-----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, N4vNMFl39LsGjBdhyDoywXCr6a6AbQAlswSo4MpO9/esftJvywDETx5Sj+pzQHmr CFNwwFViKtW52SDJ3hAZvQ== 0000935069-96-000124.txt : 19961031 0000935069-96-000124.hdr.sgml : 19961031 ACCESSION NUMBER: 0000935069-96-000124 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961030 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOREIGN FUND INC CENTRAL INDEX KEY: 0000930667 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-09102 FILM NUMBER: 96650394 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027912919 N-30D 1 FOREIGN FUND ANNUAL REPORT WORLD EQUITY BENCHMARK SHARES WEBS [GRAPHIC OMITTED] 1 9 9 6 ANNUAL REPORT FOREIGN FUND, INC. FOREIGN FUND, INC. ================================================================================ Dear Shareholder, As a pioneering investor in World Equity Benchmark Shares (WEBS), you will be glad to see your good judgment affirmed: WEBS have met their performance and pricing goals in the first six months of operation. You can expect more and more investors to follow your lead into this exciting arena of international equities. ALREADY, A GOOD TRACK RECORD As you know, each of the 17 WEBS series seeks to deliver the investment performance of a specific country's stock market, as measured by a Morgan Stanley Capital International (MSCI) country index. This annual report contains information about the tracking of each series of WEBS as compared to its benchmark MSCI country index during the period from inception (March 12, 1996) through August 31, 1996. As you will see, each WEBS produced performance well within the limit set forth in the prospectus. For an indicator of how well WEBS perform for our shareholders, we designed a weighted basket of WEBS to mirror the performance of the MSCI EAFE (Europe, Australasia, Far East) index, the standard international benchmark for US institutional investors. The tracking error of this basket compared to EAFE was only 0.09% from WEBS' introduction on March 12, 1996 through the end of their first fiscal year. While this performance may reassure current and prospective shareholders, it should come as no surprise. Barclays Global Fund Advisors, which manages WEBS, uses sophisticated optimization models to construct portfolios that have capitalization, industry and fundamental investment characteristics similar to those of the relevant index. They also use these models to rebalance each WEBS portfolio when the underlying MSCI index changes. PRICE/VALUE STABILITY WEBS have also shown that their unique structure has indeed kept share prices very close to their net asset values. While the relationships between market price and net asset value varied from moment to moment and from index series to index series, WEBS traded on the American Stock Exchange at an average end-of-day market price only 4 cents per share -- about one-third of 1% -- over their underlying net asset values. The largest average end-of-day spread, for Australia, was only 1.27%. In contrast, shares in closed-end international funds frequently trade at substantial discounts or premiums to their net asset values. INTERNATIONAL OUTLOOK While we are pleased to present these favorable results, the true excitement of WEBS -- and the compelling reason you purchased your shares -- is the opportunity represented by the international markets whose performance WEBS deliver. First, adding international assets to a portfolio of US equities generally decreases overall risk because many foreign markets have a low correlation to US markets. In 1987, for example, when the US equities market delivered its worst performance in a decade and rose only 0.61% for the year, Japan, Spain, and the United Kingdom delivered returns of 42.41%, 32.70% and 31.56%, respectively.1 Second, foreign markets have offered superior returns over the past two decades. In seven of the 10 years from 1986 through 1995, the US market did not even rank among the top five developed markets. This year, the US equity market ranked only tenth when compared to the 17 WEBS markets for the first eight months. Mexico's total return was 18.22% and Sweden's was 17.81%, compared with 8.46% for the US. These diversification and return advantages have led a number of leading financial advisors to routinely recommend that investors place from 10% to 40% of their assets in non-US securities. Moreover, investors are increasingly putting their foreign assets in indexed investments such as WEBS. Pension funds placed almost half their 1995 international equity investments into indexed products, according to INSTITUTIONAL INVESTOR. GROWTH WEBS were launched on March 12 with aggregate net assets of $79 million, which grew 280% to - ------------------- 1 Market performance data are as measured by the relevant MSCI Index in US dollars with net dividends reinvested for each country. It is not possible to invest in an MSCI Index. 1 ANNUAL REPORT OF THE INVESTMENT ADVISER ================================================================================ more than $300 million by August 31. The success of WEBS in fiscal 1996, together with the growing importance of international equities to US investors, the attractiveness of index investing, and the ease of investing in WEBS, make us optimistic about the prospect for continued strong investment interest in WEBS in fiscal 1997. The creation of new WEBS to meet increased demand should result in reduced expense ratios for all shares as certain costs are spread over a larger asset base. Lower expense ratios would make WEBS an even more efficient vehicle for international investing. We hope that many of you, our initial shareholders, will purchase additional WEBS as you gain confidence in them and continue to diversify your portfolios. In the meantime, we wish to thank you for your early support of and confidence in WEBS. Sincerely, /s/ NATHAN MOST /s/ DONALD L. LUSKIN Nathan Most Donald L. Luskin Chairman and President Vice Chairman Foreign Fund, Inc. Barclays Global Fund Advisors 2 FOREIGN FUND, INC. =============================================================================== INTRODUCTION The Investment Adviser for each WEBS Index Series is Barclays Global Fund Advisors. Each WEBS Index Series is managed to hold a representative sample of the securities held in the corresponding MSCI Index (using an analytic technique known as "portfolio sampling"), as opposed to a full replication of the Index. Portfolio sampling is a highly disciplined approach to capturing index returns which involves maximizing float and liquidity, reflecting accurately the market's size and industry profiles and minimizing cross-ownership. No attempt is made to manage the WEBS Index Series using economic, financial or market analysis. There are several factors that should be kept in mind when reviewing the performance of the Fund's various WEBS Index Series. First, because of the portfolio sampling approach discussed above, as well as regulatory and other constraints imposed on its use (such as limits on investing in particular stocks imposed by the Internal Revenue Code and the need to comply with the Fund's concentration policy), the resulting performance of the WEBS Index Series may vary positively or negatively from that of the MSCI Index during any period. Second, the MSCI Indices are unmanaged and, therefore, do not bear management, administration, distribution, transaction or other expenses. However, the WEBS Index Series do incur such expenses, which impacts their performance. A final factor to be considered is the method in which the MSCI Index records dividend income. The MSCI Index calculates total dividends received in a year and allocates that total pro rata over a twelve-month period (i.e., the dividend payments are "smoothed" throughout the year). Each WEBS Index Series records dividend income on its portfolio securities on their specific ex-dividend dates, which results in uneven flows of dividend income during the year. It should be noted that computations for the MSCI Indices herein allocate a pro rata portion of the March 1996 dividend amount over the 20 days in March that the Fund was operational. 3 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ AUSTRALIA For the period ended August 31, 1996 the total return of the WEBS Australia Index Series was 3.88%. The corresponding Index total return for the period was 3.83%. The Australia Index Series outperformed the Index total return by 0.05% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS AUSTRALIA INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Australia Index Series outperformed the benchmark for several reasons, including the impact of portfolio sampling and dividend smoothing. The primary reason the Index Series outperformed the benchmark was due to portfolio sampling. This technique resulted in an overweighting of the gold mining and banking sectors, which impacted performance positively, more than offsetting the effect of the Fund's expenses on the Australia Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE WEBS AUSTRALIA INDEX SERIES' PERFORMANCE DURING THE PERIOD? The fear of an Australian Reserve Bank interest rate cut came to an end following the report showing a GDP growth rate of 4.8% through March. The consumer, business and government sectors all contributed to this growth, although the services, agriculture and mining (particularly gold mining) sectors were the leaders. The manufacturing and construction sectors performed poorly overall. In May, the Australian dollar appreciated 1.4% against the United States dollar, which resulted in increased imports. In June, there was a slump in gold and copper prices which contributed to a slight depreciation in the value of the Australian dollar. The Australian stock market sustained losses in May with industrial stocks sliding 2%. Overall, Australia has experienced stable inflation rates, asset prices and healthy corporate profits which has resulted in slow, steady growth of the economy. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE AUSTRALIA INDEX SERIES VS. THE MSCI AUSTRALIA INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000.00 $10,000.00 March 31,1996 $10,170.68 $10,160.80 April 30,1996 $10,670.15 $10,633.17 May 31,1996 $10,587.76 $10,522.61 June 30,1996 $10,238.20 $10,261.31 July 31,1996 $9,758.14 $9,768.84 August 31,1996 $10,383.06 $10,388.19 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Australia Index Series $10,388* == MSCI Australia Index $10,383 TOTAL RETURN SINCE INCEPTION(DAGGER) ----------------- Australia Index Series 3.88% MSCI Australia Index 3.83% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Australia Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 4 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ AUSTRIA For the period ended August 31, 1996 the total return of the WEBS Austria Index Series was (3.39)%. The corresponding Index total return for the period was 0.73%. The Austria Index Series underperformed the Index total return by 4.12% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS AUSTRIA INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Austria Index Series underperformed the benchmark for several reasons, including the impact of expenses and dividend smoothing. The primary reason the Index Series underperformed the benchmark was due to portfolio sampling. This technique resulted in certain securities within the banking and insurance sectors being overweighted in the Index Series. These securities performed poorly during this period, which caused the Index Series to underperform the Index. WHAT MARKET CONDITIONS AFFECTED THE WEBS AUSTRIA INDEX SERIES' PERFORMANCE DURING THE PERIOD? The cyclical upswing that Austria had experienced in the last year is losing momentum. The long period of growth in the construction sector has slowed and tourism has also suffered. The construction sector is expected to continue to perform poorly due to small wage increases, a low savings rate and smaller disposable income in Austria. The GDP has decreased from 2.1% in 1995 to 1.6% in the first half of 1996. Risks have arisen in the European business cycle resulting from a movement to restrictive fiscal policies in the hopes of reducing excessive budget deficits (as required by the criteria set in the Maastricht Treaty). Austria plans to decrease its deficit (currently at 5.4% of GDP) to 3% of GDP by 1997. The Government plans to accomplish this deficit decrease by cutting public labor costs and the rate of early retirements. Inflation has slowed down, falling below 2% in early 1996. It should continue its decline. Unemployment has risen from 4.6% in 1995 to 4.7% in 1996 (although traditionally low for Austria) and should continue rising into 1997. The slowdown of growth Austria has experienced, in addition to rising unemployment and the strict budget reduction plan, has put a strain on economic growth this year. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE AUSTRIA INDEX SERIES VS. THE MSCI AUSTRIA INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,237 $10,101 April 30,1996 $10,304 $10,009 May 31,1996 $10,866 $10,577 June 30,1996 $10,202 $9,881 July 31,1996 $9,978 $9,698 August 31,1996 $10,073 $9,661 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - --- Austria Index Series $9,661* == MSCI Austria Index $10,073 TOTAL RETURN SINCE INCEPTION(DAGGER) ----------------- Austria Index Series (3.39)% MSCI Austria Index 0.73% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Austria Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 5 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ BELGIUM For the period ended August 31, 1996 the total return of the WEBS Belgium Index Series was 5.01%. The corresponding Index total return for the period was 4.96%. The Belgium Index Series outperformed the Index total return by 0.05% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS BELGIUM INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Belgium Index Series outperformed the benchmark for several reasons, including dividend smoothing and portfolio sampling. The majority of the overperformance was due to dividend smoothing by the benchmark. The Index Series received over 90% of the year's dividends during the May through August period, the months many European companies pay dividends. The result of dividend smoothing more than offset the effect of the Fund's expenses on the Belgium Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE WEBS BELGIUM INDEX SERIES' PERFORMANCE DURING THE PERIOD? The Belgian economy is showing signs of picking up again after a short downturn. The GDP growth rate was 2% in 1995 and decreased slightly to 1.8% in the first part of 1996, although the forecast for 1997 is 2.4%. This growth downturn was caused by a general slowdown in the manufacturing sector in Europe, which affected the intermediate goods sector in Belgium. Inventories have been accumulating due to weak domestic demand caused by higher taxes, unemployment and a freeze on real wage increases. The unemployment rate is expected to remain subdued, holding at an average of 2% in 1996. Along with the rest of Europe, Belgium is determined to decrease it's budget deficit from 4.3% of GDP in 1995 to 3% of GDP by the end of 1996. This plan to reduce the deficit looks promising based on a government austerity program which includes a three year wage freeze and cuts in health and social spending. The biggest challenge facing the country is the reduction of the deficit by 1998. Overall, Belgium has experienced steady growth in 1996, along with a decrease in its unemployment rate. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BELGIUM INDEX SERIES VS. THE MSCI BELGIUM INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $9,823 $9,759 April 30,1996 $10,076 $9,966 May 31,1996 $10,237 $10,288 June 30,1996 $10,284 $10,322 July 31,1996 $10,399 $10,456 August 31,1996 $10,496 $10,501 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Belgium Index Series $10,501* == MSCI Belgium Index $10,496 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Belgium Index Series 5.01% MSCI Belgium Index 4.96% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Belgium Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 6 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ CANADA For the period ended August 31, 1996 the total return of the WEBS Canada Index Series was 4.63%. The corresponding Index total return for the period was 5.21%. The Canada Index Series underperformed the Index total return by 0.58% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS CANADA INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Canada Index Series underperformed the benchmark for several reasons, including dividend smoothing and the impact of expenses. The primary reason for the underperformance was expenses incurred by the Index Series. WHAT MARKET CONDITIONS AFFECTED THE WEBS CANADA INDEX SERIES' PERFORMANCE DURING THE PERIOD? Canada has experienced continued growth due to the strength of the U.S. economy, additional penetration by Canadian exporters in the U.S. and overseas markets, as well as a stronger world economy. Expectations are that the pace of economic growth in Canada will accelerate from 1.6% this year to 2.4% in 1997. Productivity growth, low inflation and a slow rate of wage increases have allowed Canadian producers to win market share abroad. This export growth should continue with increased market share penetration in the U.S., and especially in overseas markets. The financial services sector has experienced above average growth consistent with the growth in demand for new services. In government, cutbacks are a major focus. These cutbacks will adversely affect the health care and education sectors. The manufacturing sector, which slowed in the last year, is regaining strength and should outperform most other sectors in 1997. Increasing competition, due to modest growth, will keep businesses focused on productivity improvements and reducing costs. Unemployment is forecast to drop slightly to 9.2% for 1996, due to the creation of jobs. The strong growth that Canada has experienced in the last year, which was fueled by export growth, is forecast to continue through 1997. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CANADA INDEX SERIES VS. THE MSCI CANADA INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,100 $10,088 April 30,1996 $10,516 $10,462 May 31,1996 $10,682 $10,639 June 30,1996 $10,389 $10,344 July 31,1996 $10,071 $10,029 August 31,1996 $10,521 $10,463 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Canada Index Series $10,463* == MSCI Canada Index $10,521 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Canada Index Series 4.63% MSCI Canada Index 5.21% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Canada Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 7 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ FRANCE For the period ended August 31, 1996 the total return of the WEBS France Index Series was 4.95%. The corresponding Index total return for the period was 3.71%. The France Index Series outperformed the Index total return by 1.24% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS FRANCE INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The France Index Series outperformed the benchmark for several reasons, including dividend smoothing and portfolio sampling. The primary reason the Index Series outperformed the benchmark was due to dividend smoothing by the benchmark. The Index Series received over 90% of the year's dividends during the June through July period, the months many European companies pay dividends. The result of dividend smoothing more than offset the effect of the Fund's expenses on the France Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE WEBS FRANCE INDEX SERIES' PERFORMANCE DURING THE PERIOD? A major change in the government following the general election (a move from a Socialist president to a Center-Right president) has upset the economy. Consumer spending has fallen, as have the volumes of both imports and exports. The rate of inflation has remained stable at 2% and should continue at this level. The biggest problem facing the French economy is restricting public finances in order to reduce the deficit to a target level of 4% of GDP by the end of 1996 (in keeping with the criteria set in the Maastricht Treaty). The plan to reduce the deficit has resulted in wage freezes, reduction of military spending, postponement of payments to the unemployment insurance fund and tax increases on petroleum products and tobacco. A proposed social security benefit cut has resulted in large scale public sector strikes by unions in France. The unemployment rate is 11.6%, due to a rigid labor market, high minimum wages and unskilled workers. The unemployment rate is expected to rise in the next year. The French economy has experienced a year of sluggish growth due to changes in government and efforts to reduce the deficit. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FRANCE INDEX SERIES VS. THE MSCI FRANCE INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,629 $10,596 April 30,1996 $10,821 $10,765 May 31,1996 $10,701 $10,668 June 30,1996 $10,893 $10,998 July 31,1996 $10,589 $10,757 August 31,1996 $10,371 $10,495 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- France Index Series $10,495* == MSCI France Index $10,371 TOTAL RETURN SINCE INCEPTION(DAGGER) ----------------- France Index Series 4.95% MSCI France Index 3.71% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the France Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 8 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ GERMANY For the period ended August 31, 1996 the total return of the WEBS Germany Index Series was 4.00%. The corresponding Index total return for the period was 4.51%. The Germany Index Series underperformed the Index total return by 0.51% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS GERMANY INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Germany Index Series underperformed the benchmark due principally to expenses incurred by the Index Series. WHAT MARKET CONDITIONS AFFECTED THE WEBS GERMANY INDEX SERIES' PERFORMANCE DURING THE PERIOD? In the last year, Germany has seen its growth rate slow down after a very strong 1995. There has been a surge in the value of the currency, excessive wage settlements, a slowdown in overseas export activity and a tax related drop in construction activity. The slowdown of the economy and the strength of the Deutschmark in late 1995 had a beneficial impact on inflation and it fell, below estimates, to 1.6%. The Bundesbank eased monetary policy and reduced the key discount rate to 3%. The slow growth environment had a detrimental impact on the public finances and the budget deficit widened to 3.6% of GDP, taking Germany above the Maastricht Treaty borrowing criteria. Unemployment has increased sharply in the last few years, but is expected to decrease slightly from 10.3% in 1996 to 10% in 1997. Labor market reforms are being implemented to make the market more flexible and to address the very serious unemployment crisis. Consumer expenditure should get a boost from a recent reduction in personal taxes. Although the growth rate in Germany has slowed in the last year, the country has experienced low inflation and is working to increase growth in 1997. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GERMANY INDEX SERIES VS. THE MSCI GERMANY INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,216 $10,181 April 30,1996 $9,843 $9,781 May 31,1996 $9,984 $9,955 June 30,1996 $10,187 $10,144 July 31,1996 $10,216 $10,197 August 31,1996 $10,451 $10,400 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - --- Germany Index Series $10,400* == MSCI Germany Index $10,451 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Germany Index Series 4.00% MSCI Germany Index 4.51% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Germany Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 9 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ HONG KONG For the period ended August 31, 1996 the total return of the WEBS Hong Kong Index Series was 3.22%. The corresponding Index total return for the period was 4.15%. The Hong Kong Index Series underperformed the Index total return by 0.93% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS HONG KONG INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Hong Kong Index Series underperformed the benchmark for several reasons, including the impact of expenses and portfolio sampling. The primary reason for the underperformance was expenses incurred by the Index Series. WHAT MARKET CONDITIONS AFFECTED THE WEBS HONG KONG INDEX SERIES' PERFORMANCE DURING THE PERIOD? There was a considerable slow down in export growth over 1995 which contributed to a weak overall economy during this time. The main factors underlying the deceleration in export growth were the strengthening of the Hong Kong dollar, a slowdown in import demand in the United States and China and a heightening of tension in the Taiwan Strait. As a result, exports have risen by only 4% in the first half of 1996, compared to 10% in the last half of 1995. The GDP growth rate reached a low of 3.1% in the first quarter of 1996. Unemployment fell below the 3% mark in July for the first time in 14 months. However, unemployment in the local manufacturing sector showed no signs of abatement, being affected by weak exports and an on-going trend of relocation of production processes outside Hong Kong. Inflation was at 6.8% in the first half of 1996. There has been a surge in tourism which, together with a shift in the structure of trade towards offshore trading and a continued increase in exports of financial and other business products, should contribute to robust growth in exports of services in late 1996. Import demand in the United States is expected to revive and the unfavorable exchange rate effect should dissipate by 1997. Hong Kong has experienced a slow economy during 1996 primarily due to the strength of the Hong Kong dollar. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HONG KONG INDEX SERIES VS. THE MSCI HONG KONG INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,477 $10,429 April 30,1996 $10,501 $10,468 May 31,1996 $10,817 $10,826 June 30,1996 $10,566 $10,569 July 31,1996 $10,085 $10,031 August 31,1996 $10,415 $10,322 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - --- Hong Kong Index Series $10,322* == MSCI Hong Kong Index $10,415 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Hong Kong Index Series 3.22% MSCI Hong Kong Index 4.15% ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Hong Kong Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 10 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ ITALY For the period ended August 31, 1996 the total return of the WEBS Italy Index Series was 4.11%. The corresponding Index total return for the period was 3.33%. The Italy Index Series outperformed the Index total return by 0.78% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS ITALY INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Italy Index Series outperformed the benchmark for several reasons, including portfolio sampling and dividend smoothing. The primary reason the Index Series outperformed the Index was due to portfolio sampling, more than offsetting the effect of the Fund's expenses on the Italy Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE WEBS ITALY INDEX SERIES' PERFORMANCE DURING THE PERIOD? The Italian economy has expanded by 4% in the first quarter of 1996, fueled by export growth as a result of the weakness of the Lira. However, there has been a slowdown in export demand lately, due to subdued external markets. The deterioration in the prospects of European economies, which account for 40% of Italy's exports, indicate a further decline in coming months. Monetary policy has been stable since May of 1995 when the discount rate was raised to 9%. The reason for tight monetary policy is governmental concern over inflation. Inflation has been at 4.5% for 1996, down from 5.4% in 1995. Along with the rest of Europe, budget deficit concerns are a major priority. Italy aims to reduce its budget deficit to 3% of GDP by 1998. This is extremely optimistic and the deficit is expected to be 6.5% of GDP for 1996 and 6% of GDP for 1997. The budget package for 1996 was finalized in the beginning of 1996 and includes 0.1% of GDP in spending cuts and 0.4% of GDP in revenue increasing measures. Budget revisions later in the year are necessary to further cut spending if the goal of a budget deficit of 5.8% of GDP in 1996 is to be met. The budgetary goals that pertain to all European countries have had a detrimental effect on the Italian economy, in terms of a decrease in exports. Budgetary concerns will continue to be a major focus for Italy into 1997, and will continue to put a strain on economic growth. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ITALY INDEX SERIES VS. THE MSCI ITALY INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $9,918 $9,875 April 30,1996 $11,272 $11,197 May 31,1996 $11,207 $11,226 June 30,1996 $11,233 $11,300 July 31,1996 $10,416 $10,514 August 31,1996 $10,333 $10,411 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Italy Index Series $10,411* == MSCI Italy Index $10,333 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Italy Index Series 4.11% MSCI Italy Index 3.33% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Italy Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 11 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ JAPAN For the period ended August 31, 1996 the total return of the WEBS Japan Index Series was (3.11)%. The corresponding Index total return for the period was (2.80)%. The Japan Index Series underperformed the Index total return by 0.31% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS JAPAN INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Japan Index Series underperformed the benchmark for several reasons, including the impact of expenses and dividend smoothing. The primary reason for the underperformance was expenses incurred by the Index Series. WHAT MARKET CONDITIONS AFFECTED THE WEBS JAPAN INDEX SERIES' PERFORMANCE DURING THE PERIOD? Business sentiment has been weak. The economy is expected to continue weakening in the second half of this year. Inflation is developing moderately (-.1% in 1995 and .2% in the first half of 1996), but is not considered to be a problem. Competition in the retail sector has become more fierce as a result of deregulation of the entry requirements for large supermarkets (discount stores). When the currency began its downward trend in late 1995, inflation was finally stabilized. The appreciation of the Japanese Yen in the mid-1990's had caused the prices of imported goods to fall. Thus, foreign inputs (raw materials) became cheaper for Japanese producers, as did imported finished goods. This triggered productivity improvements and had considerable impact on price trends. Japan increased the Value Added Tax (VAT) from 3% to 5% on April 1, 1996. There is a question as to whether the retailers will pass the price increase to their clients (given the growing competition) or absorb all or some of the increase themselves. GDP growth is on the rise moving from .8% in 1995 to a forecasted 3.4% for 1996. Japan has experienced a year of turmoil, with GDP growing while the Yen depreciated. Expected growth and business development looks promising in the year ahead, with employment prospects improving as well. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE JAPAN INDEX SERIES VS. THE MSCI JAPAN INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,570 $10,548 April 30,1996 $11,171 $11,116 May 31,1996 $10,596 $10,548 June 30,1996 $10,652 $10,629 July 31,1996 $10,175 $10,149 August 31,1996 $9,720 $9,689 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Japan Index Series $9,689* == MSCI Japan Index $9,720 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Japan Index Series (3.11)% MSCI Japan Index (2.80)% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Japan Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 12 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ MALAYSIA For the period ended August 31, 1996 the total return of the WEBS Malaysia Index Series was 4.28%. The corresponding Index total return for the period was 5.12%. The Malaysia Index Series underperformed the Index total return by 0.84% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS MALAYSIA INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Malaysia Index Series underperformed the benchmark for several reasons, including the impact of expenses and portfolio sampling. The primary reason for the underperformance was expenses incurred by the Index Series. WHAT MARKET CONDITIONS AFFECTED THE WEBS MALAYSIA INDEX SERIES' PERFORMANCE DURING THE PERIOD? The economy expanded by 9.6% in 1995 due to large investments in construction. There has also been strong growth in the mining, agriculture and manufacturing sectors. GDP will remain driven by investment and private consumption, growing an expected 8.3% this year. The capital, Kuala Lumpur, is being transformed by skyscrapers and new roads. Many of the large infrastructure changes are being funded by the private sector, although there have also been large inflows of foreign funds since 1991. A continuation of Malaysia's overseas funding depends on the country's ability to enter the next stage of industrialization. The economy is dependent on labor intensive industries rather than high technology sectors, which is detrimental in the long run. The economy has changed from one based on commodities to one based on manufacturing exports. The link to the domestic economy is weak due to the shortage of skilled workers and a sub par education system. Inflation has been on the rise moving from 3.4% in 1995 to a forecasted 3.8% for 1996. The current account deficit widened to 9% of GDP in 1995 and could move to 9.6% of GDP in 1996. This indicates that the economy is expanding too rapidly. The Malaysian central bank has increased reserve requirements to 12.5% in February in an effort to absorb liquidity and limit credit expansion. Further tightening of monetary policy is expected as current fiscal policy is considered to be inadequate to curb growth. The last few years have seen explosive growth for the Malaysian economy. This growth has stemmed from Malaysia's evolving from a developing country to an industrial nation. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MALAYSIA INDEX SERIES VS. THE MSCI MALAYSIA INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,450 $10,438 April 30,1996 $11,007 $10,899 May 31,1996 $10,562 $10,498 June 30,1996 $10,612 $10,551 July 31,1996 $9,966 $9,894 August 31,1996 $10,512 $10,428 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - --- Malaysia Index Series $10,428* == MSCI Malaysia Index $10,512 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Malaysia Index Series 4.28% MSCI Malaysia Index 5.12% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Malaysia Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 13 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ MEXICO For the period ended August 31, 1996 the total return of the WEBS Mexico (Free) Index Series was 15.93%. The corresponding Index total return for the period was 17.36%. The Mexico (Free) Index Series underperformed the Index total return by 1.43% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS MEXICO (FREE) INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Mexico (Free) Index Series underperformed the benchmark for several reasons, including portfolio sampling and the impact of expenses. The primary reason the Index Series underperformed the Index was because of portfolio sampling. WHAT MARKET CONDITIONS AFFECTED THE WEBS MEXICO (FREE) INDEX SERIES' PERFORMANCE DURING THE PERIOD? The slump in Mexico turned out to be worse than expected in 1995, with the GDP decline for the year as a whole estimated to have been as high as 6%, giving negative growth performance for two years in a row. GDP fell by 10.5% in the second quarter of 1995, which represented the worse decline in growth in more than a decade. It is also an indication of the depth of the adjustment that is taking place in the economy as a result of the devaluation of the Peso in December 1994 and the subsequent capital outflows. The economy of Mexico expanded in the first half of 1996. The economy is expected to grow 2% in 1996. This growth is based on increased consumption, government spending and investment spending. The Peso has been strong and, as such, has contributed to lower inflation this year, although inflation remains high in comparison to other countries, having increased to 53% in 1995. The huge increase in inflation is a result of the 50% depreciation of the Peso against the U.S. dollar from December 1994 to March 1995 and an increase in nominal interest rates to 80%. Interest rates have held relatively stable at 31.6% in 1996. An increase in the Value Added Tax (VAT) level from 10% to 15% and higher gasoline and electricity prices have put upward pressure on prices. The expansion of the Mexican economy is due, in part, to a sizable public-sector surplus, a stronger Peso and declining domestic interest rates. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MEXICO (FREE) INDEX SERIES VS. THE MSCI MEXICO (FREE) INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,913 $10,864 April 30,1996 $11,540 $11,437 May 31,1996 $11,617 $11,618 June 30,1996 $11,486 $11,427 July 31,1996 $10,743 $10,683 August 31,1996 $11,736 $11,593 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Mexico (Free) Index Series $11,593* == MSCI Mexico (Free) Index $11,736 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Mexico (Free) Index Series 15.93% MSCI Mexico (Free) Index 17.36% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Mexico (Free) Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 14 PERFORMANCE REVIEW FOREIGN FUND, INC. =============================================================================== NETHERLANDS For the period ended August 31, 1996 the total return of the WEBS Netherlands Index Series was 11.19%. The corresponding Index total return for the period was 9.74%. The Netherlands Index Series outperformed the Index total return by 1.45% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS NETHERLANDS INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Netherlands Index Series outperformed the benchmark due to portfolio sampling and compliance with Subchapter M of the Internal Revenue Code, which generally requires that no more than 25% of an Index Series' portfolio can be made up of one individual security. In keeping with this tax provision, holdings of Royal Dutch Petroleum have been restricted to 25%. This resulted in a re-weighting of the remaining securities in the portfolio which has had a positive effect on performance. This caused the Index Series to outperform the Index and more than offset the effect of the Fund's expenses on the Netherlands Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE WEBS NETHERLANDS INDEX SERIES' PERFORMANCE DURING THE PERIOD? Compared to other countries in Europe, the Netherlands experienced relatively high first quarter growth of GDP at 1.8% in 1996. Export growth slowed in 1995 and should continue its slowdown into 1996 due to appreciation of the Guilder and a slowdown in the economy of the Dutch trading partners. Private consumption should increase driven by increases in wages in the corporate sector and measures in the 1996 budget to reduce taxes. Reducing the budget deficit is a major concern in keeping with the criteria set in the Maastricht Treaty. The Government aims to reduce the budget deficit to 2.8% of GDP in 1996. Employment growth has been sluggish and a drop in the unemployment rate has been slow to materialize because of the growth of the labor force. This growth has been a result of overall population growth and an increase in the participation rate. Inflation has decreased as well to an expected 2.1% in 1996 because of wage restraints and the strength of the Guilder. Overall, the economy is expected to expand by 2.1% this year. The economy of the Netherlands has gained strength this year due to the reduction of personal taxes and the increase in wages. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NETHERLANDS INDEX SERIES VS. THE MSCI NETHERLANDS INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,412 $10,434 April 30,1996 $10,457 $10,471 May 31,1996 $10,941 $11,113 June 30,1996 $10,966 $11,094 July 31,1996 $10,792 $10,911 August 31,1996 $10,974 $11,119 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - --- Netherlands Index Series $11,119* == MSCI Netherlands Index $10,974 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Netherlands Index Series 11.19% MSCI Netherlands Index 9.74% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Netherlands Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 15 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ SINGAPORE For the period ended August 31, 1996 the total return of the WEBS Singapore (Free) Index Series was (6.73)%. The corresponding Index total return for the period was (8.04)%. The Singapore (Free) Index Series outperformed the Index total return by 1.31% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS SINGAPORE (FREE) INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Singapore (Free) Index Series outperformed the benchmark for several reasons, including portfolio sampling, dividend smoothing and compliance with Subchapter M of the Internal Revenue Code, which imposes restrictions on the composition of the Index Series. In keeping with this tax provision, Singapore Telecom was added to the Index but, due to compliance concerns, the Index Series did not purchase Singapore Telecom until later. The Index Series benefited from not holding the security because the return of Singapore Telecom was down during the period, which more than offset the effect of the Fund's expenses on the Singapore (Free) Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE WEBS SINGAPORE (FREE) INDEX SERIES' PERFORMANCE DURING THE PERIOD? The economy expanded 8.9% in 1995 but is estimated to expand only 8.1% in 1996. GDP growth is also expected to be moderate at 8.1% this year and 7.5% forecast for 1997. In the past, public investment in the subway system boosted investment in transportation and equipment by 70% (the subway is now complete). Government spending has been increasing and contributed to the growth last year. Inflation is on the rise coming in at 1.7% for 1995 and forecast at 2.1% for 1996. This is down from a high in 1994 of 3.1% inflation. The Government is running a fiscal surplus of 14.4% of GDP and can afford to invest in the economy via expansionary measures. Government spending will increase in order to counteract weak private consumption. Measures are being taken to increase consumer demand, such as a 2% cut in the personal income tax, a 1% cut in property taxes and a 10% rebate on 1995 personal income taxes. Singapore has felt a slowdown in its economy after two years of double digit growth primarily due to the completion of major construction projects. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SINGAPORE (FREE) INDEX SERIES VS. THE MSCI SINGAPORE (FREE) INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,308 $10,278 April 30,1996 $10,284 $10,302 May 31,1996 $9,692 $9,714 June 30,1996 $9,571 $9,722 July 31,1996 $8,828 $8,979 August 31,1996 $9,196 $9,327 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Singapore (Free) Index Series $9,327* == MSCI Singapore (Free) Index $9,196 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Singapore (Free) Index Series (6.73)% MSCI Singapore (Free) Index (8.04)% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Singapore (Free) Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 16 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ SPAIN For the period ended August 31, 1996 the total return of the WEBS Spain Index Series was 8.45%. The corresponding Index total return for the period was 9.17%. The Spain Index Series underperformed the Index total return by 0.72% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS SPAIN INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Spain Index Series underperformed the benchmark for several reasons, including portfolio sampling and the impact of expenses. The primary reason the Index Series underperformed the Index was because of portfolio sampling. WHAT MARKET CONDITIONS AFFECTED THE WEBS SPAIN INDEX SERIES' PERFORMANCE DURING THE PERIOD? Growth in Spain averaged 3% in 1995 and is estimated to be slightly lower (2.7%) for 1996. A weakness in consumer spending reflects high interest rates, lower household income and an extremely high unemployment rate (the highest in Europe). The unemployment rate fell to 22.7% at the end of 1995 and should improve in 1996-97 due to labor market reforms, which included hiring flexibility through part-time and temporary employment. The Bank of Spain reduced key interest rates to 7.75% in April 1996. The cut was the fourth cut since December 1994 when rates peaked at 9.25%. This easing of monetary policy reflects the increased confidence the Bank of Spain has in the improved inflationary environment, as well as concerns over a slowdown and appreciation of the Peseta. Inflation has been decreasing and is expected to be 3.6% for 1996 (3.4% for 1997). The Government is focusing on reducing the deficit, which fell to 5.8% of GDP for 1995. The goal is to reduce the deficit to 4.5% of GDP for 1996. Investment has been the main force of growth in 1996, while export demand declined and private consumption has slowed. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SPAIN INDEX SERIES VS. THE MSCI SPAIN INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12, 1996 $10,000 $10,000 March 31,1996 $10,428 $10,399 April 30,1996 $10,824 $10,715 May 31,1996 $10,747 $10,640 June 30,1996 $11,199 $11,069 July 31,1996 $10,688 $10,663 August 31,1996 $10,917 $10,845 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Spain Index Series $10,845* == MSCI Spain Index $10,917 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Spain Index Series 8.45% MSCI Spain Index 9.17% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Spain Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 17 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ SWEDEN For the period ended August 31, 1996 the total return of the WEBS Sweden Index Series was 14.13%. The corresponding Index total return for the period was 12.00%. The Sweden Index Series outperformed the Index total return by 2.13% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS SWEDEN INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Sweden Index Series outperformed the benchmark for several reasons, including portfolio sampling and dividend smoothing. The primary reason the Index Series outperformed the Index was because of portfolio sampling. The technique resulted in an underweighting in the health and personal care industry and overweighting in the merchandising and construction sectors. These weighting factors resulted in the outperformance of the Index, which more than offset the effect of the Fund's expenses on the Sweden Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE WEBS SWEDEN INDEX SERIES' PERFORMANCE DURING THE PERIOD? The Government is determined to restrict public finances and reduce the budget deficit to 8% of GDP this year (down from an estimated 9.5% in 1995), with further reductions into 1997. A preliminary budget has been drafted and savings are planned for 1997 and 1998, 65% of which are to be made via spending cuts. The remaining 35% is expected to come from increased taxes - increased energy taxes, base tax rates and payroll taxes. Spending cuts are widespread except on higher and adult education. This budget revision is a response to the criteria set forth in the Maastricht Treaty requiring Europe to reduce budget deficits. Inflation has been falling to 2.6% in 1995 and an expected 2.5% in 1996. Lower interest rates and lower prices on clothing and gasoline were the main sources of the decline. Both the appreciation of the Swedish Krona and the sluggishness in consumer demand eased price pressures. The Riksbank has cut the repo rate eight times this year from 8.91% to 7.15%. The deposit rate has been cut from 7.5% to 6.75% and the lending rate from 9% to 8.25%. This easing of monetary policy reflects a benign inflationary environment and the improvement of the currency over the last few months. The Swedish economy has expanded this year, being driven mainly by fixed investment and exports, with consumer demand remaining weak. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SWEDEN INDEX SERIES VS. THE MSCI SWEDEN INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,459 $10,424 April 30,1996 $10,345 $10,446 May 31,1996 $10,805 $10,976 June 30,1996 $10,949 $11,127 July 31,1996 $10,499 $10,651 August 31,1996 $11,200 $11,413 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Sweden Index Series $11,413* == MSCI Sweden Index $11,200 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Sweden Index Series 14.13% MSCI Sweden Index 12.00% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Sweden Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 18 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ SWITZERLAND For the period ended August 31, 1996 the total return of the WEBS Switzerland Index Series was 2.60%. The corresponding Index total return for the period was 3.19%. The Switzerland Index Series underperformed the Index total return by 0.59% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS SWITZERLAND INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The Switzerland Index Series underperformed the benchmark for several reasons, including portfolio sampling and the impact of expenses. The primary reason the Index Series underperformed the Index was because of portfolio sampling. WHAT MARKET CONDITIONS AFFECTED THE WEBS SWITZERLAND INDEX SERIES' PERFORMANCE DURING THE PERIOD? Switzerland has had relatively flat growth in the last year with the economy expanding only .7% in 1995. Domestic demand remains too weak to lead the recovery, with consumer spending remaining subdued. Construction activity has remained flat, limited by excess capacity. The export sector is expected to continue to suffer as a result of the strength of the currency. A rise in VAT last year pushed the inflation rate to 1.8% in 1995 (compared to .8% in 1994). Inflation is expected to average 1.5% this year and decrease to 1.2% in 1997. The effects of last year's VAT increase are dissipating and rent reductions are expected to be legally imposed, which should ease price pressures. Unemployment was 4.2% last year and is expected to rise slightly to 4.5% this year. Real household income growth is expected to remain weak this year, which will limit private consumption. The government deficit fell to .9% of GDP in 1995 from 2% of GDP in 1994. The Government is aiming to balance the budget by 2001. The Swiss National Bank lowered the discount rate to 1.5% the lowest level in eighteen years. This comes in an attempt to boost growth and to counter the effects of the strong currency. Overall, the economy has been fairly stable during the year due to a decrease in inflation and the (counteractive) strength of the Swiss franc. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SWITZERLAND INDEX SERIES VS. THE MSCI SWITZERLAND INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,357 $10,298 April 30,1996 $9,951 $10,025 May 31,1996 $9,617 $9,751 June 30,1996 $10,095 $10,207 July 31,1996 $9,891 $9,876 August 31,1996 $10,319 $10,260 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- Switzerland Index Series $10,260* == MSCI Switzerland Index $10,319 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- Switzerland Index Series 2.60% MSCI Switzerland Index 3.19% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Switzerland Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 19 PERFORMANCE REVIEW FOREIGN FUND, INC. ================================================================================ UNITED KINGDOM For the period ended August 31, 1996 the total return of the WEBS United Kingdom Index Series was 10.41%. The corresponding Index total return for the period was 10.78%. The United Kingdom Index Series underperformed the Index total return by 0.37% in this period. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE WEBS UNITED KINGDOM INDEX SERIES' PERFORMANCE OVER THE PERIOD ENDED AUGUST 31, 1996? The United Kingdom Index Series underperformed the benchmark due, primarily, to the impact of expenses incurred by the Index Series. WHAT MARKET CONDITIONS AFFECTED THE WEBS UNITED KINGDOM INDEX SERIES' PERFORMANCE DURING THE PERIOD? The British economy is beginning to pick up after several years of sluggish growth.There are several reasons for this improvement: lower mortgage rates and tax cuts (actual and forecast). Consumer demand is on the rise due to rising job security, real income gains and rising housing prices. The services sector has been performing well because leisure activities have increased. The manufacturing sector is experiencing slow growth and production has been on the decline.Bond market yields have been increasing in the first half of 1996. Inflation is at a thirty year low (currently 2.20%) and is expected to remain below the Government's target for 1996 (2.50%). Consumer demand is expected to fuel domestic markets, rather than export growth. Overall, the economy is experiencing growth, but has yet to deal with budgetary concerns imposed by the Maastricht Treaty that will be a major focus into 1997. These fiscal concerns will put a strain on economic growth. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE UNITED KINGDOM INDEX SERIES VS. THE MSCI UNITED KINGDOM INDEX CHART [GRAPHIC OMITTED] MSCI Index Fund Date PLOT POINTS PLOT POINTS - ------- -------------------- -------------------- March 12,1996 $10,000 $10,000 March 31,1996 $10,200 $10,206 April 30,1996 $10,399 $10,371 May 31,1996 $10,521 $10,470 June 30,1996 $10,459 $10,412 July 31,1996 $10,532 $10,478 August 31,1996 $11,078 $11,041 Past performance is not predictive of future performance Value August 31, 1996 ------------------ - -- United Kingdom Index Series $11,041* == MSCI United Kingdom Index $11,078 TOTAL RETURN SINCE INCEPTION(DAGGER) ---------------- United Kingdom Index Series 10.41% MSCI United Kingdom Index 10.78% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the United Kingdom Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. (DAGGER) For the period March 12, 1996 (commencement of operations) through August 31, 1996 (unannualized). 20 FOREIGN FUND, INC. ================================================================================ [THIS PAGE INTENTIONALLY LEFT BLANK] 21 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ AUSTRALIA INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 98.29% APPLIANCES & HOUSEHOLD DURABLES 0.71% 34,200 Email Limited $ 86,059 ---------- BANKING 16.71% 121,200 National Australia Bank Limited 1,182,516 169,200 Westpac Banking Limited 831,444 ---------- 2,013,960 ---------- BEVERAGES & TOBACCO 7.16% 40,800 Coca-Cola Amatil Limited 531,089 180,600 Foster's Brewing Group Limited 331,548 ---------- 862,637 ---------- BROADCASTING & PUBLISHING 9.63% 156,600 News Corporation Limited 835,204 72,000 News Corporation Limited - Preferred 324,750 ---------- 1,159,954 ---------- BUILDING MATERIALS & COMPONENTS 4.82% 100,200 Boral Limited 241,036 39,000 James Hardie Industries Limited 86,101 87,600 Pioneer International Limited 253,010 ---------- 580,147 ---------- BUSINESS & PUBLIC SERVICES 2.31% 18,600 Brambles Industries Limited 278,174 ---------- CHEMICALS 1.86% 24,600 ICI Australia Limited 224,637 ---------- ENERGY SOURCES 19.27% 157,200 Broken Hill Proprietary Company 2,142,036 46,800 Santos Limited 179,239 ---------- 2,321,275 ---------- FOOD & HOUSEHOLD PRODUCTS 1.41% 43,200 Burns Phillip & Company Limited 63,924 102,600 Goodman Fielder Limited 106,355 ---------- 170,279 ---------- FOREST PRODUCTS & PAPER 2.53% 49,800 Amcor Limited 305,008 ---------- GOLD MINES 2.22% 24,000 Newcrest Mining Limited 87,170 52,800 Normandy Mining Limited 87,322 18,600 Plutonic Resources Limited 93,460 ---------- 267,952 ---------- LEISURE & TOURISM 1.10% 57,000 Crown Limited * 133,057 ---------- MERCHANDISING 2.64% 91,200 Coles Myer Limited 317,533 ---------- METALS - NON FERROUS 11.71% 25,800 CRA Limited 392,387 128,400 Mount Isa Mines Holdings Limited 164,597 64,200 North Limited 191,522 16,800 Renison Goldfields Consolidated Limited 77,104 84,000 WMC Limited 584,929 ---------- 1,410,539 ---------- METALS - STEEL 0.72% 107,400 Australian National Industries Limited 86,685 ---------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- MULTI-INDUSTRY 6.61% 82,800 CSR Limited $ 290,907 22,800 Howard Smith Limited 167,968 82,800 Pacific Dunlop Limited 179,524 63,000 Southcorp Holdings Limited 158,529 ---------- 796,928 ---------- REAL ESTATE 6.88% 77,400 General Property Trust 140,255 19,800 Lend Lease Corporation Limited 324,009 58,200 Stockland Trust Group 136,779 123,600 Westfield Trust 227,885 ---------- 828,928 ---------- TOTAL COMMON STOCK - BASKET (Cost $11,581,794) 11,843,752 ---------- COMMON STOCK - NON-BASKET 1.71% GOLD MINES 1.71% 124,250 Normandy Mining Limited 205,487 ---------- TOTAL COMMON STOCK - NON-BASKET (Cost $188,949) 205,487 ---------- TOTAL INVESTMENTS (COST $11,770,743)(DAGGER) 100.00% $12,049,239 ======= =========== - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $11,811,083. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 420,726 Excess of tax cost over value (182,570) ----------- $ 238,156 =========== See accompanying notes to financial statements. 22 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ AUSTRIA INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE --------- ----------- ----- COMMON STOCK - BASKET 100.00% BANKING 34.91% 38,428 Bank Austria AG $ 3,159,559 9,256 Creditanstalt Bankverein 591,913 19,760 Creditanstalt Bankverein Vorzug 893,665 ----------- 4,645,137 ----------- BEVERAGES & TOBACCO 4.69% 10,140 Oesterreichische Brau Beteiligungs AG 624,066 ----------- BUILDING MATERIALS & COMPONENTS 4.29% 3,055 Wienerberger Baustoffindustrie AG 571,404 ----------- BUSINESS & PUBLIC SERVICES 4.82% 9,178 Flughafen Wien AG 641,645 ----------- CHEMICALS 1.36% 2,860 Lenzing 180,694 ----------- CONSTRUCTION & HOUSING 4.55% 4,017 Bau Holdings AG 225,980 3,965 Bau Holdings AG Vorzug 179,969 4,706 Universale-Bau 199,121 ----------- 605,070 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 2.22% 4,290 Austria Mikro Systeme International AG 296,206 ----------- ENERGY SOURCES 4.64% 6,175 OMV AG 617,565 ----------- INSURANCE 10.95% 5,122 EA - Generali AG 1,457,954 ----------- MACHINERY & ENGINEERING 8.01% 2,249 BWT 265,583 12,480 Steyr Daimler Puch* 192,020 4,745 Va Technologie AG 607,789 ----------- 1,065,392 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- METALS - STEEL 4.67% 7,956 Boehler - Uddeholm $ 621,246 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 7.39% 11,687 Mayr Melnhof Karton* 549,572 14,872 Radex-Heraklith Industries 433,336 ----------- 982,908 ----------- TRANSPORTATION - AIRLINES 3.03% 2,873 Austrian Airlines* 403,092 ----------- UTILITIES - ELECTRICAL & GAS 4.47% 8,190 Oesterreichische Elektrizitaetswirtschafts AG - Class A 594,941 ----------- TOTAL COMMON STOCK - BASKET (Cost $14,484,721) 13,307,320 ----------- TOTAL INVESTMENTS (COST $14,484,721)(DAGGER) 100.00% $13,307,320 ======= =========== - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $14,490,908. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 76,039 Excess of tax cost over value (1,259,627) ----------- ($1,183,588) =========== See accompanying notes to financial statements. 23 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ BELGIUM INDEX SERIES - ------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 100.00% BANKING 13.55% 432 Generale de Banque SA $ 159,711 279 Kredietbank NV 88,660 ---------- 248,371 ---------- BUILDING MATERIALS & COMPONENTS 4.51% 1,089 Cimenteries CBR Cementbedrij 82,668 ---------- CHEMICALS 4.32% 135 Solvay SA 79,079 ---------- ELECTRONIC COMPONENTS, INSTRUMENTS 4.92% 525 Barco NV 90,232 ---------- ENERGY SOURCES 10.90% 633 Petrofina SA 199,698 ---------- INDUSTRIAL COMPONENTS 4.09% 99 Bekaert SA 74,990 ---------- INSURANCE 8.77% 615 Fortis AG 85,894 402 Royal Belge 74,772 ---------- 160,666 ---------- MERCHANDISING 4.82% 1,650 Delhaize - Le Lion SA 88,383 ---------- METALS - NON FERROUS 4.57% 1,086 Union Miniere Group SA * 83,689 ---------- MISCELLANEOUS MATERIALS & COMMODITIES 4.20% 705 Glaverbel 76,918 ---------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- MULTI-INDUSTRY 17.15% 1,230 Gevaert NV $ 80,033 615 Groupe Bruxelles Lambert SA 76,900 372 Tractebel 157,394 ---------- 314,327 ---------- UTILITIES - ELECTRICAL & GAS 18.20% 1,506 Electrabel SA 333,567 ---------- TOTAL COMMON STOCK - BASKET (Cost $1,801,814) 1,832,588 ---------- COMMON STOCK - NON-BASKET 0.00% UTILITIES - ELECTRICAL & GAS 0.00% 74 Electrabel SA-Strip * 78 ---------- TOTAL COMMON STOCK - NON-BASKET (Cost $0) 78 ---------- TOTAL INVESTMENTS (COST $1,801,814)(DAGGER) 100.00% $1,832,666 ======= ========== - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $1,812,869. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 44,201 Excess of tax cost over value (24,404) ----------- $ 19,797 =========== See accompanying notes to financial statements. 24 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ CANADA INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.71% AEROSPACE & MILITARY TECHNOLOGY 2.59% 5,200 Bombardier Incorporated - Class A $ 73,727 15,600 Bombardier Incorporated - Class B 220,039 7,800 Cae Incorporated 60,710 ------------ 354,476 ------------ BANKING 13.25% 16,900 Bank of Montreal 414,997 14,300 Bank of Nova Scotia 354,286 13,000 Canadian Imperial Bank of Commerce 433,713 10,400 National Bank of Canada 87,788 20,800 Royal Bank of Canada 522,166 ------------ 1,812,950 ------------ BEVERAGES & TOBACCO 6.17% 3,900 Cott Corporation * 30,498 2,600 Molson Company Limited - Class A 39,904 23,400 Seagram Company Limited 772,988 ------------ 843,390 ------------ BROADCASTING & PUBLISHING 6.41% 3,900 Quebecor Incorporated - Class B 60,710 11,700 Rogers Communications Incorporated - Class B * 84,652 5,200 Southam Incorporated 62,516 37,700 Thomson Corporation 669,524 ------------ 877,402 ------------ BUSINESS & PUBLIC SERVICES 2.77% 3,900 Corel Systems Corporation * 37,338 15,600 Laidlaw Incorporated - Class B 150,493 2,600 Loewen Group Incorporated 76,102 6,500 Moore Corporation Limited 114,723 ------------ 378,656 ------------ CHEMICALS 1.03% 6,500 Dupont Canada Incorporated - Class A 141,087 ------------ ELECTRICAL & ELECTRONICS 5.71% 15,600 Northern Telecommunication Limited 780,969 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 2.18% 5,200 Newbridge Networks Corporation * 298,897 ------------ ENERGY SOURCES 12.76% 6,500 Alberta Energy Company Limited 119,948 7,800 Anderson Exploration Limited * 79,237 5,200 Canadian Natural Resources * 106,599 10,400 Canadian Occidental Petroleum 172,915 10,400 Imperial Oil Limited 449,200 5,200 IPL Energy Incorporated 137,762 6,500 Norcen Energy Resources Incorporated 118,048 7,800 Numac Energy Incorporated * 33,918 6,500 Renaissance Energy Limited * 182,891 5,200 Suncor Incorporated 183,556 6,500 Talisman Energy Incorporated * 160,802 ------------ 1,744,876 ------------ FINANCIAL SERVICES 1.01% 7,800 Power Corporation of Canada Limited 137,667 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- FOREST PRODUCTS & PAPER 1.98% 3,900 Avenor Incorporated $ 66,981 7,800 Domtar Incorporated 62,421 7,800 Macmillan Bloedel Limited 112,300 7,800 Repap Enterprises Incorporated* 28,788 ------------ 270,490 ------------ GOLD MINES 8.68% 26,000 Barrick Gold Corporation 702,112 7,800 Echo Bay Mines Limited 77,527 16,900 Placer Dome Incorporated 407,586 ------------ 1,187,225 ------------ INDUSTRIAL COMPONENTS 1.38% 3,900 Magna International Incorporated - Class A 188,117 ------------ MERCHANDISING 1.56% 5,200 Canadian Tire Corporation - Class A 61,946 3,900 George Weston Limited 151,063 ------------ 213,009 ------------ METALS - NON FERROUS 10.96% 14,300 Alcan Aluminum Limited 451,480 3,900 Cameco Corporation 194,672 5,200 Cominco Limited 116,670 7,800 Inco Limited 251,392 14,300 Noranda Incorporated 301,509 6,500 Teck Corporation - Class B 137,287 3,900 Viridian Incorporated 46,602 ------------ 1,499,612 ------------ METALS - STEEL 0.81% 5,200 Dofasco Incorporated 79,617 6,500 Stelco Incorporated - Class A * 31,115 ------------ 110,732 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 2.01% 2,600 Potash Corporation of Saskatchewan 196,667 3,900 Rio Algom Limited 78,382 ------------ 275,049 ------------ MULTI-INDUSTRY 6.56% 6,500 Brascan Limited - Class A 124,699 20,800 Canadian Pacific Limited 465,921 15,600 Imasco Limited 307,257 ------------ 897,877 ------------ TELECOMMUNICATIONS 6.54% 19,500 BCE Incorporated 769,568 9,100 Telus Corporation 124,699 ------------ 894,267 ------------ TRANSPORTATION - AIRLINES 0.24% 9,100 Air Canada Incorporated * 32,388 ------------ UTILITIES - ELECTRICAL & GAS 5.11% 31,200 Nova Corporation 277,045 11,700 Transalta Corporation 131,682 13,000 Transcanada Pipelines Limited 207,594 5,200 Westcoast Energy Incorporated 82,657 ------------ 698,978 ------------ See accompanying notes to financial statements. 25 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ CANADA INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- TOTAL COMMON STOCK - BASKET (Cost $13,613,715) $13,638,114 ------------ COMMON STOCK - NON-BASKET 0.29% ENERGY SOURCES 0.27% 837 Imperial Oil Limited 36,152 ------------ METALS - NON FERROUS 0.02% 1,020 Westaim Corporation * 2,982 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $37,763) 39,134 ------------ TOTAL INVESTMENTS (COST $13,651,478)(DAGGER) 100.00% $13,677,248 ======= ============ - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is substantially the same as for book purposes. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 416,637 Excess of tax cost over value (390,867) ----------- $ 25,770 =========== See accompanying notes to financial statements. 