2.38 APASCO Materials 1,446.74 2.27 GRUPO ICA Capital Equipment 1,415.45 2.22 BIMBO ACP Consumer Goods 1,400.00 2.19 LIVERPOOL (EL PUERTO) 1 Services 1,254.11 1.81 LIVERPOOL (EL PUERTO) C1 Services 1,254.11 0.16 DESC B Multi-Industry 1,104.22 1.73 VITRO Materials 740.52 1.16 GRUPO FIN BANCOMER B Finance 707.68 1.11 CONTROL. COMERCIAL MEX B Services 678.43 1.06 MASECA B2 Consumer Goods 661.34 1.04 TAMSA Capital Equipment 553.26 0.87 TRANSPORTACION MARIT. L Services 523.89 0.82 GRUPO CONTINENTAL Consumer Goods 488.47 0.77 GRUPO FIN SERFIN B Finance 425.26 0.40 GRUPO FIN SERFIN LCP Finance 425.26 0.27 GRUPO FIN PROBURSA B Finance 393.12 0.62 CYDSA Materials 297.96 0.47 GRUPO SITUR B Services 290.44 0.46 GRUPO MEX DESARROLLO L Capital Equipment 167.62 0.26 CONSORCIO G GRUPO DINA Capital Equipment 157.46 0.25 GRUPO SIMEC B Materials 154.03 0.24 EMPAQUES PONDEROSA Materials 152.60 0.24 GRUPO HERDEZ A Consumer Goods 97.32 0.08 GRUPO HERDEZ B Consumer Goods 97.32 0.07
A-23 APPENDIX A-12 MSCI NETHERLANDS INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ----------------------------------------- ---------------------- ---------------- ------------- ROYAL DUTCH PETROLEUM CO Energy 74,304.11 35.05 UNILEVER NV CERT Consumer Goods 23,076.45 10.88 ING GROEP (INT'LE) NEDER Finance 19,091.36 9.01 KON. PTT NEDERLAND Services 17,757.60 8.38 ABN AMRO HOLDING Finance 13,792.75 6.51 PHILIPS ELECTRONICS Consumer Goods 13,752.29 6.49 ELSEVIER Services 9,204.96 4.34 HEINEKEN NV Consumer Goods 8,930.22 4.21 AKZO NOBEL Materials 7,556.64 3.56 WOLTERS KLUWER Services 6,578.45 3.10 AHOLD (KON.) Services 5,107.39 2.41 KLM Services 2,792.81 1.32 KONINKLIJKE KNP BT Materials 2,566.83 1.21 HOOGOVENS (KON.) Materials 1,125.92 0.53 GETRONICS Capital Equipment 1,117.71 0.53 OCE-VAN DER GRINTEN Capital Equipment 1,117.51 0.53 STAD ROTTERDAM Finance 916.86 0.43 IHC CALAND Capital Equipment 847.20 0.40 STORK (VER MACHINE.) Capital Equipment 723.63 0.34 PAKHOED (KON.) Capital Equipment 708.20 0.33 HOLLANDSCHE BETON GROEP Capital Equipment 499.86 0.24 NEDLLOYD (KON.) Services 434.12 0.20
A-24 APPENDIX A-13 MSCI SINGAPORE (FREE) INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ----------------------------------------- ---------------------- ---------------- ------------- SINGAPORE AIRLINES FGN Services 13,464.34 15.37 OCBC BANK FGN Finance 12,454.98 14.22 UNITED OVERSEAS BANK FGN Finance 9,825.44 11.22 DEVELOPMENT BK SING FGN Finance 9,561.03 10.92 SINGAPORE PRESS HLDG FGN Services 6,572.17 7.50 CITY DEVELOPMENTS Finance 6,359.58 7.26 KEPPEL CORP Capital Equipment 4,841.40 5.53 DBS LAND Finance 3,623.03 4.14 FRASER & NEAVE Consumer Goods 3,336.42 3.81 CYCLE & CARRIAGE Consumer Goods 2,664.62 3.04 STRAITS STEAMSHIP LAND Finance 2,117.10 2.42 UIC UNITED INDUSTRIAL Finance 1,466.58 1.67 UNITED OVERSEAS LAND Finance 1,092.15 1.25 AMCOL HOLDINGS Consumer Goods 887.87 1.01 JURONG SHIPYARD Capital Equipment 854.09 0.98 NEPTUNE ORIENT LINES NOL Services 844.59 0.96 PARKWAY HOLDINGS Finance 787.26 0.90 FIRST CAPITAL CORP Finance 760.57 0.87 STRAITS TRADING Materials 749.14 0.86 HOTEL PROPERTIES Services 716.11 0.82 OVERSEAS UNION ENT. Services 706.43 0.81 NATSTEEL Materials 661.68 0.76 INCHCAPE BERHAD Multi-Industry 574.44 0.66 SHANGRI-LA HOTEL Services 526.32 0.60 METRO HOLDINGS Services 437.02 0.50 HAW PAR BROTHERS INT'L Multi-Industry 403.24 0.46 LUM CHANG HOLDINGS Multi-Industry 312.80 0.36 HAI SUN HUP GROUP Services 308.19 0.35 ROBINSON AND CO Services 252.29 0.29 CHUAN HUP HOLDINGS Capital Equipment 203.80 0.23 PRIMA Consumer Goods 145.32 0.17 LOW KENG HUAT(SINGAPORE) Capital Equipment 66.37 0.08
A-25 APPENDIX A-14 MSCI SPAIN INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ---------------------------------------- ---------------------- ---------------- ------------- ENDESA Energy 14,311.09 15.05 TELEFONICA DE ESPANA Services 13,789.30 14.50 REPSOL Energy 10,433.95 10.97 IBERDROLA Energy 8,702.51 9.15 BANCO BILBAO VIZCAYA Finance 8,237.35 8.66 BANCO SANTANDER Finance 7,682.54 8.08 GAS NATURAL SDG Energy 5,402.53 5.68 ARGENTARIA CORP BANCARIA Finance 5,265.87 5.54 BANCO CENTRAL HISPANO Finance 3,397.67 3.57 AUTOPISTAS CESA (ACESA) Services 2,278.03 2.40 UNION ELECTRICA FENOSA Energy 1,594.91 1.68 MAPFRE (CORPORACION) Finance 1,510.59 1.59 TABACALERA Consumer Goods 1,431.99 1.51 AGUAS DE BARCELONA Services 1,323.22 1.39 FOMENTO CONST Y CONTR Capital Equipment 1,245.47 1.31 ACERINOX Materials 1,187.68 1.25 ALBA (CORP FINANCIERA) Multi-Industry 1,013.41 1.07 ZARDOYA OTIS Capital Equipment 916.84 0.96 VALLEHERMOSO Finance 816.77 0.86 DRAGADOS Y CONSTRUCCION Capital Equipment 779.08 0.82 METROVACESA Finance 726.06 0.76 EBRO AGRICOLAS Consumer Goods 537.35 0.56 URALITA Materials 474.35 0.50 PORTLAND VALDERRIVAS Materials 451.14 0.47 PROSEGUR Services 347.00 0.36 ENCE EMPR NAC CELULOSAS Materials 319.17 0.34 VISCOFAN Materials 250.43 0.26 SARRIO Materials 231.80 0.24 URBIS (INMOBILIARIA) Finance 181.48 0.19 AGUILA (EL) Consumer Goods 134.90 0.14 ERCROS Materials 133.76 0.14
A-26 APPENDIX A-15 MSCI SWEDEN AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ---------------------------------------- ---------------------- ---------------- ------------- ASTRA A Consumer Goods 24,954.23 19.58 ASTRA B Consumer Goods 24,954.23 4.42 ERICSSON (LM) B Capital Equipment 19,217.84 18.48 VOLVO B Consumer Goods 8,694.63 5.78 VOLVO A Consumer Goods 8,694.63 2.58 ASEA A Capital Equipment 8,660.46 6.10 ASEA B Capital Equipment 8,660.46 2.22 SVENSKA HANDELSBK A Finance 4,282.32 3.76 SVENSKA HANDELSBK B Finance 4,282.32 0.36 SKAND.ENSKILDA BANKEN A Finance 3,944.28 3.79 SKANSKA B Capital Equipment 3,896.87 3.75 STORA KOPPARBERG A Materials 3,447.59 2.70 STORA KOPPARBERG B Materials 3,447.59 0.62 AGA A Materials 3,350.42 1.76 AGA B Materials 3,350.42 1.47 ELECTROLUX B Consumer Goods 3,088.53 2.97 SCA SV CELLULOSA B Materials 2,940.75 2.83 ATLAS COPCO A Capital Equipment 2,703.11 1.74 ATLAS COPCO B Capital Equipment 2,703.11 0.86 SKANDIA FORSAKRING Finance 2,585.56 2.49 HENNES & MAURITZ B Services 2,388.21 2.30 STADSHYPOTEK A Finance 2,309.18 2.22 SKF B Capital Equipment 2,092.53 1.13 SKF A Capital Equipment 2,092.53 0.88 AUTOLIV Capital Equipment 1,329.97 1.28 TRELLEBORG B Multi-Industry 1,266.73 1.22 EUROC A Materials 1,226.42 1.18 SECURITAS B Services 1,044.84 1.00 ESSELTE A Services 556.90 0.30 ESSELTE B Services 556.90 0.24
A-27 APPENDIX A-16 MSCI SWITZERLAND INDEX AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- ROCHE HOLDING GENUSS Consumer Goods 72,760.15 17.53% ROCHE HOLDING INHABER Consumer Goods 72,760.15 7.27 NESTLE Consumer Goods 41,221.33 14.05 SANDOZ NAMEN Consumer Goods 32,911.66 10.37 SANDOZ INHABER Consumer Goods 32,911.66 0.84 SCHWEIZ BANKGESELL INH Finance 26,729.35 7.42 SCHWEIZ BANKGESELL NAMEN Finance 26,729.35 1.68 CIBA-GEIGY NAMEN Materials 23,495.56 6.95 CIBA-GEIGY INHABER Materials 23,495.56 1.06 CS HOLDING Finance 17,336.66 5.91 SCHWEIZ RUECKVERS Finance 14,444.30 4.92 SCHWEIZ BANKVEREIN INH Finance 13,657.07 2.96 SCHWEIZ BANKVEREIN NAMEN Finance 13,657.07 1.70 ZUERICH VERSICHERUNG Finance 12,371.79 4.22 BBC BROWN BOVERI INH Capital Equipment 10,138.16 3.04 BBC BROWN BOVERI NAMEN Capital Equipment 10,138.16 0.41 HOLDERBANK INHABER Materials 4,897.61 1.18 HOLDERBANK NAMEN Materials 4,897.61 0.49 ALUSUISSE-LONZA HLDG NAM Multi-Industry 4,762.32 1.09 ALUSUISSE-LONZA HLDG INH Multi-Industry 4,762.32 0.54 SMH PORTEUR Consumer Goods 3,972.78 0.71 SMH NOM Consumer Goods 3,972.78 0.65 SGS SURVEILLANCE PORT Services 3,351.12 0.75 SGS SURVEILLANCE NOM Services 3,351.12 0.39 SULZER NAMEN Capital Equipment 2,152.35 0.50 SULZER PART Capital Equipment 2,152.35 0.23 SWISSAIR NAMEN Services 1,899.27 0.65 SCHINDLER NAMEN Capital Equipment 1,454.63 0.27 SCHINDLER PART Capital Equipment 1,454.63 0.22 ADIA PORTEUR Services 1,174.14 0.40 MERKUR HOLDING NAMEN Services 863.82 0.29 FISCHER (GEORG) INHABER Capital Equipment 783.46 0.22 FISCHER (GEORG) NAMEN Capital Equipment 783.46 0.04 FORBO HOLDING Materials 599.38 0.20 SIKA FINANZ INHABER Materials 543.55 0.19 KUONI REISEN NAMEN B Services 527.56 0.18 DANZAS HOLDING NAMEN Services 504.56 0.14 DANZAS HOLDING PART Services 504.56 0.03 MOEVENPICK INHABER Services 372.37 0.07 MOEVENPICK PART Services 372.37 0.05 JELMOLI HOLDING INHABER Services 325.85 0.07 JELMOLI HOLDING NAMEN Services 325.85 0.04 INTERDISCOUNT HLDG PORT Services 192.88 0.07
A-28 APPENDIX A-17 MSCI UK AS OF JANUARY 31, 1996
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- GLAXO WELLCOME Consumer Goods 50,339.71 5.72 BRITISH PETROLEUM Energy 44,384.77 5.04 HSBC HOLDINGS (HKD 10) Finance 43,855.31 3.34 HSBC HOLDINGS (GBP 0.75) Finance 43,855.31 1.64 BRITISH TELECOM Services 33,585.90 3.81 SMITHKLINE BEECHAM A Consumer Goods 29,635.73 1.73 SMITHKLINE BEECHAM UNIT Consumer Goods 29,635.73 1.64 BAT INDUSTRIES Multi-Industry 27,259.85 3.10 LLOYDS TSB GROUP Finance 24,983.16 2.84 BTR Multi-Industry 19,493.64 2.21 BARCLAYS Finance 19,361.14 2.20 ZENECA GROUP Consumer Goods 18,424.69 2.09 MARKS & SPENCER Services 18,382.63 2.09 UNILEVER PLC Consumer Goods 16,629.80 1.89 HANSON Multi-Industry 15,869.08 1.80 BRITISH GAS Energy 15,634.24 1.78 REUTERS HOLDINGS Services 15,614.57 1.77 GENERAL ELECTRIC PLC Capital Equipment 15,055.18 1.71 RTZ CORP REG Materials 14,786.56 1.68 CABLE & WIRELESS Services 14,783.50 1.68 GRAND METROPOLITAN Consumer Goods 14,133.95 1.60 GUINNESS Consumer Goods 13,910.21 1.58 PRUDENTIAL CORP Finance 12,373.15 1.41 ABBEY NATIONAL Finance 11,950.07 1.36 BRITISH SKY BROADCASTING Services 11,091.45 1.26 VODAFONE GROUP Services 10,939.90 1.24 THORN EMI Consumer Goods 10,918.86 1.24 SAINSBURY (J) Services 10,773.91 1.22 GREAT UNIVERSAL STORES Services 10,493.69 1.19 BASS Consumer Goods 9,944.81 1.13 TESCO Services 9,303.37 1.06 IMPERIAL CHEMICAL ICI Materials 9,040.38 1.03 BOOTS CO Services 8,930.96 1.01 REED INTERNATIONAL Services 8,782.83 1.00 CADBURY SCHWEPPES Consumer Goods 8,119.94 0.92 BRITISH AIRWAYS Services 7,737.43 0.88 NATIONAL POWER Energy 7,439.00 0.84 ROYAL BANK OF SCOTLAND Finance 6,778.86 0.77 BOC GROUP Materials 6,654.15 0.76 COMMERCIAL UNION Finance 6,166.15 0.70 SCOTTISH & NEWCASTLE Consumer Goods 5,857.60 0.67 RANK ORGANISATION Services 5,746.04 0.65 BRITISH AEROSPACE Capital Equipment 5,732.62 0.65 ARGYLL GROUP Services 5,708.36 0.65 PEARSON Services 5,571.14 0.63 KINGFISHER Services 5,402.44 0.61
A-29
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- LEGAL & GENERAL GROUP Finance 5,296.97 0.60 BRITISH STEEL Materials 5,237.77 0.59 NATIONAL GRID GROUP Energy 5,136.42 0.58 ASSOCIATED BRITISH FOODS Consumer Goods 5,124.73 0.58 PEN & ORIENTAL STEAM Services 4,994.37 0.57 FORTE Services 4,939.75 0.56 LAND SECURITIES Finance 4,810.89 0.55 SCOTTISH POWER Energy 4,754.85 0.54 GENERAL ACCIDENT Finance 4,673.00 0.53 ROLLS-ROYCE Capital Equipment 4,480.47 0.51 GKN Capital Equipment 4,337.01 0.49 UNITED UTIL. (NORTH WEST Services 4,297.96 0.49 WOLSELEY Materials 3,851.52 0.44 RMC GROUP Materials 3,833.76 0.44 ROYAL INSURANCE HLDGS Finance 3,808.37 0.43 BLUE CIRCLE INDUSTRIES Materials 3,794.26 0.43 SCHRODERS Finance 3,776.92 0.43 CARLTON COMMUNICATIONS Services 3,623.79 0.41 GUARDIAN ROYAL EXCHANGE Finance 3,494.96 0.40 TI GROUP Multi-Industry 3,445.56 0.39 THAMES WATER Services 3,306.24 0.38 SOUTHERN ELECTRIC Energy 3,180.06 0.36 REDLAND Materials 3,124.21 0.35 LADBROKE GROUP Services 3,029.63 0.34 PILKINGTON Materials 2,995.70 0.34 SMITHS INDUSTRIES Capital Equipment 2,983.42 0.34 WILLIAMS HOLDINGS Materials 2,980.46 0.34 BURMAH CASTROL Energy 2,968.62 0.34 REXAM Materials 2,871.29 0.33 TATE & LYLE Consumer Goods 2,825.34 0.32 ARGOS Services 2,665.82 0.30 COURTAULDS PLC Materials 2,628.65 0.30 LUCAS INDUSTRIES Capital Equipment 2,618.61 0.30 BRITISH LAND Finance 2,617.28 0.30 NEXT Services 2,590.97 0.29 MEPC Finance 2,466.23 0.28 MERCURY ASSET MGMT GROUP Finance 2,457.46 0.28 LONRHO Multi-Industry 2,450.14 0.28 DE LA RUE Services 2,412.30 0.27 LASMO Energy 2,406.93 0.27 BPB INDUSTRIES Materials 2,341.98 0.27 ARJO WIGGINS APPLETON Materials 2,324.38 0.26 ANGLIAN WATER Services 2,289.25 0.26 ELECTROCOMPONENTS Capital Equipment 2,195.20 0.25 SEARS PLC Services 2,187.30 0.25 EAST MIDLANDS ELEC Energy 2,035.58 0.23 CARADON Materials 2,026.61 0.23 COATS VIYELLA Consumer Goods 1,986.46 0.23 UNITED BISCUITS Consumer Goods 1,955.02 0.22 BET Multi-Industry 1,893.03 0.21
A-30
INDEX MARKET CAPITALIZATION WEIGHT IN (MILLIONS OF MSCI INDEX CONSTITUENT NAME INDUSTRY SECTOR US$) (%) - ------------------------------------------ ---------------------- ---------------- ------------- LONDON ELECTRICITY Energy 1,867.40 0.21 BBA GROUP Capital Equipment 1,845.37 0.21 JOHNSON MATTHEY Multi-Industry 1,763.62 0.20 TARMAC Materials 1,711.68 0.19 HARRISONS & CROSFIELD Materials 1,650.86 0.19 IMI Materials 1,623.06 0.18 PROVIDENT FINANCIAL Finance 1,610.60 0.18 SOUTHERN WATER Services 1,586.82 0.18 BICC Capital Equipment 1,543.73 0.18 UNIGATE Consumer Goods 1,536.93 0.17 ENGLISH CHINA CLAYS Materials 1,492.83 0.17 HAMMERSON Finance 1,447.12 0.16 CHUBB SECURITY Services 1,412.65 0.16 WELSH WATER Services 1,378.47 0.16 RACAL ELECTRONICS Multi-Industry 1,311.51 0.15 T & N Capital Equipment 1,306.59 0.15 FKI Capital Equipment 1,300.02 0.15 VICKERS Capital Equipment 1,270.44 0.14 SLOUGH ESTATES Finance 1,265.44 0.14 BOWTHORPE Capital Equipment 1,188.42 0.13 HEPWORTH Materials 1,139.75 0.13 RUGBY GROUP Materials 1,079.45 0.12 SEDGWICK GROUP Finance 1,016.25 0.12 WILLIS CORROON GROUP Finance 975.79 0.11 OCEAN GROUP Services 906.51 0.10 NORTHERN ELECTRIC Energy 881.49 0.10 DELTA PLC Capital Equipment 875.40 0.10 GREAT PORTLAND ESTATES Finance 850.67 0.10 LAIRD GROUP Capital Equipment 842.60 0.10 TAYLOR WOODROW Capital Equipment 820.64 0.09 WIMPEY (GEORGE) Capital Equipment 790.78 0.09 MEYER INTERNATIONAL Materials 734.82 0.08 COBHAM Capital Equipment 712.92 0.08 BARRATT DEVELOPMENTS Capital Equipment 680.55 0.08 COURTAULDS TEXTILES Consumer Goods 643.24 0.07 CALOR GROUP Energy 634.13 0.07 MARLEY Materials 632.88 0.07 LEX SERVICE Services 549.43 0.06 TRAFALGAR HOUSE Multi-Industry 537.24 0.06 WILSON (CONNOLLY) HLDGS Capital Equipment 534.91 0.06 TRANSPORT DEVELOPMENT Services 459.31 0.05 ST JAMES'S PLACE CAPITAL Finance 447.16 0.05 LAING (JOHN) ORD Capital Equipment 350.24 0.04 DAWSON INTERNATIONAL Consumer Goods 327.88 0.04 AMSTRAD Capital Equipment 319.25 0.04 OXFORD INSTRUMENTS Capital Equipment 308.40 0.04 AMEC Capital Equipment 305.04 0.03 COSTAIN GROUP Capital Equipment 56.34 0.01
A-31 APPENDIX B The Fund intends to effect deliveries of Portfolio Securities on a basis of "T" plus three New York business days (i.e., days on which the New York Stock Exchange is open) in the relevant foreign market of each Index Series, except as discussed below. The ability of the Fund to effect in-kind redemptions within three New York business days of receipt of a redemption request is subject, among other things, to the condition that, within the time period from the date of the request to the date of delivery of the securities, there are no days that are local market holidays but "good" New York business days. For every occurrence of one or more intervening holidays in the local market that are not holidays observed in New York, the redemption settlement cycle will be extended by the number of such intervening local holidays. In addition to holidays, other unforeseeable closings in a foreign market due to emergencies may also prevent the Fund from delivering securities within three New York business days. The securities delivery cycles currently practicable for transferring Portfolio Securities to redeeming investors, coupled with local market holiday schedules, will require a delivery process longer than seven calendar days for some Index Series, in certain circumstances, during 1996. The holidays applicable to each Index Series during 1996 are listed below, as are instances where more than seven days will be needed to deliver redemption proceeds. Although certain holidays may occur on different dates in subsequent years, the number of days required to deliver redemption proceeds in any given year is not expected to exceed the maximum number of days listed below for each Index Series. The proclamation of new holidays, or the elimination of existing holidays, and changes in local securities delivery practices, could affect the information set forth herein at some time in the future. THE AUSTRALIA INDEX SERIES REGULAR HOLIDAYS. The regular Australian holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Australia Day -- January 26, 1996 Labor Day (Victoria only) -- March 11, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Anzac Day -- April 25, 1996 Queens Birthday (except Western Australia) -- June 10, 1996 Bank Holiday (New South Wales only) -- August 5, 1996 Labour Day (New South Wales only) -- October 7, 1996 Melbourne Cup Day (Victoria only) -- November 5, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996
REDEMPTION. The Fund is not aware of a redemption request over any Australian holiday that would result in a settlement period that will exceed 7 calendar days in 1996. B-1 THE AUSTRIA INDEX SERIES REGULAR HOLIDAYS. The regular Austrian holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Epiphany Day -- January 6, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Labor Day -- May 1, 1996 Ascension Day -- May 16, 1996 Whit Monday -- May 27, 1996 Corpus Christi -- June 6, 1996 Assumption Day -- August 15, 1996 National Holiday -- October 26, 1996 All Saints Day -- November 1, 1996 Immaculate Conception -- December 8, 1996 Christmas Eve -- December 24, 1996 Christmas Day -- December 25, 1996 St. Stephen's Day -- December 26, 1996 New Year's Eve -- December 31, 1996
REDEMPTION. A redemption request over the following Austrian holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- --------------------- ---------------- --------------- ---------------- 12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8 12/25/96 Christmas Day 12/20/96 12/30/96 R + 10 12/26/96 St. Stephen's Day 12/24/96 Christmas Eve 12/23/96 1/2/97 R + 10 12/25/96 Christmas Day 12/24/96 1/2/97 R + 9 12/16/96 St. Stephen's Day 12/31/96 New Year's Eve 1/1/97 New Year's Day
In 1996, R+10 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Austria Index Series. B-2 THE BELGIUM INDEX SERIES REGULAR HOLIDAYS. The regular Belgian holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Good Friday -- -- -- (Stock Exchange only closed) -- -- -- April 5, 1996 Easter Monday -- -- -- April 8, 1996 Labour Day -- -- -- May 1, 1996 Ascension -- May 16, 1996 Bank Holiday May 17, 1996 Whit Monday May 27, 1996 Assumption August 15, 1996 Bank Holiday August 16, 1996 All Saint's Day November 1, 1996 Remembrance Day November 11, 1996 Christmas Day December 25, 1996 Bank Holiday December 26, 1996 New Year's Eve December 31, 1996
REDEMPTION. A redemption request over the following Belgian holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- --------------------- ---------------- --------------- ---------------- 12/25/96 Christmas Day 12/24/96 1/2/97 R + 9 12/29/96 Bank Holiday 12/31/96 New Year's Eve
In 1996, R+9 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Belgium Index Series. B-3 THE CANADA INDEX SERIES REGULAR HOLIDAYS. The regular Canadian holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 New Year's Day (observed) (Montreal Only) -- January 2, 1996 Good Friday (Toronto only) -- April 5, 1996 Easter Monday (Montreal only) -- April 8, 1986 Victoria Day -- May 20, 1996 St. Jean-Baptist (Montreal only) -- June 24, 1996 Canada Day -- July 1, 1996 Civic Holiday (Toronto only) -- August 5, 1996 Labor Day -- September 2, 1996 Thanksgiving Day -- October 14, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996
REDEMPTION. The Fund is not aware of a redemption request over any Canadian holiday that would result in a settlement period that will exceed 7 calendar days in 1996. THE FRANCE INDEX SERIES REGULAR HOLIDAYS. The regular French holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Labor Day -- May 1, 1996 Victory Day -- May 8, 1996 Ascension Day -- May 16, 1996 Pentecost -- May 27, 1996 Assumption Day -- August 15, 1996 Assumption Day -- August 16, 1996 All Saints Day -- November 1, 1996 Armistice Day -- November 11, 1996 Christmas Day -- December 25, 1996
REDEMPTION. The Fund is not aware of a redemption request over any French holiday that would result in a settlement period that will exceed 7 calendar days in 1996. B-4 THE GERMANY INDEX SERIES REGULAR HOLIDAYS. The regular German holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Epiphany Day -- January 6, 1996 Carnival -- February 19, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Labor Day -- May 1, 1996 Ascension Day -- May 16, 1996 Whit Monday -- May 27, 1996 Corpus Christi -- June 6, 1996 Assumption Day -- August 15, 1996 German Unity Day -- October 3, 1996 Reformation Day -- October 31, 1996 All Saints Day -- November 1, 1996 Christmas Eve -- December 24, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996 New Year's Eve -- December 31, 1996
REDEMPTION. A redemption request over the following German holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- ------------------- ---------------- --------------- ---------------- 12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8 12/25/96 Christmas Day 12/20/96 12/30/96 R + 10 12/26/96 Boxing Day 12/24/96 Christmas Eve 12/23/96 1/2/97 R + 10 12/25/96 Christmas Day 12/24/96 1/2/97 R + 9 12/26/96 Boxing Day 12/31/96 New Year's Eve 1/1/97 New Year's Day
In 1996, R+10 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Germany Index Series. B-5 THE HONG KONG INDEX SERIES REGULAR HOLIDAYS. The regular Hong Kong holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Lunar New Year's Day -- February 19, 1996 Second Day of Lunar New Year's Day -- February 20, 1996 Third Day of Lunar New Year's Day -- February 21, 1996 Ching Ming Festival -- April 4, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Monday after Queen's Birthday -- June 17, 1996 Tueng Ng Festival -- June 20, 1996 Liberation Day -- August 26, 1996 Mid-Autumn Festival -- September 28, 1996 Chung Yeung Festival -- October 21, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996
REDEMPTION. A redemption request over the following Hong Kong holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- ------------------------ ---------------- --------------- ---------------- 2/19/96 Lunar New Year 2/14/96 2/22/96 R + 8 2/20/96 Lunar New Year 2/15/96 2/23/96 R + 8 2/21/96 Lunar New Year 2/16/96 2/24/96 R + 10 4/4/96 Ching Ming Festival 4/1/96 4/9/96 R + 8 4/5/96 Good Friday 4/2/96 4/10/96 R + 8 4/8/96 Easter Monday 4/3/96 4/11/96 R + 8
In 1996, R+10 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Hong Kong Index Series. B-6 THE ITALY INDEX SERIES REGULAR HOLIDAYS. The regular Italian holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Easter Monday -- April 8, 1996 Liberation Day -- April 25, 1996 Labor Day -- May 1, 1996 Bank Holiday (early close) -- August 14, 1996 Assumption Day -- August 15, 1996 All Saints Day -- November 1, 1996 Christmas Eve (early close) -- December 24, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996 New Year's Eve (early close) -- December 31, 1996
REDEMPTION. A redemption request over the following Italian holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- ------------------- ---------------- --------------- ---------------- 12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8 12/25/96 Christmas Day 12/20/96 12/30/96 R + 10 12/26/96 Boxing Day 12/24/96 Christmas Eve 12/23/96 1/2/97 R + 10 12/25/96 Christmas Day 12/24/96 1/2/97 R + 9 12/26/96 Boxing Day 12/31/96 New Year's Eve 1/1/97 New Year's Day
In 1996, R+10 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Italy Index Series. B-7 THE JAPAN INDEX SERIES REGULAR HOLIDAYS. The regular Japanese holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 First weekday after New Year's Day -- January 2, 1996 Bank Holiday -- January 3, 1996 Coming of Age Day -- January 15, 1996 National Foundation Day (observed) -- February 12, 1996 Vernal Equinox Day -- March 20, 1996 Greenery Day -- April 29, 1996 Constitutional Memorial Day -- May 3, 1996 Children's Day (observed) -- May 6, 1996 Respect for Aged Day -- September 16, 1996 Autumnal Equinox Day -- September 23, 1996 Sports Day -- October 10, 1996 Culture Day (observed) -- November 4, 1996 Labor Thanksgiving Day -- November 23, 1996 The Emperor's Birthday -- December 23, 1996 Exchange Holiday (early close) -- December 30, 1996 New Year's Eve -- December 31, 1996
REDEMPTION. A redemption request over the following Japanese holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- ------------------------ ---------------- --------------- ---------------- 12/23/96 Emperor's Birthday 12/24/96 1/6/97 R + 13 12/30/96 Exchange Holiday 12/26/96 1/7/97 R + 12 12/31/96 New Year's Eve 12/27/96 1/8/97 R + 12 1/1/97 New Year's Day 12/30/96 1/8/97 R + 9 1/2/97 First Weekday After New 1/3/97 Year's Day 12/31/96 1/8/97 R + 8 Bank Holiday
In 1996, R+13 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Japan Index Series. B-8 THE MALAYSIA INDEX SERIES REGULAR HOLIDAYS. The regular Malaysian holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Federal Territory Day -- February 1, 1996 Chinese New Year -- February 19, 1996 Chinese New Year -- February 20, 1996 Hari Raya Puasa (subject to change) -- February 21, 1996 Hari Raya Haji (subject to change) -- April 28, 1996 Labor Day -- May 1, 1996 Awal Muharam -- May 19, 1996 Wesak Day -- May 31, 1996 Birthday of DYMM SPB Yang Di-Pertuon Ajong -- June 1, 1996 Prophet Mohammed's Birthday -- July 28, 1996 National Day -- August 31, 1996 Deepavali Day (observed) -- November 10, 1996 Christmas Day -- December 25, 1996
REDEMPTION. A redemption request over the following Malaysian holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- ------------------------ ---------------- --------------- ---------------- 2/19/96 Chinese New Year 2/24/96 2/23/96 R + 9 2/20/96 Chinese New Year 2/15/96 2/26/96 R + 11 2/21/96 Hari Raya Puasa 2/16/96 2/27/96 R + 11
In 1996, R+11 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Malaysia Index Series. B-9 THE MEXICO (FREE) INDEX SERIES REGULAR HOLIDAYS. The regular Mexican holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Constitution Day -- February 5, 1996 Benito Juarez Ivarez Day -- March 21, 1996 Holy Wednesday (half day) -- April 3, 1996 Holy Thursday -- April 4, 1996 Good Friday -- April 5, 1996 Labor Day -- May 1, 1996 Puebla Battle -- May 5, 1996 Presidential Report -- September 1, 1996 Independence Day -- September 16, 1996 Columbus Day -- October 12, 1996 All Saint's Day -- November 2, 1996 Mexican Revolution -- November 20, 1996 Our Lady of Guadalupe Day -- December 12, 1996 Christmas Eve -- December 24, 1996 Christmas Day -- December 25, 1996 New Year's Eve -- December 31, 1996
REDEMPTION. A redemption request over the following Mexican holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- ------------------------ ---------------- --------------- ---------------- 4/3/96 Holy Wednesday 3/29/96 4/8/96 R + 10 4/4/96 Holy Thursday 4/1/96 4/9/96 R + 8 4/5/96 Good Friday 4/2/96 4/10/96 R + 8
In 1996, R+10 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Mexico (Free) Index Series. B-10 THE NETHERLANDS INDEX SERIES REGULAR HOLIDAYS. The regular Netherlands holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Liberation Day -- April 30, 1996 Ascension Day -- May 16, 1996 Whit Monday -- May 27, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996 New Year's Eve -- December 31, 1996
REDEMPTION. A redemption request over the following Netherlands holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- --------------------- ---------------- --------------- ---------------- 12/15/96 Christmas Day 12/24/96 1/2/97 R + 9 12/26/96 Boxing Day 12/31/96 New Year's Eve 1/1/97 New Year's Day
In 1996, R+9 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Netherlands Index Series. THE SINGAPORE (FREE) INDEX SERIES REGULAR HOLIDAYS. The regular Singaporean holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Chinese New Year -- February 19, 1996 Hari Raya Puasa -- February 20, 1996 Hari Raya Puasa -- February 21, 1996 Good Friday -- April 5, 1996 Hari Raya Haji (observed) -- April 29, 1996 Labor Day -- May 1, 1996 Vesak Day -- May 31, 1996 National Day -- August 9, 1996 Deepavali (observed) -- November 11, 1996 Christmas Day -- December 25, 1996
REDEMPTION. A redemption request over the following Singaporean holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- ------------------------ ---------------- --------------- ---------------- 2/19/96 Chinese New Year 2/14/96 2/22/96 R + 8 2/20/96 Hari Raya Puasa 2/15/96 2/23/96 R + 8 2/21/96 Hari Raya Puasa 2/16/96 2/26/96 R + 10
In 1996, R+10 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Singapore (Free) Index Series. B-11 THE SPAIN INDEX SERIES REGULAR HOLIDAYS. The regular Spanish holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Epiphany Day -- January 6, 1996 St. Vincent -- January 22, 1996 St. Joseph -- March 19, 1996 Holy Thursday -- April 4, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Labor Day -- May 1, 1996 Independence Day -- May 2, 1996 St. Isidro -- May 15, 1996 St. James -- July 25, 1996 St. Loyola -- July 31, 1996 Assumption -- August 15, 1996 Hispanity -- October 12, 1996 All Saints Day -- November 1, 1996 Our Lady of Almudena -- November 9, 1996 Constitution Day -- December 6, 1996 Immaculate Conception -- December 8, 1996 Christmas Day -- December 25, 1996
REDEMPTION. A redemption request over the following Spanish holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- --------------------- ---------------- --------------- ---------------- 4/4/96 Holy Thursday 4/1/96 4/9/96 R + 8 4/5/96 Good Friday 4/2/96 4/10/96 R + 8 4/8/96 Easter Monday 4/3/96 4/11/96 R + 8
In 1996, R+8 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Spain Index Series. B-12 THE SWEDEN INDEX SERIES REGULAR HOLIDAYS. The regular Swedish holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Twelfth Night (Early Closing) -- January 5, 1996 Epiphany -- January 6, 1996 Holy Thursday (Early Closing) -- April 4, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Labour Day -- May 1, 1996 Eve of Ascension (Early Closing) -- May 15, 1996 Ascension Day -- May 16, 1996 Whit Monday -- May 27, 1996 Midsummer Eve -- June 21, 1996 Eve of All Saints Day (Early Closing) -- November 1, 1996 All Saints Day -- November 2, 1996 Christmas Eve -- December 24, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996 New Year's Eve -- December 31, 1996
REDEMPTION. A redemption request over the following Swedish holidays would result in a settlement period that will exceed 7 calendar days (examples are based on the days particular holidays fall in 1996):
REDEMPTION REDEMPTION SETTLEMENT DATE HOLIDAY REQUEST DATE (R) SETTLEMENT DATE PERIOD - ---------- --------------------- ---------------- --------------- ---------------- 4/4/96 Holy Thursday 4/1/96 4/9/96 R + 8 4/5/96 Good Friday 4/2/96 4/10/96 R + 8 4/8/96 Easter Monday 4/3/96 4/11/96 R + 8 12/24/96 Christmas Eve 12/19/96 12/27/96 R + 8 12/25/96 Christmas Day 12/20/96 12/30/96 R + 10 12/26/96 Boxing Day 12/23/96 1/2/97 R + 10 12/24/96 Christmas Eve 12/24/96 1/2/97 R + 9 12/25/96 Christmas Day 12/30/96 1/7/97 R + 8 12/26/96 Boxing Day 12/31/96 New Year's Eve 1/1/97 New Year's Day
In 1996, R+10 calendar days would be the maximum number of calendar days necessary to satisfy a redemption request made on the Sweden Index Series. B-13 THE SWITZERLAND INDEX SERIES REGULAR HOLIDAYS. The regular Swiss (Zurich) holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Berchtoldstag -- January 2, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 Sechselauten (Zurich) -- April 15, 1996 Labor Day -- May 1, 1996 Ascension Day -- May 16, 1996 Whit Monday -- May 27, 1996 National Day -- August 1, 1996 Knabeaschiessea -- September 9, 1996 Christmas Day -- December 25, 1996 St. Stephen's Day -- December 26, 1996
REDEMPTION. The Fund is not aware of a redemption request over any Swiss (Zurich) holiday that would result in a settlement period that will exceed 7 calendar days in 1996. THE UNITED KINGDOM INDEX SERIES REGULAR HOLIDAYS. The regular United Kingdom holidays affecting the relevant securities markets (and their respective dates in calendar year 1996) are as follows: New Year's Day -- January 1, 1996 Good Friday -- April 5, 1996 Easter Monday -- April 8, 1996 May Day -- May 6, 1996 Spring Bank Holiday -- May 27, 1996 Summer Bank Holiday -- August 26, 1996 Christmas Day -- December 25, 1996 Boxing Day -- December 26, 1996
REDEMPTION. The Fund is not aware of a redemption request over any United Kingdom holiday that would result in a settlement period that will exceed 7 calendar days in 1996. B-14 PART C OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements: Part B -- Foreign Fund, Inc. Financial Statements: Statement of Assets and Liabilities, at [ ], 1996. (b) Exhibits: (1) -- Articles of Amendment and Restatement of the Fund (2) -- Amended Bylaws of the Fund (3) -- Not applicable (4) -- Form of global certificate evidencing shares of the Common Stock, $.001 par value, of each Index Series of the Fund (5) -- Investment Management Agreement between the Fund and BZW Barclays Global Fund Advisors (6) (A) -- Distribution Agreement between the Fund and Funds Distributor, Inc. (6) (B) -- Form of Authorized Participant Agreement (6) (C) -- Form of Sales and Investor Services Agreement (7) -- Not applicable (8) (A) -- Custodian Agreement between the Fund and Morgan Stanley Trust Company (8) (B) -- Form of Lending Agreement (9) (A) -- Administration and Accounting Services Agreement Between the Fund and PFPC Inc. (9) (B) -- Transfer Agency Services Agreement between the Fund and PFPC Inc. (9) (C) -- License Agreement between the Fund and Morgan Stanley Capital International * (10) -- Opinion and consent of Sullivan & Cromwell * (11) -- Opinion and consent of Ernst & Young, LLP (12) -- Not applicable * (13) (A) -- Subscription Agreement(s) between the Fund and Funds Distributor, Inc. with respect to the Fund's initial capitalization (13) (B) -- Letter of Representations among the Depository Trust Company, the Fund and Morgan Stanley Trust Company (14) -- Not applicable (15) -- Form of 12b-1 Plan (16) -- Not applicable (17) -- Not applicable
- ------------------------ * To be filed by amendment. ** Previously filed. 1 ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT Immediately prior to the contemplated public offering of the shares of the Fund, the following persons may be deemed individually to control each Index Series of the Fund: [To be completed by amendment] ITEM 26. NUMBER OF HOLDERS OF SECURITIES As of , 1996, the stockholders of Common Stock, par value $.001 per share, of each of the initial seventeen Index Series of the Fund were: [To be completed by amendment] ITEM 27. INDEMNIFICATION It is the Fund's policy to indemnify officers, directors, employees and other agents to the maximum extent permitted by Section 2-418 of the Maryland General Corporation Law, Article EIGHTH of the Fund's Articles of Incorporation, and Article VI of the Fund's Bylaws (each set forth below). Section 2-418 of the Maryland General Corporation Law reads as follows: "2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. (a) In this section the following words have the meaning indicated. (1) "Director" means any person who is or was a director of a corporation and any person who, while a director of a corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan. (2) "Corporation" includes any domestic or foreign predecessor entity of a corporation in a merger, consolidation, or other transaction in which the predecessor's existence ceased upon consummation of the transaction. (3) "Expenses" include attorney's fees. (4) "Official capacity" means the following: (i) When used with respect to a director, the office of director in the corporation; and (ii) When used with respect to a person other than a director as contemplated in subsection (j), the elective or appointive office in the corporation held by the officer, or the employment or agency relationship undertaken by the employee or agent in behalf of the corporation. (iii) "Official capacity" does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, other enterprise, or employee benefit plan. (5) "Party" includes a person who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (6) "Proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative. (b) (1) A Corporation may indemnify any director made a party to any proceeding by reason of service in that capacity unless it is established that: (i) the act or omission of the director was material to the matter giving rise to the proceeding; and 1. Was committed in bad faith; or 2. Was the result of active and deliberate dishonesty; or (ii) The director actually received an improper personal benefit in money, property, or services; or 2 (iii) In the case of any criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. (2) (i) Indemnification may be against judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the director in connection with the proceeding. (ii) However, if the proceeding was one by or in the right of the corporation, indemnification may not be made in respect of any proceeding in which the director shall have been adjudged to be liable to the corporation. (3) (i) The termination of any proceeding by judgment, order, or settlement does not create a presumption that the director did not meet the requisite standard of conduct set forth in this subsection. (ii) The termination of any proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the director did not meet that standard of conduct. (c) A director may not be indemnified under subsection (B) of this section in respect of any proceeding charging improper personal benefit to the director, whether or not involving action in the director's official capacity, in which the director was adjudged to be liable on the basis that personal benefit was improperly received. (d) Unless limited by the charter: (1) A director who has been successful, on the merits or otherwise, in the defense of any proceeding referred to in subsection (B) of this section shall be indemnified against reasonable expenses incurred by the director in connection with the proceeding. (2) A court of appropriate jurisdiction upon application of a director and such notice as the court shall require, may order indemnification in the following circumstances: (i) If it determines a director is entitled to reimbursement under paragraph (1) of this subsection, the court shall order indemnification, in which case the director shall be entitled to recover the expenses of securing such reimbursement; or (ii) If it determines that the director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director has met the standards of conduct set forth in subsection (b) of this section or has been adjudged liable under the circumstances described in subsection (c) of this section, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any proceeding by or in the right of the corporation or in which liability shall have been adjudged in the circumstances described in subsection (c) shall be limited to expenses. (3) A court of appropriate jurisdiction may be the same court in which the proceeding involving the director's liability took place. (e) (1) Indemnification under subsection (b) of this section may not be made by the corporation unless authorized for a specific proceeding after a determination has been made that indemnification of the director is permissible in the circumstances because the director has met the standard of conduct set forth in subsection (b) of this section. (2) Such determination shall be made: (i) By the board of directors by a majority vote of a quorum consisting of directors not, at the time, parties to the proceeding, or, if such a quorum cannot be obtained, then by a majority vote of a committee of the board consisting solely of two or more directors not, at the time, parties to such proceeding and who were duly designated to act in the matter by a majority vote of the full board in which the designated directors who are parties may participate; 3 (ii) By special legal counsel selected by the board of directors or a committee of the board by vote as set forth in subparagraph (I) of this paragraph, or, if the requisite quorum of the full board cannot be obtained therefor and the committee cannot be established, by a majority vote of the full board in which director (sic) who are parties may participate; or (iii) By the shareholders. (3) Authorization of indemnification and determination as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible. However, if the determination that indemnification is permissible is made by special legal counsel, authorization of indemnification and determination as to reasonableness of expenses shall be made in the manner specified in subparagraph (ii) of paragraph (2) of this subsection for selection of such counsel. (4) Shares held by directors who are parties to the proceeding may not be voted on the subject matter under this subsection. (f) (1) Reasonable expenses incurred by a director who is a party to a proceeding may be paid or reimbursed by the corporation in advance of the final disposition of the proceeding upon receipt by the corporation of: (i) A written affirmation by the director of the director's good faith belief that the standard of conduct necessary for indemnification by the corporation as authorized in this section has been met; and (ii) A written undertaking by or on behalf of the director to repay the amount if it shall ultimately be determined that the standard of conduct has not been met. (2) The undertaking required by subparagraph (ii) of paragraph (1) of this subsection shall be an unlimited general obligation of the director but need not be secured and may be accepted without reference to financial ability to make the repayment. (3) Payments under this subsection shall be made as provided by the charter, bylaws, or contract or as specified in subsection (e) of this section. (g) The indemnification and advancement of expenses provided or authorized by this section may not be deemed exclusive of any other rights, by indemnification or otherwise, to which a director may be entitled under the charter, the bylaws, a resolution of shareholders or directors, an agreement or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. (h) This section does not limit the corporation's power to pay or reimburse expenses incurred by a director in connection with an appearance as a witness in a proceeding at a time when the director has not been made a named defendant or respondent in the proceeding. (i) For purposes of this section: (1) The corporation shall be deemed to have requested a director to serve an employee benefit plan where the performance of the director's duties to the corporation also imposes duties on, or otherwise involves services by, the director to the plan or participants or beneficiaries of the plan; (2) Excise taxes assessed on a director with respect to an employee benefit plan pursuant to applicable law shall be deemed fines; and (3) Action taken or omitted by the director with respect to an employee benefit plan in the performance of the director's duties for a purpose reasonably believed by the director to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation. 4 (j) Unless limited by the charter: (1) An officer of the corporation shall be indemnified as and to the extent provided in subsection (d) of this section for a director and shall be entitled, to the same extent as a director, to seek indemnification pursuant to the provisions of subsection (d); (2) A corporation may indemnify and advance expenses to an officer, employee, or agent of the corporation to the same extent that it may indemnify directors under this section; and (3) A corporation, in addition, may indemnify and advance expenses to an officer, employee, or agent who is not a director to such further extent, consistent with law, as may be provided by its charter, bylaws, general or specific action of its board of directors or contract. (k) (1) A corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or who, while a director, officer, employee, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, other enterprise, or employee benefit plan against any liability asserted against and incurred by such person in any such capacity or arising out of such person's position, whether or not the corporation would have the power to indemnify against liability under the provisions of this section. (2) A corporation may provide similar protection, including a trust fund, letter of credit, or surety bond, not inconsistent with this section. (3) The insurance or similar protection may be provided by a subsidiary or an affiliate of the corporation. (l) Any indemnification of, or advance of expenses to, a director in accordance with this section, if arising out of a proceeding by or in the right of the corporation, shall be reported in writing to the shareholders with the notice of the next stockholders' meeting or prior to the meeting." Article EIGHTH of the Fund's Articles of Amendment and Restatement provides: "The Corporation shall indemnify to the fullest extent permitted by law (including the Investment Company Act of 1940) any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. To the fullest extent permitted by law (including the Investment Company Act of 1940), expenses incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by Article EIGHTH shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of Article EIGHTH shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of Article EIGHTH, the term "Corporation" shall include any predecessor of the Corporation any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with 5 respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Nothing in Article SEVENTH or in this Article EIGHTH protects or purports to protect any director or officer against any liability to the Corporation or its security holders to which he or she would otherwise be subject by reason of willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office." ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER. See "Management of the Fund" in the Statement of Additional Information. Information as to the directors and officers of the Adviser is included in its form ADV filed with the Commission and is incorporated herein by reference thereto. ITEM 29. PRINCIPAL UNDERWRITERS (a) Funds Distributor, Inc. is the Fund's principal underwriter. Funds Distributor, Inc. also acts as a principal underwriter, depositor, or investment adviser for the following other investment companies: BEA Investment Funds, Inc. Fremont Mutual Funds, Inc. HT Insight Funds, Inc., d/b/a Harris Insight Funds The Munder Funds Trust The Munder Funds, Inc. The Panagora Institutional Funds BJB Investment Funds Sierra Trust Funds (Class B shares only) The Skyline Fund Waterhouse Investors Cash Management Fund, Inc. (b)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT - ----------------------------- --------------------------------------------- ----------------------------------- - -- Marie E. Connolly* President, Chief Executive Officer and Director None - -- John E. Pelletier* Senior Vice President, General Counsel, Secretary and Clerk Director, President and Treasurer - -- Richard W. Healey* Senior Vice President None - -- Rui M. Moura* Senior Vice President None - -- Donald R. Roberson* Senior Vice President None - -- Joseph F. Tower, III* Senior Vice President, Treasurer and Chief Financial Officer None - -- Dick Ingram* Senior Vice President None - -- Mary A. Nelson* Assistant Treasurer None - -- Eric B. Fischman** Vice President and Associate General Counsel None - -- Frederick C. Dey* Vice President None - -- Dennis S. Gallant* Vice President None - -- Hannah S. Grove* Vice President None - -- Richard S. Joseph* Vice President None - -- Dale F. Lampe* Vice President None - -- Paul M. Prescott* Vice President None - -- Linda C. Raftery* Vice President None
6
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT - ----------------------------- --------------------------------------------- ----------------------------------- - -- Joseph A. Vignone* Vice President None - -- Maureen Walsh* Vice President None - -- John Pyburn** Vice President None - -- Elizabeth Bachman** Assistant Vice President and Counsel None - -- William Nutt* Director None - -- John W. Gomez* Director None
- ------------------------ * The principal business address of this individual is One Exchange Place, Boston, Massachusetts 02109. ** The principal business address of this individual is 200 Park Avenue, New York, New York 10166. (c) Not applicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules thereunder will be maintained at the offices of PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809. ITEM 31. MANAGEMENT SERVICES Not applicable. ITEM 32. UNDERTAKINGS The Fund hereby undertakes that it will file a post-effective amendment, using financial statements which need not be certified, within four to six months from the date the shares of the Fund's Index Series are first sold to the public (subject to an extension of up to an additional 60 days under certain circumstances prescribed by the staff of the Securities and Exchange Commission). The Fund hereby undertakes to call a meeting of the shareholders for the purpose of voting upon the question of removal of any Director when requested in writing to do so by the holders of at least 10% of the Fund's outstanding shares of common stock and, in connection with such meeting, to comply with the provisions of Section 16(c) of the 1940 Act relating to shareholder communications. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") Act may be permitted to directors, officers and controlling persons of the Fund pursuant to the foregoing provisions, or otherwise, the Fund has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Fund of expenses incurred or paid by a director, officer or controlling person of the Fund in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Fund will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, and State of New York on the 29th day of February, 1996: FOREIGN FUND, INC. (The Registrant) By: /s/ JOHN E. PELLETIER ----------------------------------- John E. Pelletier PRESIDENT Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registrant's Registration Statement has been signed below by the following persons in the capacities indicated on the day of February, 1996: Director, President and /s/ JOHN E. PELLETIER Treasurer (Principal - ----------------------------------- Executive Officer and (John E. Pelletier) Principal Financial and Accounting Officer) INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY NUMBER EXHIBIT NUMBERED PAGE - --------------- ----------------------------------------------------------------------------------- --------------- (1) -- Articles of Amendment and Restatement of the Fund (2) -- Amended Bylaws of the Fund (3) -- Not applicable (4) -- Form of global certificate evidencing shares of the Common Stock, $.001 par value, of each Index Series of the Fund (5) -- Investment Management Agreement between the Fund and BZW Barclays Global Fund Advisors (6) (A) -- Distribution Agreement between the Fund and Funds Distributor, Inc. (6) (B) -- Form of Authorized Participant Agreement (6) (C) -- Form of Sales and Investor Services Agreement (7) -- Not applicable (8) (A) -- Custodian Agreement between the Fund and Morgan Stanley Trust Company (8) (B) -- Form of Lending Agreement (9) (A) -- Administration and Accounting Services Agreement Between the Fund and PFPC Inc. (9) (B) -- Transfer Agency Services Agreement between the Fund and PFPC Inc. (9) (C) -- License Agreement between the Fund and Morgan Stanley Capital International * (10) -- Opinion and consent of Sullivan & Cromwell * (11) -- Opinion and consent of Ernst & Young, LLP (12) -- Not applicable * (13) (A) -- Subscription Agreement(s) between the Fund and Funds Distributor, Inc. with respect to the Fund's initial capitalization (13) (B) -- Letter of Representations among the Depository Trust Company, the Fund and Morgan Stanley Trust Company (14) -- Not applicable (15) -- Form of 12b-1 Plan (16) -- Not applicable (17) -- Not applicable
- ------------------------ * To be filed by amendment. ** Previously filed. EX-99.1 2 EXHIBIT 99.1 ARTICLES OF AMENDMENT AND RESTATEMENT OF FOREIGN FUND, INC. Pursuant to Section 2-609 of the General Corporation Law of the State of Maryland, Foreign Fund, Inc., a Maryland corporation (the "Corporation"), hereby certifies that: First: The name of the Corporation is Foreign Fund, Inc. The Corporation's original Articles of Incorporation were filed with the State Department of Assessments and Taxation on September 1, 1994 and the name under which it was originally incorporated was Foreign Fund, Inc. Second: The current address of the principal office of the Corporation in this State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. Third: The Corporation's current resident agent in the State of Maryland is The Corporation Trust Incorporated and the agent's current address is 32 South Street, Baltimore, Maryland 21202. Fourth: The Corporation has one director, John E. Pelletier. Fifth: The Corporation desires to restate its Articles of Incorporation as currently in effect and to integrate the amendments made hereby. Sixth: The Articles of Incorporation of the Corporation are hereby amended to increase the total number of shares of Common Stock of all series that the Corporation shall have authority to issue; to designate seventeen series of Common Stock and the number of shares of Common Stock initially classified and allocated to each such Series; to restrict the stockholders' right of redemption of shares of Common Stock of each series to redemptions in aggregations of a number of shares to be determined by the Board of Directors; to permit the Corporation to pay the redemption or repurchase price of shares within such time period after surrender of such shares as may be permitted by any applicable rule, regulation or order of the Securities and Exchange Commission; and to make certain other modifications, all as set forth in these Articles of Amendment and Restatement. Seventh: Immediately prior to the amendments to the Articles of Incorporation set forth herein, the Corporation had the authority to issue 1,000,000,000 shares, par value $.001 per share, of Common Stock of all series and classes, none of which shares were classified or allocated to any series; and the aggregate par value of all of the authorized shares was $1,000,000. Eighth: Immediately after giving effect to the amendments to the Articles of Incorporation set forth herein, the Corporation will have the authority to issue 6,000,000,000 shares, par value $.001 per share, of Common Stock of all series and classes, of which 5,999,425,000 -2- shares (sometimes referred to as "World Equity Benchmark Shares" or "WEBS") will be classified and allocated to each of the seventeen series of Common Stock as follows: Number of Shares of Common Stock Initially Classified and Name of Series Allocated Australia Index Series............... 127,800,000 Austria Index Series................. 19,800,000 Belgium Index Series................. 136,200,000 Canada Index Series.................. 340,200,000 France Index Series.................. 340,200,000 Germany Index Series................. 382,200,000 Hong Kong Index Series............... 191,400,000 Italy Index Series................... 63,600,000 Japan Index Series................... 2,124,600,000 Malaysia Index Series................ 127,800,000 Mexico (Free) Index Series........... 255,000,000 Netherlands Index Series............. 255,000,000 Singapore (Free) Index Series........ 191,400,000 Spain Index Series................... 127,800,000 Sweden Index Series.................. 63,600,000 Switzerland Index Series............. 318,625,000 United Kingdom Index Series.......... 934,200,000 The remaining 575,000 shares of Common Stock shall be undesignated as to series until the Board of Directors shall have designated such shares. The aggregate par value of all the authorized shares will be $6,000,000. Ninth: Each series of Common Stock and, if and when authorized (as hereinafter contemplated), each class of that series shall have such preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other characteristics as the Board of Directors may determine in the absence of a contrary -3- provision set forth in these Articles of Amendment and Restatement. Tenth: The provisions set forth in these Articles of Amendment and Restatement are all the provisions of the Articles of Incorporation currently in effect, as so amended and incorporating the provisions of previously filed Articles of Amendment. Eleventh: The Articles of Incorporation of the Corporation are restated in their entirety as follows: FIRST: INCORPORATOR. I, THE UNDERSIGNED, J. Michael Locke, whose post office address is 1701 Pennsylvania Avenue, N.W., Suite 800, Washington, D.C. 20006, being at least twenty-one years of age, do under and by virtue of the General Laws of the State of Maryland authorizing the formation of corporations, associate myself as incorporator with the intention of forming a corporation (hereinafter called the "Corporation"). SECOND: NAME. The name of the Corporation is Foreign Fund, Inc. THIRD: PURPOSES AND POWERS. The purpose for which the Corporation is formed is to act as an open-end management investment company under the Investment Company Act of 1940, as currently in effect or as hereafter may be amended and the rules and regulations from time to time promulgated and effective thereunder (referred to herein collectively as the "Investment Company Act of 1940") and to -4- exercise and enjoy all of the powers, rights and privileges granted to, or conferred upon, corporations by the General Laws of the State of Maryland now or hereafter in force. FOURTH: PRINCIPAL OFFICE. The post office address of the principal office of the Corporation in this State is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of the Corporation's resident agent is The Corporation Trust Incorporated, and its post office address is 32 South Street, Baltimore, Maryland 21202. Said resident agent is a corporation of the State of Maryland. FIFTH: CAPITAL STOCK. 1. The total number of shares of capital stock of all series and classes that the Corporation initially shall have authority to issue is 6,000,000,000 shares, with a par value of one-tenth of one cent ($.001) per share, to be known and designated as Common Stock, such shares of Common Stock having an aggregate par value of six million dollars ($6,000,000). The Board of Directors shall have power and authority to increase or decrease, from time to time, the aggregate number of shares of stock, or of any series or class of stock, that the Corporation shall have the authority to issue. 2. Subject to the provisions of these Articles of Incorporation, the Board of Directors shall have the power to issue shares of Common Stock of the Corporation from time to time, at prices not less than the net asset value or par -5- value thereof, whichever is greater, for such consideration (which may consist of, among other things, cash and/or securities) as may be fixed from time to time pursuant to the direction of the Board of Directors. All stock, upon issuance against receipt of the consideration specified by the Board of Directors, shall be fully paid and non-assessable. The Board of Directors may, by resolution, determine that shares of any Series or Class (each as defined below) of the Corporation may be issued only in specified aggregations of shares. 3. Pursuant to Section 2-105 of the Maryland General Corporation Law, the Board of Directors of the Corporation shall have the power to designate one or more series of shares of Common Stock, to fix the number of shares in any such series and to classify or reclassify any unissued shares with respect to such series. Any series of Common Stock shall be referred to herein individually as a "Series" and collectively, together with any further series from time to time established, as the "Series". Any such Series (subject to any applicable rule, regulation or order of the Securities and Exchange Commission or other applicable law or regulation) shall have such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, terms and conditions of redemption and other characteristics as the Board of Directors may determine in the absence of a -6- contrary provision set forth herein. The aforesaid power shall include the power to create, by classifying or reclassifying unissued shares in the aforesaid manner, one or more Series in addition to those initially designated as named below and to increase the aggregate number of shares of a Series. Subject to such aforesaid power, the Board of Directors has initially designated seventeen Series (sometimes referred to as "Index Series") of shares of Common Stock of the Corporation (which shares are sometimes referred to as "World Equity Benchmark Shares" or "WEBS"). The names of such Series and the number of shares of Common Stock initially classified and allocated to these Series are as follows: Number of Shares of Common Stock Initially Classified and Name of Series Allocated Australia Index Series............... 127,800,000 Austria Index Series................. 19,800,000 Belgium Index Series................. 136,200,000 Canada Index Series.................. 340,200,000 France Index Series.................. 340,200,000 Germany Index Series................. 382,200,000 Hong Kong Index Series............... 191,400,000 Italy Index Series................... 63,600,000 Japan Index Series................... 2,124,600,000 Malaysia Index Series................ 127,800,000 Mexico (Free) Index Series........... 255,000,000 Netherlands Index Series............. 255,000,000 Singapore (Free) Index Series........ 191,400,000 Spain Index Series................... 127,800,000 Sweden Index Series.................. 63,600,000 Switzerland Index Series............. 318,625,000 United Kingdom Index Series.......... 934,200,000 The remaining 575,000 shares of Common Stock shall be undesignated as to Series until the Board of Directors shall have made such designation pursuant to this Section 3. -7- 4. The Board of Directors may, from time to time and without stockholder action, classify shares of a particular Series into one or more additional classes of that Series, the voting, dividend, liquidation and other rights of which shall differ from the classes of Common Stock of that Series to the extent provided in Articles Supplementary for such additional class, such Articles Supplementary to be filed for record with the appropriate authorities of the State of Maryland. Each class so created shall consist, until further changed, of the lesser of (x) the number of shares classified in Section 3 of this Article FIFTH or (y) the number of shares that could be issued by issuing all of the shares of that Series currently or hereafter classified less the total number of shares of all classes of such Series then issued and outstanding. Any class of a Series of Common Stock shall be referred to herein individually as a "Class" and collectively, together with any further class or classes of such Series from time to time established, as the "Classes". 5. All Classes of a particular Series of Common Stock of the Corporation shall represent the same interest in the Corporation and have identical voting, dividend, liquidation and other rights with any other shares of Common Stock of that Series; PROVIDED, however, that notwithstanding anything in the Articles of Incorporation of the Corporation to the contrary: -8- (i) Any Class of shares may be subject to such sales loads, contingent deferred sales charges, Rule 12b-1 fees, administrative fees, service fees or other fees, however designated, in such amounts as may be established by the Board of Directors from time to time in accordance with the Investment Company Act of 1940 and the applicable rules and regulations of the National Association of Securities Dealers, Inc. (ii) Expenses related solely to a particular Class of a Series (including, without limitation, distribution expenses under a Rule 12b-1 plan and administrative expenses under an administration or service agreement, plan or other arrangement, however designated) shall be borne by that Class and shall be appropriately reflected (in the manner determined by the Board of Directors) in the net asset value, dividends, distributions and liquidation rights of the shares of that Class. (iii) As to any matter with respect to which a separate vote of any Class of a Series is required by the Investment Company Act of 1940 or by the Maryland General Corporation Law (including, without limitation, approval of any plan, agreement or other arrangement referred to in subsection (ii) above), such requirement as to a separate vote by that Class shall apply in lieu of single class voting (as defined in Section 7 of this -9- Article FIFTH), and if permitted by the Investment Company Act of 1940 or the Maryland General Corporation Law, the Classes of more than one Series shall vote together as a single Class on any such matter that shall have the same effect on each such Class. As to any matter that does not affect the interest of a particular Class of a Series, only the holders of shares of the affected Classes of that Series shall be entitled to vote. 6. Subject to the foregoing, each share of a Series or Class shall have equal rights with each other share of that Series or Class with respect to the assets of the Corporation pertaining to that Series or Class. The dividends payable to the holders of any Series or Class (subject to any applicable rule, regulation or order of the Securities and Exchange Commission or any other applicable law or regulation) shall be determined by the Board of Directors and need not be individually declared, but may be declared and paid in accordance with a formula adopted by the Board of Directors (whether or not the amount of dividend or distribution so declared can be calculated at the time of such declaration). 7. The holder of each share of Common Stock of the Corporation shall be entitled to one vote for each full share, and a fractional vote for each fractional share, irrespective of the Series or Class, then standing in his or -10- her name in the books of the Corporation. On any matter submitted to a vote of stockholders, all shares of Common Stock of the Corporation then issued and outstanding and entitled to vote, irrespective of the Series or Class, shall be voted in the aggregate and not by Series or Class ("single class voting") except (1) when otherwise expressly provided by the Maryland General Corporation Law, or when required by the Investment Company Act of 1940, shares shall be voted by individual Series or Class; and (2) when the matter does not affect any interest of a particular Series or Class, then only stockholders of such other Series or Class or Series or Classes whose interests may be affected shall be entitled to vote thereon. Holders of shares of Common Stock of the Corporation shall not be entitled to cumulative voting in the election of Directors or on any other matter. 8. All consideration received by the Corporation for the issuance or sale of stock of each Series or Class, together with all transaction fees charged by the Corporation and all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall belong to the Series or Class of shares of stock with respect to which such assets, payments or funds were received by the Corporation for all purposes, -11- subject only to the rights of creditors, and shall be so handled upon the books of account of the Corporation. Such assets, income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation thereof, and any assets derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as "assets belonging to" such Series or Class. 9. The Board of Directors may from time to time declare and pay dividends or distributions in stock, property (including securities) or in cash on any or all Series or Classes of stock and to the stockholders of record as of such date as the Board of Directors may determine; PROVIDED that such dividends or distributions on shares of any Series or Class of stock shall be paid only out of earnings, surplus, or other lawfully available assets belonging to such Series or Class. Subject to the foregoing proviso, the amount of any dividends or distributions and the payment thereof shall be wholly in the discretion of the Board of Directors. 10. In the event of the liquidation or dissolution of the Corporation, stockholders of each Series and Class therein shall be entitled to receive, as a Series or Class, out of the assets of the Corporation available for distribution to stockholders, but other than general assets, the assets belonging to such Series or Class and the assets -12- so distributable to the stockholders of any Series or Class shall be distributed among such stockholders in proportion to the number of shares of such Series or Class held by them and recorded on the books of the Corporation. In the event that there are any general assets not belonging to any particular Series or Class of stock and available for distribution, such distribution shall be made to the holders of stock of all Series and Classes in proportion to the net asset value of the respective Series or Class determined as hereinafter provided. 11. The assets belonging to any Series or Class of stock shall be charged with the liabilities in respect to such Series or Class and shall also be charged with such Series' or Classes' proportionate share of the general liabilities of the Corporation, based upon the ratio of the net asset value, determined as hereinafter provided, of the shares of such Series or Class then outstanding to the net asset value of all shares of Common Stock of the Corporation then outstanding. The determination of the Board of Directors shall be conclusive with respect to the amount of liabilities, including accrued expenses and reserves, the allocation of such liabilities to a given Series or Class, and whether the same or general assets of the Corporation are allocable to one or more Series or Classes. 12. The Board of Directors may provide for a holder of any Series or Class of stock of the Corporation, -13- who surrenders his certificate in good form for transfer to the Corporation or, if the shares in question are not represented by certificates, who delivers to the Corporation a written request in good order signed by the stockholder, to convert the shares in question on such basis as the Board of Directors may provide, into shares of stock of any other Series or Class of the Corporation. 13. Subject to Section 14 below, the net asset value per share of the Corporation's Common Stock shall be determined by adding the value of all securities, cash and other assets of the Corporation pertaining to that Series or Class, subtracting the liabilities applicable to that Series or Class, proportionally allocating any general assets and general liabilities to that Series or Class, and dividing the net result by the number of shares of that Series or Class outstanding. Subject to Section 14 below, the value of the securities, cash and other assets, and the amount and nature of liabilities, and the allocation thereof to any particular Series or Class, shall be determined pursuant to the direction of, or procedures or methods prescribed by or approved by, the Board of Directors in its sole discretion and shall be so determined at the time or times prescribed or approved by the Board of Directors in its sole discretion. 14. The net asset value per share of a Series or Class of the Corporation's Common Stock for the purpose of -14- issuance, redemption or repurchase of shares, shall be determined in accordance with the Investment Company Act of 1940 and any other applicable Federal securities law or rule or regulation. 15. All shares of Common Stock now or hereafter authorized shall be subject to redemption and redeemable at the option of the stockholder in accordance with and pursuant to procedures or methods prescribed or approved by the Board of Directors and, in the case of any Series now or hereafter authorized, if so determined by the Board of Directors, shall be redeemable only in aggregations of such number of shares and on such days as may be determined by, or determined pursuant to procedures or methods prescribed by or approved by, the Board of Directors from time to time with respect to such Series. The number of shares comprising an aggregation for purposes of redemption or repurchase so determined from time to time with respect to any Series shall be referred to herein as a "Creation Unit" and collectively, as "Creation Units". Initially, the number of shares of Common Stock that will comprise a Creation Unit for each Series shall be as follows: Index Series Shares per Creation Unit - ------------ ------------------------ Australia Index Series 200,000 Austria Index Series 100,000 Belgium Index Series 40,000 Canada Index Series 100,000 France Index Series 200,000 Germany Index Series 300,000 Hong Kong Index Series 75,000 Italy Index Series 150,000 Japan Index Series 600,000 -15- ndex Series 75,000 Mexico (Free) Index Series 100,000 Netherlands Index Series 50,000 Singapore (Free) Index Series 100,000 Spain Index Series 75,000 Sweden Index Series 75,000 Switzerland Index Series 125,000 United Kingdom Index Series 200,000 The Board of Directors shall have the unrestricted power to alter the number of shares constituting a Creation Unit by resolutions adopted by the Board of Directors at any time, including prior to the time the Corporation commences operations. Each holder of a Creation Unit aggregation of shares of a Series, upon request to the Corporation accompanied by surrender of the appropriate stock certificate or certificates in proper form for transfer if certificates have been issued to such holder, or in accordance with such other procedures as may from time to time be in effect if certificates have not been issued, shall be entitled to require the Corporation to redeem all or any number of such holder's shares of Common Stock standing in the name of such holder on the books of the Corporation, but in the case of shares of any Series as to which the Board of Directors has determined that such shares shall be redeemable only in Creation Unit aggregations, only in such Creation Unit aggregations of shares of such Series as the Board of Directors may determine from time to time in accordance with this Section 15, at a redemption price per share equal to an amount determined by the Board of Directors in accordance with any applicable laws and -16- s; PROVIDED that (i) such amount shall not exceed the net asset value per share determined in accordance with this Article, and (ii) if so authorized by the Board of Directors, the Corporation may, at any time from time to time, charge fees for effecting such redemption or repurchase, at such rate or rates as the Board of Directors may establish, as and to the extent permitted under the Investment Company Act of 1940. Such rates may vary depending on the type of redemption or repurchase in question (E.G., a redemption or repurchase for cash as opposed to a redemption or repurchase for portfolio securities). The redemption price may be payable in cash, securities or a combination thereof, as determined by or pursuant to the direction of the Board of Directors from time to time. 16. Notwithstanding Section 15 above (or any other provision of these Articles of Incorporation), the Board of Directors of the Corporation may suspend the right of the holders of Creation Unit size aggregations of shares of any Series to require the Corporation to redeem such shares (or may suspend any voluntary purchase of such shares pursuant to the provisions of these Articles of Incorporation) or postpone the date of payment of satisfaction upon redemption of such shares during any Financial Emergency. -17- For the purpose of these Articles of Incorporation, a "Financial Emergency" is defined as the whole or part of any period (i) during which the New York Stock Exchange is closed, other than customary weekend and holiday closings, (ii) during which trading on the New York Stock Exchange is restricted, (iii) during which an emergency exists as a result of which disposal by the Corporation of securities owned by such Series is not reasonably practicable or it is not reasonably practicable for the Corporation fairly to determine the value of the net assets of such Series, or (iv) during any other period when the Securities and Exchange Commission (or any succeeding governmental authority) may for the protection of security holders of the Corporation by order permit suspension of the right of redemption or postponement of the date of payment on redemption. 17. The Board of Directors may by resolution from time to time authorize the repurchase by the Corporation, either directly or through an agent, of shares upon such terms and conditions and for such consideration as the Board of Directors shall deem advisable, out of funds legally available therefor and at prices per share not in excess of the net asset value per share, determined in accordance with this Article and to take all other steps deemed necessary or advisable in connection therewith. -18- 18. Except as otherwise permitted by the Investment Company Act of 1940 or any applicable rule, regulation or order of the Securities and Exchange Commission, payment of the redemption or repurchase price of shares surrendered to the Corporation for redemption pursuant to the provisions of Section 15 or 20 of this Article FIFTH or for repurchase by the Corporation pursuant to the provisions of Section 17 of this Article FIFTH shall be made by the Corporation within seven (7) days after surrender of such shares to the Corporation for such purpose. Any such payment may be made in whole or in part in portfolio securities or in cash, as the Board of Directors shall deem advisable, and no stockholder shall have the right, other than as determined by the Board of Directors, to have shares redeemed or repurchased in portfolio securities or in cash or in any particular combination thereof. 19. In the absence of any specification of the purpose for which the Corporation redeems or repurchases any shares of its Common Stock, all redeemed or repurchased shares shall be deemed to be acquired for retirement in the sense contemplated by the General Corporation Law of the State of Maryland. Shares of any Series retired by redemption or repurchase shall thereafter have the status of authorized but unissued shares of any Series. -19- 20. All shares now or hereafter authorized shall be subject to redemption and be redeemable at the option of the Corporation. From time to time the Board of Directors may by resolution, without the vote or consent of stockholders, authorize the redemption of all or any part of any outstanding shares (including through the establishment of uniform standards with respect to the minimum net asset value of a stockholder account) upon the sending of written notice thereof to each stockholder any of whose shares are to be so redeemed and upon such terms and conditions as the Board of Directors shall deem advisable, out of funds legally available therefor, at net asset value per share determined in accordance with the provisions of this Article and may take all other steps deemed necessary or advisable in connection therewith. The Board of Directors may authorize the closing and redemption of all shares of any accounts not meeting the specified minimum standards of net asset value. 21. The holders of shares of Common Stock or other securities of the Corporation shall have no preemptive rights to subscribe for new or additional shares of its Common Stock or other securities. SIXTH: DIRECTORS. The initial number of directors of the Corporation shall be three (3); PROVIDED that the minimum number of directors for so long as there is only one or fewer stockholders shall be one (1). The names of the -20- directors who shall act until the first annual meeting or until their respective successors are duly chosen and qualified are R. Sheldon Johnson, Vikram S. Pandit and W. Thomas Clark. Upon such time as the Corporation has issued two or more shares of its capital stock, the minimum number of directors shall be increased in accordance with the provisions of Section 2-402 of the Maryland General Corporation Law. The number of Directors may be changed from time to time in such lawful manner as is provided in the Bylaws of the Corporation. Unless otherwise provided by the Bylaws of the Corporation, directors of the Corporation need not be stockholders. SEVENTH: LIABILITIES OF DIRECTORS AND OFFICERS. A director or officer of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation thereof is not permitted by law (including the Investment Company Act of 1940) as currently in effect or as the same may hereafter be amended. No amendment, modification or repeal of this Article SEVENTH shall adversely affect any right or protection of a director or officer that exists at the time of such amendment, modification or repeal. EIGHTH: INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Corporation shall indemnify to the fullest -21- extent permitted by law (including the Investment Company Act of 1940) any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. To the fullest extent permitted by law (including the Investment Company Act of 1940), expenses incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this Article EIGHTH shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of this Article EIGHTH shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this Article EIGHTH, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation -22- or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Nothing in Article SEVENTH or in this Article EIGHTH protects or purports to protect any director or officer against any liability to the Corporation or its security holders to which he or she would otherwise be subject by reason of willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. NINTH: MANAGEMENT OF THE AFFAIRS OF THE CORPORATION. The Board of Directors shall have the management and control of the property, business and affairs of the Corporation and is hereby vested with all the powers possessed by the Corporation itself so far as is not -23- inconsistent with law or these Articles of Incorporation. In furtherance and without limitation of the foregoing provisions, it is expressly declared that, subject to these Articles of Incorporation, the Board of Directors shall have power: (i) To make, alter, amend or repeal from time to time the Bylaws of the Corporation except as such power may otherwise be limited in the Bylaws. (ii) To authorize the repurchase of shares in the open market or otherwise, at prices not in excess of the net asset value of such shares determined in accordance with Article FIFTH hereof, PROVIDED that the Corporation has assets legally available for such purpose and to pay for such shares in cash, securities or other assets then held or owned by the Corporation. iii) To fix an offering price for the shares of any Series or Class that shall yield to the Corporation not less than the par value thereof, at which price the shares of the Common Stock of the Corporation shall be offered for sale, and to determine from time to time thereafter the offering price that will yield to the Corporation not less than the par value thereof from sales of the shares of its Common Stock. (iv) From time to time to determine whether, to what extent, at what times and places and under what conditions and regulations the books and accounts of -24- the Corporation, or any of them other than the stock ledger, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by law or authorized by resolution of the Board of Directors or of the stockholders. (v) In addition to the powers and authorities granted herein and by statute expressly conferred upon it, the Board of Directors is authorized to exercise all such powers and do all acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of Maryland law, of these Articles of Incorporation and of the Bylaws of the Corporation. TENTH: CORPORATE BOOKS. The books of the Corporation may be kept (subject to any provisions contained in applicable statutes) outside the State of Maryland at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. Election of directors need not be by ballot unless the Bylaws of the Corporation shall so provide. ELEVENTH: AMENDMENTS. The Corporation reserves the right from time to time to amend, alter, or repeal any of the provisions of these Articles of Incorporation (including any amendment that changes the terms of any of the -25- outstanding shares by classification, reclassification or otherwise), and any contract rights, as expressly set forth in these Articles of Incorporation, of any outstanding shares, and to add or insert any other provisions that may, under the statutes of the State of Maryland at the time in force, be lawfully contained in articles of incorporation, and all rights at any time conferred upon the stockholders of the Corporation by these Articles of Incorporation are subject to the provisions of this Article ELEVENTH. TWELFTH: QUORUM; MAJORITY VOTE. 1. The presence in person or by proxy of the holders of record of one-third of the shares issued and outstanding and entitled to vote thereat shall constitute a quorum for the transaction of any business at all meetings of the stockholders except as otherwise provided by law (including the Investment Company Act of 1940) or in these Articles of Incorporation. 2. On any given matter, the presence in any meeting, in person or by proxy, of holders of record of less than one-third of the shares issued and outstanding and entitled to vote thereat shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat, in person or by proxy, holders of record of the number of shares required for action in respect of such other matter or matters. -26- Notwithstanding any provision of Maryland law requiring more than a majority vote of the Common Stock, or any Series or Class thereof, in connection with any corporation action (including, but not limited to, the amendment of these Articles of Incorporation), unless otherwise provided in these Articles of Incorporation, the Corporation may take or authorize such action upon the favorable vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon. THIRTEENTH: ACQUISITION SUBJECT TO ARTICLES OF INCORPORATION. All persons who shall acquire shares in the Corporation shall acquire the same subject to the provisions of these Articles of Incorporation. FOURTEENTH: DURATION. The duration of the Corporation shall be perpetual. FIFTEENTH: AMENDMENT AND RESTATEMENT. This Amendment and Restatement of the Articles of Incorporation of the Corporation as hereinabove set forth was approved by the Corporation's Directors and no stock entitled to be voted on the matter was outstanding or subscribed for at the time of approval. IN WITNESS WHEREOF, FOREIGN FUND, INC., has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by the sole Director and President, and attested to by its Secretary, and each said officer of the Corporation has also acknowledged these -27- Articles of Amendment and Restatement to be the act of the Corporation and has stated under penalty of perjury that to the best of his knowledge, information and belief the matters and facts set forth herein are true in all material respects, all on February , 1996. FOREIGN FUND, INC. By: __________________ John E. Pelletier Attest: ___________________ -28- EX-99.2 3 EXHIBIT 99.2 AMENDED BYLAWS OF FOREIGN FUND, INC. ARTICLE I FISCAL YEAR AND OFFICES SECTION 1. FISCAL YEAR. Unless otherwise provided by resolution of the Board of Directors the fiscal year of FOREIGN FUND, INC. (the "Corporation") shall begin on November 1 and end on the last day of October. SECTION 2. REGISTERED OFFICE. The registered office of the Corporation in Maryland shall be located at 32 South Street, Baltimore, Maryland 21202, and the name and address of its Resident Agent is The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. SECTION 3. OTHER OFFICES. The Corporation shall have additional places of business, either within or outside the State of Maryland as the Board of Directors may from time to time designate. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE OF MEETING. Meetings of the Stockholders for the election of Directors shall be held in such place as shall be fixed by resolution of the Board of Directors and stated in the notice of the Meeting. SECTION 2. ANNUAL MEETINGS. Annual Meetings of Stockholders shall be held at such time and on such dates as may be fixed by the Board of Directors by resolution; PROVIDED, that Annual Meetings of Stockholders will not be held if none of the following is required to be acted on by Stockholders under the INVESTMENT COMPANY ACT OF 1940: (a) election of directors; (b) approval of the investment advisory agreement; (c) ratification of selection of independent accountants; and (d) approval of a distribution agreement. SECTION 3. SPECIAL MEETINGS. Special Meetings of the Stockholders may be called at any time by the Chairman of the Board or the President, or by a majority of the Board of Directors, and shall be called by the Chairman of the Board, President or Secretary upon written request of the holders of shares entitled to cast not less than twenty-five percent of all the votes entitled to be cast at such meeting provided that (a) such request shall state the purposes of such meeting and the matters proposed to be acted on, and (b) the Stockholders requesting such meeting shall have paid to the Corporation the reasonably estimated cost of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such Stockholders. No Special Meeting need be called upon the request of holders of common stock entitled to cast less than a majority of all votes entitled to be cast at such meeting to consider any matter which is substantially the same as a matter voted on at any meeting of the Stockholders held during the preceding twelve months. SECTION 4. NOTICE. Not less than ten nor more than ninety days before the date of every Annual or Special Stockholders' Meeting, the Secretary shall cause to be mailed to each Stockholder entitled to vote at such meeting at his (her) address (as it appears on the records of the Corporation at the time of mailing) written notice stating the time and place of the meeting and, in the case of a Special Meeting of Stockholders, shall be limited to the purposes stated in the notice. Notice of adjournment of a Stockholders' meeting to another time or place need not be given, if such time and place are announced at the meeting. SECTION 5. RECORD DATE FOR MEETINGS. Subject to the provisions of Maryland law, the Board of Directors may fix in advance a date not more than ninety days, nor less than ten days, prior to the date of any Annual or Special Meeting of the Stockholders as a record date for the determination of the Stockholders entitled to receive notice of, and to vote at any meeting and any adjournment thereof; and in such case such Stockholders and only such Stockholders as shall be Stockholders of record on the date so fixed shall be entitled to receive notice of and to vote at such meeting and any adjournment thereof as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. SECTION 6. QUORUM. At any meeting of Stockholders, the presence in person or by proxy of the holders of a majority of all the votes entitled to be cast without regard to series at the meeting shall constitute a quorum for the transaction of business at the meeting, except that where any provision of law or the Articles of Incorporation require that the holders of any class or series of shares shall vote as a class or series, then a majority of the aggregate number of shares of such class or series, as the case may be, at the time outstanding shall be necessary to constitute a quorum for the transaction of such business. If, however, such quorum shall not be present or represented at any meeting of the Stockholders, the holders of a majority of the stock present or in person or by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented to a date not more than 120 days after -2- the original record date. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 7. VOTING. Each Stockholder shall have one vote for each full share and a fractional vote for each fractional share of stock having voting power held by such Stockholder on the record date set pursuant to Section 5 on each matter submitted to a vote at a meeting of Stockholders. Such vote may be made in person or by proxy. At all meetings of the Stockholders, a quorum being present, all matters shall be decided by majority vote of the shares of stock entitled to vote held by Stockholders present in person or by proxy, unless the question is one which by express provision of the laws of the State of Maryland, the Investment Company Act of 1940, as from time to time amended, or the Articles of Incorporation, a different vote is required, in which case such express provision shall control the decision of such question. At all meetings of Stockholders, unless the voting is conducted by inspectors, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the Chairman of the meeting. SECTION 8. VOTING - PROXIES. The right to vote by proxy shall exist only if the instrument authorizing such proxy to act shall have been executed in writing by the Stockholder himself or by his attorney thereunto duly authorized in writing. No proxy shall be voted on after eleven months from its date unless it provides for a longer period. SECTION 9. INSPECTORS. At any election of Directors, the Board of Directors prior thereto may, or, if they have not so acted, the Chairman of the meeting may, appoint one or more inspectors of election who shall first subscribe an oath of affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall after the election make a certificate of the result of the vote taken. SECTION 10. STOCK LEDGER AND LIST OF STOCKHOLDERS. It shall be the duty of the Secretary or Assistant Secretary of the Corporation to cause an original or duplicate stock ledger to be maintained at the office of the Corporation's transfer agent. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. SECTION 11. ACTION WITHOUT MEETING. Any action to be taken by Stockholders may be taken without a meeting if (a) all Stockholders entitled to vote on the matter consent to the action in writing, and (b) all Stockholders entitled to notice of the meeting but not entitled to vote at it sign a written waiver of any right to dissent and -3- (c) the written consents are filed with the records of the meetings of Stockholders. Such consent shall be treated for all purposes as a vote at a meeting. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business of the Corporation shall be under the direction of its Board of Directors, which may exercise all powers of the Corporation, except such as are by statute, or the Articles of Incorporation, or by these ByLaws conferred upon or reserved to the Stockholders. SECTION 2. NUMBER AND TERM OF OFFICE. The number of Directors which shall constitute the whole Board shall be determined from time to time by the Board of Directors, but shall not be fewer than three nor more than fifteen; provided that the number of Directors shall not be fewer than one for so long as there is only one or fewer Stockholders. Each Director elected shall hold office until his successor is elected and qualified. Directors need not be Stockholders. SECTION 3. ELECTION. Initially the Directors shall be those persons named as such in the Articles of Incorporation. The Directors shall be elected by the vote of a majority of the shares present in person or by proxy at a meeting of the Stockholders called for such purpose, except that any vacancy in the Board of Directors may be filled by a majority vote of the Board of Directors, although less than a quorum, except that a newly-created directorship may be filled only by a vote of the entire Board of Directors. SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be chosen, shall perform and execute such executive duties and administrative powers as the Board of Directors shall from time to time prescribe. The Chairman of the Board shall not be considered an officer of the Corporation. SECTION 5. PLACE OF MEETING. Meetings of the Board of Directors, regular or special, may be held at any place in or out of the State of Maryland as the Board may from time to time determine. SECTION 6. QUORUM. At all meetings of the Board of Directors one-third of the entire Board of Directors shall constitute a quorum for the transaction of business provided that in no case may a quorum be less than two persons. The action of a majority of the Directors present at any meeting at which a quorum is present shall be the action of the Board of Directors unless the concurrence of a greater proportion is required for such action by the laws of Maryland, the Investment Company Act of -4- 1940, these ByLaws or the Articles of Incorporation. If a quorum shall not be present at any meeting of Directors, the Directors present thereat may by a majority vote adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without additional notice at such time and place as shall from time to time be determined by the Board of Directors provided that notice of any change in the time or place of such meetings shall be sent promptly to each Director not present at the meeting at which such change was made in the manner provided for notice of special meetings. SECTION 8. SPECIAL MEETINGS. Special Meetings of the Board of Directors may be called by the Chairman of the Board or the President on one day's notice to each Director. Special Meetings shall be called by the Chairman of the Board, President or Secretary in like manner and on like notice on the written request of two Directors. SECTION 9. TELEPHONE MEETINGS. Members of the Board of Directors or a committee of the Board of Directors may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means constitutes, subject to the provisions of the INVESTMENT COMPANY ACT OF 1940, presence in person at the meeting. SECTION 10. INFORMAL ACTIONS. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 11. COMMITTEES. The Board of Directors may by resolution passed by a majority of the entire Board appoint from among its members an Executive Committee and other committees composed of two or more Directors, and may delegate to such committees, in the intervals between meetings of the Board of Directors, any or all of the powers of the Board of Directors in the management of the business and affairs of the Corporation. SECTION 12. ACTION OF COMMITTEES. In the absence of an appropriate resolution of the Board of Directors each committee may adopt such rules and regulations governing its proceedings, quorum and manner of acting as it shall deem proper and desirable, provided that the quorum shall not be less than two Directors. The committees shall keep minutes of their proceedings and shall report the same to the Board of Directors at the meeting next succeeding, and any action by the committee -5- shall be subject to revision and alteration by the Board of Directors, provided that no rights of third persons shall be affected by any such revision or alteration. In the absence of any member of such committee the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of such absent member. SECTION 13. COMPENSATION. Any Director, whether or not he is a salaried officer or employee of the Corporation, may be compensated for his services as Director or as a member of a committee of Directors, or as Chairman of the Board or chairman of a committee by fixed periodic payments or by fees for attendance at meetings or by both, and in addition may be reimbursed for transportation and other expenses, and in such manner and amounts as the Board of Directors may from time to time determine. ARTICLE IV NOTICES SECTION 1. FORM. Notices to Stockholders shall be in writing and delivered personally or mailed to the Stockholders at their addresses appearing on the books of the Corporation. Notices to Directors shall be oral or by telephone or telegram or in writing delivered personally or mailed to the Directors at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Subject to the provisions of the INVESTMENT COMPANY ACT OF 1940, notice to Directors need not state the purpose of a Regular or Special Meeting. SECTION 2. WAIVER. Whenever any notice of the time, place or purpose of any meeting of Stockholders, Directors or a committee is required to be given under the provisions of Maryland law or under the provisions of the Articles of Incorporation or these ByLaws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof or actual attendance at the meeting of Stockholders in person or by proxy, or at the meeting of Directors of committee in person, shall be deemed equivalent to the giving of such notice to such persons. -6- ARTICLE V OFFICERS SECTION 1. EXECUTIVE OFFICERS. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Secretary and a Treasurer. The Board of Directors may, from time to time, elect or appoint a Controller, one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. The same person may hold two or more offices, except that no person shall be both President and Vice-President and no officer shall execute, acknowledge or verify any investment in more than one capacity, if such instrument is required by law, the Articles of Incorporation or these ByLaws to be executed, acknowledged or verified by two or more officers. SECTION 2. ELECTION. The Board of Directors shall choose a President, a Secretary and a Treasurer at its first meeting or by unanimous consent pursuant to Section 2-408(c) of the Maryland General Corporation Law. SECTION 3. OTHER OFFICERS. The Board of Directors from time to time may appoint such other officers and agents as it shall deem advisable, who shall hold their offices for such terms and shall exercise powers and perform such duties as shall be determined from time to time by the Board. The Board of Directors from time to time may delegate to one or more officers or agents the power to appoint any such subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. SECTION 4. COMPENSATION. The salaries or other compensation of all officers and agents of the Corporation shall be fixed by the Board of Directors, except that the Board of Directors may delegate to any person or group of persons the power to fix the salary or other compensation of any subordinate officers or agents appointed pursuant to Section 3 of this Article V. SECTION 5. TENURE. The officers of the Corporation shall serve for one year and until their successors are chosen and qualify. Any officer or agent may be removed by the affirmative vote of a majority of the Board of Directors whenever, in its judgment, the best interests of the Corporation will be served thereby. In addition, any officer or agent appointed pursuant to Section 3 may be removed, either with or without cause, by any officer upon whom such power of removal shall have been conferred by the Board of Directors. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors, unless pursuant to Section 3 the power of appointment has been conferred by the Board of Directors on any other officer. -7- SECTION 6. PRESIDENT. The President shall be the Chief Executive Officer of the Corporation; shall see that all orders and resolutions of the Board are carried into effect. The President shall also be the chief administrative officer of the Corporation and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECTION 7. VICE-PRESIDENT. The Vice-Presidents, in order of their seniority, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties as the Board of Directors or the Chief Executive Officer may from time to time prescribe. SECTION 8. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the Stockholders and record all the proceedings thereof and shall perform like duties for any committee when required. He (she) shall give, or cause to be given, notice of meetings of the Stockholders and of the Board of Directors, shall have charge of the records of the Corporation, including the stock books, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he (she) shall be. He (she) shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, shall affix and attest the same to any instrument requiring it. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest to the affixing by his (her) signature. SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretaries in order of their seniority, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe. SECTION 10. TREASURER. The Treasurer, unless another officer has been so designated, shall be the Chief Financial Officer of the Corporation. He (she) shall have general charge of the finances and books of account of the Corporation. Except as otherwise provided by the Board of Directors, he (she) shall have general supervision of the funds and property of the Corporation and of the funds and property of the Corporation and of the performance by the custodian of its duties with respect thereto. He (she) shall render to the Board of Directors, whenever directed by the Board, an account of the financial condition of the Corporation and of all his (her) transactions as Treasurer, and as soon as possible after the close of each financial year he (she) shall make and submit to the Board of Directors a like report for such financial year. He (she) shall cause to be prepared annually a full and correct statement of the affairs of the Corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year, which shall be submitted at the Annual Meeting of Stockholders and filed within twenty days thereafter at the principal office of the Corporation. He (she) shall perform all the -8- acts incidental to the office of Treasurer, subject to the control of the Board of Directors. SECTION 11. ASSISTANT TREASURER. The Assistant Treasurers, in the order of their seniority, shall in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors may from time to time presume. SECTION 12. SURETY BONDS. The Board of Directors may require any officer or agent of the Corporation to execute a bond (including, without limitation, any bond required by the INVESTMENT COMPANY ACT OF 1940, as amended, and the rules and regulations of the SECURITIES AND EXCHANGE COMMISSION) to the Corporation in such sum and with such surety or sureties as the Board of Directors may determine, conditioned upon the faithful performance of his (her) duties of the Corporation, including responsibility for negligence and for the accounting of any Corporation's property, funds or securities that may come into his (her) hands. ARTICLE VI INSURANCE Subject to the provisions of the INVESTMENT COMPANY ACT OF 1940, the Corporation, directly, through third parties or through affiliates of the Corporation, may purchase, or provide through a trust fund, letter of credit or surety bond insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or who, while a Director, officer, employee or agent of the Corporation, is or was serving at the request of the Corporation as a Director, officer, employee, partner, trustee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise against any liability asserted against and incurred by such person in any such capacity or arising out of such person's position, whether or not the Corporation would have the power to indemnify such person against such liability. ARTICLE VIII STOCK SECTION 1. CERTIFICATES. Stockholders are not entitled to receive certificates evidencing their share ownership unless the Directors shall, by resolution, otherwise determine. -9- SECTION 2. TRANSFER OF CAPITAL STOCK. Transfers of shares of the stock of the Corporation shall be made on the books of the Corporation by the holder of record thereof (in person or by his attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the Secretary of the Corporation) (i) if a certificate or certificates have been issued, upon the surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such shares, or (ii) as otherwise prescribed by the Board of Directors. Every certificate exchanged, surrendered for redemption or otherwise returned to the Corporation shall be marked "Canceled" with the date of cancellation. SECTION 3. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the General Laws of the State of Maryland. SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may, from time to time, appoint or remove transfer agents and/or registrars of transfers of shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made all certificates representing shares of stock thereafter issued shall be countersigned by one of such transfer agents or by one of such registrars of transfers or by both and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only one countersignature by such person shall be required. SECTION 5. STOCK LEDGER. The Corporation shall maintain an original stock ledger containing the names and addresses of all Stockholders and the number and class or series of shares held by each Stockholder. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. -10- ARTICLE VIII GENERAL PROVISIONS SECTION 1. CUSTODIANSHIP. (a) The Corporation shall place and at all times maintain in the custody of a custodian (including any subcustodian for the custodian) all funds, securities and similar investments owned by the Corporation. Subject to the approval of the Board of Directors the custodian may enter into arrangements with securities depositories, as long as such arrangements comply with the provisions of the Investment Company Act of 1940 and the rules and regulations promulgated thereunder. SECTION 2. SEAL. The corporate seal shall have inscribed thereon the name of the Corporation and the year of its organization. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 3. EXECUTION OF INSTRUMENTS. All deeds, documents, transfers, contracts, agreements and other instruments requiring execution by the Corporation shall be signed by any officer thereof. ARTICLE IX AMENDMENTS The Board of Directors shall have the power to make, alter and repeal the bylaws of the Corporation. -11- EX-99.4 4 EXHIBIT 99.4 [Form of the Face of Global Certificate] COMMON STOCK COMMON STOCK FOREIGN FUND, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND THE _________________ INDEX SERIES Unless this Certificate is presented by an authorized representative of the Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. CUSIP ____________________ SEE REVERSE FOR CERTAIN DEFINITIONS THIS IS TO CERTIFY THAT CEDE & CO. is the owner and registered Holder of the number of fully paid and nonassessable shares of the common stock, par value $.001 per share (the "World Equity Benchmark Shares" or "WEBS"), of the ________________Index Series of Foreign Fund, Inc., a Maryland corporation (the "Corporation"), shown from time to time on the records of the Transfer Agent thereof as represented by this Certificate which shall be all of the outstanding WEBS of the ______ Index Series of the Corporation. This Certificate and the WEBS represented hereby are issued and shall be held subject to the provisions of the General Corporation Law of the State of Maryland and the Articles of Incorporation and By-laws of the Corporation, as they may be amended from time to time. 2 This certificate is not valid unless manually countersigned by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated _________________________ _________________________ SECRETARY PRESIDENT __________________________ TRANSFER AGENT By___________________________________ Authorized Officer 3 [Reverse of Form of Global Certificate] FOREIGN FUND, INC. Incorporated Under the Laws of the State of Maryland __________ Index Series This Certificate represents all shares of common stock, par value $.001 per share ("World Equity Benchmark Shares" or "WEBS"), of the _____ Index Series of Foreign Fund, Inc. (the "Corporation") recorded from time to time on the books of PFPC Inc., as transfer agent (the "Transfer Agent"), located in Wilmington, Delaware. The registered Holder is entitled to all the rights, interests and privileges of a stockholder as provided in the Articles of Incorporation and By-Laws of the Corporation, as amended, which are incorporated by reference herein. This Certificate shall be transferable by Cede & Co. as the registered Holder hereof by presentation and surrender hereof at the office of the Transfer Agent, properly endorsed or accompanied by an instrument of transfer, in form satisfactory to the Transfer Agent, and executed in blank by the registered Holder hereof or his authorized attorney. WEBS represented hereby may be redeemed by the Corporation only in aggregations of a specified number of shares (each, a "Creation Unit") at their net asset value next determined after receipt of a redemption request in proper form by the Distributor thereof in kind, in cash or a combination thereof pursuant to Article _____ of the Articles of Incorporation, as amended in accordance with the requirements thereof, by the registered Holder when tendered together with an instrument of assignment and transfer duly endorsed or executed in blank, together with an irrevocable instruction in writing to redeem the same, and the Corporation will thereafter redeem said WEBS at net asset value next determined after receipt of a redemption request in proper form by the Distributor, provided that the WEBS to be redeemed represented by this Certificate shall equal one or more Creation Units of WEBS as provided in the Articles of Incorporation, as amended from time to time. The Corporation has authority to issue stock of more than one index series (each, an "Index Series"). The Corporation will furnish without charge to the registered Holder hereof a full statement of: (1) the designations and 4 any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the stock of each Index Series which the Corporation is authorized to issue; (2) the differences in the relative rights and preferences between the WEBS of each Index Series which the Corporation is authorized to issue to the extent such rights and preferences have been set; and (3) the authority of the Board of Directors to set the relative rights and preferences of subsequent Index Series. The registered Holder hereof may be required to pay taxes or other governmental charges that may be imposed in connection with the transfer, redemption or other surrender of this Certificate. The Transfer Agent, notwithstanding any notice to the contrary, may treat the person in whose name this Certificate is registered upon the books of the Transfer Agent as the absolute owner hereof for all purposes. [SEE CURRENT PROSPECTUS FOR FURTHER INFORMATION CONCERNING REDEMPTION OF WEBS] __________ 5 [FORM OF ASSIGNMENT] For value received _______________________ hereby sells, assigns and transfers unto ____________________ [________] (please insert Social Security Number or other identifying number of the Assignee) all WEBS of the ______ Index Series of Foreign Fund, Inc. represented by the within Certificate, and does hereby irrevocably constitute and appoint _____________________________ Attorney to transfer the said WEBS on the books of the Transfer Agent for such ___________ with full power of substitution in the premises. Dated:_______________ _______________________________ (Signature) SIGNATURE GUARANTEED BY:_________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement or any change whatever. EX-99.5 5 EXHIBIT 99.5 FORM OF ADVISORY AGREEMENT AGREEMENT made as of the _____ day of _____________, 1996 between BZW Barclays Global Fund Advisors, a corporation organized under the laws of the State of California (the "Adviser"), and Foreign Fund, Inc., a Maryland corporation (the "Company"). WHEREAS, the Adviser is engaged principally in the business of rendering investment management services and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Company proposes to engage in the business of an open-end management investment company and is registered as such under the 1940 Act; and WHEREAS, the Company is authorized to issue shares of beneficial interest in separate series with each such series representing interests in a separate portfolio of securities and other assets; and WHEREAS, the Company intends initially to offer shares representing interests in each of the separate portfolios identified on Schedule A hereto (each, an "Initial Fund" and collectively, the "Initial Funds"); and WHEREAS, the Company desires to appoint the Adviser to serve as the investment adviser with respect to each of the Initial Funds; and WHEREAS, the Company may, from time to time, offer shares representing interests in one or more additional portfolios (each, an "Additional Fund" and collectively, the "Additional Funds"); and WHEREAS, the Company may desire to appoint the Adviser as the investment adviser with respect to one or more of the "Additional Funds" (each such Additional Fund and Initial Fund being referred to herein individually as a "Fund" and collectively as the "Funds"); NOW THEREFORE, the parties hereto hereby agree as follows: 1. APPOINTMENT OF ADVISER a. INITIAL FUNDS. The Company hereby appoints the Adviser to act as investment adviser for the Initial Funds for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. b. ADDITIONAL FUNDS. In the event the Company desires to retain the Adviser to render investment advisory services hereunder with respect to any Additional Fund, it shall so notify the Adviser in writing, indicating the advisory fee to be payable with respect to the Additional Fund. If the Adviser is willing to render such services for such fee and on the terms provided for herein, it shall so notify the Company in writing, whereupon such Additional Fund shall become a Fund hereunder. 2. DUTIES OF THE ADVISER The Adviser, at its own expense (subject to the overall supervision and review of the Board of Directors of the Company), shall (i) furnish continuously an investment program for each Fund in compliance with that Fund's investment objective and policies, as set forth in the then current prospectus and statement of additional information for such Fund contained in the Company's Registration Statement on Form N-1A, as such prospectus and statement of additional information is amended or supplemented from time to time, (ii) determine what investments shall be purchased, held, sold or exchanged for each Fund and what portion, if any, of the assets of each Fund shall be held uninvested, (iii) make changes on behalf of the Company in the investments for each Fund and (iv) provide the Company with records concerning the Adviser's activities that the Company is required to maintain and render reports to the Company's officers and Board of Directors concerning the Adviser's discharge of the foregoing responsibilities. The Adviser shall furnish to the Company all office facilities, equipment, services and executive and administrative personnel necessary for managing the investment program of the Company for each Fund. 3. ALLOCATION OF EXPENSES Except for expenses incurred by the Adviser in providing the services set forth in Paragraph 2 above, the Company assumes and shall pay all expenses for all other Company operations and activities. The expenses to be borne by the Company shall include, without limitation: (1) all expenses of organizing the Company or forming any series thereof; (2) all expenses (including information, materials and services other than services of the Adviser) of preparing, printing and mailing all annual, semiannual and periodic reports, proxy materials and other communications (including registration statements, prospectuses and amendments and revisions thereto) furnished to existing shareholders of the Company and/or regulatory authorities; (3) fees involved in registering and maintaining registration of the Company and its shares with the Securities and Exchange Commission and state regulatory authorities; (4) any other registration, filing or other fees in connection with requirements of regulatory authorities; (5) expenses, including the cost of printing of certificates relating to the issuance of shares of the Company; 2 (6) to the extent not paid by the Company's distributor, the expenses of maintaining a shareholder account and furnishing, or causing to be furnished, to each shareholder a statement of account, including the expense of mailing such statements; (7) taxes and similar fees payable by the Company; (8) expenses related to the redemption of its shares; (9) all issue and transfer taxes, brokers' commissions and other costs chargeable to the Company in connection with securities transactions to which the Company is a party, including any portion of such commissions attributable to research and brokerage services as defined by Section 28(e) of the Securities Exchange Act of 1934, as amended from time to time (the "1934 Act"); (10) the charges and expenses of the custodian appointed by the Company, or any depository utilized by such custodian, for the safekeeping of its property; (11) the charges and expenses of any lending agent appointed by the Company and all borrowers' rebates and similar fees payable by the Company in connection with any loan transaction; (12) charges and expenses of any administrator and/or accounting and recordkeeping agent appointed by the Company; (13) charges and expenses of any shareholder servicing agent, transfer agent and registrar appointed by the Company, including costs of servicing shareholder investment accounts; (14) charges and expenses of independent accountants retained by the Company; (15) legal fees and expenses in connection with the affairs of the Company, including legal fees and expenses in connection with registering and qualifying its shares with federal and state regulatory authorities; (16) compensation and expenses of Directors of the Company who are not "affiliated persons" (as defined in the 1940 Act) of the Adviser; (17) expenses of shareholders' and Directors' meetings; (18) membership dues in, and assessments of, the Investment Company Institute or similar organizations; (19) insurance premiums on fidelity, errors and omissions and other coverages; 3 (20) expenses incurred in connection with any distribution plan adopted by the Company in compliance with Rule 12b-1 of the 1940 Act; and (21) such other non-recurring expenses of the Company as may arise, including expenses of actions, suits, or proceedings to which the Company is a party and the legal obligation which the Company may have to indemnify its Directors or shareholders with respect thereto. 4. ADVISORY FEE For the services to be provided by the Adviser hereunder with respect to each Fund, the Company shall pay to the Adviser an annual gross investment advisory fee equal to the amount set forth on Schedule A attached hereto. Schedule A shall be amended from time to time to reflect the addition and/or termination of any Fund as a Fund hereunder and to reflect any change in the advisory fees payable with respect to any Fund duly approved in accordance with Section 7(b) hereunder. All fees payable hereunder shall be accrued daily and paid as soon as practical after the last day of each calendar quarter. In the case of commencement or termination of this Agreement with respect to any Fund during any calendar quarter, the fee with respect to such Fund for that quarter shall be reduced proportionately based upon the number of calendar days during which it is in effect, and the fee shall be computed upon the average daily net assets of such Fund for the days during which it is in effect. 5. PORTFOLIO TRANSACTIONS In connection with the management of the investment and reinvestment of the assets of the Company, the Adviser, acting by its own officers, directors or employees, is authorized to select the brokers or dealers that will execute purchase and sale transactions for the Company. In executing portfolio transactions and selecting brokers or dealers, if any, the Adviser will use its best efforts to seek on behalf of a Fund the best overall terms available. In assessing the best overall terms available for any transaction, the Adviser shall consider all factors it deems relevant, including the breadth of the market in and the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any (for the specific transaction and on a continuing basis). In evaluating the best overall terms available, and in selecting the broker or dealer, if any, to execute a particular transaction, the Adviser may also consider the brokerage and research services (as those terms are defined in Section 28(e) of the 1934 Act) provided to any Fund of the Company. The Adviser may pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided. The Company acknowledges that any such research may be useful to the Adviser in connection with other accounts managed by it. 4 6. LIABILITY OF ADVISER a. Neither the Adviser nor its officers, directors, employees, agents or controlling persons or assigns shall be liable for any error of judgment or mistake of law or for any loss suffered by the Company or its shareholders in connection with the matters to which this Agreement relates; provided that no provision of this Agreement shall be deemed to protect the Adviser against any liability to the Company or its shareholders to which it might otherwise be subject by reason of any willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties under this Agreement. b. The Company, on behalf of each Fund, hereby agrees to indemnify and hold harmless the Adviser, its directors, officers and employees and each person, if any, who controls the Adviser (collectively, the "Indemnified Parties") against any and all losses, claims, damages or liabilities (including reasonable attorneys fees and expenses), joint or several, relating to a Fund, to which any such Indemnified Party may become subject under the Securities Act of 1933, as amended (the 1933 Act ), the 1934 Act, the Investment Advisers Act of 1940, as amended, the 1940 Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission to state a material fact required to be stated or necessary to make the statements made not misleading in (x) the Registration Statement or the prospectus, (y) any advertisement or sales literature authorized by the Company for use in the offer and sale of shares of the Fund, or (z) any application or other document filed in connection with the qualification of the Company or shares of the Fund under the Blue Sky or securities laws of any jurisdiction, except insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission (1) in a document prepared by the Adviser, or (2) made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Adviser pertaining to or originating with the Adviser for use in connection with any document referred to in clauses (x), (y) or (z), or (ii) subject in each case to clause (i) above, the Adviser acting as investment adviser to the Company with respect to the Fund; c. It is understood, however, that nothing in this paragraph 6 shall protect any Indemnified Party against, or entitle any Indemnified Party to, indemnification against any liability to the Company or its shareholders to which such Indemnified Party is subject, by reason of its willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of any reckless disregard of its obligations and duties, under this Agreement or otherwise to an extent or in a manner inconsistent with Section 17(i) of the 1940 Act. 5 7. DURATION AND TERMINATION OF THIS AGREEMENT a. DURATION. This Agreement shall become effective with respect to each Initial Fund on the date hereof and, with respect to any Additional Fund, on the date specified in the written notice received by the Company from the Adviser in accordance with paragraph 1(b) hereof that the Adviser is willing to serve as Adviser with respect to such Fund. Unless terminated as herein provided, this Agreement shall remain in full force and effect for two years from the date hereof with respect to each Initial Fund and, with respect to each Additional Fund, for two years from the date on which such Fund becomes a Fund hereunder. Subsequent to such initial periods of effectiveness, this Agreement shall continue in full force and effect for periods of one year thereafter with respect to each Fund so long as such continuance with respect to such Fund is approved at least annually (i) by either the Directors of the Company or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of such Fund, and (ii), in either event, by the vote of a majority of the Directors of the Company who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. b. AMENDMENT. Any amendment to this Agreement shall become effective with respect to a Fund upon approval of the Adviser and of a majority of directors who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting such approval and a majority of the outstanding voting securities (as defined in the 1940 Act) of that Fund. c. TERMINATION. This Agreement may be terminated with respect to any Fund at any time, without payment of any penalty, by vote of the Directors or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of that Fund, or by the Adviser, in each case on sixty (60) days' prior written notice to the other party; provided, that a shorter notice period shall be permitted for a Fund in the event its shares are no longer listed on a national securities exchange. d. AUTOMATIC TERMINATION. This Agreement shall automatically and immediately terminate in the event of its "assignment" (as defined in the 1940 Act). e. APPROVAL, AMENDMENT OR TERMINATION BY A FUND. Any approval, amendment or termination of this Agreement by the holders of a "majority of the outstanding voting securities" (as defined in the 1940 Act) of any Fund shall be effective to continue, amend or terminate this Agreement with respect to any such Fund notwithstanding (i) that such action has not been approved by the holders of a majority of the outstanding voting securities of any other Fund affected thereby, and (ii) that such action has not been approved by the vote of a majority of the outstanding voting securities of the Company, unless such action shall be required by any applicable law or otherwise. 6 8. SERVICES NOT EXCLUSIVE The services of the Adviser to the Company hereunder are not to be deemed exclusive, and the Adviser shall be free to render similar services to others so long as its services hereunder are not impaired thereby. 9. MISCELLANEOUS a. NOTICE. Any notice under this Agreement shall be in writing, addressed and delivered or mailed, postage prepaid, to the other party at such address as such other party may designate in writing for the receipt of such notices. b. SEVERABILITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder shall not be thereby affected. c. APPLICABLE LAW. This Agreement shall be construed in accordance with and governed by the laws of New York. d. EXECUTION BY COUNTERPART. This Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first set forth above. FOREIGN FUND, INC. By: -------------------------------- Name: Title: BZW BARCLAYS GLOBAL FUND ADVISORS By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: 7 SCHEDULE A ADVISORY FEE FOR THE INITIAL FUNDS: .27% per annum of the aggregate net assets of the Initial Funds up to aggregate net assets of $1.7 billion, plus .15% per annum of the aggregate net assets of the Initial Funds in excess of $1.7 billion. INITIAL FUNDS: Australia Index Series Austria Index Series Belgium Index Series Canada Index Series France Index Series Germany Index Series Hong Kong Index Series Italy Index Series Japan Index Series Malaysia Index Series Mexico (Free) Index Series Netherlands Index Series Singapore (Free) Index Series Spain Index Series Sweden Index Series Switzerland Index Series United Kingdom Index Series 8 EX-99.6(A) 6 EXHIBIT 99.6(A) FORM OF DISTRIBUTION AGREEMENT FOREIGN FUND, INC. c/o PFPC Inc. 400 Bellevue Parkway Wilmington, Delaware 19809 , 1996 Funds Distributor, Inc. One Exchange Place Tenth Floor Boston, Massachusetts 02109 Dear Sirs: This is to confirm that, in consideration of the agreements hereinafter contained, the above-named investment company (the "Fund") has agreed that you shall be, for the period of this agreement, the distributor of shares of each Index Series of the Fund set forth on Exhibit A hereto, as such Exhibit may be revised from time to time (each, an "Index Series") . For purposes of this agreement the term "Shares" shall mean the authorized shares of the relevant Index Series. 1. Services as Distributor 1.1 You will act as agent of the Fund for the distribution of Shares in Creation Units (as defined herein) covered by, and in accordance with, the registration statement and prospectus then in effect under the Securities Act of 1933, as amended (the "1933 Act") and will transmit promptly any orders received by you for purchase or redemption of Shares in Creation Units to the Transfer and Dividend Disbursing Agent for the Fund of which the Fund has notified you in writing. You shall deliver or cause the delivery of a prospectus to persons purchasing Shares in Creation Units and shall maintain records of both orders placed with you and confirmations of acceptance furnished by you. You represent and warrant that you are a broker-dealer registered under the Securities Exchange Act of 1934 (the "1934 Act") and a member of the National Association of Securities Dealers, Inc. You agree to comply with all of the applicable terms and provisions of the 1934 Act. 1 1.2 You agree to use your best efforts to solicit orders for the sale of Shares in Creation Units on a continuous basis. It is contemplated that you may enter into sales or servicing agreements with securities dealers, financial institutions and other industry professionals, such as investment advisers, accountants and estate planning firms, and in so doing you will act only on your own behalf as principal. 1.3 You shall act as distributor of Shares in Creation Units in compliance with all applicable laws, rules and regulations, including, without limitations, all rules and regulations made or adopted pursuant to the Investment Company Act of 1940, as amended, (the "1940 Act") by the Securities and Exchange Commission or any securities association registered under the Securities Exchange Act of 1934, as amended (the "1934 Act). 