26 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ FRANCE INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.58% AEROSPACE & MILITARY TECHNOLOGY 1.08% 8,775 Thomson CSF $ 243,494 ------------ AUTOMOBILES 1.71% 3,375 PSA Peugeot Citroen 387,156 ------------ BANKING 8.82% 12,474 Banque National de Paris 450,003 8,100 Cie Financiere de Paribas - Class A 509,925 10,737 Compagnie Financiere de Suez 385,853 5,868 Societe Generale de Paris 646,442 ------------ 1,992,223 ------------ BEVERAGES & TOBACCO 7.43% 5,940 LVMH (Moet-Hennessy Louis Vuitton) 1,253,531 4,050 Pernod Ricard 245,751 4,455 Societe Nationale D'exploration 178,866 ------------ 1,678,148 ------------ BROADCASTING & PUBLISHING 1.55% 1,521 Canal Plus SA 348,957 ------------ BUILDING MATERIALS & COMPONENTS 1.52% 6,210 Lafarge SA 343,901 ------------ BUSINESS & PUBLIC SERVICES 5.84% 8,010 Compagnie Generale des Eaux 773,736 4,410 Havas SA 296,553 540 Sodexho SA 247,673 ------------ 1,317,962 ------------ CHEMICALS 6.10% 4,725 L'Air Liquide 805,552 21,771 Rhone-Poulenc - Class A 571,391 ------------ 1,376,943 ------------ CONSTRUCTION & HOUSING 0.68% 1,575 Bouygues 153,416 ------------ ELECTRICAL & ELECTRONICS 7.16% 10,080 Alcatel Alsthom 781,504 1,935 Legrand SA 289,709 270 Sagem SA 153,261 8,775 Schneider SA 391,882 ------------ 1,616,356 ------------ ENERGY SOURCES 10.95% 18,000 Elf Acquitaine SA 1,312,949 15,750 Total SA - Class B 1,160,356 ------------ 2,473,305 ------------ FINANCIAL SERVICES 1.36% 1,800 Compagnie Bancaire 178,359 315 Societe Eurafrance SA 127,717 ------------ 306,076 ------------ FOOD & HOUSEHOLD PRODUCTS 4.10% 1,800 Eridania Beghin-Say SA 253,476 4,860 Groupe Danone 671,889 ------------ 925,365 ------------ - ------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- HEALTH & PERSONAL CARE 9.60% 720 Essilor International $ 190,819 4,554 L'Oreal 1,424,898 6,975 Sanofi SA 552,085 ------------ 2,167,802 ------------ INDUSTRIAL COMPONENTS 2.59% 7,380 Michelin - Class B 345,347 4,752 Valeo SA 239,663 ------------ 585,010 ------------ INSURANCE 5.00% 12,609 AXA 708,743 20,907 Union des Assurances de Paris 420,944 ------------ 1,129,687 ------------ LEISURE & TOURISM 1.21% 2,250 Accor SA 272,789 ------------ MACHINERY & ENGINEERING 1.00% 1,944 Sidel SA 116,422 1,197 Compagnie Francaise d'Etudes de Construction Technip 108,665 ------------ 225,087 ------------ MERCHANDISING 10.75% 2,565 Carrefour SA 1,298,201 4,320 Casino Guichard Perrachon 170,797 369 Comptoirs Modernes 159,099 1,539 Pinault-Printemps Redoute SA 494,017 1,260 Promodes 306,022 ------------ 2,428,136 ------------ METALS - NON FERROUS 0.53% 900 Imetal 118,906 ------------ METALS - STEEL 1.01% 16,533 Usinor Sacilor 227,259 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 3.11% 5,670 Compagnie de Saint Gobain 703,129 ------------ MULTI-INDUSTRY 2.88% 594 Groupe Saint Louis Bouchon 138,629 6,552 Lagardere S.C.A. 156,410 4,050 Lyonnaise des Eaux SA 355,489 ------------ 650,528 ------------ REAL ESTATE 1.27% 2,475 Simco SA 200,698 846 Union du Credit-Bail Immobilier 86,673 ------------ 287,371 ------------ RECREATION, OTHER CONSUMER GOODS 1.64% 2,025 Bic 295,974 90 Salomon SA 74,761 ------------ 370,735 ------------ UTILITIES - ELECTRICAL & GAS 0.69% 1,449 Primagaz CIE 155,615 ------------ See accompanying notes to financial statements. 27 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ FRANCE INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- TOTAL COMMON STOCK - BASKET (Cost $22,624,598) $22,485,356 ------------ COMMON STOCK - NON-BASKET 0.42% BANKING 0.07% 1,240 Credit Foncier de France* 16,910 ------------ MERCHANDISING 0.35% 315 Docks de France SA 77,876 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $73,316) 94,786 ------------ TOTAL INVESTMENTS (COST $22,697,914)(DAGGER) 100.00% $22,580,142 ======= ============ - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $22,704,553. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 375,891 Excess of tax cost over value (500,302) ----------- $ (124,411) =========== See accompanying notes to financial statements. 28 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ GERMANY INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.90% AUTOMOBILES 10.11% 35,000 Daimler-Benz AG * $ 1,907,735 2,100 Volkswagen AG 781,567 700 Volkswagen AG Preferred 195,155 ------------ 2,884,457 ------------ BANKING 14.47% 18,200 Bayer Hypotheken-Und Wechsel Bank AG 516,024 22,750 Bayerische Vereinsbank AG 761,258 32,550 Deutsche Bank AG 1,609,879 45,500 Dresdner Bank AG 1,242,337 ------------ 4,129,498 ------------ BEVERAGES & TOBACCO 0.10% 350 Brau Und Brunnen AG* 29,605 ------------ BUILDING MATERIALS & COMPONENTS 0.82% 350 Heidelberger Zement AG 232,812 ------------ BUSINESS & PUBLIC SERVICES 4.46% 385 Herlitz AG * 41,032 4,466 SAP AG 744,938 2,961 SAP AG Preferred 486,086 ------------ 1,272,056 ------------ CHEMICALS 9.58% 45,500 BASF AG 1,357,180 38,500 Bayer AG 1,378,164 ------------ 2,735,344 ------------ CONSTRUCTION & HOUSING 1.27% 7,000 Hochtief AG 331,574 350 Strabag AG * 29,486 ------------ 361,060 ------------ ELECTRICAL & ELECTRONICS 7.14% 38,500 Siemens AG 2,037,285 ------------ FOREST PRODUCTS & PAPER 0.35% 700 Pwa-Papierwerke Waldhof-Aschaffenburg AG 100,656 ------------ HEALTH & PERSONAL CARE 4.32% 7,000 Beiersdorf AG 321,390 12,978 Merck KGAA 476,861 5,950 Schering AG 434,836 ------------ 1,233,087 ------------ INDUSTRIAL COMPONENTS 0.52% 8,750 Continental AG 148,498 ------------ INSURANCE 17.59% 1,750 Allianz AG Holdings 3,121,532 350 AMB Aachener & Muench Beteiligungs AG * 286,575 700 Muenchener Rueckversicherung AG 1,611,449 ------------ 5,019,556 ------------ MACHINERY & ENGINEERING 6.36% 350 Industrie-Werke Karlsruheaugsburg AG 75,788 5,250 Kloeckner Humboldt-Deutz AG * 28,776 700 Linde AG 435,783 1,050 MAN AG 263,601 2,800 Mannesmann AG 1,011,774 ------------ 1,815,722 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- MERCHANDISING 3.28% 2,499 Douglas Holding AG $ 101,800 1,050 Karstadt AG 369,468 4,900 Metro AG * 465,861 ------------ 937,129 ------------ METALS - STEEL 1.56% 2,450 Thyssen AG 445,967 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 1.30% 1,050 Degussa 371,600 ------------ MULTI-INDUSTRY 3.96% 3,850 Agiv AG * 63,568 1,750 Preussag AG 414,467 1,785 Viag AG 652,253 ------------ 1,130,288 ------------ RECREATION, OTHER CONSUMER GOODS 1.02% 3,388 Adidas AG 291,733 ------------ TEXTILES & APPAREL 0.07% 126 Escada AG 20,719 ------------ TRANSPORTATION - AIRLINES 1.57% 3,150 Deutsche Lufthansa 448,691 ------------ UTILITIES - ELECTRICAL & GAS 10.05% 20,300 Rwe AG 740,405 10,850 Rwe AG - Preferred 325,617 34,300 Veba AG 1,802,270 ------------ 2,868,292 ------------ TOTAL COMMON STOCK - BASKET (Cost $28,226,838) 28,514,055 ------------ COMMON STOCK - NON-BASKET 0.10% MERCHANDISING 0.10% 315 Metro AG 29,948 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $24,211) 29,948 ------------ TOTAL INVESTMENTS (COST $28,251,049)(DAGGER) 100.00% $28,544,003 ======= ============ - ------------------ * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is substantially the same as for book purposes. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 674,027 Excess of tax cost over value (381,073) ----------- $ 292,954 =========== See accompanying notes to financial statements. 29 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ HONG KONG INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.99% BANKING 14.04% 99,200 Bank of East Asia Limited $ 359,843 72,000 Hang Seng Bank Limited 737,905 ------------ 1,097,748 ------------ BROADCASTING & PUBLISHING 1.46% 32,000 Television Broadcast Limited 113,803 ------------ FINANCIAL SERVICES 1.01% 56,000 Peregrine Investment Holdings 78,938 ------------ LEISURE & TOURISM 3.46% 96,000 Hong Kong & Shanghai Hotels Limited 165,738 80,000 Shangri-La Asia Limited 104,491 ------------ 270,229 ------------ MERCHANDISING 1.63% 72,000 Dickson Concepts International 87,524 48,000 Giordano International Limited 39,727 ------------ 127,251 ------------ MULTI-INDUSTRY 16.93% 160,000 Hutchison Whampoa Limited 968,355 40,000 Swire Pacific Limited `A' 355,633 ------------ 1,323,988 ------------ REAL ESTATE 39.05% 48,000 Cheung Kong Holdings Limited 336,752 128,000 Chinese Estates Holdings 114,216 160,000 Hang Lung Development Company 302,094 240,000 Hopewell Holdings Limited 128,028 80,000 Hysan Development Company Limited 246,744 72,000 Miramar Hotel & Investment 133,614 64,000 New World Development Company Limited 310,370 112,000 Sun Hung Kai Properties Limited 1,093,538 112,000 Tai Cheung Properties 86,180 80,000 Wharf Holdings Limited 302,094 ------------ 3,053,630 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- TELECOMMUNICATIONS 10.28% 480,000 Hong Kong Telecommunications Limited $ 803,859 ------------ TRANSPORTATION - AIRLINES 4.08% 192,000 Cathay Pacific Airways Limited 319,061 ------------ UTILITIES - ELECTRICAL & GAS 8.05% 72,000 China Light & Power Company Limited 306,335 200,000 Hong Kong & China Gas Company Limited 323,302 ------------ 629,637 ------------ TOTAL COMMON STOCK - BASKET (Cost $7,866,524) 7,818,144 ------------ COMMON STOCK - NON-BASKET 0.01% UTILITIES - ELECTRICAL & GAS 0.01% 600 Hong Kong & China Gas Company Limited 970 ------------ TOTAL COMMON STOCK - NON-BASKET(Cost $950) 970 ------------ TOTAL INVESTMENTS (COST $7,867,474)(DAGGER) 100.00% $7,819,114 ======= ========== - ------------------ (DAGGER) Aggregate cost for Federal income tax purposes is $7,875,654. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 159,870 Excess of tax cost over value (216,410) ---------- $ (56,540) ---------- See accompanying notes to financial statements. 30 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ ITALY INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 6.08% 684,811 Fiat SPA $ 2,116,641 ------------ BANKING 19.35% 513,910 Banca Commerciale Italiana 976,071 127,500 Banca Popolare di Milano 610,472 149,243 Banco Ambrosiano Veneto 331,327 728,943 Credito Italiano 846,825 267,257 Istituto Bancario San Paolo de Torino 1,681,143 180,999 Istituto Mobiliare Italiano 1,420,668 161,262 Mediobanca 865,315 ------------ 6,731,821 ------------ BROADCASTING & PUBLISHING 0.87% 43,656 Arnoldo Mondadori Editore 302,762 ------------ CONSTRUCTION & HOUSING 1.24% 69,428 Sirti SPA 430,746 ------------ DATA PROCESSING & REPRODUCTION 1.49% 991,287 Olivetti Group* 518,710 ------------ ENERGY SOURCES 14.32% 1,137,317 Ente Nazionale Idrocarburi SPA 4,983,476 ------------ FOOD & HOUSEHOLD PRODUCTS 1.37% 347,786 Parmalat Finanziaria SPA 477,551 ------------ FOREST PRODUCTS & PAPER 0.59% 45,288 Burgo (Cartiere) 206,786 ------------ INDUSTRIAL COMPONENTS 3.03% 137,343 Magneti Marelli SPA 174,753 525,266 Pirelli SPA 880,331 ------------ 1,055,084 ------------ INSURANCE 16.75% 110,211 Assicurazioni Generali 2,428,407 1,239,640 Istituto Nazionale delle Assicurazioni 1,771,178 105,145 Riunione Adriatica di Sicurta SPA 907,021 62,951 Riunione Adriatica di Sicurta SPA RNC 279,676 53,873 Societa Assicuratrice Industriale 440,916 ------------ 5,827,198 ------------ MACHINERY & ENGINEERING 0.52% 50,694 Sasib SPA 181,413 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- MERCHANDISING 1.37% 78,438 Rinascente $ 475,626 ------------ METALS - STEEL 0.40% 35,190 Falck Acciaierie & Ferriere Lombarde 138,593 ------------ MULTI-INDUSTRY 2.80% 1,267,054 Montedison SPA * 814,572 172,686 SNIA Bpd 159,986 ------------ 974,558 ------------ RECREATION - OTHER CONSUMER GOODS 1.26% 25,925 Bulgari SPA 436,918 ------------ TELECOMMUNICATIONS 20.39% 267,393 Telecom Italia-Rnc 430,600 1,527,501 Telecom Italia SPA 3,001,402 1,615,748 Telecom Italia Mobile SPA 3,335,413 269,671 Telecom Italia Mobile SPA-Rnc 325,970 ------------ 7,093,385 ------------ TEXTILES & APPAREL 2.64% 54,604 Benetton Group SPA 590,088 53,703 Marzotto & Figli SPA 328,523 ------------ 918,611 ------------ UTILITIES - ELECTRICAL & GAS 5.53% 197,693 Edison SPA 1,070,494 249,781 Italgas 855,129 ------------ 1,925,623 ------------ TOTAL COMMON STOCK - BASKET (Cost $36,470,270) 34,795,502 ------------ TOTAL INVESTMENTS (COST $36,470,270)(DAGGER) 100.00% $34,795,502 ======= =========== - ------------------ * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $36,523,245. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 210,608 Excess of tax cost over value (1,938,351) ----------- ($1,727,743) ----------- ----------- See accompanying notes to financial statements. 31 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. =============================================================================== JAPAN INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.75% APPLIANCES & HOUSEHOLD DURABLES 4.95% 108,000 Matsushita Electric Industrial $ 1,819,890 12,000 Pioneer Electronic Corporation 243,094 108,000 Sanyo Electric 556,906 60,000 Sharp Corporation 950,276 24,000 Sony Corporation 1,507,182 ------------ 5,077,348 ------------ AUTOMOBILES 6.56% 48,000 Honda Motor Company 1,109,392 132,000 Nissan Motor 988,177 192,000 Toyota Motor Corporation 4,632,044 ------------ 6,729,613 ------------ BANKING 21.21% 120,000 Asahi Bank Limited 1,337,017 36,000 Ashikaga Bank Limited 207,182 240,000 Bank of Tokyo - Mitsubishi 4,883,978 60,000 Bank of Yokohama Limited 487,845 36,000 Chiba Bank Limited 285,083 144,000 Fuji Bank 2,651,934 12,000 Gunma Bank Limited 120,442 36,000 Hokuriku Bank 202,541 120,000 Industrial Bank of Japan 2,552,486 36,000 Joyo Bank 261,878 72,000 Mitsubishi Trust & Banking 1,080,663 60,000 Mitsui Trust & Banking 602,210 180,000 Sakura Bank 1,707,182 24,000 Seventy-Seven Bank 232,044 48,000 Shizuoka Bank 534,807 156,000 Sumitimo Bank Limited 2,858,564 108,000 Tokai Bank 1,282,873 12,000 Yamaguchi Bank 182,320 60,000 Yasuda Trust & Banking 300,000 ------------ 21,771,049 ------------ BEVERAGES & TOBACCO 1.07% 24,000 Asahi Breweries Limited 260,773 60,000 Kirin Brewery Company Limited 618,785 24,000 Sapporo Breweries Limited 220,332 ------------ 1,099,890 ------------ BUILDING MATERIALS & COMPONENTS 1.74% 36,000 Chichibu Onoda Cement Corporation 176,354 24,000 Inax Corporation 229,834 24,000 Nihon Cement 157,348 36,000 Sekisui Chemical 391,160 12,000 Sumitomo Forestry Company 173,481 12,000 Tostem Company 342,541 24,000 Toto Limited 318,232 ------------ 1,788,950 ------------ BUSINESS & PUBLIC SERVICES 2.75% 48,000 Dai Nippon Printing Limited 844,199 12,000 Kamigumi Company 97,680 12,000 Kokuyo Company 314,917 12,000 Mitsubishi Logistics Corporation 190,055 12,000 Secom Company 767,956 48,000 Toppan Printing Company 605,525 ------------ 2,820,332 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- CHEMICALS 3.97% 84,000 Asahi Chemical Industries Company Limited $ 564,641 72,000 Dai Nippon Ink & Chemical Corporation 314,254 12,000 Kuraray Company Limited 122,652 144,000 Mitsubishi Chemical Corporation 604,641 36,000 Mitsubishi Rayon Company 144,199 60,000 Mitsui Toatsu Chemicals Incorporated 217,127 24,000 Shin-Etsu Chemical 424,309 84,000 Showa Denko K. K.* 241,326 108,000 Sumitomo Chemical Company Limited 469,392 60,000 Teijin Limited 292,818 84,000 Toray Industries 523,646 36,000 Tosoh Corporation* 148,508 ------------ 4,067,513 ------------ CONSTRUCTION & HOUSING 4.18% 36,000 Daiwa House Industry Company Limited 513,812 60,000 Fujita Corporation 238,122 60,000 Kajima Corporation 538,122 12,000 Kandenko Company Limited 140,331 24,000 Kinden Corporation 366,851 60,000 Kumagai Gumi Company Limited 213,260 12,000 Nishimatsu Construction Company Limited 111,602 60,000 Obayashi Corporation 498,343 24,000 Penta-Ocean Construction 143,425 48,000 Sekisui House 508,287 60,000 Shimizu Corporation 558,011 72,000 Taisei Corporation 456,796 ------------ 4,286,962 ------------ DATA PROCESSING & REPRODUCTION 1.71% 48,000 Canon Incorporated 892,818 96,000 Fujitsu Limited 865,414 ------------ 1,758,232 ------------ ELECTRICAL & ELECTRONICS 3.44% 168,000 Hitachi Limited 1,543,867 12,000 Makita Corporation 172,376 108,000 Mitsubishi Electric Corporation 693,149 84,000 NEC Corporation 897,238 12,000 Omron Corporation 219,890 ------------ 3,526,520 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 2.30% 12,000 Fanuc Company Limited 438,674 12,000 Kyocera Corporation 815,470 12,000 Murata Manufacturing Company 426,519 24,000 Nikon Corporation 260,773 12,000 Tokyo Electron 313,812 12,000 Yokogwa Wokushin Electric Corporation 103,315 ------------ 2,358,563 ------------ ENERGY SOURCES 1.05% 36,000 Cosmo Oil Company Limited 208,840 72,000 Japan Energy Corporation 247,956 24,000 Mitsubishi Oil Company Limited 184,530 72,000 Nippon Oil Company Limited 440,884 ------------ 1,082,210 ------------ See accompanying notes to financial statements. 