1.4 Whenever the parties hereto, in their collective judgment, mutually agree that such action is warranted by unusual market, economic or political conditions, or by abnormal circumstances of any kind deemed by them to render sales of a Fund's Shares in Creation Units not in the best interest of the Fund, the parties hereto may agree to decline to accept any orders for, or make any sales of, any Shares in Creation Units until such time as the parties deem it advisable to accept such orders and to make such sales. 1.5 The Fund agrees to pay all costs and expenses in connection with the registration of Shares under the 1933 Act and all expenses in connection with maintaining facilities for the issue and transfer of Shares in Creation Units and for supplying information, prices and other data to be furnished by the Fund hereunder, and all expenses in connection with the preparation and printing of the Fund's prospectuses and statements of additional information for regulatory purposes and for distribution to shareholders; provided however, that the Fund shall not pay any of the costs of advertising or promotion for the sale of Shares. 1.6 The Fund agrees to execute any and all documents and to furnish any and all information and otherwise to take all actions which may be reasonably necessary in the discretion of the Fund's officers in connection with the qualification of Shares for sale in Creation Units in such states as you may designate to the Fund and the Fund may approve, and the Fund agrees to pay all expenses which may be incurred in connection with such qualification. You shall pay all expenses connected with your own qualification as a dealer under state or Federal laws and, except as otherwise specifically provided in this agreement, all other expenses incurred by you in connection with the sale of Shares in Creation Units as contemplated in this agreement. 1.7 The Fund shall furnish you from time to time, for use in connection with the sale of Shares in Creation Units, such information with respect to the Fund or any relevant Index Series and the Shares as you may reasonably request, all of which shall be signed by one or more of the Fund's duly authorized officers; and the Fund warrants that the statements contained in any such information, when so signed by the Fund's officers, shall be true and correct. The Fund also shall furnish you upon request with: (a) semi-annual reports and annual audited reports of the Fund's books and accounts made by independent public accountants regularly retained by the Fund, (b) quarterly earnings statements prepared by the Fund, (c) a monthly itemized list of the securities in the Fund's or, if applicable, each Index Series' portfolio, (d) monthly balance sheets as soon as practicable after the end of each month, and (e) from time to time such additional information regarding the Fund's financial condition as you may reasonably request. 2 1.8 The Fund represents to you that all registration statements and prospectuses filed by the Fund with the Securities and Exchange Commission under the 1933 Act, and under the 1940 Act, with respect to the Shares have been prepared in conformity with the requirements of said Acts and rules and regulations of the Securities and Exchange Commission thereunder. As used in this agreement the terms "registration statement" and "prospectus" shall mean any registration statement and prospectus, including the statement of additional information incorporated by reference therein, filed with the Securities and Exchange Commission and any amendments and supplements thereto which at any time shall have been filed with said Commission. The Fund represents and warrants to you that any registration statement and prospectus, when such registration statement becomes effective, will contain all statements required to be stated therein in conformity with said Acts and the rules and regulations of said Commission; that all statements of fact contained in any such registration statement and prospectus will be true and correct when such registration statement becomes effective; and that neither any registration statement nor any prospectus when such registration statement becomes effective will include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Fund may, but shall not be obligated to, propose from time to time such amendment or amendments to any registration statement and such supplement or supplements to any prospectus as it may deem necessary or advisable. If the Fund shall not propose such amendment or amendments and/or supplement or supplements within fifteen days after receipt by the Fund of a written request from you to do so, you may, at your option, terminate this agreement or decline to make offers of the Fund's securities until such amendments are made. The Fund will give you reasonable notice in advance of its filing of any amendment to any registration statement or supplement to any prospectus; provided, however, that nothing contained in this agreement shall in any way limit the Fund's right to file at any time such amendments to any registration statement and/or supplements to any prospectus, of whatever character, as the Fund may deem advisable, such right being in all respects absolute and unconditional. 1.9 The Fund authorizes you and any dealers with whom you have entered into dealer agreements to use any prospectus in the form most recently furnished by the Fund in connection with the sale of Shares in Creation Units. The Fund agrees to indemnify, defend and hold you, your several officers and directors, and any person who controls you within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any reasonable counsel fees incurred in connection therewith) which you, your officers and directors, or any such controlling persons, may incur under the 1933 Act, the 1940 Act or common law or otherwise, arising out of or on the basis of any untrue statement, or alleged untrue statement, of a material fact required to be stated in either any registration statement or any prospectus or any statement of additional information, or arising out of or based upon any omission, or alleged omission, to state a material fact required to be stated in any registration statement, any prospectus or any statement of additional information or necessary to make the statements in any of them not misleading, except that the Fund's agreement to indemnify you, your officers or directors, and any such controlling person will not be deemed to cover any such claim, demand, liability or expense to the extent that it arises out of or is based upon any such untrue statement, alleged untrue statement, omission or alleged omission made in any registration statement, any prospectus or any statement of additional information in reliance upon information furnished by you, your officers, directors or any such controlling person to the Fund or its representatives for use in the preparation thereof, and except that the Fund's agreement to 3 indemnify you and the Fund's representations and warranties set out in paragraph 1.8 of this Agreement will not be deemed to cover any liability to the Funds or their shareholders to which you would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of your duties, or by reason of your reckless disregard of your obligations and duties under this Agreement ("Disqualifying Conduct"). The Fund's agreement to indemnify you, your officers and directors, and any such controlling person, as aforesaid, is expressly conditioned upon the Fund's being notified of any action brought against you, your officers or directors, or any such controlling person, such notification to be given by letter, by facsimile or by telegram addressed to the Fund at its address set forth above within a reasonable period of time after the summons or other first legal process shall have been served. The failure so to notify the Fund of any such action shall not relieve the Fund from any liability which the Fund may have to the person against whom such action is brought by reason of any such untrue, or alleged untrue, statement or omission, or alleged omission, otherwise than on account of the Fund's indemnity agreement contained in this paragraph 1.9. The Fund will be entitled to assume the defense of any suit brought to enforce any such claim, demand or liability, but, in such case, such defense shall be conducted by counsel of good standing chosen by the Fund and approved by you. In the event the Fund elects to assume the defense of any such suit and retain counsel of good standing approved by you, the defendant or defendants in such suit shall bear the fees and expenses of any additional counsel retained by any of them; but in case the Fund does not elect to assume the defense of any such suit, the Fund will reimburse you, your officers and directors, or the controlling person or persons named as defendant or defendants in such suit, for the reasonable fees and expenses of any counsel retained by you or them. The Fund's indemnification agreement contained in this paragraph 1.9 and the Fund's representations and warranties in this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of you, your officers and directors, or any controlling person, and shall survive the delivery of any Shares. This agreement of indemnity will inure exclusively to your benefit, to the benefit of your several officers and directors, and their respective estates, and to the benefit of any controlling persons and their successors. The Fund agrees promptly to notify you of the commencement of any litigation or proceedings against the Fund or any of its officers or Board members in connection with the issue and sale of Shares. 1.10 You agree to indemnify, defend and hold the Fund, its several officers and Board members, and any person who controls the Fund within the meaning of Section 15 of the 1933 Act, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Fund, its officers or Board members, or any such controlling person, may incur under the 1933 Act, the 1940 Act, or under common law or otherwise, but only to the extent that such liability or expense incurred by the Fund, its officers or Board members, or such controlling person resulting from such claims or demands, (a) shall arise out of or be based upon any unauthorized sales literature, advertisements, information, statements or representations or any Disqualifying Conduct in connection with the offering and sale of any Shares, or (b) shall arise out of or be based upon any untrue, or alleged untrue, statement of a material fact contained in information furnished in writing by you to the Fund specifically for use in the Fund's registration statement and used in the answers to any of the items of the registration statement or in the corresponding statements made in the prospectus or statement of additional information, or shall arise out of or be based upon any omission, or alleged omission, to state a material fact in connection with such information furnished in writing by you to the Fund and required to be stated in such answers or necessary to make such information not 4 misleading. Your agreement to indemnify the Fund, its officers and Board members, and any such controlling person, as aforesaid, is expressly conditioned upon your being notified of any action brought against the Fund, its officers or Board members, or any such controlling person, such notification to be given by letter, by facsimile or by telegram addressed to you at your address set forth above within a reasonable period of time after the summons or other first legal process shall have been served. The failure so to notify you of any such action shall not relieve you from any liability which you may have to the Fund, its officers or Board members, or to such controlling person by reason of any such untrue, or alleged untrue, statement or omission, or alleged omission, otherwise than on account of your indemnity agreement contained in this paragraph. You will be entitled to assume the defense of such action, but, in such case, such defense shall be conducted by counsel of good standing chosen by you and approved by an executive officer of the Fund, if such action is based solely upon such alleged misstatement or omission on your part, and in any other event the Fund, its officers or Board members, or such controlling person shall each have the right to participate in the defense or preparation of the defense of any such action. This agreement of indemnity will inure exclusively to the Fund's benefit, to the benefit of the Fund's officers and Board members, and their respective estates, and to the benefit of any controlling persons and their successors. You agree promptly to notify the Fund of the commencement of any litigation or proceedings against you or any of your officers or directors in connection with the issue and sale of Shares. 1.11 No Shares shall be offered by either you or the Fund under any of the provisions of this agreement and no orders for the purchase or sale of such Shares hereunder shall be accepted by the Fund if and so long as the effectiveness of the registration statement then in effect or any necessary amendments thereto shall be suspended under any of the provisions of the 1933 Act or if and so long as a current prospectus as required by Section 10 of said Act is not on file with the Securities and Exchange Commission; provided, however, that nothing contained in this paragraph 1.11 shall in any way restrict or have any application to or bearing upon the Fund's obligation to redeem or repurchase any Shares from any shareholder in accordance with the provisions of the Fund's prospectus or charter documents. 1.12. The Fund agrees to advise you immediately in writing of the occurrence of any of the following events, as soon as any such event comes to the attention of the Fund: (a) any request by the Securities and Exchange Commission for amendments to the registration statement or prospectus then in effect or for additional information; (b) the event of the issuance by the Securities and Exchange Commission of any stop order suspending the effectiveness of the registration statement or prospectus then in effect or the initiation of any proceeding for that purpose; (c) the happening of any event which makes untrue any statement of a material fact made in the registration statement or prospectus then in effect or which requires the making of a change in such registration statement or prospectus in order to make the statements therein not misleading; and (d) all actions of the Securities and Exchange Commission with respect to any amendments to any registration statement or prospectus which may from time to time be filed with the Securities and Exchange Commission. 5 2. Offering Creation Units Shares in Creation Units of each Index Series will be offered for sale by you at a price per Creation Unit in the manner set forth in the then-current prospectus, based on a net asset value determined in accordance with the Fund's prospectus and charter documents. Any payments to dealers shall be governed by a separate agreement between you and such dealer and the Fund's then-current prospectus. You will accept as compensation for the performance of your obligations hereunder such compensation, if any, as may be provided for in any plan of distribution adopted by the Fund with respect to the Fund or any Index Series pursuant to Rule 12b-1 under the 1940 Act. 3. Term This Agreement shall become effective with respect to each Index Series of the Fund as of the date hereof and will continue for an initial two-year term and is renewable annually thereafter so long as such continuance is specifically approved (i) by the Fund's Board on behalf of each Index Series or (ii) by a vote of a majority (as defined in the 1940 Act) of the Shares of the Fund or the relevant Index Series, as the case may be, provided that in either event its continuance also is approved by a majority of the Board members who are not "interested persons" (as defined in the 1940 Act) of any party to this Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. This agreement may be terminated in respect of an Index Series at any time, without the payment of any penalty, (i) by vote of a majority of the Directors who are not interested persons of the Fund (as defined under the 1940 Act) or (ii) by vote of a majority (as defined under the 1940 Act) of the outstanding voting securities of the relevant Index Series, on at least 60 days' written notice to you. This agreement may also be terminated at any time by you, without the payment of any penalty, upon 60 days' notice by you and will terminate automatically in the event of its assignment (as defined under the 1940 Act). 4. Miscellaneous 4.1 The Fund recognizes that your directors, officers and employees may from time to time serve as directors, trustees, officers and employees of corporations and business trusts (including other investment companies), and that you or your affiliates may enter into distribution or other agreements with such other corporations and trusts. 4.2 No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which an enforcement of the change, waiver, discharge or termination is sought. 4.3 This Agreement shall be governed by the laws of the State of New York, without regard to principles of conflicts of laws. 4.4 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. 6 Please confirm that the foregoing is in accordance with your understanding and indicate your acceptance hereof by signing below, whereupon it shall become a binding agreement between us. Very truly yours, FOREIGN FUND, INC. By: ____________________________ Accepted: FUNDS DISTRIBUTOR, INC. By: ________________________________ 7 EXHIBIT A INDEX SERIES OF THE FUND FOREIGN FUND, INC. Australia Index Series Austria Index Series Belgium Index Series Canada Index Series France Index Series Germany Index Series Hong Kong Index Series Italy Index Series Japan Index Series Malaysia Index Series Mexico (Free) Index Series Netherlands Index Series Singapore (Free) Index Series Spain Index Series Sweden Index Series Switzerland Index Series United Kingdom Index Series 8 EX-99.6(B) 7 EXHIBIT 99.6(B) FOREIGN FUND, INC. FORM OF - AUTHORIZED PARTICIPANT AGREEMENT - This Authorized Participant Agreement (the "Agreement") is entered into by and between FUNDS DISTRIBUTOR, INC. (the "Distributor"), and __________ (the "Participant"). The Distributor and the Participant acknowledge and agree that Foreign Fund, Inc. (the "Fund"), BZW Barclays Global Fund Advisors as Adviser, Morgan Stanley Trust Company as Custodian and Lending Agent, PFPC Inc. as Administrator and Accounting Agent, and PNC Bank, N.A. as Transfer Agent shall be third party beneficiaries of this Agreement, and shall receive the benefits contemplated by this agreement, to the extent specified herein. The Distributor has been retained to provide services as principal underwriter of the Fund acting on an agency basis in connection with the sale and distribution of shares of common stock, par value $.001 per share (sometimes referred to as "World Equity Benchmark Shares-SM-" or "WEBS-SM-"), of the Index Series of the Fund (each, an "Index Series") named on Annex I hereto. As specified in the Fund's prospectus, including the statement of additional information incorporated therein (the "Prospectus") included as part of its registration statement, as amended, on Form N-1A (No. 33-97598), the WEBS of any Index Series offered thereby may be purchased or redeemed only in aggregations of a specified number of WEBS referred to therein and herein as a "Creation Unit". The number of WEBS presently constituting a Creation Unit of each Index Series is set forth in Annex I. Creation Units of WEBS may be purchased only by or through a Participant that has entered into an Authorized Participant Agreement with the Fund and the Distributor. The Prospectus provides that Creation Units generally will be sold in exchange for an in-kind deposit of a designated portfolio of equity securities (the "Deposit Securities") and an amount of cash computed as described in the Prospectus (the "Cash Component"), plus a purchase transaction fee as described in the Prospectus, delivered to the Fund by the Participant for its own account or acting on behalf of another party. Together, the Deposit Securities and the Cash Component constitute the "Portfolio Deposit", which represents the minimum initial and subsequent investment amount for WEBS of any Index Series of the Fund. References to the Prospectus are to the then current Prospectus as it may be supplemented or amended from time to time. Capitalized terms not otherwise defined herein are used herein as defined in the Prospectus. This Agreement is intended to set forth certain premises and the procedures by which the Participant may purchase and/or redeem Creation Units of WEBS through the facilities of The Depository Trust Company ("DTC"). The procedures for processing an order to purchase WEBS (each a "Purchase Order") and an order to redeem WEBS (each a "Redemption Order") are described in the Fund's Prospectus and in Annex II to this agreement. All Purchase Orders must be in writing in the form of Purchase Order approved by the Fund (see Annex III hereto). All Redemption Orders must be in writing in the form of Redemption Order approved by the Fund (see Annex IV hereto). All Purchase Orders and Redemption Orders are irrevocable. The Participant may place Purchase Orders or Redemption Orders for Creation Units of WEBS subject to the procedures for purchase and redemption referred to in paragraph 2 of this Agreement. The parties hereto in consideration of the premises and of the mutual agreements contained herein agree as follows: 1. STATUS OF PARTICIPANT. The Participant hereby represents, covenants and warrants that with respect to Purchase Orders or Redemption Orders of Creation Units of WEBS of any Index Series, it is a DTC participant. Any change in the foregoing status of the Participant shall terminate this Agreement and the Participant shall give prompt written notice to the Distributor and the Fund of such change. The Participant hereby represents and warrants that unless the following paragraph is applicable to it, it is registered as a broker- dealer under the Securities Exchange Act of 1934, as amended, is qualified to act as a broker or dealer in the states or other jurisdictions where it transacts business, and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"), and the Participant agrees that it will maintain such registrations, qualifications, and membership in good standing and in full force and effect throughout the term of this Agreement. The Participant agrees to comply with all applicable Federal laws, the laws of the states or other jurisdictions concerned, and the rules and regulations promulgated thereunder and with the Constitution, By-Laws and Rules of Fair Practice of the NASD, and that it will not offer or sell WEBS of any Index Series of the Fund in any state or -2- jurisdiction where they may not lawfully be offered and/or sold. If the Participant is offering and selling WEBS of any Index Series of the Fund in jurisdictions outside the several states, territories, and possessions of the United States and is not otherwise required to be registered, qualified, or a member of the NASD as set forth above, the Participant nevertheless agrees to observe the applicable laws of the jurisdiction in which such offer and/or sale is made, to comply with the full disclosure requirements of the Securities Act of 1933, as amended (the "1933 Act") and the regulations promulgated thereunder and to conduct its business in accordance with the spirit of the Rules of Fair Practice of the NASD. The Participant understands and acknowledges that the proposed method by which Creation Units of WEBS will be created and traded may raise certain issues under applicable securities laws. For example, because new Creation Units of WEBS may be issued and sold by the Fund on an ongoing basis, at any point a "distribution", as such term is used in the 1933 Act, may occur. The Participant understands and acknowledges that some activities on its part may, depending on the circumstances, result in its being deemed a participant in a distribution in a manner which could render it a statutory underwriter and subject it to the prospectus delivery and liability provisions of the 1933 Act. The Participant also understands and acknowledges that dealers who are not "underwriters" but are effecting transactions in WEBS, whether or not participating in the distribution of WEBS, are generally required to deliver a prospectus. 2. EXECUTION OF PURCHASE ORDERS AND REDEMPTION ORDERS. All Purchase Orders or Redemption Orders shall be handled in accordance with the terms of the Prospectus and the procedures described in Annex II to this Agreement and shall require the timely execution and delivery of an appropriate Purchase Order or Redemption Order, as the case may be, substantially in the forms set forth in Annexes III and IV hereto, respectively. Each party hereto agrees to comply with the provisions of such documents to the extent applicable to it. It is contemplated that the phone lines used by the WEBS telephone representatives will be recorded, and the Participant hereby consents to the recording of all calls with the WEBS telephone representatives. The Fund reserves the right to issue -3- additional or other procedures relating to the manner of purchasing or redeeming Creation Units and the Participant agrees to comply with such procedures as may be issued from time to time. The Participant acknowledges and agrees on behalf of itself and any party for which it is acting (whether as a customer or otherwise) that delivery of a Purchase Order or Redemption Order shall be irrevocable, provided that the Fund and the Distributor on behalf of the Fund reserves the right to reject any Purchase Order until acceptance and any Redemption Order that is not in "proper form" as defined in the Prospectus. With respect to any Redemption Order, the Participant also acknowledges and agrees on behalf of itself and any party for which it is acting (whether as a customer or otherwise) to return to the Fund any dividend, distribution or other corporate action paid to it or to the party for which it is acting in respect of any Deposit Security that is transferred to the Participant or any party for which it is acting that, based on the valuation of such Deposit Security at the time of transfer, should have been paid to the Index Series. With respect to any Redemption Order, the Participant also acknowledges and agrees on behalf of itself and any party for which it is acting (whether as a customer or otherwise) that the Fund is entitled to reduce the amount of money or other proceeds due to the Participant or any party for which it is acting by an amount equal to any dividend, distribution or other corporate action to be paid to it or to the party for which it is acting in respect of any Deposit Security that is transferred to the Participant or any party for which it is acting that, based on the valuation of such Deposit Security at the time of transfer, should be paid to the Index Series. With respect to any Purchase Order, the Fund acknowledges and agrees to return to the Participant or any party for which it is acting any dividend, distribution or other corporate action paid to the Fund in respect of any Deposit Security that is transferred to the Fund that, based on the valuation of such Deposit Security at the time of transfer, should have been paid to the Participant or any party for which it is acting. 3. MARKETING MATERIALS AND REPRESENTATIONS. The Participant represents, warrants and agrees that it will not make any representations concerning WEBS other than those contained in the Fund's then current Prospectus or in any promotional materials or sales literature furnished to the Participant by the -4- Distributor. The Participant agrees not to furnish or cause to be furnished to any person or display or publish any information or materials relating to WEBS (including, without limitation, promotional materials and sales literature, advertisements, press releases, announcements, statements, posters, signs or other similar materials), except such information and materials as may be furnished to the Participant by the Distributor, and such other information and materials as may be approved in writing by the Distributor. The Participant understands that the Fund will not be advertised or marketed as an open-end investment company, i.e., as a mutual fund, which offers redeemable securities, and that any advertising materials will prominently disclose that the WEBS are not redeemable units of beneficial interest in the Fund. In addition, the Participant understands that any advertising material that addresses redemptions of WEBS, including the Fund's Prospectus, will disclose that the owners of WEBS may acquire WEBS and tender WEBS for redemption to the Fund in Creation Unit aggregations only. 4. SUBCUSTODIAN ACCOUNT. The Participant understands and agrees that in the case of each Index Series, the Fund has caused the Fund custodian ("Custodian") to maintain with the applicable subcustodian for such Index Series an account in the relevant foreign jurisdiction to which the Participant shall deliver or cause to be delivered in connection with the purchase of a Creation Unit the securities and any other redemption proceeds (or the cash value of all or a part of such securities, in the case of a permitted or required cash purchase or "cash in lieu" amount) on behalf of itself or any party for which it is acting (whether or not a customer), with any appropriate adjustments as advised by the Fund, in accordance with the terms and conditions applicable to such account in such jurisdiction. 5. TITLE TO SECURITIES; RESTRICTED SHARES. The Participant represents on behalf of itself and any party for which it acts that upon delivery of a portfolio of Deposit Securities to the Custodian and/or the relevant subcustodian in accordance with the terms of the Prospectus, the Fund will acquire good and unencumbered title to such securities, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims, including, without limitation, any restriction upon the sale or transfer of such securities imposed by (i) any -5- agreement or arrangement entered into by the Participant or any party for which it is acting in connection with a Purchase Order or (ii) any provision of the 1933 Act, and any regulations thereunder (except that portfolio securities of issuers other than U.S. issuers shall not be required to have been registered under the 1933 Act if exempt from such registration), or of the applicable laws or regulations of any other applicable jurisdiction and (iii) no such securities are "restricted securities" as such term is used in Rule 144(a)(3)(i) promulgated under the 1933 Act. 6. CASH COMPONENT AND FEES. The Participant hereby agrees that as between the Fund and itself or any party for which it acts in connection with a Purchase Order, it will make available in same day funds for each purchase of WEBS an amount of cash sufficient to pay the Cash Component and any other amounts of cash due to the Fund in connection with the purchase of any Creation Unit of WEBS (including the purchase transaction fee for in-kind and cash purchases and the additional variable charge for cash purchases (when, in the sole discretion of the Fund, cash purchases are available or specified)) (the "Cash Amount"), which shall be made to an account maintained by the Custodian at Chemical Bank, New York, providing payment on or before the Contractual Settlement Date (as defined in Annex II) in same day or immediately available funds. The Participant hereby agrees to ensure that the Cash Amount will be received by the Fund on or before the Contractual Settlement Date, and in the event payment of such Cash Amount has not been made by such Contractual Settlement Date, the Participant agrees on behalf of itself or any party for which it acts in connection with a Purchase Order to pay the full cash amount, plus interest. The Participant may require its customer to enter into an agreement with the Participant with respect to such matters. The Participant shall be liable to the Distributor for any amounts advanced by the Distributor in its sole discretion to the Participant for payment of the amounts due and owing for the Cash Component, the purchase transaction fee and/or the additional variable charge for cash purchases (when, in the sole discretion of the Fund, cash purchases are available or specified). 7. ROLE OF PARTICIPANT. (a) The Participant acknowledges and agrees that for all purposes of this Agreement, the Participant -6- will be deemed to be an independent contractor, and will have no authority to act as agent for the Fund or the Distributor in any matter or in any respect. The Participant agrees to make itself and its employees available, upon request, during normal business hours to consult with the Fund or the Distributor or their designees concerning the performance of the Participant's responsibilities under this Agreement. (b) In executing this Agreement, the Participant agrees in connection with any purchase or redemption transactions in which it acts for a customer or for any other DTC Participant or indirect participant, or any other Beneficial Owner, that it shall extend to any such party all of the rights, and shall be bound by all of the obligations, of a DTC Participant in addition to any obligations that it undertakes hereunder or in accordance with the Prospectus. (c) The Participant agrees to maintain records of all sales of WEBS made by or through it and to furnish copies of such records to the Fund or the Distributor upon the request of the Fund or the Distributor. 8. AUTHORIZED PERSONS. Concurrently with the execution of this Agreement and from time to time thereafter, the Participant shall deliver to the Distributor and the Fund, with copies to the Custodian and the Transfer Agent (referred to below) duly certified as appropriate by its Secretary or other duly authorized official, a certificate in a form approved by the Fund (see Annex V hereto) setting forth the names and signatures of all persons authorized to give instructions relating to any activity contemplated hereby or any other notice, request or instruction on behalf of the Participant (each an "Authorized Person"). Such certificate may be accepted and relied upon by the Distributor and the Fund as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until delivery to the Distributor and the Fund of a superseding certificate in a form approved by the Fund bearing a subsequent date. The Distributor shall issue to each Authorized Person a unique personal identification number ("PIN Number") by which such Authorized Person and the Participant shall be identified and instructions issued by the Participant hereunder shall be authenticated. The PIN Number shall be kept confidential and only provided to Authorized Persons. Upon the termination or revocation of authority of such Authorized Person by the Participant, -7- the Participant shall give immediate written notice of such fact to the Distributor and the Fund and such notice shall be effective upon receipt by both the Distributor and the Fund. 9. REDEMPTION. The Participant understands and agrees that Redemption Orders may be submitted only on days that the American Stock Exchange, Inc. (the "AMEX") is open for trading. (a) The Participant represents and warrants that it will not obtain a Redemption Order Number (as defined in Annex II) from the Fund for the purpose of redeeming any Creation Unit of WEBS of any Index Series unless it first ascertains that it or its customer, as the case may be, owns outright or has full legal authority and legal and beneficial right to tender for redemption the requisite number of WEBS of the relevant Index Series to be redeemed and to the entire proceeds of the redemption and that such WEBS have not been loaned or pledged to another party and are not the subject of a repurchase agreement, securities lending agreement or any other arrangement that would preclude the delivery of such WEBS to the Transfer Agent in accordance with the Prospectus or as otherwise required by the Fund. The Participant understands that WEBS of any Index Series may be redeemed only when one or more Creation Units of WEBS of a Beneficial Owner are held in the account of a single Participant. (b) In order to provide for the delivery of Deposit Securities and any other redemption proceeds upon redemption of WEBS in Creation Units, the Participant agrees for itself and on behalf of any Beneficial Owner for which it is acting, to provide to the Distributor and the Fund on a form approved by the Fund (see Annex VI hereto), with copies to the Custodian and the Transfer Agent (referred to below), written instructions (the "Standing Redemption Instructions") for delivery of Deposit Securities and other redemption proceeds in the applicable jurisdiction(s) for each Index Series with respect to which the Participant wishes to be authorized to submit a Redemption Order to redeem Creation Units of WEBS. A Participant is authorized to submit a Redemption Order only with respect to Creation Units of WEBS of an Index Series for which Standing Redemption Instructions have been received by the Fund and the Distributor. The Standing Redemption Instructions shall include information (including the applicable account name, account number and any other reference number) -8- identifying the account(s) into which the Deposit Securities and any other redemption proceeds should be delivered pursuant to a Redemption Order. The Participant may designate in its Standing Redemption Instructions a U.S. dollar account into which the U.S. dollar denominated cash portion of the redemption proceeds, if any, should be delivered pursuant to a Redemption Order. An Authorized Person of the Participant may amend the Standing Redemption Instructions from time to time before or concurrently with submission of a Redemption Order in writing to the Distributor and the Fund in a form approved by the Fund (see Annex VI hereto), with copies to the Custodian and the Transfer Agent. A Redemption Order may include alternative delivery instructions ("Alternative Delivery Instructions") which supersede and replace the Participant's Standing Redemption Instructions only with respect to the Redemption Order to which such Alternative Delivery Instructions are attached. Alternative Delivery Instructions do not constitute an amendment to the Participant's Standing Redemption Instructions, and Alternative Delivery Instructions must accompany a Redemption Order and be in a form approved by the Fund (see Annex IV hereto). The Participant understands and agrees that the Distributor will instruct the Custodian or subcustodian to deliver, and the Custodian or subcustodian will deliver, Deposit Securities and any other redemption proceeds into the account(s) identified in the Standing Redemption Instructions or the Alternative Delivery Instructions, as the case may be. If neither the redeeming Beneficial Owner, nor the Participant acting on behalf of such redeeming Beneficial Owner, has appropriate arrangements satisfactory to the Fund to take delivery of the Deposit Securities in the applicable foreign jurisdiction, and it is not possible to make other such arrangements (to which situation the Participant shall reasonably agree), or if it is not possible to effect deliveries of Deposit Securities in such jurisdiction, the Participant understands and agrees that the Fund may, in its sole discretion, exercise its option to redeem such shares in cash and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash, less the redemption transaction fee for in-kind and cash redemptions and the additional variable charge for cash redemptions. 10. BENEFICIAL OWNERSHIP. The Participant represents and warrants to the Distributor and the Fund that (based upon the number of outstanding WEBS of such Index Series made publicly available by the Fund) it -9- does not, and will not in the future, hold for the account of any single Beneficial Owner of WEBS of the relevant Index Series 80 percent or more of the currently outstanding WEBS of such relevant Index Series, so as to cause the Fund to have a basis in the portfolio securities deposited with the Fund with respect to such Index Series different from the market value of such portfolio securities on the date of such deposit, pursuant to section 351 of the Internal Revenue Code of 1986, as amended. The Participant agrees that the confirmation relating to any order for one or more Creation Units of WEBS of an Index Series shall state as follows: "Purchaser represents and warrants that, after giving effect to the purchase of WEBS to which this confirmation relates, it will not hold 80 percent or more of the outstanding WEBS of the relevant Index Series of Foreign Fund, Inc. and that it will not treat such purchase as eligible for tax-free treatment under Section 351 of the Internal Revenue Code of 1986, as amended. If purchaser is a dealer, it agrees to deliver similar written confirmations to any person purchasing any of the WEBS to which this confirmation relates from it." The Fund, and its Transfer Agent and Distributor, shall have the right to require information from the Participant regarding WEBS ownership of each Index Series and to rely thereon to the extent necessary to make a determination regarding ownership of 80 percent or more of the currently outstanding WEBS of any Index Series by a Beneficial Owner as a condition to the acceptance of a deposit of Deposit Securities. 11. INDEMNIFICATION. The Participant hereby agrees to indemnify and hold harmless the Distributor, the Fund, BZW Barclays Global Fund Advisors as Adviser, Morgan Stanley Trust Company as Custodian and Lending Agent, PFPC Inc. as Administrator and Accounting Agent, and PNC Bank, N.A. as Transfer Agent, their respective subsidiaries, affiliates, directors, officers, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each an "Indemnified Party") from and against any loss, liability, cost and expense (including attorneys' fees) incurred by such Indemnified Party as a result of (i) a breach of any representation, warranty or covenant made by the Participant in this Agreement; or (ii) failure of the Participant to perform any obligations set forth in the Agreement; or (iii) any failure on the part of the Participant to comply with applicable laws; or (iv) any actions of such Indemnified Party in reliance upon any -10- instructions issued in accordance with Annexes II, III, IV, V and VI (as each may be amended from time to time) believed by the Distributor and/or the Fund to be genuine and to have been given by the Participant. The Participant and the Distributor understand and agree that the Fund as a third party beneficiary to this Agreement is entitled and intends to proceed directly against the Participant in the event that the Participant fails to honor any obligations pursuant to this Agreement that benefit the Fund. This paragraph shall survive the termination of this Agreement. THE DISTRIBUTOR SHALL NOT BE LIABLE TO THE PARTICIPANT FOR ANY DAMAGES ARISING OUT OF MISTAKES OR ERRORS IN DATA PROVIDED TO THE DISTRIBUTOR, OR ARISING OUT OF INTERRUPTIONS OR DELAYS OF COMMUNICATIONS WITH THE INDEMNIFIED PARTIES WHO ARE SERVICE PROVIDERS TO THE FUND. 12. INFORMATION ABOUT PORTFOLIO DEPOSITS. The Participant understands that the number and names of the designated portfolio of Deposit Securities to be included in the current Portfolio Deposit for each Index Series will be made available by the Distributor as such information is supplied to the Distributor by the Adviser each day that the AMEX is open for trading and will also be made available on each such day through the facilities of the National Securities Clearing Corporation. 13. ACKNOWLEDGMENT. The Participant acknowledges receipt of the Prospectus and represents it has reviewed such documents and understands the terms thereof. 14. NOTICES. Except as otherwise specifically provided in this Agreement, all notices required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by personal delivery or by postage prepaid registered or certified United States first class mail, return receipt requested, or by telex, telegram or facsimile or similar means of same day delivery (with a confirming copy by mail). Unless otherwise notified in writing, all notices to the Fund shall be at the address or telephone, facsimile or telex numbers indicated below the Fund's signature line, Attn.: Vice President, Operations, with a copy to Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201, Attn: WEBS. All notices to the Participant and the Distributor shall be directed to the address or telephone, fac- -11- simile or telex numbers indicated below the signature line of such party. 15. INITIAL CREATION BY PARTICIPANT. The Participant agrees that as promptly after the date of this Agreement as is practicable, it will purchase at least one Creation Unit of each Index Series of the Fund. 16. TERMINATION AND AMENDMENT. This Agreement shall become effective in this form as of the date executed by the Fund and may be terminated at any time by any party upon sixty days prior written notice to the other parties and may be terminated earlier by the Fund at any time in the event of a breach by the Participant of any provision of this Agreement or the procedures described or incorporated herein. This Agreement supersedes any prior such agreement between or among the parties. This Agreement may be amended by the Fund from time to time without the consent of any Beneficial Owner by the following procedure. The Fund will mail a copy of the amendment to the Distributor and the Participant. If neither the Distributor nor the Participant objects in writing to the amendment within five days after its receipt, the amendment will become part of this Agreement in accordance with its terms. 17. GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York. The parties irrevocably submit to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. 18. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. -12- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year written below. FUNDS DISTRIBUTOR, INC. BY:____________________ TITLE: ADDRESS: Date: , 199 TELEPHONE: FACSIMILE: PARTICIPANT BY:____________________ TITLE: ADDRESS: Date: , 199 TELEPHONE: FACSIMILE: -13- ANNEX I FOREIGN FUND, INC. INDEX SERIES AND WEBS PER CREATION UNIT Index WEBS per Series Creation Unit - ------ ------------- The 200,000 Australia Index The 100,000 Austria Index The 40,000 Belgium Index The 100,000 Canada Index The 200,000 France Index The 300,000 Germany Index The 75,000 Hong Kong Index The 150,000 Italy Index The 600,000 Japan Index The 75,000 Malaysia Index The 100,000 Mexico (Free) Index I-1 The 50,000 Netherlands Index The 100,000 Singapore (Free) Index The 75,000 Spain Index The 75,000 Sweden Index The 125,000 Switzerland Index The 200,000 United Kingdom Index I-2 ANNEX II FOREIGN FUND, INC. PROCEDURES FOR PROCESSING PURCHASE ORDERS AND REDEMPTION ORDERS This Annex II to the Authorized Participant Agreement supplements the Prospectus with respect to the procedures to be used in processing a Purchase Order for the purchase of WEBS in Creation Units of each Index Series and a Redemption Order for the redemption of WEBS in Creation Units of each Index Series. Capitalized terms, unless otherwise defined in this Annex II, have the meanings attributed to them in the Authorized Participant Agreement or the Prospectus. A Participant is required to have signed the Authorized Participant Agreement. Upon acceptance of the Agreement and execution thereof by the Fund and in connection with the initial Purchase Order submitted by the Participant, the Distributor will assign a PIN Number to each Authorized Person authorized to act for a Participant. This will allow a Participant through its Authorized Person(s) to place a Purchase Order or Redemption Order with respect to the purchase or redemption of Creation Units of WEBS. PART A TO PLACE AN ORDER FOR PURCHASE OF CREATION UNIT(S) OF WEBS 1. CALL TO GIVE NOTICE OF INTENT TO SUBMIT PURCHASE ORDER AND TO RECEIVE AN ORDER CONTROL NUMBER. To initiate an order for a Creation Unit of WEBS, the Participant must give notice to the Distributor of its intent to submit a Purchase Order to purchase WEBS. Giving notice to the Distributor of an intent to submit a Purchase Order does not constitute a Purchase Order, which must be completed subsequently. An Authorized Person for the Participant must call the WEBS telephone representative at 800-810-WEBS(9327) not later than the closing time of the regular trading session on the American Stock Exchange (the "AMEX Closing Time")(ordinarily 4:00 p.m. New York time) to receive a number with respect to its contemplated Purchase Order (the "Order Control Number"). Each Order Control Number can be used for ordering multiple Creation Units of a single Index Series in one Purchase Order. Separate Order Control II-1 Numbers are required for ordering Creation Units of different Index Series. A creation charge will be assessed with respect to each Order Control Number. Upon verifying the authenticity of the caller (as determined by the use of the appropriate PIN Number) and the terms of the order, the WEBS telephone representative will issue the appropriate unique Order Control Number(s). Incoming telephone calls are queued and will be handled in the sequence received. Calls placed before the AMEX Closing Time will be processed even if the call is taken after this cut-off time. ACCORDINGLY, DO NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE AMEX CLOSING TIME WILL NOT BE ACCEPTED. NOTE THAT THE TELEPHONE CALL IN WHICH THE ORDER CONTROL NUMBER(S) IS/ARE ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE PURCHASE ORDER. A PURCHASE ORDER IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF A WRITTEN PURCHASE ORDER CONTAINING THE DESIGNATED ORDER CONTROL NUMBER(S) AND PIN NUMBER AND TRANSMITTED BY FACSIMILE OR ELECTRONIC INTERFACE PROVIDED BY THE DISTRIBUTOR TO (617)-248-6439. An Order Control Number is only valid for the Business Day (as defined in the Prospectus) on which it is issued. 2. PLACE THE PURCHASE ORDER. All orders with respect to the creation of Creation Units of WEBS of any Index Series are required to be in writing in the form of Purchase Order approved by the Fund (see Annex III hereto) and accompanied by the designated Order Control Number. One Order Control Number may be used in a Purchase Order for multiple Creation Units of a single Index Series. Separate Order Control Numbers are required for each Index Series from which the Participant wishes to purchase WEBS. All Purchase Orders for Creation Units of WEBS are irrevocable. The Purchase Order for creation of Creation Units of WEBS must be sent by facsimile or Electronic Interface provided by the Distributor and must be received by the WEBS telephone representative prior to the AMEX Closing Time. The Fund acknowledges its agreement to return to the Participant or any party for which it is acting any dividend, distribution or other corporate action paid to the Fund in respect of any Deposit Security that is transferred to the Fund that, based on the valuation of such Deposit Security at the time of transfer, should have been paid to the Participant or any party for which it is acting. 3. AWAIT RECEIPT OF CONFIRMATION. Subject to the conditions that (i) a properly completed irrevocable Purchase Order has been submitted by the Participant (either on its own or another investor's behalf) not later than the II-2 AMEX Closing Time, and (ii) arrangements satisfactory to the Fund are in place for payment of the Cash Component and any other cash amounts which may be due, the Distributor will accept the Purchase Order on behalf of the Fund and the Distributor will inform the Participant that its Purchase Order has been accepted by 6:00 p.m. New York time on the Business Day the Purchase Order is received. In the event that the Participant does not receive a timely confirmation from the Distributor, the Participant should contact the WEBS telephone representative at the telephone number indicated. 4. AMBIGUOUS INSTRUCTIONS. In the event that a Purchase Order contains ambiguous instructions or terms that differ from the information provided in the telephone call at the time of issuance of the Order Control Number(s), the WEBS telephone representative will attempt to contact the Participant to request confirmation of the terms of the order. If an Authorized Person confirms the terms as they appear in the Purchase Order then the order will be processed. If an Authorized Person contradicts its terms, the Purchase Order will be deemed invalid and a corrected Purchase Order must be received by the WEBS telephone representative not later than the AMEX Closing Time. If the WEBS telephone representative is not able to contact an Authorized Person, then the Purchase Order shall be accepted and processed in accordance with its terms notwithstanding any inconsistency with the telephone information. In the event that a Purchase Order contains terms that are illegible, the Purchase Order will be deemed invalid and the WEBS telephone representative will attempt to contact the Participant to request retransmission of the Purchase Order. A corrected Purchase Order must be received by the WEBS telephone representative not later than the AMEX Closing Time. 5. PROCESSING A PURCHASE ORDER. The Distributor reserves the right to suspend a Purchase Order in the event that its acceptance would appear to result in the Participant or a Beneficial Owner owning 80 percent or more of all outstanding WEBS of an Index Series. In such event, the WEBS telephone representative will attempt to contact an Authorized Person for purposes of confirmation of the fact that with respect to such Participant no Beneficial Owner would own 80 percent or more of all outstanding WEBS of a given Index Series upon execution of the Purchase Order. In the event that (i) the WEBS telephone representative is unable to contact an Authorized Person or (ii) the Participant fails to transmit an identical Purchase Order confirming the representation and warranty as to such fact, then the Purchase Order shall be deemed invalid. II-3 The Fund and/or the Distributor also reserve the absolute right to reject or suspend a Purchase Order if (i) the portfolio of Deposit Securities delivered is not as specified by the Distributor; (ii) acceptance of the Deposit Securities would have certain adverse tax consequences to the Index Series; (iii) the acceptance of the Portfolio Deposit would, in the opinion of counsel, be unlawful; (iv) the acceptance of the Portfolio Deposit would otherwise, in the discretion of the Fund or the Adviser, have an adverse effect on the Fund or the rights of beneficial owners of WEBS; or (v) in the event that circumstances outside the control of the Fund, the Distributor and the Adviser make it for all practical purposes impossible to process purchase orders. The Fund shall notify the Participant of its rejection of any Purchase Order. The Fund and the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of Portfolio Deposits nor shall either of them incur any liability for the failure to give any such notification. 6. CONTRACTUAL SETTLEMENT. Except as provided below, Deposit Securities must be delivered to an account maintained at the applicable local subcustodian of the Fund on or before the Contractual Settlement Date (defined below). The Participant must also make available on or before the Contractual Settlement Date, by means satisfactory to the Fund, immediately available or same day funds estimated by the Fund to be sufficient to pay the Cash Component next determined after acceptance of the Purchase Order, together with the applicable purchase transaction fee (as described in the Prospectus). Any excess funds will be returned following settlement of the issue of the Creation Unit of WEBS. The "Contractual Settlement Date" is the earlier of (i) the date upon which all of the required Deposit Securities, the Cash Component and any other cash amounts which may be due are delivered to the Fund and (ii) the last day for settlement on the customary settlement cycle in the jurisdiction where the securities of the applicable Index Series are customarily traded. Except as provided in the next two paragraphs, a Creation Unit of WEBS of an Index Series will not be issued until the transfer of good title to the Fund of the portfolio of Deposit Securities and the payment of the Cash Component and the purchase transaction fee have been completed. When the subcustodian confirms to the Custodian that the required securities included in the Portfolio Deposit (or, when permitted in the sole discretion of the Fund, the cash value thereof) have been delivered to the account of the relevant subcustodian, the Custodian shall notify the Distributor and the Adviser, and the Fund will II-4 issue and cause the delivery of the Creation Unit of WEBS. The Distributor will then transmit a confirmation of acceptance to the Participant. The Fund may in its sole discretion permit or require the substitution of an amount of cash (i.e., a "cash in lieu" amount) to be added to the Cash Component to replace any Deposit Security which may not be available in sufficient quantity for delivery or for other similar reasons. If the Adviser notifies the Distributor that a "cash in lieu" amount will be accepted, the Distributor will notify the Participant and the Participant shall deliver, on behalf of itself or the party on whose behalf it is acting, the "cash in lieu" amount, with any appropriate adjustments as advised by the Fund. Any excess funds will be returned following settlement of the issue of the Creation Unit of WEBS. In the event that a Portfolio Deposit is incomplete on the settlement date for a Creation Unit of WEBS because certain Deposit Securities are missing, the Fund may, in its sole discretion, issue a Creation Unit of WEBS notwithstanding such deficiency in reliance on the undertaking of the Participant to deliver the missing Deposit Securities as soon as possible, which undertaking shall be secured by such Participant's delivery and maintenance of collateral consisting of cash or Short-Term Investments (as defined in the Prospectus) having a value at least equal to 105% of the value of the missing Deposit Securities. The parties hereto agree that the Fund may purchase the missing Deposit Securities at any time and the Participant agrees to accept liability for any shortfall between the cost to the Fund of purchasing such securities and the value of the collateral, which may be sold by the Fund at such time, and in such manner, as the Fund may determine in its sole discretion. 7. CASH PURCHASES. When, in the sole discretion of the Fund, cash purchases of Creation Units of WEBS are available or specified for an Index Series, such purchases shall be effected in essentially the same manner as in- kind purchases thereof. In the case of a cash purchase, the Participant must pay the cash equivalent of the Deposit Securities it would otherwise be required to provide through an in-kind purchase, plus the same Cash Component required to be paid by an in-kind purchaser. In addition, to offset the Fund's brokerage and other transaction costs associated with using the cash to purchase the requisite Deposit Securities, the Participant must pay a fixed purchase transaction fee, plus an additional variable charge for cash purchases, which is expressed as a percentage of the value of the Deposit Securities. The transaction fees for in-kind II-5 and cash purchases of Creation Units of WEBS are described in the Prospectus. 8. SUBCUSTODIAN ACCOUNTS. Annex VII hereto contains a list of the subcustodian accounts of the Fund, into which the portfolio securities constituting the portfolio of Deposit Securities of each Index Series are to be delivered in connection with a Purchase Order. II-6 PART B TO PLACE AN ORDER FOR REDEMPTION OF CREATION UNIT(S) OF WEBS The Participant understands and agrees that Redemption Orders may be submitted only on days that the American Stock Exchange, Inc. (the "AMEX") is open for trading. 1. CALL TO RECEIVE A REDEMPTION ORDER NUMBER AND TO NOTIFY DELIVERY OF WEBS. (a) An Authorized Person of the Participant must call the WEBS telephone representative at 800-810-WEBS(9327) not later than the AMEX Closing Time to receive a number with respect to the contemplated Redemption Order (a "Redemption Order Number"). Upon verifying the authenticity of the caller (as determined by the use of the appropriate PIN Number) and the terms of the Redemption Order, the WEBS telephone representative will issue a unique Redemption Order Number. All Redemption Orders must be in the form of Redemption Order approved by the Fund (see Annex IV hereto) and accompanied by the designated Redemption Order Number. Incoming telephone calls are queued and will be handled in the sequence received. Calls placed before the AMEX Closing Time will be processed even if the call is taken after this cut-off time. ACCORDINGLY, DO NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE AMEX CLOSING TIME WILL NOT BE ACCEPTED. (b) An Authorized Person of the Participant must also inform the WEBS telephone representative at 800-810-WEBS(9327) prior to delivering the aggregated WEBS constituting a Creation Unit to notify the Transfer Agent of the intention to redeem. A Participant planning to deliver WEBS for redemption on such day should ascertain the deadlines applicable to DTC by contacting the operations department of the broker or depository institution effectuating such transfer of securities. These deadlines will vary and are likely to be significantly earlier than the AMEX Closing Time. NOTE THAT THE TELEPHONE CALL IN WHICH THE REDEMPTION ORDER NUMBER IS ISSUED INITIATES THE REDEMPTION ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE REDEMPTION ORDER. A REDEMPTION ORDER IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF WRITTEN INSTRUCTIONS CONTAINING THE DESIGNATED REDEMPTION ORDER NUMBER AND PIN NUMBER AND TRANSMITTED BY FACSIMILE OR ELECTRONIC INTERFACE PROVIDED BY THE DISTRIBUTOR. II-7 2. PLACE THE REDEMPTION ORDER. A Redemption Order Number in only valid for the Business Day on which it is issued. One Redemption Order Number may be used in a Redemption Order for multiple Creation Units of a single Index Series. Separate Redemption Order Numbers are required for each Index Series from which the Participant wishes to redeem WEBS. All Redemption Orders of Creation Units of WEBS are irrevocable. The Redemption Order for Creation Units of WEBS must be sent by facsimile or Electronic Interface provided by the Distributor and must be received by the WEBS telephone representative prior to the AMEX Closing Time. In the Redemption Order, the Participant will be required to acknowledge its agreement on behalf of itself and any party for which it is acting (whether as a customer or otherwise) to return to the Fund any dividend, distribution or other corporate action paid to it or to the party for which it is acting in respect of any Deposit Security that is transferred to the Participant or any party for which it is acting that, based on the valuation of such Deposit Security at the time of transfer, should be paid to the Index Series to which the Redemption Order relates. In the Redemption Order, the Participant will also be required to acknowledge its agreement on behalf of itself and any party for which it is acting (whether as a customer or otherwise) that the Fund is entitled to reduce the amount of money or other proceeds due to the Participant or any party for which it is acting by an amount equal to any dividend, distribution or other corporate action to be paid to it or to the party for which it is acting in respect of any Deposit Security that is transferred to the Participant or any party for which it is acting that, based on the valuation of such Deposit Security at the time of transfer, should be paid to the Index Series to which the Redemption Order relates. 3. AWAIT RECEIPT OF CONFIRMATION. Subject to the conditions that (i) a duly completed Redemption Order is received by the Distributor from the Participant on behalf of itself or another redeeming investor by the AMEX Closing Time and (ii) the Participant has transferred or caused to be transferred to the Fund's Transfer Agent the Creation Unit of WEBS being redeemed through the book-entry system of DTC so as to be effective by 4:00 p.m. New York time on a day on which the AMEX is open for business, the Distributor will accept the Redemption Order on behalf of the Fund and the Distributor will inform the Participant that its Redemption Order has been accepted by 6:00 p.m. New York time on the Business Day the Redemption Order is received. II-8 4. AMBIGUOUS INSTRUCTIONS. In the event that a Redemption Order contains terms that differ from the information provided in the telephone call at the time of issuance of the Redemption Order Number(s), the WEBS telephone representative will attempt to contact the Participant to request confirmation of the terms of the Order. If an Authorized Person confirms the terms as they appear in the Redemption Order then the Redemption Order will be accepted and processed. If an Authorized Person contradicts its terms, the Order will be deemed invalid and a corrected Redemption Order must be received by the WEBS telephone representative not later than the AMEX Closing Time. If the WEBS telephone representative is not able to contact an Authorized Person, then the Redemption Order shall be accepted and processed in accordance with its terms notwithstanding any inconsistency with the terms of the telephone information. In the event that a Redemption Order contains terms that are illegible, the Order will be deemed invalid and the WEBS telephone representative will attempt to contact the Participant to request retransmission of the Redemption Order. A corrected Redemption Order must be received by the WEBS telephone representative not later than the AMEX Closing Time. 5. TAKING DELIVERY OF DEPOSIT SECURITIES. The Deposit Securities constituting in-kind redemption proceeds will be delivered to the appropriate foreign account which must be indicated in the Participant's Standing Redemption Instructions or indicated on Alternative Delivery Instructions attached to a Redemption Order. Alternative Delivery Instructions supersede and replace the Participant's Standing Redemption Instructions only with respect to the Redemption Order to which it is attached. An Authorized Person of the Participant may amend the Participant's Standing Redemption Instructions from time to time in writing to the Distributor and the Fund in a form approved by the Fund (see Annex VI hereto). A redeeming Beneficial Owner or Participant acting on behalf of such Beneficial Owner must maintain appropriate securities broker-dealer, bank or other custody arrangements in each jurisdiction in which any of the Deposit Securities are customarily traded, to which account such Deposit Securities will be delivered. If neither the redeeming beneficial owner nor the Participant acting on behalf of such redeeming Beneficial Owner has appropriate arrangements to take delivery of the Deposit Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Deposit Securities in such jurisdiction, the Beneficial Owner will be required to receive its redemption proceeds in cash. In such case, the investor will receive a cash payment equal to the net asset value of its shares II-9 based on the net asset value of WEBS of the relevant Index Series next determined after the Redemption Order is received in proper form (minus a redemption transaction fee and additional variable charge for cash redemptions as specified in the Prospectus, to offset the Fund's brokerage and other transaction costs associated with the disposition of Deposit Securities of the Index Series). Redemptions of WEBS for Deposit Securities will be subject to compliance with applicable United States federal and state securities laws and each Index Series (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that the Index Series could not lawfully deliver specific Deposit Securities upon redemptions or could not do so without first registering the Deposit Securities under such laws. 6. CONTRACTUAL SETTLEMENT. Deliveries of redemption proceeds by the Index Series relating to those countries generally will be made within three Business Days. Due to the schedule of holidays in certain countries, however, the delivery of in-kind redemption proceeds may take longer than three Business Days after the day on which the Redemption Order is received in proper form. See Appendix B of the statement of additional information for instances where more than seven calendar days would be needed to deliver redemption proceeds. 7. CASH REDEMPTIONS. In the event that, in the sole discretion of the Fund, cash redemptions are permitted or required by the Fund, proceeds will be paid to the Participant redeeming shares on behalf of the redeeming investor as soon as practicable after the date of redemption (within seven calendar days thereafter, except for the instances listed in Appendix B of the statement of additional information where more than seven calendar days would be needed). 8. STANDING REDEMPTION INSTRUCTIONS. Annex VI hereto contains the Participant's Standing Redemption Instructions, which includes information identifying the account(s) into which Deposit Securities of each Index Series and any other redemption proceeds should be delivered by the Fund pursuant to a Redemption Order. II-10 ANNEX III FOREIGN FUND, INC. FORM OF IRREVOCABLE PURCHASE ORDER CONTACT INFORMATION FOR PURCHASE ORDER EXECUTION Telephone Purchase Order Number: (800) 810-WEBS Business Number: (617) 248-6009 Facsimile Number: (617) 248-6439 ALL ITEMS IN PART I MUST BE COMPLETED BY THE PARTICIPANT. THE DISTRIBUTOR, IN ITS DISCRETION, MAY REJECT ANY PURCHASE ORDER NOT SUBMITTED IN PROPER FORM. SEE THE FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION. I. TO BE COMPLETED BY PARTICIPANT Date: ______________ Time: ______________ Participant Name: _______________________________ Telephone Number: _____________________________ Facsimile Number: ______________________________ Authorized Person: ______________________________ PIN Number (assigned by Distributor): _______________ Standard Instructions For Delivering Custodian(s) YES NO (If 'NO' attach listing) ARRANGEMENTS FOR DELIVERY OF CASH COMPONENT: The undersigned Participant has arranged for delivery to the Custodian of funds equal, at a minimum, to the Cash Component, the purchase transaction fee and the additional variable charge for cash purchases (when, in the sole discretion of the Fund, cash purchases are available or specified) with respect to the above Purchase Order. The delivery of the Cash Component and the applicable purchase transaction fee to the Custodian are set forth on the following page: III-1 Wire Transfer: Other: __________________ __________________ (Originating Bank) _____________________ _____________________ (Account) _____________________ _____________________ (Reference Number) IRREVOCABILITY OF PURCHASE ORDER AND REPRESENTATIONS AND WARRANTIES REGARDING BENEFICIAL OWNERSHIP. The undersigned Participant understands and agrees that upon acceptance by the Fund or the Distributor on behalf of the Fund of this Purchase Order and the related portfolio of Deposit Securities, the purchase of Creation Units of WEBS as specified herein shall be irrevocable. The Participant also represents and warrants to the Distributor and the Fund that (i) it does not and will not, after the consummation of the purchase contemplated by this Purchase Order, hold for the account of any single Beneficial Owner of WEBS of the Index Series to which this Purchase Order relates 80 percent or more of the outstanding shares of such Index Series, and (ii) it has received a representation and warranty from each Beneficial Owner purchasing WEBS by means of this Purchase Order that (x) such Beneficial Owner will not own, after consummation of the purchase, 80 percent or more of the outstanding shares of the applicable Index Series, and (y) such Beneficial Owner will not treat such purchase as eligible for tax-free treatment under Section 351 of the Internal Revenue Code of 1986, as amended. Signature of Authorized Person: __________________________ Name: THIS IRREVOCABLE PURCHASE ORDER MUST BE ACCOMPANIED BY A PURCHASE ORDER FORM. III-2
(DTC PART #) (NAME OF B/D) SUBSCRIPTION / / DAILY TRADE SUMMARY REDEMPTION / / FOREIGN FUND, INCORPORATED TRADE DATE: 12/28/95 FUNDS DISTRIBUTOR, INC. TRADE DATE: TRADING PHONE (800) 810-WEBS OPTION #2 FAX (617) 248-6439 - ------------------------------------------------------------------------------------------------------------------------------------ Creation Total Cash Sub/Red Control Settlement Confirmed By/or Index: Units: WEBS: Component: Fee: Number: Date: Days Extended Detail: - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRALIA (02) 200K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRIA (04) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ BELGIUM (06) 40K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ CANADA (08) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ FRANCE (10) 200K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ GERMANY (12) 300K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ HONG KONG (14) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ ITALY (16) 150K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ JAPAN (18) 600K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ MALAYSIA (20) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ MEXICO (22) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ NETHERLANDS (24) 50K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SINGAPORE (26) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SPAIN (28) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SWEDEN (30) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SWITZERLAND (32) 125K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ U.K. (34) 200K - (WEBS Cusip number - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL: 0 0 $0.00 $0.00 - - - ------------------------------------------------------------------------------------------------------------------------------------ ----------------------- PIN -----------------------
III-3 II. TO BE COMPLETED BY DISTRIBUTOR ( ) Properly completed irrevocable purchase order, including Index Series Order Sheet submitted before AMEX closing time. ( ) Arrangements satisfactory to the Fund are in place for payment of the Cash Component and any other cash amounts which may be due. This certifies that the attached Purchase Order has been: ( ) Accepted by the Fund-subject to timely and accurate delivery of the attached listing of securities and cash per Index Series. ( ) Declined - Due to: _________________________________________________ _________________________________________________ _________________________________________________ _______ _______ _______________________ Date Time Authorized Signature Signature of Authorized Person: _______________________________ Name: Title: III-4 ANNEX IV FOREIGN FUND, INC. FORM OF IRREVOCABLE REDEMPTION ORDER CONTACT INFORMATION FOR REDEMPTION ORDER EXECUTION Telephone Redemption Order Number: (800) 810-WEBS Business Number: (617) 248-6009 Facsimile Number: (617) 248-6439 ALL ITEMS IN PART I MUST BE COMPLETED BY THE PARTICIPANT. THE DISTRIBUTOR, IN ITS DISCRETION, MAY REJECT ANY REDEMPTION ORDER NOT SUBMITTED IN PROPER FORM. SEE THE FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION. I. TO BE COMPLETED BY PARTICIPANT Date: ______________ Time: ______________ Participant Name: _______________________________ Telephone Number: _____________________________ Facsimile Number: ______________________________ Authorized Person: ______________________________ PIN Number (assigned by Distributor): _______________ Standing Instructions For Receiving Custodian(s) YES NO (If 'NO' complete Alternative Delivery Instructions attached hereto) Alternate Cash Delivery Instructions YES NO (If 'YES' complete Alternative Delivery Instructions attached hereto) The Participant must deliver, on the redemption date, to the Transfer Agent (Account Name) _______________________; (Account Number)_______________________ (Other Reference Number) __________________________ the Creation Units of WEBS being redeemed. The undersigned Participant represents and warrants to the Distributor and the Fund that it has the right and authority IV-1 for itself or on behalf of its customer to redeem the WEBS contemplated by this redemption. REPRESENTATION, WARRANTY AND COVENANT REGARDING RETURN OF CERTAIN DISTRIBUTIONS IN RESPECT OF PORTFOLIO SECURITIES The undersigned Participant represents and warrants that it acknowledges and agrees on behalf of itself and any party for which it is acting (whether as a customer or otherwise) to return to the Fund any dividend, distribution or other corporate action paid to it or to the party for which it is acting in respect of any Deposit Security that is transferred to the Participant or any party for which it is acting that, based on the valuation of such Deposit Security at the time of transfer, should be paid to the Index Series to which this Redemption Order relates. The undersigned Participant represents and warrants that it also acknowledges and agrees on behalf of itself and any party for which it is acting (whether as a customer or otherwise) that the Fund is entitled to reduce the amount of money or other proceeds due to the Participant or any party for which it is acting by an amount equal to any dividend, distribution or other corporate action to be paid to it or to the party for which it is acting in respect of any Deposit Security that is transferred to the Participant or any party for which it is acting that, based on the valuation of such Deposit Security at the time of transfer, should be paid to the Index Series to which this Redemption Order relates. Signature of Authorized Person: __________________________ Name: THIS IRREVOCABLE REDEMPTION ORDER MUST BE ACCOMPANIED BY A REDEMPTION ORDER FORM. IV-2
(DTC PART #) (NAME OF B/D) SUBSCRIPTION / / DAILY TRADE SUMMARY REDEMPTION / / FOREIGN FUND, INCORPORATED TRADE DATE: 12/28/95 FUNDS DISTRIBUTOR, INC. TRADE DATE: TRADING PHONE (800) 810-WEBS OPTION #2 FAX (617) 248-6439 - ------------------------------------------------------------------------------------------------------------------------------------ Creation Total Cash Sub/Red Control Settlement Confirmed By/or Index: Units: WEBS: Component: Fee: Number: Date: Days Extended Detail: - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRALIA (02) 200K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRIA (04) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ BELGIUM (06) 40K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ CANADA (08) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ FRANCE (10) 200K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ GERMANY (12) 300K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ HONG KONG (14) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ ITALY (16) 150K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ JAPAN (18) 600K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ MALAYSIA (20) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ MEXICO (22) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ NETHERLANDS (24) 50K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SINGAPORE (26) 100K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SPAIN (28) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SWEDEN (30) 75K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ SWITZERLAND (32) 125K - (WEBS Cusip number) - ------------------------------------------------------------------------------------------------------------------------------------ U.K. (34) 200K - (WEBS Cusip number - ------------------------------------------------------------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL: 0 0 $0.00 $0.00 - - - ------------------------------------------------------------------------------------------------------------------------------------ ----------------------- PIN -----------------------
IV-3 Alternative Delivery Instructions THESE ALTERNATIVE DELIVERY INSTRUCTIONS SUPERSEDE AND REPLACE THE PARTICIPANT'S STANDING REDEMPTION INSTRUCTIONS ONLY WITH RESPECT TO THE ATTACHED REDEMPTION ORDER. The Participant hereby instructs the Fund, the Distributor, the Custodian and the relevant Subcustodian (if applicable) to deliver the Deposit Securities and other redemption proceeds, if any, of the attached Redemption Order with respect to each Index Series listed below into the account(s) in the applicable jurisdiction(s) listed below. Index Series: ________________ Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ Index Series: ________________ Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ The Participant hereby instructs the Fund, the Distributor and the Custodian to deliver the U.S. dollar denominated cash portion of the redemption proceeds, if any, of the attached Redemption Order into the following account: Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ The undersigned, [name], [title], [company], does hereby certify that the information above constitutes the complete and accurate redemption instructions for the attached Redemption Order. The Participant understands and agrees that the Distributor will instruct the Custodian or relevant Subcustodian to deliver, and the Custodian or relevant Subcustodian will deliver, Deposit Securities and any other redemption proceeds with respect to the attached Redemption Order into the relevant account(s) identified in these Alternative Delivery Instructions. THESE ALTERNATIVE DELIVERY INSTRUCTIONS RELATE ONLY TO THE ATTACHED PURCHASE ORDER AND DO NOT CONSTITUTE AN AMENDMENT TO THE PARTICIPANT'S STANDING REDEMPTION INSTRUCTIONS. AN AUTHORIZED PERSON OF THE PARTICIPANT MAY AMEND THE PARTICIPANT'S STANDING REDEMPTION INSTRUCTIONS IV-4 FROM TIME TO TIME IN WRITING TO THE DISTRIBUTOR AND THE FUND IN A FORM APPROVED BY THE FUND (SEE ANNEX VI HERETO). In Witness Whereof, the undersigned has hereby set his/her hand and the seal of [company]. Date:_________________ ___________________ [name, title] IV-5 II. TO BE COMPLETED BY DISTRIBUTOR ( ) Properly completed irrevocable redemption order, including Index Series Order Sheet submitted before AMEX closing time. ( ) WEBS have been received into Transfer Agent Account. This certifies that the attached Redemption Order has been: ( ) Accepted by the Fund-delivery of the attached listing of securities and cash per Index Series will occur per the procedures outlined in the prospectus and statement of additional information. ( ) Declined - Due to: _________________________________________________ _________________________________________________ _________________________________________________ _______ _______ ____________________ Date Time Authorized Signature IV-6 ANNEX V FOREIGN FUND, INC. FORM OF CERTIFIED AUTHORIZED PERSONS OF PARTICIPANT The following are the names, titles and signatures of all persons (each an "Authorized Person") authorized to give instructions relating to any activity contemplated by this Authorized Participant Agreement or any other notice, request or instruction on behalf of the Participant pursuant to this Authorized Participant Agreement. Name: __________________ Title: __________________ Signature: __________________ Name: __________________ Title: __________________ Signature: __________________ Name: __________________ Title: __________________ Signature: __________________ Name: __________________ Title: __________________ Signature: __________________ The undersigned, [name], [title], [company], does hereby certify that the persons listed above have been duly elected to the offices set forth beneath their names, that they presently hold such offices, that they have been duly authorized to act as Authorized Persons pursuant to the Authorized Participant Agreement by and among Foreign Fund, Inc, Funds Distributor, Inc and [name of Participant], dated [date] and that their signatures set forth above are their own true and genuine signatures. In Witness Whereof, the undersigned has hereby set his/her hand and the seal of [company]. Date: _________________ ___________________ [name, title] V-1 ANNEX VI FOREIGN FUND, INC. FORM OF AUTHORIZED PARTICIPANT'S STANDING REDEMPTION INSTRUCTIONS DATED: _______________ The Participant hereby instructs the Fund, the Distributor, the Custodian and the relevant Subcustodian (if applicable) to deliver the Deposit Securities and other redemption proceeds, if any, of a Redemption Order with respect to each Index Series listed below into the account(s) in the applicable jurisdiction(s) listed below. Index Series: ________________ Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ Index Series: ________________ Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ Index Series: ________________ Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ Index Series: ________________ Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ The Participant hereby instructs the Fund, the Distributor and the Custodian to deliver the U.S. dollar denominated cash portion of the redemption proceeds, if any, of a Redemption Order into the following account: Account Name: ________________ Account Number: ________________ Other Reference Number: ________________ VI-1 The undersigned, [name], [title], [company], does hereby certify that the information above constitutes the complete and accurate Standing Redemption Instructions for Redemption Orders relating to redemptions of Creation Units of WEBS of the Index Series for which Standing Redemption Instructions have been provided herein. The Participant acknowledges that it is authorized to submit a Redemption Order to redeem Creation Units of WEBS only with respect to Index Series in jurisdictions for which Standing Redemption Instructions have been provided to the Fund in writing. The Participant understands and agrees that the Distributor will instruct the Custodian or relevant Subcustodian to deliver, and the Custodian or relevant Subcustodian will deliver, Deposit Securities and any other redemption proceeds into the relevant account identified in these Standing Redemption Instructions. In Witness Whereof, the undersigned has hereby set his/her hand and the seal of [company]. Date:_________________ ___________________ [name, title] Pin Number:___________ VI-2 ANNEX VII FOREIGN FUND, INC. FUND SUBCUSTODIAN ACCOUNTS FOR DELIVERY OF DEPOSIT SECURITIES The subcustodian accounts into which a Participant should deposit the securities constituting the Deposit Securities of each Index Series are set forth below: Australia Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Austria Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Belgium Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Canada Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ France Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Germany Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Hong Kong Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ VII-1 Italy Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Japan Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Malaysia Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Mexico (Free) Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Netherlands Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Singapore Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Spain Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Sweden Index Series: Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ Switzerland Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ VII-2 United Kingdom Index Series Account Name: __________________ Account Number: __________________ Other Reference Number: __________________ VII-3 EX-99.6(C) 8 EXHIBIT 99.6(C) FORM OF FOREIGN FUND, INC. SALES AND INVESTOR SERVICES AGREEMENT Date: , 19__ _____________________ _____________________ _____________________ Ladies and Gentlemen: Foreign Fund, Inc. (the "Fund") is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), organized as a series fund and formed as a corporation under the laws of the State of Maryland. The Fund will consist initially of seventeen series (each, an "Index Series"), and will issue shares of common stock, par value $.001 per share, of each Index Series (such shares are referred to herein as "World Equity Benchmark Shares-SM-" or "WEBS-SM-"). The Fund will only sell and redeem WEBS in aggregations of a specified number of WEBS (each, a "Creation Unit") depending on the Index Series as set forth in the Fund's Prospectus and Statement of Additional Information, as they may be amended from time to time. Pursuant to a Distribution Agreement between the Fund and us (the "Distribution Agreement"), we will act as distributor (the "Distributor") and principal underwriter of Creation Units of WEBS of the various Index Series as exclusive agent on behalf of the Fund. Capitalized terms not defined herein shall have the meanings attributed to them in the current Prospectus and Statement of Additional Information of the Fund. Creation Units of WEBS of each Index Series will generally be sold at net asset value, without a sales charge, in exchange for Deposit Securities and a balancing cash payment, all as described in the Fund's Prospectus and Statement of Additional Information. Only Authorized Participants may directly place orders for Creation Units of WEBS. As Distributor and principal underwriter of the Fund, we wish to enter into this Sales and Investor Services Agreement (this "Agreement") with you concerning (i) your solicitation of purchase orders for Creation Units of WEBS, (ii) your provision of broker-dealer and shareholder support services to your clients ("Clients") who may from time to time beneficially own WEBS of any Index Series and (iii) your educational and promotional activities in the secondary market for WEBS listed and traded on the American Stock Exchange (the "AMEX"). You understand and acknowledge that the proposed method by which Creation Units of WEBS will be created and traded may raise certain issues under applicable securities laws. For example, because new Creation Units of WEBS may be issued and sold by the Fund on an ongoing basis, at any point a "distribution", as such term is used in the 1933 Act, may occur. You understand and acknowledge that some activities on your part may, depending on the circumstances, result in your being deemed a participant in a distribution in a manner which could render you a statutory underwriter and subject you to the prospectus delivery and liability provisions of the 1933 Act. You also understand and acknowledge that when you are not an "underwriter" but are effecting transactions in WEBS, whether or not participating in the distribution of WEBS, you are generally required to deliver a prospectus. This Agreement is a related agreement as contemplated by Rule 12b-1 under the 1940 Act with respect to the Rule 12b-1 plan of the Fund ("12b-1 Plan"). Both you and we and the Fund expect that your services and educational and promotional activities in connection with WEBS pursuant to this Agreement will tend to increase investor interest in and the use and trading of WEBS in the secondary market and thus further sales of WEBS of the Fund's Index Series. In consideration of the mutual covenants contained herein, it is hereby agreed that our respective rights and obligations shall be as follows: 1. ROLE OF DISTRIBUTOR. Pursuant to and in accordance with the provisions of the Distribution Agreement, we will make arrangements for securities dealers that can make the representations set forth in Section 4 of this Agreement to solicit orders to purchase Creation Units of WEBS of each Index Series. You are hereby invited to become one of the securities dealers referred to herein as a "Soliciting Dealer". This will confirm our mutual agreement as to the terms and conditions applicable to your participation as a Soliciting Dealer, such agreement to be effective upon your confirmation hereof. You understand that we are seeking to enter into this Agreement in counterparts with you and other firms which also may act as -2- Soliciting Dealers. All purchases of Creation Units of WEBS from the Fund shall be effected by us, through an Authorized Participant, in our capacity as principal underwriter and distributor acting as agent on behalf of the Fund. You understand that we shall have no obligation to you hereunder at such times as we are not acting as distributor and principal underwriter for the sale of WEBS in Creation Unit aggregations. 