32 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ JAPAN INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- FINANCIAL SERVICES 3.80% 12,000 Acom Company Limited $ 481,768 12,000 Credit Saison Company 288,398 72,000 Daiwa Securities Company 815,470 108,000 Nomura Securities Company 1,879,558 72,000 Yamaichi Securities Company 437,569 ------------ 3,902,763 ------------ FOOD & HOUSEHOLD PRODUCTS 1.63% 36,000 Ajinomoto Company Incorporated 381,215 36,000 Kao Corporation 427,624 36,000 Meiji Seika Kaisha 207,514 12,000 Nippon Meat Packers Incorporated 166,851 12,000 Nissin Food Products Company 289,503 12,000 Yamazaki Baking Company Limited 204,420 ------------ 1,677,127 ------------ FOREST PRODUCTS & PAPER 0.72% 24,000 Honshu Paper Company 160,221 36,000 New Oji Paper Company Limited 292,376 48,000 Nippon Paper Industries Company 287,293 ------------ 739,890 ------------ HEALTH & PERSONAL CARE 3.11% 12,000 Daiichi Pharmaceutical 183,425 12,000 Eisai Company Limited 207,735 36,000 Kyowa Hakko Kogyo Company Limited 311,271 24,000 Sankyo Company Limited 596,685 24,000 Shionogi & Company 187,624 12,000 Shiseido Company Limited 145,856 24,000 Taisho Pharmaceutical 481,768 48,000 Takeda Chemical Industries 830,939 12,000 Yamanouchi Pharmaceutical 247,514 ------------ 3,192,817 ------------ INDUSTRIAL COMPONENTS 3.62% 36,000 Bridgestone Corporation 590,055 24,000 Fujikura Limited 185,856 48,000 Furukawa Electric Company 262,099 24,000 Minebea Company Limited 200,663 24,000 NGK Insulators Limited 251,934 12,000 NGK Spark Plug Company 123,757 48,000 Nippondenso Company Limited 990,055 48,000 NSK Limited 316,022 24,000 NTN Corporation 153,591 48,000 Sumitomo Electric Industries 636,464 ------------ 3,710,496 ------------ INSURANCE 2.19% 48,000 Mitsui Marine & Fire Insurance 333,702 24,000 Nichido Fire & Marine Insurance 166,851 24,000 Nippon Fire & Marine Insurance 142,320 48,000 Sumitomo Fire & Marine Insurance 371,271 108,000 Tokio Marine & Fire Insurance 1,233,149 ------------ 2,247,293 ------------ LEISURE & TOURISM 0.44% 12,000 Fujita Kanko 233,149 12,000 Tokyo Dome Corporation 223,204 ------------ 456,353 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- MACHINERY & ENGINEERING 4.64% 24,000 Amada Company Limited $ 225,414 24,000 Daikin Kogyo Industries 236,464 24,000 Ebara Corporation 362,431 72,000 Hitachi Zosen Shipbuilding 351,381 72,000 Kawasaki Heavy Industries 331,492 48,000 Komatsu Limited 410,608 84,000 Kubota Corporation 493,481 12,000 Kurita Water Industries 250,829 180,000 Mitsubishi Heavy Industries 1,423,757 84,000 Mitsui Engineering & Shipping* 225,856 60,000 Sumitomo Heavy Industries 214,365 12,000 Toyoda Automatic Loom Works 230,939 ------------ 4,757,017 ------------ MERCHANDISING 4.12% 36,000 Daiei, Incorporated 361,326 12,000 Hankyu Department Stores 153,591 12,000 Isetan Company 163,536 24,000 Ito Yokado Company 1,266,298 24,000 Jusco Company Limited 711,602 24,000 Marui Company 470,718 24,000 Mitsukoshi 216,575 24,000 Mycal Corporation 377,901 12,000 Seiyu 135,912 12,000 Takashimaya Company 163,536 12,000 Uny Company Limited 211,050 ------------ 4,232,045 ------------ METALS - NON FERROUS 0.90% 72,000 Mitsubishi Materials Corporation 348,066 36,000 Nippon Light Metal Company 181,657 48,000 Sumitomo Metal Mining 394,696 ------------ 924,419 ------------ METALS - STEEL 3.29% 180,000 Kawasaki Steel Corporation 604,972 456,000 Nippon Steel Corporation 1,444,420 228,000 NKK Corporation* 602,541 180,000 Sumitomo Metal Industries 508,840 12,000 Tokyo Steel Manufacturing Company 214,365 ------------ 3,375,138 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 1.37% 60,000 Asahi Glass Company Limited 668,508 12,000 Nitto Denko Corporation 183,425 12,000 Toyo Seikan Kaisha Limited 385,635 48,000 Ube Industries Limited 167,956 ------------ 1,405,524 ------------ REAL ESTATE 1.15% 60,000 Mitsubishi Estate Company 734,807 36,000 Mitsui Fudosan Company 444,199 ------------ 1,179,006 ------------ RECREATION, OTHER CONSUMER GOODS 1.77% 24,000 Casio Computer Company Limited 207,735 24,000 Citizen Watch Company 192,928 24,000 Fuji Photo Film Limited 722,652 24,000 Konica Corporation 165,746 12,000 Olympus Optical Corporation 110,497 12,000 Shimano 222,099 12,000 Yamaha Corporation 190,055 ------------ 1,811,712 ------------ See accompanying notes to financial statements. 33 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ JAPAN INDEX SERIES (CONCLUDED) - ------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- TEXTILES & APPAREL 0.41% 24,000 Nisshinbo Industries $ 220,332 60,000 Toyobo Company Limited 200,552 ------------ 420,884 ------------ TRANSPORTATION - AIRLINES 0.70% 96,000 Japan Air Lines* 716,022 ------------ TRANSPORTATION - ROAD & RAIL 3.63% 60,000 Hankyu Corporation* 332,597 24,000 Keihin Electric Express 134,807 84,000 Kinki Nippon Railway Company 591,713 72,000 Nagoya Railroad 336,796 36,000 Nankai Electric Railway Company 216,464 60,000 Nippon Express Company 528,729 36,000 Odakyu Electric Railway Company 232,707 12,000 Seino Transportation Company 176,796 60,000 Tobu Railway Company 362,431 84,000 Tokyu Corporation 552,265 24,000 Yamato Transport Company 260,773 ------------ 3,726,078 ------------ TRANSPORTATION - SHIPPING 0.62% 84,000 Mitsui Osk Lines* 252,155 72,000 Nippon Yusen K.K. 380,552 ------------ 632,707 ------------ UTILITIES - ELECTRICAL & GAS 3.78% 36,000 Kansai Electric Power Incorporated 802,210 168,000 Osaka Gas Company 578,564 24,000 Tohoku Electric Power Company 517,127 60,000 Tokyo Electric Power Company Incorporated 1,464,088 156,000 Tokyo Gas Limited 520,000 ------------ 3,881,989 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- WHOLESALE & INTERNATIONAL TRADE 2.93% 84,000 Itochu Corporation $ 509,724 72,000 Marubeni Corporation 350,055 84,000 Mitsubishi Corporation 935,912 84,000 Mitsui & Company 709,282 60,000 Sumitomo Corporation 506,630 ------------ 3,011,603 ------------ TOTAL COMMON STOCK - BASKET (Cost $111,083,020) 102,368,065 ------------ COMMON STOCK - NON-BASKET 0.25% BANKING 0.09% 8,800 Industrial Bank of Japan Rights (expiration date 10/15/96)** 89,945 ------------ BROADCASTING & PUBLISHING 0.16% 11,000 Tokyo Broadcasting 168,140 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $294,099) 258,085 ------------ TOTAL INVESTMENTS (COST $111,377,119)(DAGGER) 100.00% $102,626,150 ======= ============= - ------------------ * Non-income producing security. ** Fair valued security. (DAGGER) Aggregate cost for Federal income tax purposes is $111,396,190. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 629,671 Excess of tax cost over value (9,399,711) ------------- $ (8,770,040) ============= See accompanying notes to financial statements. 34 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ MALAYSIA INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.73% AUTOMOBILES 5.33% 18,000 Edaran Otomobil Nasional BHD $ 187,666 36,000 Perusahaan Otomobil Nasional BHD 194,883 63,000 Tan Chong Motor Holdings BHD 111,661 ------------ 494,210 ------------ BANKING 12.04% 18,000 Commerce Asset Holdings BHD 112,599 54,000 DCB Holdings BHD 164,568 72,000 Malayan Banking BHD 684,257 81,000 Public Bank BHD (Foreign) 155,257 ------------ 1,116,681 ------------ BEVERAGES & TOBACCO 4.16% 45,000 Guinness Anchor BHD 101,953 27,000 Rothmans of Pall Mall BHD 284,205 ------------ 386,158 ------------ BROADCASTING & PUBLISHING 1.09% 18,000 New Straits Times Press BHD 101,051 ------------ BUILDING MATERIALS & COMPONENTS 3.43% 27,000 Hume Industries - Malaysia BHD 138,584 36,000 Malayan Cement BHD 89,502 81,000 Pan Malaysia Cement Works BHD 90,621 ------------ 318,707 ------------ CONSTRUCTION & HOUSING 3.09% 36,000 Ekran BHD 153,019 27,000 YTL Corporation BHD 133,170 ------------ 286,189 ------------ ELECTRICAL & ELECTRONICS 0.82% 36,000 Time Engineering BHD 76,510 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 1.04% 27,000 Malaysian Pacific Industries BHD 96,900 ------------ ENERGY SOURCES 0.88% 27,000 Shell Refining Company BHD 81,201 ------------ FINANCIAL SERVICES 5.27% 22,000 AMMB Holdings BHD 149,972 14,000 AMMB Holdings BHD Class A** 93,753 81,000 MBF Capital BHD 115,631 36,000 Rashid Hussain BHD 129,200 ------------ 488,556 ------------ FOOD & HOUSEHOLD PRODUCTS 1.94% 18,000 Nestle (Malaysia) BHD 179,726 ------------ INDUSTRIAL COMPONENTS 0.84% 36,000 Leader Universal Holdings BHD 77,953 ------------ INSURANCE 0.89% 63,000 Idris Hydraulic (Malaysia) BHD * 82,861 ------------ LEISURE & TOURISM 6.81% 117,000 Magnum Corporation BHD 189,542 81,000 Resorts World BHD 441,736 ------------ 631,278 ------------ MACHINERY & ENGINEERING 4.98% 36,000 UMW Holdings BHD 142,914 45,000 United Engineers (Malaysia) Limited 319,392 ------------ 462,306 ------------ METALS - NON FERROUS 0.87% 72,000 Malaysian Mining Corporation BHD 80,840 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- METALS - STEEL 0.90% 117,000 Amsteel Corporation BHD $ 83,042 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 5.86% 90,000 Golden Hope Plantations BHD 145,080 63,000 Highlands & Lowlands BHD 107,114 18,000 Kian Joo Can Factory BHD 106,825 36,000 Kuala Lumpur Kepong BHD 89,502 27,000 Perlis Plantations BHD 94,735 ------------ 543,256 ------------ MULTI-INDUSTRY 8.21% 135,000 Berjaya Group BHD 89,322 36,000 Land and General Holdings BHD 65,827 63,000 Multi-Purpose Holdings BHD 87,914 153,000 Sime Darby BHD 518,425 ------------ 761,488 ------------ REAL ESTATE 2.21% 81,000 Hong Leong Properties BHD 91,270 36,000 Malaysian Resource Corporation BHD 114,043 ------------ 205,313 ------------ TELECOMMUNICATIONS 16.22% 81,000 Technology Resources Industries BHD 233,860 144,000 Telekom Malaysia BHD 1,270,350 ------------ 1,504,210 ------------ TRANSPORTATION - AIRLINES 1.74% 54,000 Malaysian Airlines System BHD 161,320 ------------ TRANSPORTATION - SHIPPING 2.66% 81,000 Malaysia International Shipping BHD (Foreign) 246,852 ------------ UTILITIES - ELECTRICAL & GAS 8.45% 216,000 Tenaga Nasional BHD 783,864 ------------ TOTAL COMMON STOCK - BASKET (Cost $9,167,360) 9,250,472 ------------ COMMON STOCK - NON-BASKET 0.27% BANKING 0.05% 2,333 Public Bank BHD (Foreign) 4,472 ------------ METALS - NON FERROUS 0.02% 1,600 Malaysian Mining Corporation BHD 1,796 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.20% 5,250 Perlis Plantations BHD 18,421 ------------ TOTAL COMMON STOCK - NON-BASKET (COST $22,815) 24,689 ------------ TOTAL INVESTMENTS (COST $9,190,175)(DAGGER) 100.00% $9,275,161 ======= ============ - ------------------ BHD - Berhad * Non-income producing security. ** Fair valued security. (DAGGER) Aggregate cost for Federal income tax purposes is $9,191,178. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 378,273 Excess of tax cost over value (294,290) ---------- $ 83,983 ========== See accompanying notes to financial statements. 35 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ MEXICO (FREE) INDEX SERIES - ------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 94.33% BANKING 5.74% 65,000 Grupo Financiero Banamex - Series B* $ 137,889 30,000 Grupo Financiero Banamex - Series L* 61,583 165,000 Grupo Financiero Bancomer - Series B* 80,323 85,000 Grupo Financiero Serfin - Series BCP* 46,201 ------------ 325,996 ------------ BEVERAGES & TOBACCO 15.96% 50,000 Empresas La Moderna - Series A 252,639 70,000 Fomento Economico Mexicano - Series B 209,169 25,000 Grupo Continental S.A. - Series CP 98,615 75,000 Grupo Modelo S.A. - Series C 346,306 ------------ 906,729 ------------ BROADCASTING & PUBLISHING 7.89% 30,000 Grupo Televisa S.A. - Series CPO* 448,417 ------------ BUILDING MATERIALS & COMPONENTS 8.40% 35,000 Apasco S.A. 235,488 35,000 Cemex S.A. - Series A 124,670 15,000 Cemex S.A. - Series B 62,137 15,000 Cemex S.A. - Series CPO 54,815 ------------ 477,110 ------------ CONSTRUCTION & HOUSING 2.60% 10,000 Empresas ICA S.A.* 147,757 ------------ ENERGY EQUIPMENT & SERVICES 1.90% 10,000 Tubos de Acero de Mexico S.A.* 108,179 ------------ FINANCIAL SERVICES 1.41% 1,080,000 Grupo Financiero BBV - Probursa* 79,789 ------------ FOOD & HOUSEHOLD PRODUCTS 5.51% 35,000 Grupo Industrial Bimbo - Series A 181,003 110,000 Grupo Industrial Maseca - Series B 131,768 ------------ 312,771 ------------ LEISURE & TOURISM 0.61% 275,000 Grupo Situr S.A. - Series B* 34,829 ------------ MERCHANDISING 7.23% 150,000 Cifra S.A. de C.V. - Series B* 234,301 45,000 Cifra S.A. de C.V. - Series C* 69,578 110,000 Controladora Comercial Mexicana - Series B* 106,807 ------------ 410,686 ------------ METALS - NON FERROUS 6.94% 65,000 Grupo Mexico S.A. - Series B* 193,799 45,000 Industrias Penoles S.A. - Series CP 200,660 ------------ 394,459 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 1.37% 40,000 Vitro S.A. 78,100 ------------ MULTI-INDUSTRY 6.59% 50,000 ALFA S.A. - Series A 219,327 30,000 Desc S.A. - Series B* 155,145 ------------ 374,472 ------------ TELECOMMUNICATIONS 21.45% 750,000 Telefonos de Mexico - Series L 1,218,997 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- TRANSPORTATION - SHIPPING 0.73% 5,000 Transportacion Maritima Mexicana - Series L $ 41,557 ------------ TOTAL COMMON STOCK - BASKET (Cost $4,825,519) 5,359,848 ------------ COMMON STOCK - NON-BASKET 5.67% BANKING 0.07% 1,710 Grupo Financiero Banamex - Series L* 3,510 ------------ FINANCIAL SERVICES 0.27% 209,520 Grupo Financiero BBV-Probursa* 15,479 ------------ HEALTH & PERSONAL CARE 5.17% 16,000 Kimberly-Clark de Mexico - Series A 293,826 ------------ MULTI-INDUSTRY 0.16% 1,487 ALFA S.A. - Series A 6,523 500 Desc S.A. - Series C* 2,599 ------------ 9,122 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $300,054) 321,937 ------------ TOTAL INVESTMENTS (COST $5,125,573)(DAGGER) 100.00% $5,681,785 ======= =========== - ------------------ * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is substantially the same as for book purposes. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 613,611 Excess of tax cost over value (57,399) ----------- $ 556,212 ----------- See accompanying notes to financial statements. 36 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ NETHERLANDS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 4.12% 8,200 Philips Electronics Nv $ 277,689 ------------ BANKING 4.55% 5,600 ABN Amro Holdings Nv 306,604 ------------ BEVERAGES & TOBACCO 4.24% 1,280 Heineken Nv 285,269 ------------ BROADCASTING & PUBLISHING 9.31% 18,800 Elsevier Nv 299,602 2,600 Wolters Kluwer - CVA 327,236 ------------ 626,838 ------------ CHEMICALS 4.29% 2,480 AKZO Nobel 288,779 ------------ CONSTRUCTION & HOUSING 4.35% 672 Hollandsche Beton Groep Nv 122,506 3,136 IHC Caland Nv 170,373 ------------ 292,879 ------------ DATA PROCESSING & REPRODUCTION 3.46% 4,224 Getronics Nv 103,012 1,264 Oce Van Der Grinten Nv 130,322 ------------ 233,334 ------------ ENERGY SOURCES 23.47% 10,560 Royal Dutch Petroleum Company 1,580,876 ------------ FINANCIAL SERVICES 12.14% 26,200 Ing Groep Nv 817,663 ------------ FOOD & HOUSEHOLD PRODUCTS 11.54% 5,400 Unilever Nv - CVA 777,436 ------------ FOREST PRODUCTS & PAPER 1.43% 4,144 Koninklijke KNP Bt Nv 96,058 ------------ - -------------------------------------------------------------------------------- SECURITY VALUE ----------- ----- INSURANCE 4.65% 8,800 Stad Rotterdam $ 312,882 ------------ MERCHANDISING 4.52% 5,440 Koninklijke Ahold Nv 304,740 ------------ METALS - STEEL 1.06% 2,008 Koninklijke Nederlandsche Hoogovens Nv 71,515 ------------ TELECOMMUNICATIONS 4.26% 8,160 Koninklijke Ptt Nederland Nv 286,679 ------------ TRANSPORTATION - AIRLINES 2.61% 6,376 KLM - Konin Luchvaart Mij Nv 175,892 ------------ TOTAL COMMON STOCK - BASKET (Cost $6,369,828) 6,735,133 ------------ TOTAL INVESTMENTS (COST $6,369,828)(DAGGER) 100.00% $6,735,133 ======= =========== - -------------------- (DAGGER) Aggregate cost for Federal income tax purposes is $6,372,295. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 436,862 Excess of tax cost over value (74,024) ----------- $ 362,838 =========== See accompanying notes to financial statements. 37 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ SINGAPORE (FREE) INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON STOCK-BASKET 99.48% AUTOMOBILES 2.58% 24,000 Cycle and Carriage $ 230,244 ------------ BANKING 26.72% 56,000 Developmental Bank Singapore (Foreign) 656,623 80,000 Oversea - Chinese Banking Corporation Limited 960,773 80,000 United Overseas Bank Limited (Foreign) 767,482 ------------ 2,384,878 ------------ BEVERAGES & TOBACCO 4.52% 40,000 Fraser & Neave Limited 403,639 ------------ BROADCASTING & PUBLISHING 4.66% 24,000 Singapore Press Holdings Limited (Foreign) 416,146 ------------ LEISURE & TOURISM 1.56% 88,000 Hotel Properties 139,454 ------------ MACHINERY & ENGINEERING 0.82% 16,000 Jurong Shipyard Limited 72,769 ------------ MERCHANDISING 1.64% 40,000 Metro Holdings Limited 146,390 ------------ METALS - NON FERROUS 2.14% 80,000 Straits Trading Company Limited 191,018 ------------ METALS - STEEL 1.78% 96,000 NatSteel Limited 158,954 ------------ MULTI-INDUSTRY 14.06% 144,000 Haw Par Brothers International 313,133 104,000 Inchcape Berhad 329,619 48,000 Keppel Corporation 364,980 104,000 Singapore Technologies 246,845 ------------ 1,254,577 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- REAL ESTATE 16.61% 56,000 City Development $ 465,605 120,000 DBS Land 399,090 64,000 Parkway Holdings 201,023 224,000 United Industrial Corporation Limited 213,303 120,000 United Overseas Land 202,956 ------------ 1,481,977 ------------ TELECOMMUNICATIONS 10.68% 392,000 Singapore Telecommunications 952,700 ------------ TRANSPORTATION - AIRLINES 10.44% 88,000 Singapore Airlines Limited (Foreign) 931,779 ------------ TRANSPORTATION - SHIPPING 1.27% 128,000 Neptune Orient Lines Limited 113,701 ------------ TOTAL COMMON STOCK - BASKET (Cost $9,353,149) 8,878,226 ------------ COMMON STOCK - NON-BASKET 0.52% APPLIANCES & HOUSEHOLD DURABLES 0.52% 35,000 Amcol Holdings* 46,760 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $95,756) 46,760 ------------ TOTAL INVESTMENTS (COST $9,448,905)(DAGGER) 100.00% $8,924,986 ======= =========== - ------------------ * Fair valued security. (DAGGER) Aggregate cost for Federal income tax purposes is $9,515,898. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 49,439 Excess of tax cost over value (640,351) ----------- $ (590,912) =========== See accompanying notes to financial statements. 