2. ROLE OF SOLICITING DEALERS. (a) As a Soliciting Dealer, you shall offer and solicit purchase orders for Creation Units of WEBS. As, when and if you generate a customer request for the purchase of Creation Units of WEBS of any Index Series and you determine to transmit such request to us, you shall comply with the procedures for the purchase of Creation Units of WEBS set forth in the then current Prospectus and Statement of Additional Information of the Fund. You shall be responsible for opening, approving and monitoring customer accounts and for the review and supervision of these accounts, all in accordance with the rules of the Securities and Exchange Commission ("SEC") and the National Association of Securities Dealers, Inc. (the "NASD"). You understand that all orders for the purchase of Creation Units of WEBS of each Index Series must be placed with us and may be placed only through an Authorized Participant that has entered into an Authorized Participant Agreement with us and the Fund. During any period that you are an Authorized Participant, you may submit purchase orders to us in such capacity. Your duties and obligations as an Authorized Participant are determined by the terms and conditions of the Authorized Participant Agreement and not pursuant hereto. The procedures relating to orders and the handling thereof will be subject to the terms of the Authorized Participant Agreement, the then current Prospectus and Statement of Additional Information of the Fund and instructions in writing received by you from us or the Fund's transfer agent from time to time. No conditional orders will be accepted. No Creation Units of WEBS shall be issued except upon receipt of the consideration therefor. If payment for any purchase order is not received in accordance with the terms of the then current Prospectus and Statement of Additional Information, we reserve the right, without notice, to cancel the sale and to hold you responsible for any loss sustained as a result thereof. Unless otherwise mutually agreed in writing, each transaction shall be promptly confirmed by the Authorized Participant in writing to the customer on a fully disclosed basis and a copy of each confirmation shall be sent simultaneously to you by the Authorized Participant. You -3- agree that upon receipt of duplicate confirmations you will examine the same and promptly notify us of any errors or discrepancies which you discover and shall promptly bring to our attention, the Authorized Participant's attention and the Fund's attention any errors in such confirmations claimed by your customers. (b) You agree to offer WEBS in Creation Unit size aggregations to the public at the then current public offering price per Creation Unit of WEBS (i.e., the next determined net asset value per WEBS) as set forth in the Fund's then current Prospectus and Statement of Additional Information, as the same may be amended or supplemented. All orders are subject to acceptance or rejection by us or the Fund in our or its sole discretion. (c) You agree to provide broker/dealer and shareholder support services to Clients in connection with the outstanding and issued WEBS, including one or more of the following: (i) distributing prospectuses and shareholder reports to current shareholders; (ii) as applicable, complying with federal and state securities laws pertaining to transactions in WEBS; (iii) processing dividend payments on behalf of Clients; (iv) providing information periodically to Clients showing their positions in WEBS; [(v) providing and maintaining elective services such as check writing on the Client's account and wire transfer services;] (vi) acting as nominee for Clients holding WEBS; (vii) maintaining account records for Clients; (viii) issuing confirmations of transactions; (ix) providing subaccounting with respect to WEBS beneficially owned by Clients or the information necessary for subaccounting; (x) if required by law, forwarding shareholder communications from us or on behalf of the Fund (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices); (xi) providing services primarily intended to result in the sale of WEBS; (xii) assisting shareholders who wish to aggregate sufficient WEBS of an Index Series to constitute a Creation Unit for redemption; and (xiii) such other services analogous to the foregoing as you customarily provide to clients with respect to holdings of shares of open-end investment companies or exchange-listed stocks or as we or the Fund may reasonably request to the extent you are permitted to do so under applicable statutes, rules and regulations. (d) You agree to provide educational and promotional services related to the secondary market trading of WEBS, including the following: (i) facilitating access for investor relations representatives for WEBS to -4- designated branches or offices as set forth in Annex I for the purpose of broker education, including through sales meetings, one-on-one broker contact and broker luncheons; (ii) making your country allocation research available widely through your internal systems and reformatting such allocation research to make specific recommendations of WEBS of appropriate Index Series; (iii) working with us and the Fund to facilitate the flow of WEBS data through your internal information systems, which information shall include all available WEBS data (i.e., real-time AMEX pricing on WEBS, spot foreign exchange rates, the per WEBS value of the most recently published Portfolio Deposit and Cash Component of each Index Series, adjusted to account for foreign exchange rates (the "Adjusted Basket Value"), and, eventually, data on the underlying Morgan Stanley Capital International bench-mark indices for the Index Series) and other research and news; (iv) support of senior management for use of WEBS as a trading and hedging tool; and [(v) during the first 180 days following the initial sale of Creation Units, provide sales incentives to your brokers pursuant to arrangements set forth in a letter from you to us.] (e) You also agree to provide such office space and equipment, telephone facilities and personnel (which may be any part of the space, equipment and facilities currently used in your business, or any personnel employed by you) as may be reasonably necessary or beneficial in order to provide the services listed in clauses 2(c) and 2(d) above to Clients and as is otherwise provided in this Section 2. (f) Subject to the requirements of applicable law and regulations, nothing in this Agreement shall be construed to prohibit or restrict you from purchasing or selling for your own account Creation Unit aggregations of WEBS, whether as agent or principal. 3. INFORMATION. (a) We will furnish you, without charge, the Fund's current Prospectus and Statement of Additional Information and copies of sales materials relating to the offer and sale of Creation Units of WEBS approved and filed with the NASD by us ("Fund Sales Materials") in such quantities as are reasonably requested by you and made available to us by the Fund for use in connection with the offer and sale of Creation Units of WEBS. Such Fund Sales Materials may include materials suitable for institutional marketing efforts, including conferences, road shows and institutional advertisements and/or "tombstones" related to the initial public offering of Creation Units of WEBS. -5- Under this Agreement you will not act for us, the Fund or BZW Barclays Global Fund Advisors (the "Investment Adviser"), nor make any representation on our behalf or the Fund's behalf, or as authorized by us, the Fund or the Investment Adviser, and in offering and selling Creation Units of WEBS hereunder you may rely only upon, the Fund's then current prospectus and statement of additional information and the Fund Sales Materials, provided that you are authorized to prepare and use at your own cost and expense other brochures, advertisements (in print or other format) or similar materials in connection with your solicitation of purchases of Creation Units of WEBS which may constitute "sales literature" within the meaning of Section 24(b) of the 1940 Act ("Other Soliciting Materials"), but only if such Other Soliciting Materials (i) are prepared in compliance with all applicable NASD and SEC rules and regulations, (ii) provided to us a reasonable time prior to their intended use and (iii) are not used until approved by us and the Fund and filed by us with the NASD. You understand that the Fund will not be advertised or marketed as an open-end investment company or mutual fund, i.e., as a mutual fund, which offers redeemable securities. Any advertising materials, including the Fund Prospectus, will prominently disclose that WEBS that are not in Creation Unit aggregations are not redeemable units of beneficial interest in the Fund. In addition, any advertising material that addresses redemptions of WEBS, including the Fund prospectus, will disclose that the owners of WEBS may acquire and tender WEBS for redemption to the Fund in Creation Unit aggregations only. (b) We intend to establish a world-wide internet site to provide certain on-line MSCI analytical data ("MSCI WEBS Analitics"). If and when available, you will be provided access to our site and the use of MSCI WEBS Analitics. 4. REPRESENTATIONS. (a) You represent to us as follows, and agree to abide by all of the rules and regulations of the NASD, including, without limitation, the following provisions of its Rules of Fair Practice, except as otherwise permitted by the NASD as set forth in writing, a copy of which shall be provided to you by us: (i) you will not withhold placing customers' orders for any Creation Units of WEBS so as to profit yourself as a result of such withholding; -6- (ii) you are familiar with Rule 15c2-8 under the Securities Exchange Act of 1934, as amended (the "1934 Act"), Section 4(3) of the Securities Act of 1933, as amended (the "1933 Act"), and Section 24(d) of the 1940 Act relating to the distribution and delivery of preliminary and final prospectuses and agree that you will comply therewith; (iii) you are a member in good standing of the NASD or, if you are not such a member, you are a foreign bank, dealer or institution not eligible for membership in the NASD which agrees to make no sale within the United States, its territories or its possessions or to persons who are citizens thereof or residents therein, and in making other sales to comply, as though you were a member of NASD, with the provisions of Sections 8, 24 and 36 of Article III of the Rules of Fair Practice of the NASD and with Section 25 thereof as that Section applies to a non-NASD member broker or dealer in a foreign country. (b) You agree that your expulsion from the NASD will automatically terminate this Agreement. (c) You agree to comply with any rules of the American Stock Exchange, Inc. or such other secondary market or markets as has or have been approved by an order of the SEC for the trading of WEBS. A copy of the conditions of the SEC order in accordance with which WEBS are offered are attached hereto as Annex II. (d) We represent to you that we are a member in good standing of the NASD and agree to abide by all of the NASD's rules and regulations. 5. INDEPENDENT CONTRACTOR. For all purposes of this Agreement, you will be deemed to be an independent contractor, and will have no authority to act as agent, partner, joint venture participant or in any similar capacity for us in any matter or in any respect. You and your officers and employees will, upon request, be available during normal business hours to consult with us or our designees concerning the performance of your responsibilities under this Agreement. 6. COMPENSATION; EXPENSES. In consideration of the services and facilities provided by you hereunder, subject to the terms and conditions of the 12b-1 Plan, in our capacity as the Distributor implementing the 12b-1 Plan, we will pay to you and you agree to accept as full payment therefor, the fees set forth in Annex III attached hereto. -7- You understand and agree that no amount shall be paid or payable to you hereunder except from amounts paid to us by the Fund for disbursements to you under this Agreement and pursuant to and in accordance with the 12b-1 Plan. You understand and agree that the Distributor is obligated to make such payments to you only after the Fund has paid such 12b-1 payments to the Distributor. 7. REPORTS. You will provide to us and the Fund's Board of Directors, and we and the Fund's Directors will review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. In addition, you will furnish us or our designees with such information as we or they may reasonably request (including, without limitation, periodic certifications confirming the provision to Clients by you or your agents of the services described herein), and will otherwise cooperate with us and our designees (including, without limitation, any auditors designated by us or the Fund), in connection with preparation of reports to the Fund's Board of Directors concerning this Agreement and the monies paid or payable by us in connection the services you have agreed to provide hereunder, as well as any other reports or filings that may be required by law. 8. RULE 12b-1 RELATED AGREEMENT. By your written acceptance of this Agreement, you represent, warrant and agree that you understand that this Agreement is a Rule 12b-1 related agreement under the 1940 Act, subject to the provisions of such Rule, as well as any other applicable rules or regulations of the SEC, and agree to conform to the applicable compliance standards adopted by us for sale of WEBS, as in effect from time to time. 9. COMPLIANCE. (a) You agree that your activities pursuant to this Agreement will be at all times in conformity in all material respects with all applicable federal and state laws, rules and regulations, including without limitation, the 1933 Act, the 1934 Act, the 1940 Act and the Rules of Fair Practice of the NASD (as provided in Section 4 hereof). In connection with offers to sell and sales of WEBS of each Index Series, you agree to deliver or cause to be delivered to each person to whom any such offer of sale is made, at or prior to the time of such offer or sale, a copy of the then current prospectus and the statement of additional information of the Fund. (b) We agree to inform you, as the Fund provides or causes to be provided to us such information, as to the -8- states in which we believe WEBS of the respective Index Series have been qualified for sale under, or are exempt from the requirements of, the respective securities laws thereof, but we shall have no obligation or responsibility to make WEBS of any Index Series available for sale in any jurisdiction. 10. INITIAL PURCHASE BY SOLICITING DEALER. If applicable, the soliciting dealer will be obligated to make an initial investment in WEBS as detailed in Annex IV hereto. 11. BENEFICIAL OWNERSHIP. The Soliciting Dealer represents and warrants to the Distributor and the Fund that (based upon the number of outstanding WEBS of such Index Series made publicly available by the Fund) it does not, and will not in the future, hold for the account of any single beneficial owner of WEBS of the relevant Index Series 80 percent or more of the currently outstanding WEBS of such relevant Index Series, so as to cause the Fund to have a basis in the portfolio securities deposited with the Fund with respect to such Index Series different from the market value of such portfolio securities on the date of such deposit, pursuant to section 351 of the Internal Revenue Code of 1986, as amended. 12. INDEMNIFICATION. The Soliciting Dealer hereby agrees to indemnify and hold harmless the Distributor and the Fund, their respective subsidiaries, affiliates, directors, officers, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each an "Indemnified Party") from and against any loss, liability, cost and expense (including attorneys' fees) incurred by such Indemnified Party as a result of (i) a breach of any representation, warranty or covenant made by the Soliciting Dealer in this Agreement; or (ii) failure of the Soliciting Dealer to perform any obligations set forth in the Agreement; or (iii) any failure on the part of the Soliciting Dealer to comply with applicable laws. The Soliciting Dealer and the Distributor understand and agree that the Fund as a third party beneficiary to this Agreement is entitled and intends to proceed directly against the Soliciting Dealer in the event that the Soliciting Dealer fails to honor any obligations pursuant to this Agreement that benefit the Fund. This paragraph shall survive the termination of this Agreement. THE DISTRIBUTOR SHALL NOT BE LIABLE TO THE SOLICITING DEALER FOR ANY DAMAGES ARISING OUT OF MISTAKES OR ERRORS IN DATA PROVIDED TO THE DISTRIBUTOR, OR ARISING OUT OF INTERRUPTIONS OR DELAYS OF COMMUNICATIONS WITH THE INDEMNIFIED PARTIES WHO ARE SERVICE PROVIDERS TO THE FUND. -9- 13. TERM; TERMINATION; AMENDMENT. (a) Unless sooner terminated, this Agreement will continue for one year following the date of its adoption as provided in Section 16, and thereafter will continue automatically for successive annual periods provided such continuance is specifically approved at least annually by the Fund in the manner described in Section 16 hereof. This Agreement is terminable, without penalty, at any time by the Fund with respect to any Index Series (which termination may be by a vote of a majority of the Disinterested Directors as defined in Section 16 hereof or by vote of the holders of a majority of the voting securities (as such term is defined in the 1940 Act) of such Index Series) or by you upon 60 days' notice in writing to the other party hereto. This Agreement will also terminate automatically in the event of its assignment (within the meaning of the 1940 Act) or upon the termination of the Distribution Agreement or Rule 12b-1 Plan between the Fund and us. The Distributor, with the prior written consent of the Fund, may amend this agreement by mailing a copy of the amendment to the Soliciting Dealer, which amendment will become part of this Agreement if the Soliciting Dealer does not object in writing within 10 business days after its receipt. This Agreement may also be amended in writing by the parties hereto. (b) In the event that the Board of Directors of the Fund establishes any series of WEBS listed and traded on the AMEX or any other national securities exchange in addition to the Index Series then subject to this Agreement, adopts a 12b-1 Plan with respect to such additional series and approves this Agreement with respect to such additional series in accordance with Rule 12b-1, such additional series shall be made subject to this Agreement and shall become an "Additional Series" hereunder effective immediately upon such adoption and approval. 14. SUSPENSION. All sales will be made subject to receipt of WEBS from the Fund. We and the Fund reserve the right, in our sole discretion, without notice, to suspend sales or withdraw the offering of sales of Creation Units of WEBS of any Index Series entirely, including the sale of such WEBS to you for the account of any client or clients. 15. NO OTHER AGREEMENT. This Agreement shall supersede any prior agreements between us regarding the sale of Creation Units of WEBS. 16. BOARD APPROVAL. This Agreement and the 12b-1 Plan is subject to approval by vote of (i) the Fund's Board -10- of Directors and (ii) of a majority of those Directors who are not "interested persons" (as defined in the 1940 Act) of the Fund and have no direct or indirect financial interest in the operation of the 12b-1 Plan adopted by the Fund regarding the provision of support services to the beneficial owners of WEBS of the respective Index Series or in any agreement related thereto ("Disinterested Directors") cast in person at a meeting called for the purpose of voting on such approval. 17. MISCELLANEOUS. (a) Notice. Notice shall have been duly given if delivered by hand, mail or facsimile transmission to you, at your address or facsimile number set forth below and (b) if to us, to Funds Distributor, Inc., One Exchange Place, 10th Floor, Boston, MA 02109, facsimile no. (617) 248-6422, Attention: President, with a copy to General Counsel, or in each case such other addresses as may be notified to the other party. (b) Successors. Subject to Section 8 hereof, this Agreement will inure to the benefit of and be binding upon the parties hereto and their respective legal successors and the Fund, and no other person will have any right or obligation hereunder. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles of conflicts of law. The parties irrevocably submit to the non-exclusive jurisdiction of any New York State or United States Federal Court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. 18. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. -11- Please confirm your agreement by signing and returning to us the enclosed duplicate copies of this Agreement. Upon our acceptance hereof, this Agreement shall constitute a valid and binding contract between us. After our acceptance, we will deliver to you one fully executed copy of this Agreement. Very truly yours, FUNDS DISTRIBUTOR INC. By_________________________________ Name: Title: Confirmed: , 19__ (Name of Soliciting Dealer) By___________________________ (sign name and print title) -12- Annex I DESIGNATED BRANCHES OR OFFICES OF SOLICITING DEALER -13 Annex II CONDITIONS OF SEC ORDER -14- Annex III ANNUAL FEES [Option 1 - At the annual rate of [.03] of 1% of the average aggregate daily net assets of the outstanding WEBS of each Index Series, except WEBS held in your name at the Depository Trust Company ("DTC"), computed daily and payable on a quarterly basis, plus [.04] of 1% of the average daily net assets of the WEBS held in your name DTC up to $250 million; 0.05 of 1% of the average daily net assets of WEBS held in your name at DTC between $250 million and $750 million; and 0.07 of 1% of the average daily net assets of WEBS held in your name at DTC in excess of $750 million computed daily and payable on a quarterly basis. [Option 2 - At the annual rate of [ ] of 1% of the average daily net assets of WEBS held in your name at DTC computed daily and payable on a quarterly basis. ADDITION TERMS AND CONDITIONS For purposes of determining the fees payable under this Annex III, the average aggregate daily net assets of the Index Series will be computed in the manner specified in the Fund's Registration Statement (as the same is in effect from time to time) in connection with the computation of the net asset value of WEBS for purposes of purchases and redemptions. Except as specifically provided in this Annex III, you shall bear all of your own costs and expenses in connection with your acting as a Soliciting Dealer, it being understood that we and the Fund shall bear our and the Fund's respective costs and expenses. You shall not be required to bear any of the costs or expenses assumed by us or any other Soliciting Dealer except as provided for herein or as you may have agreed with another Soliciting Dealer. The Soliciting Dealer shall provide the Distributor with its DTC account information in the form and manner as prescribed by the Distributor by the 5th business day after the end of each calendar month. The Soliciting Dealer understands and acknowledges that the Distributor shall, on a test basis, independently verify the DTC account information provided by the Soliciting Dealer, with the costs of such independent verification borne by the Soliciting Dealer. Any discrepancies will be interpreted by the Distributor and the Distributor's interpretation of such data shall be final. -15- Annex IV INITIAL INVESTMENT IN WEBS -16- EX-99.8(A) 9 EXHIBIT 99.8(A) FORM OF CUSTODY AGREEMENT This Custody Agreement is dated ______________, 1996 between MORGAN STANLEY TRUST COMPANY, a New York State chartered trust company (the "Custodian"), and FOREIGN FUND, INC., a Maryland corporation registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "Client"). The Client issues its shares in different Index Series (each, an "Index Series"). 1. APPOINTMENT AND ACCEPTANCE; ACCOUNTS. (a) The Client, on behalf of its Index Series (each an "Index Series") hereby appoints the Custodian as a custodian of Property (as defined below) owned or under the control of the Client's Index Series, that is delivered to the Custodian, or any Subcustodian as appointed below, from time to time to be held in custody for the benefit of the Client's Index Series. The Custodian agrees to act as such Custodian upon the terms and conditions hereinafter provided. (b) Prior to the delivery of any Property by the Client, on behalf of its Index Series, to the Custodian, the Client shall deliver to the Custodian each document and other item listed in Appendix 1. In addition, the Client shall deliver to the Custodian any additional documents or items as the Custodian may reasonably deem necessary for the performance of its duties under this Agreement. (c) The Client instructs the Custodian to establish on the books and records of the Custodian the accounts listed in Appendix 2 (the "Accounts") in the name of the Client, on behalf of its Index Series. Upon receipt of Authorized Instructions (as defined below) and appropriate documentation, the Custodian shall open additional Accounts for the Client. Upon the Custodian's confirmation to the Client of the opening of such additional Accounts, or of the closing of Accounts, Appendix 2 shall be deemed automatically amended or supplemented accordingly. The Custodian shall record in the Accounts and shall have general responsibility for the safekeeping of all securities ("Securities"), cash, cash equivalents and other property (all such Securities, cash, cash equivalents and other property being collectively called the "Property") of the Client's Index Series that are delivered to the Custodian for custody. (d) The procedures the Custodian and the Client will use in performing activities in connection with this Agreement are set forth in a client services guide provided to the Client by the Custodian, as such guide may be amended from time to time by the Custodian by written notice to the Client (the "Client Services Guide"). 2. SUBCUSTODIANS. The Property may be held in custody and deposit accounts that have been established by the Custodian with one or more domestic or foreign banks or other institutions as listed on Exhibit A (the "Subcustodians"), as such Exhibit may be amended from time to time by the Custodian upon sixty (60) days prior written notice to the Client, or through the facilities of one or more securities depositories or clearing agencies. The Custodian shall hold Property through a Subcustodian, securities depository or clearing agency only if (a) such Subcustodian and any securities depository or clearing agency in which such Subcustodian or the Custodian holds Property, or any of their creditors, may not assert any right, charge, security interest, lien, encumbrance or other claim of any kind to such Property except a claim of payment for its safe custody or administration and (b) beneficial ownership of such Property may be freely transferred without the payment of money or value other than for safe custody or administration. Any Subcustodian may hold Property in a securities depository and may utilize a clearing agency. 3. RECORDS. With respect to Property held by a Subcustodian: (a) The Custodian may hold Property for all of its customers with a Subcustodian in a single account identified as belonging to the Custodian for the benefit of its customers; (b) The Custodian shall identify on its books as belonging to the Client's Index Series any Property held by a Subcustodian for the Custodian's account; (c) The Custodian shall require that Property held by the Subcustodian for the Custodian's account be identified on the Subcustodian's books as separate from any other property held by the Subcustodian other than property of the Custodian's customers held solely for the benefit of customers of the Custodian; and (d) In the event the Subcustodian holds Property in a securities depository or clearing agency, such Subcustodian shall be required by its agreement with the Custodian to identify on its books such Property as being held for the account of the Custodian as custodian for its customers or in such other manner as is required by local law or market practice. 4. ACCESS TO RECORDS. The Custodian shall allow the Client's accountants reasonable access to the Custodian's records relating to the Property held by the Custodian as such accountants may reasonably require in connection with their examination of the Client's affairs. The Custodian shall also obtain from any Subcustodian (and shall require each Subcustodian to use reasonable efforts to obtain from any securities depository or clearing agency in which it deposits Property) an undertaking, to the extent consistent with local practice and the laws of the jurisdiction or jurisdictions to which such Subcustodian, securities depository or clearing agency is subject, to permit independent public accountants such reasonable access to the records of such Subcustodian, securities depository or clearing agency as may be reasonably required in connection with the examination of the Client's affairs or to take such other action as the Custodian in its judgment may deem sufficient to ensure such reasonable access. 5. REPORTS. The Custodian shall provide such reports and other information to the Client, on behalf of its Index Series, and to such persons as the Client directs, as the Custodian and the Client may agree from time to time. 6. PAYMENT OF MONIES. The Custodian shall make, or cause any Subcustodian to make, payments from monies being held in the Accounts only in accordance with Authorized Instructions or as provided in Sections 9, 13 and 17. The Custodian may act as the Client's agent in foreign exchange transactions at such rates as are agreed from time to time between the Client, on behalf of its Index Series, and the Custodian. 7. TRANSFER OF SECURITIES. The Custodian shall make, or cause any Subcustodian to make, transfers, exchanges or deliveries of Securities only in accordance with Authorized Instructions or as provided in Sections 9, 13 and 17. 8. CORPORATE ACTIONS. (a) The Custodian shall notify the Client of details of all corporate actions affecting the Securities of the Client's Index Series promptly upon its receipt of such information. (b) The Custodian shall take, or cause any Subcustodian to take, any action in respect of such corporate actions only in accordance with Authorized Instructions or as provided in this Section 8 or Section 9. (c) In the event the Client, on behalf of its Index Series, does not provide timely Authorized Instructions to the Custodian, the Custodian shall act in accordance with the default option provided by local market practice and/or the issuer of the Securities. (d) Unless the Custodian receives Authorized Instructions to the contrary, fractional shares resulting from corporate action activity shall be treated in accordance with local market practices. 9. GENERAL AUTHORITY. In the absence of Authorized Instructions to the contrary, the Custodian may, and may authorize any Subcustodian to: (a) make payments to itself or others for expenses of handling Property or other similar items relating to its duties under this Agreement, provided that all such payments shall be accounted for to the Client; (b) receive and collect all income and principal with respect to Securities and to credit cash receipts to the Accounts; (c) exchange Securities when the exchange is purely ministerial (including, without limitation, the exchange of interim receipts or temporary securities for securities in definitive form and the exchange of warrants, or other documents of entitlement to securities, for the securities themselves); (d) surrender Securities at maturity or when called for redemption upon receiving payment therefor; (e) execute in the Client's name such ownership and other certificates as may be required to obtain the payment of income from Securities; (f) pay or cause to be paid, from the Accounts, any and all taxes and levies in the nature of taxes imposed on Property by any governmental authority in connection with custody of and transactions in such Property; (g) endorse for collection, in the name of the Client, checks, drafts and other negotiable instruments; (h) take non-discretionary action on mandatory corporate actions; and (i) in general, attend to all nondiscretionary details in connection with the custody, sale, purchase, transfer and other dealings with the Property. 10. AUTHORIZED INSTRUCTIONS; AUTHORIZED PERSONS. (a) Except as otherwise provided in Sections 6 through 9, 13 and 17, all payments of monies, all transfers, exchanges or deliveries of Property and all responses to corporate actions shall be made or taken only upon receipt by the Custodian of Authorized Instructions; PROVIDED that such Authorized Instructions are timely received by the Custodian. "AUTHORIZED INSTRUCTIONS" of the Client means instructions from an Authorized Person received by telecopy, tested telex, electronic link or other electronic means or by such other means as may be agreed in writing between the Client and the Custodian. (b) "AUTHORIZED PERSON" means each of the persons or entities identified on Appendix 3 as amended from time to time by written notice from the Client, on behalf of its Index Series, to the Custodian. The Client represents and warrants to the Custodian that each Authorized Person listed in Appendix 3, as amended from time to time, is authorized to issue Authorized Instructions on behalf of the Client's specific Index Series, as indicated on such Appendix 3. Prior to the delivery of the Property to the Custodian, the Custodian shall provide a list of designated system user ID numbers and passwords that the Client shall be responsible for assigning to Authorized Persons. The Custodian shall assume that an electronic transmission received and identified by a system user ID number and password was sent by an Authorized Person. The Custodian agrees to provide additional designated system user ID numbers and passwords as needed by the Client. The Client authorizes the Custodian to issue new system user ID numbers upon the request of a previously existing Authorized Person. Upon the issuance of additional system user ID numbers by the Custodian to the Client, Appendix 3 shall be deemed automatically amended accordingly. The Client authorizes the Custodian to receive, act and rely upon any Authorized Instructions received by the Custodian which have been issued, or which are reasonably believed to have been issued, by an Authorized Person. (c) Any Authorized Person may cancel/correct or otherwise amend any Authorized Instruction received by the Custodian, but the Client agrees to indemnify the Custodian for any liability, loss or expense incurred by the Custodian and its Subcustodians as a result of their having relied upon or acted on any prior Authorized Instruction. An amendment or cancellation of an Authorized Instruction to deliver or receive any security or funds in connection with a trade will not be processed once the trade has settled. 11. REGISTRATION OF SECURITIES. (a) In the absence of Authorized Instructions to the contrary, Securities which must be held in registered form shall be registered in the name of the Custodian or the Custodian's nominee or, in the case of Securities in the custody of an entity other than the Custodian, in the name of the Custodian, its Subcustodian or any such entity's nominee. The Custodian may, without notice to the Client, cause any Securities to be registered or re-registered in the name of the Client. (b) Where the Custodian has been instructed by the Client, on behalf of its Index Series, to hold any Securities in the name of any person or entity other than the Custodian, its Subcustodian or any such entity's nominee, the Custodian shall not be responsible for any failure to collect dividends or other income or participate in any corporate action with respect to such Securities. The foregoing shall not relieve the Custodian of its obligation to hold in safekeeping all Property of the Client's Index Series delivered to the Custodian or any Subcustodian in accordance with Section 1 hereof or to notify the Client of any corporate action of which it receives notice as provided in Section 8 hereof. 12. DEPOSIT ACCOUNTS. Unless the Client and the Custodian otherwise agree, all cash received by the Custodian for the Accounts shall be held by the Custodian as a short-term credit balance in favor of the Client's Index Series and if the Custodian and the Client have agreed in writing in advance that such balances shall bear interest, the Client shall earn interest at the rates and times as agreed between the Client and the Custodian. The Client acknowledges that any such credit balances shall not be accompanied by the benefit of any governmental insurance. 13. SHORT-TERM CREDIT EXTENSIONS. (a) From time to time, if agreed between the Custodian and the Client, the Custodian may extend or arrange short- term credit for the Client which is (i) necessary in connection with payment and clearance of securities and foreign exchange transactions or (ii) pursuant to an agreed schedule, as and if set forth in the Client Services Guide, of credits for dividends and interest payments on Securities. All such extensions of credit shall be repayable by the Client on demand. (b) The Custodian shall be entitled to charge the Client interest for any such credit extension at rates to be agreed upon from time to time or, if such credit is arranged by the Custodian with a third party on behalf of the Client, the Client shall reimburse the Custodian for any interest charge. In addition to any other remedies available, the Custodian shall be entitled to a right of set-off against the Property to satisfy the repayment of such credit extensions and the payment of, or reimbursement for, accrued interest thereon. 14. REPRESENTATIONS AND WARRANTIES. (a) The Client, on behalf of its Index Series, represents and warrants that (i) the execution, delivery and performance of this Agreement (including, without limitation, the ability to obtain the short-term extensions of credit in accordance with Section 13) are within the Client's power and authority and have been duly authorized by all requisite action (corporate or otherwise) of the Client, on behalf of its Index Series, and of the beneficial owner of the Property, if other than the Client's Index Series, and (ii) this Agreement and each extension of short-term credit extended to or arranged for the benefit of the Client in accordance with Section 13 shall at all times constitute a legal, valid and binding obligation of the Client enforceable against the Client in accordance with its terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights in general and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). (b) The Custodian represents and warrants that (i) the execution, delivery and performance of this Agreement are within the Custodian's power and authority and have been duly authorized by all requisite action (corporate or otherwise) of the Custodian and (ii) this Agreement constitutes the legal, valid and binding obligation of the Custodian enforceable against the Custodian in accordance with its terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights in general and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). 15. STANDARD OF CARE; INDEMNIFICATION. (a) The Custodian shall be responsible for the performance of only such duties as are set forth in this Agreement or contained in Authorized Instructions given to the Custodian which are not contrary to the provisions of any relevant law or regulation. The Custodian shall be liable to the Client for any loss, liability or expense incurred by the Client's Index Series in connection with this Agreement to the extent that any such loss, liability or expense results from the negligence or willful misconduct of the Custodian or any Subcustodian. (b) The Client acknowledges that the Property may be physically held outside the United States. The Custodian shall not be liable for any loss, liability or expense resulting from events beyond the reasonable control of the Custodian, including, but not limited to, FORCE MAJEURE, provided the Custodian or Subcustodian has otherwise fulfilled its obligations under this Agreement and has acted in accordance with the standard of care set forth in this Section 15. (c) In addition, the Client shall indemnify the Custodian and Subcustodians and any nominee for such persons, and hold each of them harmless from, any liability, loss or expense (including attorneys' fees and disbursements) incurred in connection with this Agreement, including without limitation, (i) as a result of the Custodian having acted or relied upon any Authorized Instructions or (ii) arising out of any such person acting as a nominee or holder of record of Securities, provided the Custodian or Subcustodian has otherwise fulfilled its obligations under this Agreement and has acted in accordance with the standard of care set forth in this Section 15. 16. FEES; LIENS. The Client, on behalf of its Index Series, shall pay to the Custodian from time to time such compensation for its services pursuant to this Agreement as may be mutually agreed upon as well as the Custodian's out-of-pocket and incidental expenses. The Client shall hold the Custodian harmless from any liability or loss resulting from any taxes or other governmental charges, and any expenses related thereto, which may be imposed or assessed with respect to the Accounts or any Property held therein. The Custodian is, and any Subcustodians are, authorized to charge the Accounts for such items and the Custodian shall have a lien, charge and security interest on any and all Property for any amount owing to the Custodian from time to time under this Agreement. 