38 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ SPAIN INDEX FUND - ------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.67% BANKING 25.39% 11,192 Banco Bilbao Vizcaya $ 470,790 9,136 Banco Central Hispanoamer SA 185,942 3,856 Banco Santander SA 197,973 4,632 Corporacion Bancaria de Espana SA 191,510 ------------ 1,046,215 ------------ BEVERAGES & TOBACCO 2.09% 2,108 Tabacalera SA-A 85,975 ------------ BUSINESS & PUBLIC SERVICES 7.48% 16,600 Autopistas Concesionaria ESP 178,531 2,672 General de Aguas D'Barcelona 104,598 680 Prosegur Comp Seguridad 25,015 ------------ 308,144 ------------ CONSTRUCTION & HOUSING 2.53% 3,748 Dragados y Construcciones SA 47,358 728 Fomento De Construcion & Contratas SA 57,055 ------------ 104,413 ------------ ENERGY SOURCES 7.30% 9,260 Repsol SA 301,027 ------------ FOOD & HOUSEHOLD PRODUCTS 1.56% 5,836 Ebro Agricolas 64,173 ------------ INSURANCE 2.11% 1,780 Corporacion Mapfre 86,833 ------------ MACHINERY & ENGINEERING 2.54% 1,084 Zardoya-Otis SA 104,893 ------------ METALS - STEEL 1.59% 584 Acerinox SA 65,384 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.57% 1,736 Viscofan Industria Navarra De Envolturas Celulosicas SA 23,462 ------------ MULTI-INDUSTRY 3.53% 1,736 Corporacion Financiera Alba 145,494 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- REAL ESTATE 3.10% 2,200 Inmobilaria Metropolitana Vasco Central SA $ 73,541 2,972 Vallehermoso SA 54,309 ------------ 127,850 ------------ TELECOMMUNICATIONS 13.93% 30,872 Telefonica de Espana 574,013 ------------ UTILITIES - ELECTRICAL & GAS 25.95% 9,768 Empresa Nacional de Electridad SA (Endesa) 569,465 872 Gas Natural SDG-E 167,364 17,364 Iberdrola SA 156,914 28,940 Union Electrica Fenosa SA 175,660 ------------ 1,069,403 ------------ TOTAL COMMON STOCK - BASKET (Cost $3,968,554) 4,107,279 ------------ COMMON STOCK - NON-BASKET 0.33% MACHINERY & ENGINEERING 0.33% 140 Zardoya-Otis 13,547 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $8,585) 13,547 ------------ TOTAL INVESTMENTS (COST $3,977,139)(DAGGER) 100.00% $4,120,826 ======= =========== - -------------------- (DAGGER) Aggregate cost for Federal income tax purposes is $3,983,641. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 203,255 Excess of tax cost over value (66,070) ----------- $ 137,185 =========== See accompanying notes to financial statements. 39 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ SWEDEN INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 3.66% 2,800 Electrolux AB-B $ 162,956 ------------ AUTOMOBILES 3.83% 2,400 Volvo AB-A 51,517 5,600 Volvo AB-B 119,360 ------------ 170,877 ------------ BANKING 7.51% 19,600 Skandinaviska Enskilda Banken-A 162,955 8,400 Svenska Handlesbanken-A 172,056 ------------ 335,011 ------------ BUILDING MATERIALS & COMPONENTS 1.73% 2,400 Scancem AB-A 77,275 ------------ BUSINESS & PUBLIC SERVICES 3.76% 2,144 Esselte AB-A 45,049 1,992 Esselte AB-B 42,458 3,200 Securitas AB-B 80,057 ------------ 167,564 ------------ CHEMICALS 3.81% 5,660 Aga AB-A 94,115 4,656 Aga AB-B 75,661 ------------ 169,776 ------------ CONSTRUCTION & HOUSING 4.04% 4,800 Skanska AB-B 179,946 ------------ ELECTRICAL & ELECTRONICS 25.97% 2,340 ABB AB-A 252,914 1,120 ABB AB-B 119,868 33,600 Ericsson LM-B 784,726 ------------ 1,157,508 ------------ FINANCIAL SERVICES 3.16% 5,440 Stadshypotek AB 141,031 ------------ FOREST PRODUCTS & PAPER 6.31% 8,400 Stora Kopparbergs-A 118,090 1,936 Stora Kopparbergs-B 27,071 6,400 Svenska Cellulosa AB-B 135,927 ------------ 281,088 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- HEALTH & PERSONAL CARE 20.18% 17,828 Astra AB-A $ 754,590 3,504 Astra AB-B 145,133 ------------ 899,723 ------------ INDUSTRIAL COMPONENTS 4.40% 2,388 Autoliv AB 78,874 2,244 S.K.F. AB-A 51,221 2,800 S.K.F. AB-B 65,817 ------------ 195,912 ------------ INSURANCE 1.98% 3,756 Skandia Forsakring AB 88,289 ------------ MACHINERY & ENGINEERING 4.01% 6,400 Atlas Copco AB-A 128,188 2,520 Atlas Copco AB-B 50,474 ------------ 178,662 ------------ MERCHANDISING 3.57% 1,532 Hennes & Mauritz AB-B 159,330 ------------ MULTI-INDUSTRY 1.35% 4,580 Trelleborg AB-B 60,233 ------------ RECREATION, OTHER CONSUMER GOODS 0.73% 11,284 Swedish Match * 32,409 ------------ TOTAL COMMON STOCK - BASKET (Cost $4,167,765) 4,457,590 ------------ TOTAL INVESTMENTS (COST $4,167,765)(DAGGER) 100.00% $4,457,590 ======= ============ - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $4,192,703. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 296,205 Excess of tax cost over value (31,318) ----------- $ 264,887 =========== See accompanying notes to financial statements. 40 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. ================================================================================ SWITZERLAND INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 100.00% BANKING 13.43% 2,600 CS Holding - Registered $ 270,291 272 Schweiz Bankgesellscraft - Bearer 264,596 1,436 Schweizerischer Bankverein - Bearer 280,281 ------------ 815,168 ------------ BUILDING MATERIALS & COMPONENTS 4.31% 1,704 Holderbank Finance Glaris - Registered 261,804 ------------ BUSINESS & PUBLIC SERVICES 7.37% 316 Adecco SA 89,185 84 Danzas Namen 86,623 116 SGS Soc Gen Surveillance - Bearer 271,693 ------------ 447,501 ------------ CHEMICALS 7.17% 344 Ciba - Geigy AG - Registered 435,170 ------------ ELECTRICAL & ELECTRONICS 4.31% 212 ABB AG - Bearer 261,814 ------------ FOOD & HOUSEHOLD PRODUCTS 9.74% 504 Nestle SA - Registered 591,282 ------------ HEALTH & PERSONAL CARE 28.97% 136 Roche Holding AG - Genussein 1,038,510 604 Sandoz AG - Registered 720,200 ------------ 1,758,710 ------------ INSURANCE 9.19% 264 Schweizerische Rueckversicherungs - Gesellschaft 285,912 988 Zuerich Versicherungs - Registered 272,244 ------------ 558,156 ------------ LEISURE & TOURISM 1.20% 256 Mowenpick Holding - Bearer 72,679 ------------ MACHINERY & ENGINEERING 2.02% 76 Schindler Namen 74,883 76 Sulzer Namen 47,786 ------------ 122,669 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- MERCHANDISING 3.89% 208 Grands Magasins Jelmoni - Bearer* $ 117,582 652 Valora Holding AG - Registered 118,684 ------------ 236,266 ------------ MULTI - INDUSTRY 4.24% 328 Alusuisse - Lonza Holdings - Registered 257,722 ------------ RECREATION, OTHER CONSUMER GOODS 2.29% 200 S.M.H. AG - Registered 139,279 ------------ TRANSPORTATION - AIRLINES 1.87% 124 Swissair - Registered* 113,584 ------------ TOTAL COMMON STOCK - BASKET (Cost $5,985,680) 6,071,804 ------------ TOTAL INVESTMENTS (COST $5,985,680)(DAGGER) 100.00% $6,071,804 ======= ========== - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $6,006,772. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 171,860 Excess of tax cost over value (106,828) ----------- $ 65,032 =========== See accompanying notes to financial statements. 41 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGNFUND, INC. ================================================= UNITED KINGDOM INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ ----------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 1.40% 7,830 British Aerospace Plc* $ 121,771 28,260 Rolls-Royce Plc 98,058 ------------ 219,829 ------------ BANKING 12.62% 22,440 Abbey National Plc 207,286 25,530 Barclays Plc 362,722 15,420 HSBC Holdings Plc (75p) 270,780 30,840 HSBC Plc ($HK10) 529,268 89,370 Lloyds Bank TSB Group Plc 523,820 12,150 Royal Bank of Scotland Plc 92,483 ------------ 1,986,359 ------------ BEVERAGES & TOBACCO 2.60% 38,160 Guinness Plc 285,397 11,670 Scottish & Newcastle Plc 123,577 ------------ 408,974 ------------ BROADCASTING & TOBACCO 3.61% 27,060 British Sky Broadcasting Plc 241,715 11,250 Pearson Plc 120,009 11,520 Reed International Plc 206,616 ------------ 568,340 ------------ BUILDING MATERIALS & COMPONENTS 2.89% 16,260 Blue Circle Industries Plc 93,652 9,060 BPB Industries Plc 50,625 4,770 Hepworth Plc 20,614 9,720 Redland Plc 66,619 5,070 RMC Group Plc 85,306 11,850 Williams Holdings Plc 65,474 9,990 Wolseley British Plc 72,138 ------------ 454,428 ------------ BUSINESS & PUBLIC SERVICES 3.75% 5,520 Anglian Water Plc 50,386 3,360 De la Rue Plc 33,611 29,040 Reuters Holdings Plc 338,606 8,100 Thames Water Plc 70,455 10,290 United Utilities Plc 97,465 ------------ 590,523 ------------ CHEMICALS 2.16% 8,220 Boc Group Plc 111,519 10,860 Courtaulds Plc 73,244 12,270 Imperial Chemical Industries Plc 155,054 ------------ 339,817 ------------ CONSTRUCTION & HOUSING 0.16% 9,330 Taylor Woodrow Plc 24,864 ------------ ELECTRICAL & ELECTRONICS 1.81% 47,280 General Electric Company Plc 284,879 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 0.20% 4,650 Bowthrope Plc 31,761 ------------ ENERGY SOURCES 6.60% 94,290 British Petroleum Company Plc 914,464 3,870 Burmah Castrol Plc 63,422 20,280 LASMO Plc 61,493 ------------ 1,039,379 ------------ - ------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- FINANCIAL SERVICES 0.84% 3,420 Mercury Asset Management Group Plc $ 52,546 3,660 Schroder Plc 79,373 ------------ 131,919 ------------ FOOD & HOUSEHOLD PRODUCTS 5.54% 19,470 Associated British Foods Plc 121,270 17,520 Cadbury Schweppes Plc 140,479 39,630 Grand Metropolitan Plc 293,604 14,640 Unilever Plc 290,491 7,950 United Biscuits Holdings Plc 25,721 ------------ 871,565 ------------ FOREST PRODUCTS & PAPER 0.63% 14,700 Arjo Wiggins Appleton Plc 42,506 9,480 Rexam Plc 56,306 ------------ 98,812 ------------ HEALTH & PERSONAL CARE 11.18% 58,920 Glaxo Wellcome Plc 845,404 45,666 Smithkline Beecham Plc 533,892 15,930 Zeneca Plc 380,948 ------------ 1,760,244 ------------ INDUSTRIAL COMPONENTS 1.09% 10,830 BBA Group Plc 55,183 10,290 BICC Plc 53,799 16,860 Lucas Industries Plc 62,982 ------------ 171,964 ------------ INSURANCE 3.87% 15,060 Commercial Union Plc 139,114 9,180 General Accident Plc 94,197 8,490 Legal & General Group Plc 95,676 39,060 Prudential Corporation Plc 263,739 8,310 Sedgwick Group Plc 15,716 ------------ 608,442 ------------ LEISURE & TOURISM 3.78% 17,640 Bass 229,393 4,950 Carlton Communications Plc 37,098 10,200 Granada Group Plc 138,940 22,440 Ladbroke Group Plc 73,129 16,710 Rank Organisation Plc 117,007 ------------ 595,567 ------------ MACHINERY & ENGINEERING 1.07% 10,260 GKN Plc 168,542 ------------ MERCHANDISING 9.32% 17,010 Boots Company Plc 165,768 18,330 Great Universal Stores Plc* 186,653 13,050 Kingfisher Plc 133,601 52,050 Marks & Spencer Plc 400,669 9,270 Next Plc 84,109 21,360 Safeway Plc 113,845 32,490 Sainsbury (J) Plc 197,795 39,090 Tesco Plc 185,126 ------------ 1,467,566 ------------ METALS - NON FERROUS 1.67% 17,640 RTZ Corporation Plc* 262,755 ------------ METALS - STEEL 0.58% 31,560 British Steel Plc 91,751 ------------ See accompanying notes to financial statements. 42 AUGUST 31, 1996 PORTFOLIO OF INVESTMENTS FOREIGN FUND, INC. =============================================================================== UNITED KINGDOM INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- MISCELLANEOUS MATERIALS & COMMODITIES 0.68% 11,430 Caradon Plc $ 39,660 21,240 Pilkington Plc 67,060 ------------ 106,720 ------------ MULTI-INDUSTRY 6.45% 54,150 B.A.T. Industries Plc 364,360 68,760 BTR Plc 274,053 94,050 Hanson Plc 231,525 13,650 Lonhro Plc 37,336 12,660 TI Group Plc 108,535 ------------ 1,015,809 ------------ REAL ESTATE 1.62% 10,890 British Land Corporation Plc 78,297 11,490 Land Securities Plc 122,390 7,890 MEPC Plc 53,583 ------------ 254,270 ------------ RECREATION, OTHER CONSUMER GOODS 1.42% 7,830 EMI Group Plc 176,354 7,830 Thorn Plc* 47,607 ------------ 223,961 ------------ TELECOMMUNICATIONS 6.95% 105,150 British Telecommunications Plc 617,132 40,350 Cable & Wireless Plc 265,512 55,770 Vodafone Group Plc 210,512 ------------ 1,093,156 ------------ TEXTILES & APPAREL 0.30% 19,170 Coats Viyella Plc 47,491 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- TRANSPORTATION - AIRLINES 0.95% 18,180 British Airways Plc $ 149,323 ------------ TRANSPORTATION - SHIPPING 0.58% 11,340 Peninsular & Oriental Steam NAV 91,103 ------------ UTILITIES - ELECTRICAL & GAS 3.68% 71,970 British Gas Plc 230,040 3,150 East Midlands Electric Plc 28,359 29,310 National Grid Plc 79,712 19,890 National Power Group Plc 124,974 14,820 Scottish Power Plc 70,997 4,320 Southern Electricity Plc 45,341 ------------ 579,423 ------------ TOTAL COMMON STOCK - BASKET (Cost $14,876,592) 15,739,536 ------------ COMMON STOCK - NON-BASKET 0.00% HEALTH & PERSONAL CARE 0.00% 13 Smithkline Beecham Plc 152 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $133) 152 ------------ TOTAL INVESTMENTS (COST $14,876,725)(DAGGER) 100.00% $15,739,688 ======= ============ - -------------------- * Non-income producing security. (DAGGER) Aggregate cost for Federal income tax purposes is $14,902,260. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 1,053,911 Excess of tax cost over value (216,483) ----------- $ 837,428 ============ See accompanying notes to financial statements. 43 AUGUST 31, 1996 STATEMENTS OF ASSETS AND LIABILITIES FOREIGN FUND, INC. ================================================================================
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY HONG KONG INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES ----------- ----------- ---------- ----------- ----------- ----------- ---------- ASSETS Investments, at value $12,049,239 $13,307,320 $1,832,666 $13,677,248 $22,580,142 $28,544,003 $7,819,114 Cash 83,065 186,991 1,936 86,106 299,339 82,500 6,141 Dividends receivable 11,325 11,535 4,021 21,828 73,005 8,567 21,040 Interest receivable 686 401 16 89 383 1,095 467 Receivable for securities sold -- -- -- -- 18,364 -- -- Receivable for shares sold 2,017,965 1,037,517 605,644 1,055,723 2,551,724 16,353,147 -- Deferred organization cost 103,246 76,744 33,565 72,956 199,982 189,983 53,039 Prepaid expenses 3,580 2,576 1,014 2,412 7,580 7,131 1,788 ----------- ----------- ---------- ----------- ----------- ----------- ---------- Total assets 14,269,106 14,623,084 2,478,862 14,916,362 25,730,519 45,186,426 7,901,589 ----------- ----------- ---------- ----------- ----------- ----------- ---------- LIABILITIES Liability for in-kind subscriptions 1,960,439 1,019,365 615,165 1,055,723 2,499,217 16,330,579 -- Advisory fee payable 2,357 2,873 289 2,920 2,684 3,659 1,625 Administration fee payable 708 1,809 -- 1,839 -- 53 1,009 Distribution fee payable 2,183 2,660 267 2,704 2,485 3,388 1,504 Custody fee payable 2,420 3,045 1,548 4,792 9,945 6,902 3,390 Accrued expenses 11,889 13,058 2,764 14,835 20,315 25,329 8,197 Deferred organization cost payable 82,330 60,215 24,042 57,150 160,939 152,477 40,406 Loan payable 30,000 -- 35,000 -- 105,000 -- -- ----------- ----------- ---------- ----------- ----------- ----------- ---------- Total liabilities 2,092,326 1,103,025 679,075 1,139,963 2,800,585 16,522,387 56,131 ----------- ----------- ---------- ----------- ----------- ----------- ---------- NET ASSETS Capital stock, $0.001 par value 1,200 1,300 120 1,300 1,801 2,101 601 Paid-in capital 11,931,054 14,696,778 1,775,527 13,743,951 23,036,770 28,355,338 7,897,650 Accumulated net investment income/(loss) (34,085) 5,240 (5,884) 5,167 7,522 13,453 (4,432) Accumulated net realized gain/(loss) on investments -- (6,187) (943) -- -- -- -- Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies 278,611 (1,177,072) 30,967 25,981 (116,159) 293,147 (48,361) ----------- ----------- ---------- ----------- ----------- ----------- ---------- Net Assets $12,176,780 $13,520,059 $1,799,787 $13,776,399 $22,929,934 $28,664,039 $7,845,458 =========== =========== ========== =========== =========== =========== ========== Shares of common stock issued and outstanding 1,200,030 1,300,030 120,030 1,300,030 1,801,000 2,101,000 601,000 =========== =========== ========== =========== =========== =========== ========== Net Asset Value Per Share $ 10.15 $ 10.40 $ 14.99 $ 10.60 $ 12.73 $ 13.64 $ 13.05 =========== =========== ========== =========== =========== =========== ========== MEXICO SINGAPORE ITALY JAPAN MALAYSIA (FREE) NETHERLANDS (FREE) SPAIN INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES ----------- ------------ ---------- ---------- ---------- ---------- ---------- ASSETS Investments, at value $34,795,502 $102,626,150 $9,275,161 $5,681,785 $6,735,133 $8,924,986 $4,120,826 Cash 378,318 597,681 36,381 75,162 205,151 162,065 66,173 Dividends receivable -- 20,361 6,979 -- 20,656 7,667 4,185 Interest receivable 3,314 3,913 28 87 708 71 157 Receivable for securities sold -- -- -- -- -- -- -- Receivable for shares sold 2,093,444 8,797,346 1,036,028 -- -- 1,138,707 1,063,858 Deferred organization cost 100,757 419,197 56,230 56,806 47,594 66,768 83,312 Prepaid expenses 3,456 16,297 1,820 1,880 1,449 2,207 2,998 ----------- ------------ ---------- ---------- ---------- ---------- ---------- Total assets 37,374,791 112,480,945 10,412,627 5,815,720 7,010,691 10,302,471 5,341,509 ----------- ------------ ---------- ---------- ---------- ---------- ---------- LIABILITIES Liability for in-kind subscriptions 2,069,385 8,797,346 1,020,487 -- -- 1,105,263 1,030,646 Advisory fee payable 6,531 22,633 