17. TERMINATION. This Agreement may be terminated by the Client in respect of any Index Series or the Custodian by 60 days written notice to the other, sent by registered mail. If notice of termination is given, the Client shall, within 30 days following the giving of such notice, deliver to the Custodian a statement in writing specifying the successor custodian or other person to whom the Custodian shall transfer the Property. In either event, the Custodian, subject to the satisfaction of any lien it may have, shall transfer the Property to the person so specified. If the Custodian does not receive such statement the Custodian, at its election, may transfer the Property to a bank or trust company established under the laws of the United States or any state thereof to be held and disposed of pursuant to the provisions of this Agreement or may continue to hold the Property until such a statement is delivered to the Custodian. In such event the Custodian shall be entitled to fair compensation for its services during such period as the Custodian remains in possession of any Property and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect; provided, however, that the Custodian shall have no obligation to settle any transactions in Securities for the Accounts. The provisions of Sections 15 and 16 shall survive termination of this Agreement. 18. INVESTMENT ADVICE. The Custodian shall not supervise, recommend or advise the Client's Index Series relative to the investment, purchase, sale, retention or other disposition of any Property held under this Agreement. 19. CONFIDENTIALITY. (a) The Custodian, its agents and employees shall maintain the confidentiality of information concerning the Property held in the Client's account, including in dealings with affiliates of the Custodian. In the event the Custodian or any Subcustodian is requested or required to disclose any confidential information concerning the Property, the Custodian shall, to the extent practicable and legally permissible, promptly notify the Client of such request or requirement so that the Client, on behalf of its Index Series, may seek a protective order or waive any objection to the Custodian's or such Subcustodian's compliance with this Section 19. In the absence of such a waiver, if the Custodian or such Subcustodian is compelled, in the opinion of its counsel, to disclose any confidential information, the Custodian or such Subcustodian may disclose such information to such persons as, in the opinion of counsel, is so required. (b) The Client shall maintain the confidentiality of, and not provide to any third parties absent the written permission of the Custodian, any computer software, hardware or communications facilities made available to the Client or its agents by the Custodian. 20. NOTICES. Any notice or other communication from the Client to the Custodian, unless otherwise provided by this Agreement or the Client Services Guide, shall be sent by certified or registered mail to Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York, 11201, Attention: President, and any notice from the Custodian to the Client is to be mailed postage prepaid, addressed to the Client at the address appearing below, or as it may hereafter be changed on the Custodian's records in accordance with written notice from the Client. 21. ASSIGNMENT. This contract may not be assigned by either party without the prior written approval of the other. 22. MISCELLANEOUS. (a) This Agreement shall bind the successors and assigns of the Client and the Custodian. (b) This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without regard to its conflicts of law rules and to the extent not preempted by federal law. The Custodian and the Client, on behalf of its Index Series, hereby irrevocably submit to the exclusive jurisdiction of any New York State court or any United States District Court located in the State of New York in any action or proceeding arising out of this Agreement and hereby irrevocably waive any objection to the venue of any such action or proceeding brought in any such court or any defense of an inconvenient forum. In witness whereof, the parties hereto have set their hands as of the date first above written. FOREIGN FUND, INC. By______________________ Name: Title: Address for record: ______________________ ______________________ ______________________ Accepted: MORGAN STANLEY TRUST COMPANY By___________________________ Authorized Signature APPENDIX 1 Account Documentation REQUIRED DOCUMENTATION FOR CORE CUSTODIAL SERVICES (INCLUDING TAX RECLAIMS): CUSTODY AGREEMENT CLIENT SERVICES GUIDE (INCLUDING APPENDICES) FEE SCHEDULE / BILLING GUIDE GENERAL ACCOUNT INFORMATION US TAX AUTHORITY DOCUMENTATION LOCAL TAX OFFICE LETTER / APPLICATION LETTER (NON-UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY) FORM 6166 / REQUEST FOR FOREIGN CERTIFICATION FORM (UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY) CERTIFICATION OF BENEFICIAL OWNERSHIP, LEGAL NAME, LEGAL RESIDENCY, TAX STATUS AND TAX IDS TAX RECLAIM POWER OF ATTORNEY PREVIOUS TAX RECLAIM FILING INFORMATION (PREVIOUS FILERS, ONLY) UK TAX AUTHORITY DOCUMENTATION SOPHISTICATED INVESTOR (ACCREDITED INVESTOR) LETTER (UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY) DOCUMENTATION THAT IS REQUIRED FROM AN ENTITY CLASSIFIED AS TAX-EXEMPT BY ITS LOCAL TAX AUTHORITY: UK FORM 4338 (EXEMPT NON-UNITED KINGDOM-RESIDENT BENEFICIAL OWNERS, ONLY) UK FORM 309A (EXEMPT UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY) FOREIGN EXEMPTION LETTERS / APPLICATION FOR AUSTRALIAN EXEMPTION LETTER (EXEMPT BENEFICIAL OWNERS, ONLY) DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL USE THE PROXY VOTING SERVICE: VOTING POWER OF ATTORNEY DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL DEAL IN CERTAIN SECURITIES: JGB INDEMNIFICATION LETTER KOREAN SECURITIES POWER OF ATTORNEY NEW ZEALAND 'APPROVED ISSUER LEVY' LETTER SPANISH POWER OF ATTORNEY WITH APOSTILE APPENDIX 2 Client Accounts Account Name Account Number Account Mnemonic ------------ -------------- ---------------- 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. APPENDIX 3 Part I - Authorized Signatures The Custodian is directed to accept and act upon Authorized Instructions received from any of the following persons or entities: Telephone/ Authorized Name Organization Title Fax Signature - ---- ------------ ----- ---------- ---------- Authorized by: ___________________________ Part II - System User ID numbers The Custodian is directed to accept and act upon Authorized Instructions transmitted electronically and identified with the following mnemonics and system user ID numbers for the following activities: Work Station Account Workstation Sessions User I.D. Mnemonic Number TE TCC SL FE CM MA TD - --------- -------- ------ -- --- -- -- -- -- -- WORKSTATION SESSION CODES TE Trade Entry TCC Trade Cancel/Correct SL Securities Lending FE Foreign Exchange CM Cash Movement MA Mass Authorization TD Time Deposit EXHIBIT A Subcustodians EX-99.8(B) 10 EXHIBIT 99.8(B) LENDING ADDENDUM TO CUSTODY AGREEMENT DRAFT 2/12/96 ADDENDUM DATED AS OF FEBRUARY__, 1996 BETWEEN MORGAN STANLEY TRUST COMPANY (THE "CUSTODIAN") AND FOREIGN FUNDS, INC. (THE "CLIENT") WHEREAS, the Custodian and the Client have entered into a Custody Agreement dated as of February __, 1996 (the "Agreement") for the safekeeping of securities and cash received by the Custodian for the account of the Client's Index Series; WHEREAS, the Client wishes to appoint the Custodian to act as the Client's agent for the purpose of lending Securities held for the Account of the Client's Index Series; WHEREAS, the Client and the Custodian have agreed to enter into this Amendment in order to authorize the Custodian to take certain additional actions on behalf of the Client; NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: 1. Terms defined in the Agreement are used herein with their defined meanings. 2. The Custodian agrees to act as agent for the Client with respect to the lending of securities by the Client to the security brokers and other borrowers listed in Attachment A, as such Attachment A may be amended from time to time by the agreement of the Custodian and the Client, pursuant to a securities loan agreement (a "Securities Loan Agreement") in a form substantially similar to Exhibit A hereto. The Custodian will notify all borrowers that the Client is prepared to lend Securities and that the Custodian is acting as agent for the Client. The Client, on behalf of its Index Series, will identify all Securities which are available for lending. The procedures the Custodian and the Client will use in performing activities in connection with this Amendment are set forth in a procedures manual provided to the Client by the Custodian as such manual may be amended from time to time by the Custodian by written notice to the Client. 3. All Collateral (as defined in the Securities Loan Agreement) pledged by any borrower pursuant to a Securities Loan Agreement shall be invested and reinvested in accordance with the terms and conditions set forth in Exhibit B hereto. Unless otherwise agreed between the Custodian and the Client, Collateral shall consist only of cash. 4. All decisions with respect to the investment and reinvestment of Collateral will be made by the Client and the Custodian shall not be liable for any such decision. 5. The net earnings from securities lending activities (consisting of interest earned on the investment and reinvestment of cash Collateral plus any fees otherwise paid by borrowers, minus rebates paid to borrowers) will be divided in half between the Client and the Custodian. In cases where Collateral other than cash is pledged, a fee shall be payable as may be mutually agreed upon by the parties. 6. The Client, on behalf of its Index Series, represents that (i) the Custodian is duly authorized to execute and deliver the Securities Loan Agreement on the Client's behalf, (ii) the Client has the power to so authorize the Custodian, to enter into the loans contemplated by the Securities Loan Agreement and to perform the obligations of Lender under such loans, and (iii) the Client has taken all requisite action (corporate or otherwise) to authorize such execution and delivery by the Custodian and such performance by it. 7. The Custodian represents that the execution, delivery and performance of the Securities Loan Agreement and this Addendum are within the Custodian's power and authority and have been duly authorized by all requisite action (corporate or otherwise) of the Custodian. 8. Except as expressly amended hereby, all terms and provisions of the Agreement are and shall continue to be in full force and effect. This Amendment shall be construed in accordance with the applicable laws of the State of New York. This Amendment may be executed by one or both of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the day and year first above written. MORGAN STANLEY TRUST COMPANY By: ___________________________ Name: Title: FOREIGN FUND, INC. By: ___________________________ Name: Title: EX-99.9(A) 11 EXHIBIT 99.9(A) FORM OF ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT THIS AGREEMENT is made as of __________________________, 1996 by and between FOREIGN FUND, INC., a Maryland corporation (the "Fund"), and PFPC INC., a Delaware corporation ("PFPC"), which is an indirect wholly owned subsidiary of PNC Bank Corp. W I T N E S S E T H : WHEREAS, the Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act") issued in series and organized as a series fund; and WHEREAS, the Fund wishes to retain PFPC to provide administration and accounting services to its index series listed on Exhibit A attached hereto and made a part hereof, as such Exhibit A may be amended from time to time (each, an "Index Series"), and PFPC wishes to furnish such services. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and intending to be legally bound hereby the parties hereto agree as follows: 1. DEFINITIONS, AS USED IN THIS AGREEMENT: (a) "1933 ACT" means the Securities Act of 1933, as amended. (b) "1934 ACT" means the Securities Exchange Act of 1934, as amended. (c) "AUTHORIZED AGENT" means any officer of the Fund and any other person duly authorized by the Fund's Board of Directors to give Oral Instructions and Written Instructions on behalf of the Fund and listed on the Authorized Persons Appendix attached hereto and made a part hereof or any amendment thereto as may be received by PFPC. An Authorized Person's scope of authority may be limited by the Fund by setting forth such limitation in the Authorized Persons Appendix. (d) "CEA" means the Commodities Exchange Act, as amended. (e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person. (f) "SEC" means the Securities and Exchange Commission. (g) "SECURITIES LAWS" means the 1933 Act, the 1934 Act, the 1940 Act and the CEA. (h) "SHARES" mean the shares of beneficial interest of any series or class of the Fund. (i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an Authorized Person and received by PFPC. The instruc- 2 tions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device. 2. APPOINTMENT. The Fund hereby appoints PFPC to provide administration and accounting services to the Fund in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services. 3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will provide PFPC with the following: (a) certified or authenticated copies of the resolu- tions of the Fund's Board of Directors, approving the appointment of PFPC or its affiliates to pro- vide services to the Fund and approving this Agree- ment; (b) a copy of Fund's most recent effective registration statement; (c) a copy of the Fund's advisory agreement; (d) a copy of the distribution agreement with respect to each class of Shares representing an interest in the Fund; (e) a copy of any shareholder servicing agreement made in respect of the Fund; and (f) copies (certified or authenticated, where applica- ble) of any and all amendments or supplements to the foregoing. 4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with all applicable requirements of the Securities Laws, and any laws, rules and regulations of 3 governmental authorities having jurisdiction with respect to the duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Fund. 5. INSTRUCTIONS. (a) Unless otherwise provided in this Agreement, PFPC shall act only upon Oral Instructions and Written Instructions. (b) PFPC shall be entitled to rely upon any Oral Instructions and Written Instructions it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral Instruction or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Board of Directors or of the Fund's shareholders, unless and until PFPC receives Written Instructions to the contrary. (c) The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC or its affiliates) so that PFPC receives the Written Instructions by the close of business within a reasonable period of time. The fact that such confirming Written 4 Instructions are not received by PFPC shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. Where Oral Instructions or Written Instructions reasonably appear to have been received from an Authorized Person, PFPC shall incur no liability to the Fund in acting upon such Oral Instructions or Written Instructions provided that PFPC's actions comply with such Oral Instructions or Written Instructions and the other provisions of this Agreement. 6. RIGHT TO RECEIVE ADVICE. (a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral Instructions or Written Instructions, from the Fund. (b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of law pertaining anyd to action it should or should not take, PFPC may request advice at its own cost from such counsel of its own choosing (who may be counsel for the Fund, the Fund's investment adviser or PFPC, at the option of PFPC). (c) CONFLICTING ADVICE. In the event of a conflict between directions, advice, Oral Instructions or Written Instructions PFPC receives from the Fund and the advice PFPC receives from counsel, PFPC may rely upon and follow the advice of counsel. In 5 the event PFPC so relies on the advice of counsel, PFPC remains liable for any action or omission on the part of PFPC which constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC of any duties, obligations or responsibilities set forth in this Agreement. (d) PROTECTION OF PFPC. PFPC shall be protected in any action it takes or does not take in reliance upon directions, advice, Oral Instructions or Written Instructions it receives from the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions, advice, Oral Instructions or Written Instructions subject to the limitations set forth in paragraph 6(c). Nothing in this section shall be construed so as to impose an obligation upon PFPC (i) to seek such directions, advice, Oral Instructions or Written Instructions, or (ii) to act in accordance with such directions, advice, Oral Instructions or Written Instructions unless, under the terms of other provisions of this Agreement, the same is a condition of PFPC's properly taking or not taking such action. Nothing in this subsection shall excuse PFPC when an action or omission on the part of PFPC constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC of any duties, obligations or responsibilities set forth in this Agreement. 6 7. RECORDS; VISITS. (a) The books and records pertaining to the Fund which are in the possession or under the control of PFPC shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person, at the Fund's expense. (b) PFPC shall keep the following records: (i) all books and records with respect to the Fund's books of account; (ii) records of the Fund's securities transactions; (iii) all other books and records as PFPC is re- quired to maintain pursuant to Rule 31a-1 of the 1940 Act in connection with the services provided hereunder. 8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the Fund and information relating to the Fund and its shareholders, unless the release of such records or information is otherwise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld and may not be withheld where PFPC may be exposed to civil or criminal contempt 7 proceedings or when required to divulge such information or records to duly constituted authorities. 9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules with respect to the Fund. PFPC shall take all reasonable action in the performance of its duties under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund. 10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failure, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PFPC shall have no liability with respect to the loss of data or service interruptions caused by equipment failure, provided such loss or interruption is not caused by PFPC's own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties or obligations under this Agreement. 11. COMPENSATION. As compensation for services rendered by PFPC during the term of this Agreement, the Fund will pay to PFPC 8 a fee or fees as may be agreed to in writing by the Fund and PFPC. 12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PFPC and its affiliates from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the Securities Laws and any state or foreign securities and blue sky laws, and amendments thereto), and expenses, including (without limitation) attorneys' fees and disbursements arising directly or indirectly from any action or omission to act which PFPC takes (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral Instructions or Written Instructions. Neither PFPC, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) arising out of PFPC's or its affiliates' own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties and obligations under this Agreement. Any amounts payable by the Fund hereunder shall be satisfied only against the relevant Index Series' assets and not against the assets of any other Index Series of the Fund. 13. RESPONSIBILITY OF PFPC. (a) PFPC shall be under no duty to take any action on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by PFPC in writing. PFPC shall be 9 obligated to exercise care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. PFPC shall be liable for any damages arising out of PFPC's failure to perform its duties under this Agreement to the extent such damages arise out of PFPC's willful misfeasance, bad faith, gross negligence or reckless disregard of such duties. (b) Without limiting the generality of the foregoing or of any other provision of this Agreement, (i) PFPC shall not be liable for losses beyond its control, provided that PFPC has acted in accordance with the standard of care set forth above; and (ii) PFPC shall not be liable for (A) the validity or invalidity or authority or lack thereof of any Oral Instruction or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to Section 100, delays or errors or loss of data occurring by reason of circumstances beyond PFPC's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood, catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. 10 (c) Notwithstanding anything in this Agreement to the contrary, neither PFPC nor its affiliates shall be liable to the Fund for any consequential, special or indirect losses or damages which the Fund may incur or suffer by or as a consequence of PFPC's or any affiliates' performance of the services provided hereunder, whether or not the likelihood of such losses or damages was known by PFPC or its affiliates. 14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS. PFPC will perform the following accounting services with respect to the Fund: (i) Journalize investment, capital share and income and expense activities; (ii) Verify investment buy/sell trade tickets when received from the investment adviser for the Fund (the "Adviser") and transmit trades to the Fund's custodian (the "Custodian") for proper settlement; (iii) Maintain individual ledgers for investment securities; (iv) Maintain historical tax lots for each security; (v) Reconcile cash and investment balances of the Fund with the Custodian, and provide the Adviser with the beginning cash balance avail- able for investment purposes; (vi) Update the cash availability throughout the day as required by the Adviser; 11 (vii) Post to and prepare the Statement of Assets and Liabilities and the Statement of Operations; (viii) Calculate various contractual expenses (E.G., advisory and custody fees); (ix) Monitor the expense accruals and notify an officer of the Fund of any proposed adjustments; (x) Control all disbursements and authorize such disbursements upon Written Instructions; (xi) Calculate capital gains and losses; (xii) Determine net income; (xiii) Obtain security market quotes from independent pricing services approved by the Adviser, or if such quotes are unavailable, then obtain such prices from the Adviser, and in either case calculate the market value of the Fund's investments; (xiv) Transmit or mail a copy of the daily valuation to the Adviser; (xv) Compute net asset value; (xvi) As appropriate, compute yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity; and (xvii) Prepare a monthly financial statement, which will include the following items: Schedule of Investments Statement of Assets and Liabilities Statement of Operations Statement of Changes in Net Assets Cash Statement Schedule of Capital Gains and Losses. 12 15. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS. PFPC will perform the following administration services with respect to the Fund: (i) Prepare quarterly broker security transactions summaries; (ii) Prepare monthly security transaction listings; (iii) Supply various normal and customary Fund statis- tical data as requested on an ongoing basis; (iv) Prepare for execution and file the Fund's Fed- eral income, Federal excise and state tax re- turns; (v) Prepare and file with the SEC the Fund's Semi- Annual Reports on Form N-SAR and the Fund's Rule 24f-2 Notices; (vi) Assist in the preparation and coordinate the production and filing of the Fund's annual, semi-annual, and quarterly shareholder reports. (vii) Assist in the preparation of registration state- ments and other filings relating to the regis- tration of Shares; (viii) Monitor the Fund's status as a regulated invest- ment company under Sub-Chapter M of the Internal Revenue Code of 1986, as amended; (ix) Coordinate contractual relationships and commu- nications between the Fund and its contractual service providers; (x) Monitor the Fund's compliance with the amounts and conditions of each state qualification; and (xi) Prepare minutes of meetings of Board of Direc- tors and shareholders. 13 16. DESCRIPTION OF ADDITIONAL REGULATORY COMPLIANCE AND ADMINISTRATION SERVICES. PFPC will perform the following services with respect to the Fund. (i) Assist the investment adviser in monitoring the Fund's compliance with certain investment re- strictions, limited to after-transactions test- ing regarding the following procedures: - Industry Diversification - Issuer Diversification; (ii) Assist in developing a response to the Securi- ties and Exchange Commission staff's routine examinations; (iii) Assist in the preparation of Post Effective Amendments to the Fund's Registration Statement on Form N-1A; (iv) Monitor various SEC and IRS regulatory devel- opments affecting investment companies; (v) Coordinate the preparations for the Fund's Board Meetings, including the preparation of an agenda and the administration report and coordination of reports and related materials from the ad- viser, distributor, transfer agent and custo- dian, etc.; (vi) Provide the Fund with officers which may be authorized by the Fund to facilitate certain required regulatory filings and the processing of invoices; (vii) Monitor the maintenance of directors' and offi- cers' insurance and fidelity bond insurance coverage on behalf of the Fund; (viii) Coordinate the independent auditors and print- ers for the preparation of shareholder reports; 14 (ix) Prepare and distribute operational reports to management by the tenth business day after receiving all applicable reports from outside vendors; and (x) Maintain a "task list" calendar noting required completion dates. 17. DURATION AND TERMINATION. This Agreement shall continue until terminated by the Fund or by PFPC on sixty (60) days' prior written notice to the other party. However, this Agreement shall terminate immediately with respect to any Index Series, the shares of which are no longer trading. 18. NOTICES. All notices and other communications, including Written Instructions, shall be in writing or by confirming telegram, cable, telex or facsimile sending device. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered. Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at C/O Mr. Nathan Most, P.O. Box 193, Burlingame, California 94011- 0193; or (c) if to neither of the foregoing, at such other address as shall have been provided by like notice to the sender of any such notice or other 15 communication by the other party. 19. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought. 20. DELEGATION; ASSIGNMENT. PFPC may not assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank, National Association or PNC Bank Corp., without prior notice to and consent of the Fund, which consent shall not be unreasonably withheld and provided further that (i) the delegate (or assignee) agrees with PFPC and the Fund to comply with all relevant provisions of the 1940 Act; and (ii) PFPC and such delegate (or assignee) promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation (or assignment), including (without limitation) the capabilities of the delegate (or assignee). 21. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 22. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 23. MISCELLANEOUS. (a) ENTIRE AGREEMENT. This Agreement embodies the entire 16 agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties and Oral Instructions. (b) CAPTIONS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. (c) GOVERNING LAW. This Agreement shall be governed by the laws of the State of New York, without regard to principles of conflicts of law. (d) PARTIAL INVALIDITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. (e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. (f) FACSIMILE SIGNATURES. The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party. 17 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. PFPC INC. By:_________________________________ Title:_______________________________ FOREIGN FUND, INC. By:___________________________________ Title:________________________________ 18 EXHIBIT A THIS EXHIBIT A, dated as of ____________________________, 1996, is Exhibit A to that certain Administration and Accounting Services Agreement dated as of_______________________________, 1996 between PFPC Inc. and Foreign Fund, Inc. This Exhibit A shall supersede all previous forms of Exhibit A. INDEX SERIES Australia Index Series Austria Index Series Belgium Index Series Canada Index Series France Index Series Germany Index Series Hong Kong Index Series Italy Index Series Japan Index Series Malaysia Index Series Mexico Index Series Netherlands Index Series Singapore (Free) Index Series Spain Index Series Sweden Index Series Switzerland Index Series United Kingdom Index Series 19 AUTHORIZED PERSONS APPENDIX NAME (Type) SIGNATURE ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ 20 EX-99.9(B) 12 EXHIBIT 99.9(B) TRANSFER AGENCY SALES AGREEMENT THIS AGREEMENT is made as of ____________________________, 1996 by and between PNC BANK, NATIONAL ASSOCIATION ("PNC Bank"), and FOREIGN FUND, INC., a Maryland corporation (the "Fund"). W I T N E S S E T H: WHEREAS, the Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act") issued in series and organized as a series fund; and WHEREAS, the Fund wishes to retain PNC Bank to serve as transfer agent, registrar, dividend disbursing agent and shareholder servicing agent to its index series listed on Exhibit A attached hereto and made a part hereof, as such Exhibit A may be amended from time to time (each, an "Index Series"), and PNC Bank wishes to furnish such services. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: 1. DEFINITIONS, AS USED IN THIS AGREEMENT: (a) "1933 ACT" means the Securities Act of 1933, as amended. -1- (b) "1934 ACT" means the Securities Exchange Act of 1934, as amended. (c) "AUTHORIZED AGENT" means any officer of the Fund and any other person duly authorized by the Fund's Board of Directors to give Oral Instructions and Written Instructions on behalf of the Fund and listed on the Authorized Persons Appendix attached hereto and made a part hereof or any amendment thereto as may be received by PNC Bank. An Authorized Person's scope of authority may be limited by the Fund by setting forth such limitation in the Authorized Persons Appendix. (d) "CEA" means the Commodities Exchange Act, as amended. (e) "ORAL INSTRUCTIONS" mean oral instructions received by PNC Bank from an Authorized Person or from a person reasonably believed by PNC Bank to be an Authorized Person. (f) "SEC" means the Securities and Exchange Commission. (g) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act and the CEA. (h) "SHARES" mean the shares of beneficial interest of any series or class of the Fund. (i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an Authorized Person and received by PNC Bank. The -2- instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device. 2. APPOINTMENT. The Fund hereby appoints PNC Bank to serve as transfer agent, registrar, dividend disbursing agent and shareholder servicing agent to the Fund in accordance with the terms set forth in this Agreement. PNC Bank accepts such appointment and agrees to furnish such services. 3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will provide PNC Bank with the following: (a) Certified or authenticated copies of the resolutions of the Fund's Board of Directors, approving the appointment of PNC Bank or its affiliates to provide services to the Fund and approving this Agreement; (b) A copy of the Fund's most recent effective registration statement; (c) A copy of the advisory agreement with respect to the Fund; (d) A copy of the distribution agreement with respect to each class of Shares of the Fund; (e) Copies of any shareholder servicing agreements made in respect of the Fund; and (f) Copies (certified or authenticated where applicable) of any and all amendments or supplements to the foregoing. 4. COMPLIANCE WITH RULES AND REGULATIONS. PNC Bank undertakes to comply with all applicable requirements of the -3- Securities Laws, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to the duties to be performed by PNC Bank hereunder. Except as specifically set forth herein, PNC Bank assumes no responsibility for such compliance by the Fund. 5. INSTRUCTIONS. (a) Unless otherwise provided in this Agreement, PNC Bank shall act only upon Oral Instructions and Written Instructions. (b) PNC Bank shall be entitled to rely upon any Oral Instructions and Written Instructions it receives from an Authorized Person (or from a person reasonably believed by PNC Bank to be an Authorized Person) pursuant to this Agreement. PNC Bank may assume that any Oral Instruction or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Board of Directors or of the Fund's shareholders, unless and until PNC Bank receives Written Instructions to the contrary. (c) The Fund agrees to forward to PNC Bank Written Instructions confirming Oral Instructions so that PNC Bank receives the Written Instructions by the close of business within a -4- reasonable period of time. The fact that such confirming Written Instructions are not received by PNC Bank shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. Where Oral Instructions or Written Instructions reasonably appear to have been received from an Authorized Person, PNC Bank shall incur no liability to the Fund in acting upon such Oral Instructions or Written Instructions provided that PNC Bank's actions comply with such Oral Instructions or Written Instructions and the other provisions of this Agreement. 6. RIGHT TO RECEIVE ADVICE. (a) ADVICE OF THE FUND. If PNC Bank is in doubt as to any action it should or should not take, PNC Bank may request directions or advice, including Oral Instructions or Written Instructions, from the Fund. (b) ADVICE OF COUNSEL. If PNC Bank shall be in doubt as to any question of law pertaining to any action it should or should not take, PNC Bank may request advice at its own cost from such counsel of its own choosing (who may be counsel for the Fund, the Fund's investment adviser or PNC Bank, at the option of PNC Bank). (c) CONFLICTING ADVICE. In the event of a conflict between directions, advice, Oral Instructions or Written Instructions PNC Bank receives from the Fund, and the advice it -5- receives from counsel, PNC Bank may rely upon and follow the advice of counsel. In the event PNC Bank so relies on the advice of counsel, PNC Bank remains liable for any action or omission on the part of PNC Bank which constitutes willful misfeasance, bad faith, negligence or reckless disregard by PNC Bank of any duties, obligations or responsibilities set forth in this Agreement. (d) PROTECTION OF PNC Bank. PNC Bank shall be protected in any action it takes or does not take in reliance upon directions, advice, Oral Instructions or Written Instructions it receives from the Fund or from counsel and which PNC Bank believes, in good faith, to be consistent with those directions, advice, Oral Instructions or Written Instructions subject to the limitations set forth in paragraph 6(c). Nothing in this section shall be construed so as to impose an obligation upon PNC Bank (i) to seek such directions, advice, Oral Instructions or Written Instructions, or (ii) to act in accordance with such directions, advice, Oral Instructions or Written Instructions unless, under the terms of other provisions of this Agreement, the same is a condition of PNC Bank's properly taking or not taking such action. Nothing in this subsection shall excuse PNC Bank when an action or omission on the part of PNC Bank constitutes willful misfeasance, bad faith, negligence or reckless disregard by PNC Bank of any duties, -6- obligations or responsibilities set forth in this Agreement. 7. RECORDS; VISITS. The books and records pertaining to the Fund which are in the possession or under the control of PNC Bank shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PNC Bank's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PNC Bank to the Fund or to an Authorized Person, at the Fund's expense. 8. CONFIDENTIALITY. PNC Bank agrees on its own behalf and that of its employees to keep confidential all records of the Fund and information relating to the Fund and its shareholders (past, present and future), unless the release of such records or information is otherwise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld and may not be withheld where PNC Bank may be exposed to civil or criminal contempt proceedings or when required to divulge such information or records to duly constituted authorities. 9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with the Fund's independent public accountants and shall take all -7- reasonable actions in the performance of its obligations under this Agreement to ensure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund. 10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failure, PNC Bank shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PNC Bank shall have no liability with respect to the loss of data or service interruptions caused by equipment failure, provided such loss or interruption is not caused by PNC Bank's own willful misfeasance, bad faith, negligence or reckless disregard of its duties or obligations under this Agreement. 11. COMPENSATION. As compensation for services rendered by PNC Bank during the term of this Agreement, the Fund will pay to PNC Bank a fee or fees as may be agreed to from time to time in writing by the Fund and PNC Bank. 12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PNC Bank and its affiliates from all taxes, charges, -8- expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws, and amendments thereto), and expenses, including (without limitation) attorneys' fees and disbursements, arising directly or indirectly from any action or omission to act which PNC Bank takes (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral Instructions or Written Instructions. Neither PNC Bank, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) arising out of PNC Bank's or its affiliates' own willful misfeasance, bad faith, negligence or reckless disregard of its duties and obligations under this Agreement. 13. RESPONSIBILITY OF PNC BANK. (a) PNC Bank shall be under no duty to take any action on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by PNC Bank in writing. PNC Bank shall be obligated to exercise care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. PNC Bank shall be liable for any damages arising out of PNC Bank's failure to perform -9- its duties under this Agreement to the extent such damages arise out of PNC Bank's willful misfeasance, bad faith, negligence or reckless disregard of such duties. (b) Without limiting the generality of the foregoing or of any other provision of this Agreement, (i) PNC Bank, shall not be liable for losses beyond its control, provided that PNC Bank has acted in accordance with the standard of care set forth above; and (ii) PNC Bank shall not be under any duty or obligation to inquire into and shall not be liable for (i) the validity or invalidity or authority or lack thereof of any Oral Instruction, Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, and which PNC Bank reasonably believes to be genuine; or (ii) subject to Section 10, delays or errors or loss of data occurring by reason of circumstances beyond PNC Bank's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood, catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. (c) Notwithstanding anything in this Agreement to the contrary, neither PNC Bank nor its affiliates shall be liable to the Fund for any consequential, special or indirect losses or -10- damages which the Fund may incur or suffer by or as a consequence of PNC Bank's or its affiliates' performance of the services provided hereunder, whether or not the likelihood of such losses or damages was known by PNC Bank or its affiliates. 14. DESCRIPTION OF SERVICES. (a) SERVICES PROVIDED ON AN ONGOING BASIS, IF APPLICABLE. (i) Maintain proper shareholder registrations; (ii) Direct payment processing of checks or wires; (iii) Prepare and certify stockholder lists in conjunction with proxy solicitations; (iv) Countersign share certificates; (v) Prepare and mail to shareholders confirmation of activity; (vi) Provide periodic shareholder lists and statistics to the clients; (vii) Provide detailed data for underwriter/broker confirmations; (viii) Prepare periodic mailing of year-end tax and statement information; (ix) Notify on a timely basis the investment adviser, accounting agent, and custodian of fund activity; and (b) SERVICES PROVIDED BY PNC BANK UNDER ORAL INSTRUCTIONS OR WRITTEN INSTRUCTIONS. (i) Accept and post daily Fund purchases and redemptions; -11- (ii) Accept, post and perform shareholder transfers; (iii) Pay dividends and other distributions; (iv) Solicit and tabulate proxies; and (v) Issue and cancel certificates (when requested in writing by the shareholder). (c) PURCHASE OF SHARES. PNC Bank shall issue and credit an account of an investor, in the manner described in the Fund's prospectus, once it receives: (i) A purchase order; (ii) Proper information to establish a shareholder account; and (iii) Confirmation of receipt or crediting of securities and funds for such order to the Fund's custodian. (d) REDEMPTION OF SHARES. PNC Bank shall redeem Shares only if that function is properly authorized by the certificate of incorporation or resolution of the Fund's Board of Directors. Shares shall be redeemed and payment therefor shall be made in accordance with the Fund's prospectus and statement of additional information when the recordholder tenders a redemption request in "proper form" as described in the Fund's prospectus and statement of additional information. (e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a -12- resolution of the Fund's Board of Directors authorizing the declaration and payment of dividends and distributions, PNC Bank shall pay such dividends and distributions in cash, as provided for in the Fund's prospectus and statement of additional information. Such payment, as well as payments upon redemption as described above, shall be made after deduction and payment of the required amount of funds to be withheld in accordance with any applicable tax laws or other laws, rules or regulations. PNC Bank shall mail to the Fund's shareholders such tax forms and other information, or permissible substitute notice, relating to dividends and distributions paid by the Fund as are required to be filed and mailed by applicable law, rule or regulation. PNC Bank shall prepare, maintain and file with the IRS and other appropriate taxing authorities reports relating to all dividends above a stipulated amount paid by the Fund to its shareholders as required by tax or other law, rule or regulation. (f) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written Instructions, PNC Bank shall mail all communications by the Fund to its shareholders, including: (i) Reports to shareholders; (ii) Confirmations of purchases and sales of Fund shares; (iii) Monthly or quarterly statements; -13- (iv) Dividend and distribution notices; (v) Proxy material; and (vi) Tax form information. In addition, PNC Bank will receive and tabulate the proxy cards for the meetings of the Fund's shareholders. (g) RECORDS. PNC Bank shall maintain records of the accounts for each shareholder showing the following information: (i) Name, address and United States Tax Identification or Social Security number; (ii) Number and class of Shares held and number and class of Shares for which certificates, if any, have been issued, including certificate numbers and denominations; (iii) Historical information regarding the account of each shareholder, including dividends and distributions paid and the date and price for all transactions on a shareholder's account; (iv) Any stop or restraining order placed against a shareholder's account; (v) Any correspondence relating to the current maintenance of a shareholders' account; (vi) Information with respect to withholdings; and (vii) Any information required in order for the transfer agent to perform any calculations contemplated or required by this Agreement. (h) LOST OR STOLEN CERTIFICATES. PNC Bank shall place a stop notice against any certificate reported to be lost or stolen -14- and comply with all applicable federal regulatory requirements for reporting such loss or alleged misappropriation. A new certificate shall be registered and issued only upon: (i) The shareholder's pledge of a lost instrument bond or such other appropriate indemnity bond issued by a surety company approved by PNC Bank; and (ii) Completion of a release and indemnification agreement signed by the shareholder to protect PNC Bank and its affiliates. (i) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from any Fund shareholder to inspect stock records, PNC Bank will notify the Fund and the Fund will issue instructions granting or denying each such request. Unless PNC Bank has acted contrary to the Fund's instructions, the Fund agrees and does hereby, release PNC Bank from any liability for refusal of permission for a particular shareholder to inspect the Fund's stock records. 15. DURATION AND TERMINATION. This Agreement shall continue until terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice to the other party. However, this Agreement shall terminate immediately with respect to any Index Series the shares of which are no longer trading. 16. NOTICES. All notices and other communications, including Written Instructions, shall be in writing or by confirming -15- telegram, cable, telex or facsimile sending device. Notices shall be addressed (a) if to PNC Bank, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at C/O Mr. Nathan Most, P.O. Box 193, Burlingame, California 94011- 0193; or (c) if to neither of the foregoing, at such other address as shall have been given by like notice to the sender of any such notice or other communication by the other party. If notice is sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. If notice is sent by first-class mail, it shall be deemed to have been given three days after it has been mailed. If notice is sent by messenger, it shall be deemed to have been given on the day it is delivered. 17. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or waiver is sought. 18. DELEGATION; ASSIGNMENT. PNC Bank may not assign its rights and delegate its duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank, National Association or PNC Bank Corp. without prior notice to and consent of the Fund, which consent shall not be unreasonably withheld, and provided further that (i) the delegate (or assignee) agrees with PNC Bank and the -16- Fund to comply with all relevant provisions of the 1940 Act; and (ii) PNC Bank and such delegate (or assignee) promptly provide such information as the Fund may request, and respond to such questions as the Fund may ask, relative to the delegation (or assignment), including (without limitation) the capabilities of the delegate (or assignee). 19. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 20. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 21. MISCELLANEOUS. (a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties and Oral Instructions. (b) CAPTIONS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their -17- construction or effect. (c) GOVERNING LAW. This Agreement shall be governed by the laws of the State of New York, without regard to principles of conflicts of law. (d) PARTIAL INVALIDITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. (e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. (f) FACSIMILE SIGNATURES. The facsimile signature of any party to this Agreement shall constitute the valid and binding execution by such party. -18- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. PNC BANK, N.A. By:_________________________________ Title:_______________________________ FOREIGN FUND, INC. By:___________________________________ Title:________________________________ -19- EXHIBIT A THIS EXHIBIT A, dated as of ____________________________, 1996, is Exhibit A to that certain Transfer Agency Services Agreement dated as of ________________________, 1996 between PNC Bank, N.A. and Foreign Fund, Inc. This Exhibit A shall supersede all previous forms of Exhibit A. INDEX SERIES Australia Index Series Austria Index Series Belgium Index Series Canada Index Series France Index Series Germany Index Series Hong Kong Index Series Italy Index Series Japan Index Series Malaysia Index Series Mexico Index Series Netherlands Index Series Singapore (Free) Index Series Spain Index Series Sweden Index Series Switzerland Index Series United Kingdom Index Series -20- AUTHORIZED PERSONS APPENDIX NAME (TYPE) SIGNATURE ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ ______________________________ ________________________________ -21- EX-99.9(C) 13 EXHIBIT 99.9(C) MORGAN STANLEY CAPITAL INTERNATIONAL FORM OF INDEX LICENSE AGREEMENT AGREEMENT, dated as of ________, 1996, by and between MORGAN STANLEY & CO. INCORPORATED ("Morgan Stanley"), a Delaware corporation, having an office at 1251 Avenue of the Americas, New York, New York 10020, and FOREIGN FUND, INC. ("Licensee"), a Maryland corporation, having an office at 400 Bellevue Parkway, Wilmington, Delaware 19809. WHEREAS, Morgan Stanley is an international investment banking and brokerage firm which owns rights in and to certain stock indices and the proprietary data contained therein (and which, through its Morgan Stanley Capital International ("MSCI") department, engages in a variety of business activities in connection with such indices and data), among which are the indices listed in Exhibit A, annexed hereto and made a part hereof (such indices and data contained therein are hereinafter referred to as the "Indices"); WHEREAS, Morgan Stanley calculates, maintains and publishes the Indices; WHEREAS, Morgan Stanley uses in commerce and owns trade name, trademark and service mark rights to the designations "Morgan Stanley," "Morgan Stanley Capital International," and "MSCI" (such rights are hereinafter individually and collectively referred to as the "Marks"); WHEREAS, Licensee wishes to use the Indices as the basis of the products described in Exhibit B, annexed hereto and made a part hereof (the "Products"), to be issued and publicly traded pursuant to an effective registration statement filed with the Securities and Exchange Commission; WHEREAS, Licensee wishes to use the Indices and the Marks in connection with writing, trading, marketing and promotion of the Products and in connection with making disclosure about the Products under applicable laws, rules and regulations in order to indicate that Morgan Stanley is the source of the Indices; and WHEREAS, Licensee wishes to obtain Morgan Stanley's authorization to use the Indices and refer to the Indices and the Marks in connection with the Products pursuant to the terms and conditions hereinafter set forth. NOW, THEREFORE, the parties hereto agree as follows: 1. GRANT OF LICENSE AND AGREEMENT TO PROVIDE INFORMATION (a) Subject to the terms and conditions of this Agreement, Morgan Stanley grants to Licensee a non-transferable, non-exclusive, license (i) to use the Indices as the basis of the Products (in accord with the restrictions set forth in Exhibit B), and (ii) to use and refer to the Indices and the Marks in connection with the writing, trading, marketing and promotion of the Products (in accord with the restrictions set forth in Exhibit B) and in connection with making such disclosure about the Products as Licensee deems necessary or desirable under any applicable laws, rules or regulations in order to indicate the source of the Indices. Licensee shall not disseminate electronically or in any other fashion any quotations or other information relating to the Indices or the Products. (b) Morgan Stanley agrees to provide and update information to Licensee concerning the Indices on an ongoing basis, and to assist in the preparation and updating of Licensee's prospectus and statement of additional information as and to the extent reasonably requested by Licensee. 2. TERM The term of the license granted hereunder shall commence on ___, 199__ and shall continue for one year thereafter. It is the intention of the parties to renew this Agreement for successive one-year renewal terms pursuant to such terms and conditions as the parties may agree upon. 3. LICENSEE FEES Upon execution of this Agreement, Licensee shall pay to Morgan Stanley a license fee at a rate of .03% per annum of the aggregate average daily net assets of Licensee calculated and paid monthly in arrears with respect to an unlimited number of Products issued by Licensee on each of the Indices listed in Exhibit A. 4. TERMINATION 2 (a) At any time during the term of this Agreement, either party may give the other party thirty (30) days' prior written notice of termination if the terminating party believes in good faith that material damage or harm is occurring to the reputation or goodwill of the terminating party by reason of its continued performance hereunder, and such notice shall be effective on the date of such termination unless the other party shall correct the condition causing such damage or harm within the notice period. In the event of termination under this paragraph 4(a), no refund of any portion of the license fees will be made. (b) In the case of breach of any of the material terms and conditions of this Agreement by either party, the other party may terminate this Agreement by giving thirty (30) days' prior written notice of its intent to terminate, and such notice shall be effective on the date of such termination unless the breaching party shall correct such breach within the notice period. In the event of termination under this paragraph 4(b) by Morgan Stanley, no refund of any of the license fees will be made. In the event of termination under this paragraph 4(b) by Licensee, Licensee shall be entitled to a pro rata refund of the license fees. (c) Morgan Stanley shall have the right, in its sole discretion, to cease compilation and publication of any of the Indices and, in the event that any of the Indices is discontinued, to terminate this Agreement if Morgan Stanley does not offer a replacement or substitute index. In the event that Morgan Stanley intends to discontinue any Index, Morgan Stanley shall give Licensee at least ninety (90) days written notice prior to such discontinuance, which notice shall specify whether a replacement or substitute index will be available. Licensee shall have the option hereunder within sixty (60) days after receiving such written notice from Morgan Stanley to notify Morgan Stanley in writing of its intent to use the replacement index under the terms of this Agreement. In the event that any of the Indices is discontinued and Licensee does not exercise such option or that at least one substitute or replacement index is not made available, Licensee shall be entitled to a pro rata refund of the license fee. (d) Licensee may terminate this Agreement upon written notice to Morgan Stanley if (i) Licensee is informed of the final adoption of any legislation or regulation that materially impairs Licensee's ability to write, market or promote the Products; or (ii) any material litigation or 3 regulatory proceeding regarding the Products is threatened or commences. In the event of termination under this paragraph 4(d), no refund of any portion of the license fees will be made. (e) Morgan Stanley may terminate this Agreement upon written notice to Licensee if (i) Morgan Stanley is informed of the final adoption of any legislation or regulation that materially impairs Morgan Stanley's ability to license and provide the Indices under this Agreement; or (ii) any material litigation or regulatory proceeding regarding the Products is threatened or commenced. In the event that Morgan Stanley terminates this Agreement, Licensee shall be entitled to a pro rata refund of the license fee. 5. RIGHTS UPON TERMINATION Upon termination of this Agreement, Licensee shall cease to use the Indices and cease referring to the Indices and the Marks with the Products except that the Products outstanding at such time may thereafter continue to be outstanding and terminate, expire, and mature in accordance with their respective terms, and the Indices and reference to the Marks may continue to be used in connection with such Products. 6. PRODUCT PROMOTION (a) Licensee shall use its best efforts to protect the goodwill and reputation of Morgan Stanley in connection with its use of the Indices and the Marks under this Agreement. Licensee shall submit to Morgan Stanley for its preview and approval all advertisements, brochures, and promotional and information material ("Informational Materials") relating to or referring to Morgan Stanley, the Indices, the Marks or the Products. Morgan Stanley's approval shall be confined solely to the use of or description of Morgan Stanley, the Marks, and the Indices and shall not be unreasonably withheld or delayed by Morgan Stanley. (b) Morgan Stanley is not obligated to engage in any marketing or promotional activities in connection with the Products. Nevertheless, Morgan Stanley agrees to make itself available and to respond in an informative and factual manner to shareholder inquiries about the Indices and their composition, as such inquiries are directed to Morgan Stanley by Licensee. (c) Licensee acknowledges and agrees that Morgan Stanley, in granting the permission contained in this 4 agreement, does not express or imply any approval of the Products or of Licensee and Licensee further agrees not to make any statement which expresses or implies that Morgan Stanley approves, endorses or consents to the promotion, marketing, and arrangement by Licensee of the Products or that Morgan Stanley makes any judgment or expresses any opinion in respect of the Licensee. 7. PROTECTION OF VALUE OF LICENSEE (a) Licensee shall cooperate reasonably with Morgan Stanley in the maintenance of all Morgan Stanley common law and statutory rights in the Indices and the Marks, including copyrights and other proprietary rights, and shall take such acts and execute such instruments as are reasonably necessary and appropriate to such purposes, including the use by the Licensee of the following notice when referring to the Indices or the Marks in any advertisement, offering circular, prospectus, brochure, or promotional or informational material relating to the Products: The MSCI Indices are the exclusive property of Morgan Stanley. Morgan Stanley Capital International is a service mark of Morgan Stanley and has been licensed for use by Foreign Fund, Inc. or such similar language as may be approved in advance by Morgan Stanley. (b) License shall not refer to the names of the Indices in any manner which might cause confusion as to Morgan Stanley's responsibility for preparing and disseminating the Indices or as to the identity of Licensee and its relationship to the Products. 8. PROPRIETARY RIGHTS (a) Licensee acknowledges that the Indices are selected, arranged and prepared by Morgan Stanley through the application of methods and standards of judgment used and developed through the expenditure of considerable work, time and money by Morgan Stanley. Licensee also acknowledges that the Indices and the Marks are the exclusive property of Morgan Stanley, and the Indices and their compilation and composition and changes therein are in the control and discretion of Morgan Stanley. (b) Morgan Stanley reserves all rights with respect to the Indices and the Marks except those expressly licensed to Licensee hereunder. 5 (c) Each party shall treat as confidential and shall not disclose or transmit to any third party any confidential and proprietary information of the other party, including the terms of this Agreement, provided that the documentation or other written materials containing such information are designated as "Confidential" or "Proprietary" by the providing party and such information is not available generally to the public or otherwise available to the receiving party from a source other than the providing party. Not withstanding the foregoing, if requested or required (by interrogatories, requests for information or documents, subpoena, or other process) either party may reveal such information if such information to be disclosed is (i) approved in writing by the other party for disclosure or (ii) required by law (in the opinion of counsel), regulatory agency or court order to be disclosed by a party, provided prior written notice of such required disclosure is given to the other party. Except with respect to disclosure made pursuant to (i) and (ii) in the immediately preceding sentence, each party shall treat as confidential the terms of this Agreement. The provisions of this paragraph shall survive any termination of this Agreement for five (5) years from disclosure by either party to the other party of the last such confidential and proprietary information. 9. WARRANTIES; DISCLAIMERS (a) Morgan Stanley represents and warrants that Morgan Stanley is the owner of rights granted to Licensee herein and that use of the Indices as provided herein shall not infringe any trademark, copyright, other proprietary right, or contractual right of any person not a party to this Agreement. (b) Licensee agrees expressly to be bound itself by and furthermore to include all of the following disclaimers and limitations in Informational Materials and upon request to furnish a copy (copies) thereof to Morgan Stanley: World Equity Benchmark Shares are not sponsored, endorsed, sold or promoted by Morgan Stanley. Morgan Stanley makes no representation or warranty, express or implied, to the owners of the WEBS of any Index Series or any member of the public regarding the advisability of investing in securities generally or in the WEBS of any Index Series particularly or the ability of the respective MSCI Indices identified herein to track general stock market performance. Morgan Stanley is the licensor of certain trademarks, service marks and trade names of Morgan Stanley, including the MSCI 6 Indices identified herein, which are determined, composed and calculated by Morgan Stanley without regard to the WEBS of any Index Series or the issuer thereof. Morgan Stanley has no obligation to take the needs of the issuer of the WEBS of any Index Series or the owners of the WEBS of any Index Series into consideration in determining, composing or calculating the respective MSCI Indices. Morgan Stanley is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the WEBS of any Index Series to be issued or in the determination or calculation of the equation by which the WEBS of any Index Series are redeemable. Morgan Stanley has no obligation or liability to owners of the WEBS of any Index Series in connection with the administration, marketing or trading of the WEBS of any Index Series. ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDICES FROM SOURCES WHICH MORGAN STANLEY CONSIDERS RELIABLE, MORGAN STANLEY DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDICES OR ANY DATA INCLUDED THEREIN. MORGAN STANLEY MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND COUNTERPARTIES, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDICES OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. (c) Each party represents and warrants to the other that it has the authority to enter into this Agreement according to its terms and that its performance does not violate any laws, regulations or agreements applicable to it. (d) Licensee represents and warrants to Morgan Stanley that the Products shall not violate any applicable laws, including but not limited to banking, commodities and securities laws. 7 (e) Neither party shall have any liability for lost profits or consequential damages arising out of this Agreement. (f) The provisions of this Section 9 shall survive any termination of this Agreement. 10. INDEMNIFICATION Licensee shall indemnify and hold harmless Morgan Stanley, its parent, subsidiaries, affiliates, and their officers, directors, employees and agents against any and all judgments, damages, costs or losses of any kind (including reasonable attorneys' and experts' fees) as a result of claims or actions brought by third parties against Morgan Stanley which arise from all acts, representations or omissions of Licensee under this Agreement or are in any manner related to the Products; provided, however, that (a) Morgan Stanley notifies Licensee promptly of any such claim or action, and (b) such judgments, damages, costs or losses are not attributable to any negligent act or omission by Morgan Stanley, its parent, affiliates, subsidiaries or any of their employees or agents. Licensee shall bear all expenses in connection with the defense and/or settlement of any such claim or action. Morgan Stanley shall have the right, at its own expense, to participate in the defense of any claim or action against which it is indemnified hereunder; provided, however, it shall have no right to control the defense, consent to judgment, or agree to settle any such claim or action, without the written consent of Licensee. Licensee, in the defense of any such claim, except with the written consent of Morgan Stanley, shall not consent to entry of any judgment or enter into any settlement which (a) does not include, as an unconditional term, the grant by the claimant to Morgan Stanley of a release of all liabilities in respect of such claims or (b) otherwise adversely affects the rights of Morgan Stanley. This provision shall survive the termination of this Agreement. 11. FORCE MAJEURE Neither Morgan Stanley nor Licensee shall bear responsibility or liability for any losses arising out of any delay in or interruptions of their respective performance of their obligations under this Agreement due to any act of God, act of governmental authority, act of the public enemy or due to war, riot, fire, flood, civil commotion, insurrection, labor difficulty (including, without limitation, any strike or other work stoppage or 8 slowdown), severe or adverse weather conditions or other cause beyond the reasonable control of the party so affected, provided that such party had exercised due diligence as the circumstances reasonably required. 12. OTHER MATTERS (a) This Agreement is solely and exclusively between the parties as now constituted and, unless otherwise provided, shall not be assigned or transferred by either party, without prior written consent of the other party, and any attempt to so assign or transfer this Agreement without such written consent shall be null and void. Notwithstanding the foregoing, this Agreement may be assigned without such consent to Morgan Stanley's parent or any subsidiary or affiliate of Morgan Stanley. (b) This Agreement constitutes the entire agreement of the parties hereto with respect to its subject matter and may be amended or modified only by a writing signed by duly authorized officers of both parties. This Agreement supersedes all previous Agreements between the parties with respect to the subject matter of this Agreement. There are no oral or written collateral representations, agreements, or understandings except as provided herein. (c) No breach, default, or threatened breach of this Agreement by either party shall relieve the other party of its obligations or liabilities under this Agreement with respect to the protection of the property of proprietary nature of any property which is the subject of this Agreement. (d) All notices and other communications under this Agreement shall be (i) in writing, (ii) delivered by hand or by registered or certified mail, return receipt requested, to the addresses set forth below or such addresses as either party shall specify by a written notice to the other and (iii) deemed given upon receipt. NOTICE TO MORGAN STANLEY: Morgan Stanley & Co. Incorporated 1251 Avenue of the Americas New York, New York 10020 ATTN: Cedric G. Foster and Morgan Stanley & Co. Incorporated 1251 Avenue of the Americas New York, New York 10020 9 ATTN: General Counsel NOTICE TO LICENSEE: Foreign Fund, Inc. 400 Bellevue Parkway Wilmington, Delaware 19809 Attn: Secretary (e) This Agreement shall be interpreted, construed and enforced in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first set forth above. MORGAN STANLEY & CO. FOREIGN FUND, INC. INCORPORATED By:______________________ BY:_______________________ Title:___________________ Title:____________________ Name:____________________ Name:_____________________ (Printed) (Printed) Date:____________________ Date:______________________ 10 EXHIBIT A List of the Indices Australia Index Series Austria Index Series Belgium Index Series Canada Index Series France Index Series Germany Index Series Hong Kong Index Series Italy Index Series Japan Index Series Malaysia Index Series Mexico (Free) Index Series Netherlands Index Series Singapore (Free) Index Series Spain Index Series Sweden Index Series Switzerland Index Series United Kingdom Index Series 11 EXHIBIT B Description of the Products The Products are to be issued and traded on a public basis, in accordance with the U.S. federal securities laws and applicable laws of other jurisdictions. The Products shall be limited to: shares of common stock issued by various series of Licensee, a registered open-end management investment company, which shares shall be listed and traded on the American Stock Exchange, Inc. 12 EX-99.13(B) 14 EXHIBIT 99.13(B) WORLD EQUITY BENCHMARK SHARES BOOK-ENTRY-ONLY Letter of Representation Foreign Fund, Inc. Name of Issuer PFPC Inc. Name of Agent (Date) 1995 The Depository Trust Company 55 Water Street, 49th Floor New York, NY 10041 Attention: General Counsel's Office Re: World Equity Benchmark Shares ("WEBS") of Foreign Fund, Inc. (Issue Description) The purpose of this letter is to set out certain matters relating to the above- referenced WEBS. PFPC Inc. (the "Agent") is acting as Administrator, Accounting and Transfer Agent, or other Agent with respect to the WEBS. WEBS are shares of common stock of Foreign Fund, Inc. (the "Fund") issued by each of its initial seventeen series (each an "Index Series"), including: the Australia Index Series, the Austria Index Series; the Belgium Index Series, the Canada Index Series, the France Index Series, the Germany Index Series, the Hong Kong Index Series, the Italy Index Series, the Japan Index Series, the Malaysia Index Series, the Mexico Index Series, the Netherlands Index Series, the Singapore (Free) Index Series, the Spain Index Series, the Sweden Index Series, the Switzerland Index Series and the United Kingdom Index Series pursuant to the Fund's articles of incorporation and bylaws and its registration statement on Form N-1A and related documents and instruments (the "Documents"). The Fund's Board of Directors may authorize additional Index Series. Pursuant to offering made in 2 accordance with the Documents, the Fund will issue and redeem WEBS of each Index Series only in aggregations of a specified number of WEBS ("Creation Units"). See Appendix A. WEBS will be listed on the American Stock Exchange. The Depository Trust Company ("DTC") will act as securities depository for the WEBS, and DTC or its nominee will be the record or registered owner of all outstanding WEBS. To induce DTC to accept the WEBS as eligible for deposit at DTC and act in accordance with its Rules with respect to the WEBS, the Issuer and the Agent make the following representations to DTC. 1. The WEBS of each Index Series are shares of common stock of an open-end investment company registered or to be registered with the Securities and Exchange Commission. Each Index Series of WEBS will have its own CUSIP number. The Issuer shall cause to be delivered at the time of the initial deposit a global certificate for each of the Index Series of WEBS (the "Certificates") registered in the name of DTC's nominee, Cede & Co., to be held in custody by the Agent on behalf of DTC, which will represent in each case the total number of WEBS of each Index Series respectively issued by the Fund, which number shall be adjusted as appropriate by the Agent. Each Certificate shall bear the following legend: Unless this Certificate is presented by an authorized representative of The Depository Trust Company ("DTC"), a New York corporation, to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co., or in such other name as is required by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co. has an interest herein. The Certificate shall remain in the Agent's possession as custodian for DTC pursuant to arrangements between the Agent and DTC, except as provided below. 3 2. In the event of any solicitation of consents from or voting by holders of WEBS, the Issuer shall establish a record date for such purposes and give DTC notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Notices to DTC pursuant to this paragraph by telecopy shall be sent to DTC's Reorganization Department at (212) 709-6896, or (212) 709-6897, and receipt of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to the address set forth below. Each WEBS will have one vote. DTC shall make available to the Issuer and Agent upon written request and for a customary fee from time to time a listing of the WEBS holdings of each DTC Participant. Such request will be addressed to DTC's Reorganization Department. Notices sent by telecopy will be sent to (212) 709-1093 or (212) 709-1094. Notices sent by mail or by any other means will be sent to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square, 23rd Floor New York, NY 10004-2695 The Issuer or Agent shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order that such notice, statement, or communication may be transmitted by such DTC Participant, directly or indirectly, to the beneficial owners of WEBS. 3. All notices and payment advices sent to DTC shall contain the CUSIP number of the WEBS of the respective Index Series. 4. Dividend or distribution payments by the Fund or any Index Series thereof shall be received by Cede & Co., an nominee of DTC, or its registered assignments in same-day funds on each payment date (or the equivalent in accordance with existing arrangements between the Issuer or Agent and DTC). Such payments shall be made payable to the order of Cede & Co. 4 In the event that the Fund takes any action in respect of payment or nonpayment of dividends or other distributions on WEBS of any Index Series, the Agent shall promptly notify DTC of such action, and shall give DTC notice of any applicable record date and the per WEBS amount to be paid. Such notice shall be given by telephoning the Supervisor of DTC's Dividend Announcement Section at (212) 709-1270 or by telecopy sent to (212) 709- 1723 on the date the dividend is declared. Such verbal or telecopy notice shall be followed promptly by written confirmation sent by a secure means to: Manager, Announcements Dividend Department The Depository Trust Company 7 Hanover Square, 22nd Floor New York, NY 10004-2695 5. Other cash payments by the Fund or any Index Series thereof shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in [same day] [next day] [note: after 2/96, same day will be required] funds on each payment date (or in accordance with existing arrangements between the Company or the Depositary and DTC). Such payments shall be made payable to the order of Cede & Co., and, absent any other existing arrangements, shall be addressed as follows: [NDFS] [SDFS] Redemption Department The Depository Trust Company 55 Water Street 50th Floor New York, New York 10041-0099 6. DTC may direct the Issuer or Agent to use any other telephone number for facsimile transmission, address or department of DTC as the number, address or department to which notices may be sent. 7. Upon written request to DTC's Reorganization Department DTC shall release security position listings only to authorized persons of the Issuer and Agent. 8. In the event of issuance and redemption of WEBS in Creation Unit size aggregations or any similar transactions necessitating an increase or decrease in the number of outstanding WEBS of any Index Series, 5 DTC's DWAC procedures will be followed. Agent recognizes that DTC accepts such instructions up until 6:30 p.m. New York City time. Concurrently therewith, the Agent shall make appropriate notation on an attachment to each applicable Certificate indicating the amount of such decrease or increase and the total number of WEBS outstanding. On each day on which Agent is open for business and on which it receives an instruction originated by a Participant through DTC's DWAC system to increase the Participant's account by a specified number of WEBS (a "Deposit Instruction"), Agent shall, before 6:30 p.m., New York City time, approve or cancel the Deposit Instruction through the DWAC system. On each day on which Agent is open for business and on which it receives an instruction originated by a Participant through the DWAC system to decrease the Participant's account by a specified number of WEBS (a "Withdrawal Instruction"), Agent shall, before 6:30 p.m. New York City time either approve or cancel the Withdrawal Instruction through the DWAC system. Agent agrees that its approval of a Deposit or Withdrawal Instruction shall be deemed to be the receipt by DTC of registration of transfer to the name of Cede & Co. for the quantity of WEBS evidenced by the instruction after the Deposit or Withdrawal Instruction is effected. All such transactions shall be effected utilizing DTC's procedures as in effect until further notice. 9. In the Event the Issuer determines pursuant to the Document(s) that beneficial owners of the WEBS shall be able to obtain certificated WEBS, the Issuer or Agent shall notify DTC of the availability of WEBS certificates and shall issue, transfer and exchange WEBS certificates in appropriate amounts as required by DTC and others. 10. (a) DTC may determine to discontinue providing its service as securities depository with respect to the WEBS at any time by giving reasonable prior written notice to the Issuer or Agent (with a copy to the Issuer) (at which time DTC will confirm with the Issuer or Agent the aggregate number of WEBS of each Index Series outstanding) and discharge its responsibilities with respect thereto under applicable law. (b) The Issuer may determine to discontinue the services of DTC thereunder (at which time DTC will 6 confirm with the Agent the aggregate number of WEBS of each Index Series outstanding). 11. If applicable, publication of tax information and other like notification will also be made to DTC. 12. Issuer (a) understands that DTC has no obligation to, and will not, communicate to its Participants or to any person having an interest in the WEBS any information contained in the Certificate(s); and (b) acknowledges that neither DTC's Participants nor any person having an interest in the WEBS shall be deemed to have notice of the provisions of the Certificate(s) by virtue of submission of such Certificates(s) to DTC. 13. Nothing herein shall be deemed to require the Agent to advance funds on behalf of the Issuer. Very truly yours, FOREIGN FUND, INC. (As Issuer) By: (Authorized Officer's Signature) PFPC INC. (As Agent) By: (Authorized Officer's Signature) Address for Purposes of Notice: Received and Accepted: THE DEPOSITORY TRUST COMPANY By: (Authorized Officer's Signature) Dated: , 1995 7 PRINCIPAL AND INCOME PAYMENTS RIDER 1. This Rider supersedes any contradictory language set forth in the Letter of Representations to which it is appended. 2. With respect to principal and income payments in the Securities: A. DTC shall receive all dividend and interest payments on payable date in same-day funds by 2:30 p.m. ET (Eastern Time). B. Issuer agrees that it or Agent shall provide dividend and interest payment information to a standard announcement service subscribed to by DTC. In the unlikely event that no such service exists, Issuer agrees that it or Agent shall provide this information directly to DTC in advance of the dividend or interest record date as soon as the information is available. This information should be conveyed directly to DTC electronically. If electronic transmission is not possible, such information should be conveyed by telephone or facsimile transmission to: The Depository Trust Company Manager, Announcements Dividend Department 7 Hanover Square, 22nd Floor New York, NY 10004 Phone: (212) 709-1270 Fax: (212) 709-1723, 1686 C. Issuer agrees that for dividend and interest payments, it or Agent shall provide automated notification of CUSIP-level detail to the depository no later than noon ET on the payment date. D. DTC shall receive maturity and redemption payments and CUSIP-level detail on the payable date in same-day funds by 2:30 p.m. ET. Absent any other arrangements between Agent and DTC, such payments 8 shall be wired according to the following instructions: Chemical Bank ABA 021000128 For credit to A/C Depository Trust Company Redemption Account 066-027306 In accordance with existing SDFS payment procedures in the manner set forth in DTC's SDFS Paying Agent Operating Procedures a copy of which has previously been furnished to Agent. E. DTC shall receive all other payments and CUSIP-level detail resulting from corporate actions (such as tender offers or mergers) on the first payable date in same-day funds by 2:30 p.m. ET. Absent any other arrangements between the Agent and DTC, such payments shall be wired to the following address: Chemical Bank ABA 021000128 For credit to A/C Depository Trust Company Reorganization Account 066-027608 EX-99.15 15 EXHIBIT 99.15 FORM OF PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1 OF FOREIGN FUND, INC. Foreign Fund, Inc. (the "Fund"), an open-end management investment company that offers its shares in Index Series (the "Series") and which is registered under the Investment Company Act of 1940, as amended (the "Act"), intends to employ Funds Distributor, Inc. as the distributor (the "Distributor") of the shares of each Series pursuant to a written distribution agreement and desires to adopt a plan of distribution pursuant to Rule 12b-1 under the Act to assist in the distribution of shares of the Series. The Board of Directors (the "Board") of the Fund having determined that a plan of distribution containing the terms set forth herein is reasonably likely to benefit each Series and its shareholders, the Fund hereby adopts a compensation-type plan of distribution (the "Plan") pursuant to Rule 12b-1 under the Act on the following terms and conditions: 1. The Fund is hereby authorized to pay to the Distributor, as compensation for its services, distribution payments (the "Payments") in connection with the distribution of shares of each Series at an annual rate of up to .25% of the average daily net assets of such Series. Such Payments as shall be approved by the Board shall be accrued daily and paid monthly in arrears. 2. Payments may be made by the Fund under this Plan for the purpose of financing or assisting in the financing of any activity which is primarily intended to result in the sale of shares of the Series. The scope of the foregoing shall be interpreted by the Board from time to time, including the selection of those activities for which payment can be made, and the Board's interpretation shall be conclusive. Without in any way limiting the discretion of the Board, the following activities are hereby declared to be primarily intended to result in the sale of shares of the Series: advertising the Series either alone or together with other series; compensating underwriters, dealers, brokers, banks and other selling entities and sales and marketing personnel or any of them for the sale of shares of the Series, whether in a lump sum or on a continuous, periodic, contingent, deferred or other basis; compensating underwriters, dealers, brokers, banks and other servicing entities and servicing personnel or any of them for providing services to shareholders of the Series relating to their investment in the Series, including assistance in connection with inquiries relating to shareholder accounts; producing and disseminating prospectuses (including statements of additional information) of the Fund or the Series and preparing, producing and disseminating sales, marketing and shareholder servicing materials; third party consultancy or similar expenses relating to any activity for which Payment is authorized by the Board; and financing any activity for which Payment is authorized by the Board. 3. Amounts paid to the Distributor by the Fund in respect of a Series under the Plan will not be used to pay the distribution expenses incurred with respect to any other Series except that distribution expenses attributable to the Fund as a whole will be allocated to the shares of the Series according to the ratio of the net assets of the Series to the total net assets of the Fund over the Fund's fiscal year or such other allocation method approved by the Board. 4. The Fund is hereby authorized and directed to enter into appropriate written agreements with the Distributor and each other person to whom the Fund intends to make any Payment, and the Distributor is hereby authorized and directed to enter into appropriate written agreements with each person (a "Service Organization") to whom the Distributor intends to make any payments in the nature of a Payment. The foregoing requirement is not intended to apply to any agreement or arrangement with respect to which the party to whom Payment is to be made does not have the purpose set forth in Section 2 above (such as the printer in the case of the printing of a prospectus or a newspaper in the case of an advertisement) unless the Board determines that such an agreement or arrangement should be treated as a "related" agreement for purposes of Rule 12b-1 under the Act. 5. The form of each agreement required to be in writing by Section 4 must contain the provisions required by Rule 12b-1 under the Act and must be approved by a majority of the Board ("Board Approval") and by a majority of the directors ("Disinterested Director Approval") who are not "interested persons" of the Fund and have no direct or indirect financial interest in the operation of the Plan or any such agreement, by vote cast in person at a meeting called for the purposes of voting on such agreement, and the identity of each Service Organization, if not previously approved, shall be ratified by such a vote within 90 days of the execution of such agreement. 6. The Distributor shall provide to the Board and the Board shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes -2- for which such Payments were made. The Board shall evaluate the appropriateness of the Plan on a continuing basis and, in doing so, shall consider all relevant factors, including expenses borne by the Distributor in the current year and in prior years and amounts received under the Plan. 7. To the extent any activity is covered by Section 2 and is also an activity which the Fund may pay for on behalf of the Series without regard to the existence or terms and conditions of a plan of distribution under Rule 12b-1 of the Act (such as the printing of prospectuses for existing Series shareholders), this Plan shall not be construed to prevent or restrict the Fund from paying such amounts outside of this Plan and without limitation hereby and without such payments being included in the calculation of Payments subject to the limitation set forth in Section 1. 8. This Plan may not be amended in any material respect without Board Approval and Disinterested Director Approval and may not be amended to increase the maximum level of Payments permitted hereunder without such approvals and further approval by a vote of a majority of the outstanding voting securities of each Series that would be affected by such increase. This Plan may continue in effect for longer than one year only as long as such continuance is specifically approved at least annually by Board Approval and by Disinterested Director Approval. In addition, a list of then-current Service Organizations must be approved at least annually by Board Approval and Disinterested Director Approval. 9. While the Plan is in effect, the selection and nomination of the Directors who are not "interested persons" of the Fund will be committed to the discretion of such disinterested Directors. 10. This Plan may be terminated in respect of a Series at any time, without penalty, by a vote of the Directors who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or any agreement hereunder, cast in person at a meeting called for the purposes of voting on such termination, or by a vote of a majority of the outstanding voting securities of the Series. This Plan will continue in effect with respect to a Series notwithstanding the fact that it has been terminated with respect to another Series of the Fund. 11. For purposes of this Plan the terms "interested person" and "related agreement" shall have the meanings ascribed to them in the Act and the rules adopted by the Securities and Exchange Commission thereunder and the term -3- "vote of a majority of the outstanding voting securities" of a Series shall mean the vote, at the annual or a special meeting of the holders of shares of the Series duly called, of the lesser of (a) 67% or more of the voting securities of the Series present at such meeting, if the holders of more than 50% of the outstanding voting securities of the Series are present or represented by proxy or (b) more than 50% of the outstanding voting securities of the Series. -4- -----END PRIVACY-ENHANCED MESSAGE-----