1,728 1,326 1,608 293 742 Administration fee payable 4,112 14,251 1,081 394 880 1,149 -- Distribution fee payable 6,047 20,957 1,600 1,227 1,489 1,690 687 Custody fee payable 12,041 13,574 17,007 3,783 2,091 21,981 10,645 Accrued expenses 27,487 106,716 9,441 6,441 6,553 13,099 6,525 Deferred organization cost payable 79,479 341,524 43,363 43,815 36,251 51,978 64,888 Loan payable -- -- -- -- -- -- -- ----------- ------------ ---------- ---------- ---------- ---------- ---------- Total liabilities 2,205,082 9,317,001 1,094,707 56,986 48,872 1,195,453 1,114,133 ----------- ------------ ---------- ---------- ---------- ---------- ---------- NET ASSETS Capital stock, $0.001 par value 2,550 7,201 675 500 401 800 300 Paid-in capital 36,882,237 111,901,662 9,229,300 5,198,163 6,594,813 9,703,783 4,076,622 Accumulated net investment income/(loss) (42,495) 4,047 2,970 3,858 3,182 3,716 6,089 Accumulated net realized gain/(loss) on investments (3,346) -- -- -- (2,467) (77,971) 156 Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies (1,669,237) (8,748,966) 84,975 556,213 365,890 (523,310) 144,209 ----------- ------------ ---------- ---------- ---------- ---------- ---------- Net Assets $35,169,709 $103,163,944 $9,317,920 $5,758,734 $6,961,819 $9,107,018 $4,227,376 =========== ============ ========== ========== ========== ========== ========== Shares of common stock issued and outstanding 2,550,030 7,201,000 675,030 500,030 401,000 800,030 300,030 =========== ============ ========== ========== ========== ========== ========== Net Asset Value Per Share $ 13.79 $ 14.33 $ 13.80 $ 11.52 $ 17.36 $ 11.38 $ 14.09 =========== ============ ========== ========== ========== ========== ========== UNITED SWEDEN SWITZERLAND KINGDOM INDEX INDEX INDEX SERIES SERIES SERIES ---------- ----------- ----------- ASSETS Investments, at value $4,457,590 $6,071,804 $15,739,688 Cash 6,515 33,474 26,196 Dividends receivable -- 15,691 117,640 Interest receivable 165 149 145 Receivable for securities sold -- -- 987 Receivable for shares sold 1,107,301 1,548,216 2,638,269 Deferred organization cost 54,267 123,789 119,325 Prepaid expenses 2,456 4,553 5,727 ---------- ---------- ----------- Total assets 5,628,294 7,797,676 18,647,977 ---------- ---------- ----------- LIABILITIES Liability for in-kind subscriptions 1,119,535 1,527,338 2,625,641 Advisory fee payable 756 1,062 3,013 Administration fee payable -- -- -- Distribution fee payable 700 983 2,790 Custody fee payable 193 3,051 6,407 Accrued expenses 6,097 8,913 20,425 Deferred organization cost payable 41,039 98,124 94,459 Loan payable 60,000 -- 105,000 ---------- ---------- ----------- Total liabilities 1,228,320 1,639,471 2,857,735 ---------- ---------- ----------- NET ASSETS Capital stock, $0.001 par value 300 501 1,201 Paid-in capital 4,125,250 6,099,525 14,941,861 Accumulated net investment income/(loss) (15,400) 7,552 (17,085) Accumulated net realized gain/(loss) on investments -- (36,109) -- Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies 289,824 86,736 864,265 ---------- ---------- ----------- Net Assets $4,399,974 $6,158,205 $15,790,242 ========== ========== =========== Shares of common stock issued and outstanding 300,030 501,000 1,201,000 ========== ========== =========== Net Asset Value Per Share $ 14.67 $ 12.29 $ 13.15 ========== ========== ===========
See accompanying notes to financial statements. 44 & 45 FOR THE PERIOD MARCH 12, 1996* THROUGH AUGUST 31, 1996 STATEMENTS OF OPERATIONS FOREIGN FUND, INC. ================================================================================
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY HONG KONG INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES -------- ---------- ------- -------- -------- -------- --------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) $138,877 $ 84,425 $59,588 $112,885 $243,047 $155,019 $106,954 Interest 5,866 3,483 698 948 1,930 7,196 2,577 -------- ---------- ------- -------- -------- -------- --------- Total investment income 144,743 87,908 60,286 113,833 244,977 162,215 109,531 -------- ---------- ------- -------- -------- -------- --------- EXPENSES: Advisory fees 10,350 9,748 2,045 13,800 14,503 16,309 7,597 Administration fees 6,524 6,123 1,289 8,682 9,081 10,284 4,793 Distribution fees 9,583 9,026 1,894 12,780 13,429 15,100 7,034 Custodian fees and expenses 5,683 6,262 3,857 4,228 10,775 6,267 3,657 Transfer agent fees 583 714 629 629 614 598 661 Directors' fees 3,989 3,359 915 4,662 6,532 6,720 2,678 Professional fees 7,930 7,375 1,963 10,905 13,452 15,263 6,045 Federal and state registration fees 4,393 5,345 657 5,047 8,210 10,242 2,898 Amortization of deferred organization costs 3,349 2,489 1,089 2,366 6,486 6,162 1,720 Insurance 3,190 2,296 903 2,148 6,756 6,356 1,591 Printing 1,387 931 361 1,956 2,389 2,316 1,045 Licensing fees 1,150 1,083 227 1,534 1,612 1,812 844 Amex listing fee 340 306 72 422 514 554 238 Miscellaneous expenses 2,985 1,669 1,513 4,792 4,918 4,152 2,220 -------- ---------- ------- -------- -------- -------- --------- Total expenses before waiver 61,436 56,726 17,414 73,951 99,271 102,135 43,021 Less: Fees waived (340) (306) (72) (422) (514) (554) (238) -------- ---------- ------- -------- -------- -------- --------- Total expenses after waiver 61,096 56,420 17,342 73,529 98,757 101,581 42,783 -------- ---------- ------- -------- -------- -------- --------- Net investment income/(loss) 83,647 31,488 42,944 40,304 146,220 60,634 66,748 -------- ---------- ------- -------- -------- -------- --------- NET REALIZED AND UNREALIZED GAIN/ (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments 24,823 27,793 5,147 3,392 8,421 14,044 3,153 Net realized gain/(loss) on investments on in-kind redemptions -- 57,688 12,517 68,111 573,003 (55,306) 40,285 Net realized gain/(loss) on foreign currency related transactions (1,056) (194) 383 7 2,141 990 (8) -------- ---------- ------- -------- -------- -------- --------- 23,767 85,287 18,047 71,510 583,565 (40,272) 43,430 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies 278,611 (1,177,072) 30,967 25,981 (116,159) 293,147 (48,361) -------- ---------- ------- -------- -------- -------- --------- Net realized and unrealized gain/ (loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies 302,378 (1,091,785) 49,014 97,491 467,406 252,875 (4,931) -------- ---------- ------- -------- -------- -------- --------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $386,025 $(1,060,297) $91,958 $137,795 $613,626 $313,509 $ 61,817 ======== =========== ======= ======== ======== ======== ======== MEXICO SINGAPORE ITALY JAPAN MALAYSIA (FREE) NETHERLANDS (FREE) SPAIN INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES --------- ----------- -------- -------- ----------- --------- -------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) $ 453,211 $ 112,954 $33,790 $ 35,713 $ 89,150 $ 69,738 $ 82,915 Interest 27,400 25,975 645 457 3,772 1,816 3,762 --------- ----------- ------- -------- -------- --------- -------- Total investment income 480,611 138,929 34,435 36,170 92,922 71,554 86,677 --------- ----------- ------- -------- -------- --------- -------- EXPENSES: Advisory fees 25,345 105,230 7,550 5,552 5,510 8,578 6,162 Administration fees 15,927 66,484 4,761 3,503 3,475 5,412 3,858 Distribution fees 23,467 97,436 6,990 5,141 5,102 7,943 5,706 Custodian fees and expenses 14,974 35,384 3,355 5,461 4,191 5,377 4,648 Transfer agent fees 661 676 598 567 598 645 598 Directors' fees 8,152 35,571 2,712 2,119 1,937 3,091 2,781 Professional fees 17,073 80,272 5,903 4,226 4,312 6,545 5,951 Federal and state registration fees 13,379 41,163 3,371 1,941 2,432 3,571 1,478 Amortization of deferred organization costs 3,268 13,596 1,824 1,842 1,544 2,166 2,702 Insurance 3,079 14,525 1,622 1,676 1,292 1,968 2,673 Printing 2,770 13,343 1,080 741 606 1,164 1,129 Licensing fees 2,816 11,692 839 617 612 953 685 Amex listing fee 767 3,231 239 181 174 272 217 Miscellaneous expenses 3,409 19,106 3,707 2,622 1,613 2,142 1,721 --------- ----------- ------- -------- -------- --------- -------- Total expenses before waiver 135,087 537,709 44,551 36,189 33,398 49,827 40,309 Less: Fees waived (767) (3,231) (239) (181) (174) (272) (217) --------- ----------- ------- -------- -------- --------- -------- Total expenses after waiver 134,320 534,478 44,312 36,008 33,224 49,555 40,092 --------- ----------- ------- -------- -------- --------- -------- Net investment income/(loss) 346,291 (395,549) (9,877) 162 59,698 21,999 46,585 --------- ----------- ------- -------- -------- --------- -------- NET REALIZED AND UNREALIZED GAIN/ (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments 338,824 174,395 3,874 -- 32,030 (77,255) 29,410 Net realized gain/(loss) on investments on in-kind redemptions 63,591 -- -- -- -- (43,489) 208,077 Net realized gain/(loss) on foreign currency related transactions 8,698 (6,564) (7) (165) (188) 82 907 --------- ----------- ------- -------- -------- --------- -------- 411,113 167,831 3,867 (165) 31,842 (120,662) 238,394 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies (1,669,237) (8,748,966) 84,975 556,213 365,890 (523,310) 144,209 --------- ----------- ------- -------- -------- --------- -------- Net realized and unrealized gain/ (loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies (1,258,124) (8,581,135) 88,842 556,048 397,732 (643,972) 382,603 --------- ----------- ------- -------- -------- --------- -------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(911,833) $(8,976,684) $78,965 $556,210 $457,430 $(621,973) $429,188 ========= =========== ======= ======== ======== ========= ======== UNITED SWEDEN SWITZERLAND KINGDOM INDEX INDEX INDEX SERIES SERIES SERIES -------- ----------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) $ 78,624 $97,531 $ 280,838 Interest 1,850 2,317 2,002 -------- ------- ---------- Total investment income 80,474 99,848 282,840 -------- ------- ---------- EXPENSES: Advisory fees 4,522 8,392 14,599 Administration fees 2,878 5,251 9,200 Distribution fees 4,187 7,770 13,517 Custodian fees and expenses 1,832 7,358 3,785 Transfer agent fees 598 583 583 Directors' fees 1,987 3,893 6,026 Professional fees 4,299 8,533 13,570 Federal and state registration fees 1,512 2,325 5,499 Amortization of deferred organization costs 1,760 4,015 3,870 Insurance 2,189 4,058 5,102 Printing 678 1,546 2,561 Licensing fees 502 932 1,622 Amex listing fee 158 301 496 Miscellaneous expenses 2,423 1,853 7,176 -------- ------- ---------- Total expenses before waiver 29,525 56,810 87,606 Less: Fees waived (158) (301) (496) -------- ------- ---------- Total expenses after waiver 29,367 56,509 87,110 -------- ------- ---------- Net investment income/(loss) 51,107 43,339 195,730 -------- ------- ---------- NET REALIZED AND UNREALIZED GAIN/ (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments 27,507 (36,109) 987 Net realized gain/(loss) on investments on in-kind redemptions 67,281 (70,863) 103,343 Net realized gain/(loss) on foreign currency related transactions 49 (67) 2,316 -------- ------- ---------- 94,837 (107,039) 106,646 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies 289,824 86,736 864,265 -------- ------- ---------- Net realized and unrealized gain/ (loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies 384,661 (20,303) 970,911 -------- ------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $435,768 $23,036 $1,166,641 ======== ======= ========== - -------- *Commencement of operations.
See accompanying notes to financial statements. 46 & 47 FOR THE PERIOD MARCH 12, 1996* THROUGH AUGUST 31, 1996 STATEMENTS OF CHANGES IN NET ASSETS FOREIGN FUND, INC. ===============================================================================
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY HONG KONG INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES ----------- ----------- ---------- ----------- ----------- ----------- ---------- OPERATIONS: Net investment income/(loss) $ 83,647 $ 31,488 $ 42,944 $ 40,304 $ 146,220 $ 60,634 $ 66,748 Net realized gain/(loss) on investments and foreign currency related transactions 23,767 85,287 18,047 71,510 583,565 (40,272) 43,430 Net change in unrealized appreciation/ (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies 278,611 (1,177,072) 30,967 25,981 (116,159) 293,147 (48,361) ----------- ----------- ---------- ----------- ----------- ----------- ---------- Net increase/(decrease) in net assets resulting from operations 386,025 (1,060,297) 91,958 137,795 613,626 313,509 61,817 ----------- ----------- ---------- ----------- ----------- ----------- ---------- DISTRIBUTIONS: Net investment income. (83,647) (26,054) (42,944) (35,145) (140,840) (48,171) (66,748) In excess of net investment income (47,153) (7,923) (7,116) (7,532) (20,645) (19,615) (9,901) Net realized gains (21,359) (33,980) (5,241) (3,392) (8,421) -- (3,153) In excess of net realized gains -- -- -- -- -- (14,044) -- Return of capital (34,847) (100,047) -- (3,132) (329,606) (132,489) (24,346) ----------- ----------- ---------- ----------- ----------- ----------- ---------- Net decrease in net assets from distributions (187,006) (168,004) (55,301) (49,201) (499,512) (214,319) (104,148) ----------- ----------- ---------- ----------- ----------- ----------- ---------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares 11,977,456 19,180,869 2,982,750 15,788,335 30,831,940 32,463,206 8,886,964 Cost of shares redeemed -- (4,432,844) (1,220,075) (2,100,833) (8,028,940) (3,911,977) (1,012,585) ----------- ----------- ---------- ----------- ----------- ----------- ---------- Net increase in net assets derived from capital share transactions 11,977,456 14,748,025 1,762,675 13,687,502 22,803,000 28,551,229 7,874,379 ----------- ----------- ---------- ----------- ----------- ----------- ---------- Total increase in net assets 12,176,475 13,519,724 1,799,332 13,776,096 22,917,114 28,650,419 7,832,048 NET ASSETS: Beginning of period 305 335 455 303 12,820 13,620 13,410 ----------- ----------- ---------- ----------- ----------- ----------- ---------- End of period $12,176,780 $13,520,059 $1,799,787 $13,776,399 $22,929,934 $28,664,039 $7,845,458 =========== =========== ========== =========== =========== =========== ========== - -------- * Commencement of operations. Capital Share Transactions: Shares sold 1,200,000 1,700,000 200,000 1,500,000 2,400,000 2,400,000 675,000 Shares redeemed -- (400,000) (80,000) (200,000) (600,000) (300,000) (75,000) ----------- ----------- ---------- ----------- ----------- ----------- ---------- Net increase in shares 1,200,000 1,300,000 120,000 1,300,000 1,800,000 2,100,000 600,000 =========== =========== ========== =========== =========== =========== ========== MEXICO SINGAPORE ITALY JAPAN MALAYSIA (FREE) NETHERLANDS (FREE) SPAIN INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES ----------- ------------ ---------- ---------- ---------- ---------- ---------- OPERATIONS: Net investment income/(loss) $ 346,291 $ (395,549) $ (9,877) $ 162 $ 59,698 $ 21,999 $ 46,585 Net realized gain/(loss) on investments and foreign currency related transactions 411,113 167,831 3,867 (165) 31,842 (120,662) 238,394 Net change in unrealized appreciation/ (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies (1,669,237) (8,748,966) 84,975 556,213 365,890 (523,310) 144,209 ----------- ------------ ---------- ---------- ---------- ---------- ---------- Net increase/(decrease) in net assets resulting from operations (911,833) (8,976,684) 78,965 556,210 457,430 (621,973) 429,188 ----------- ------------ ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS: Net investment income. (346,291) -- -- -- (56,328) (19,081) (41,405) In excess of net investment income (78,413) -- -- (2,004) (4,914) (6,120) -- Net realized gains (325,362) -- -- -- (31,842) -- (29,254) In excess of net realized gains -- -- -- -- (2,655) -- -- Return of capital (195,546) -- (4,200) (5,496) (37,393) -- -- ----------- ------------ ---------- ---------- ---------- ---------- ---------- Net decrease in net assets from distributions (945,612) -- (4,200) (7,500) (133,132) (25,201) (70,659) ----------- ------------ ---------- ---------- ---------- ---------- ---------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares 39,202,785 112,125,708 9,242,755 5,209,737 6,621,571 10,940,175 7,091,661 Cost of shares redeemed (2,176,057) -- -- -- -- (1,186,369) (3,223,243) ----------- ------------ ---------- ---------- ---------- ---------- ---------- Net increase in net assets derived from capital share transactions 37,026,728 112,125,708 9,242,755 5,209,737 6,621,571 9,753,806 3,868,418 ----------- ------------ ---------- ---------- ---------- ---------- ---------- Total increase in net assets 35,169,283 103,149,024 9,317,520 5,758,447 6,945,869 9,106,632 4,226,947 NET ASSETS: Beginning of period 426 14,920 400 287 15,950 386 429 ----------- ------------ ---------- ---------- ---------- ---------- ---------- End of period $35,169,709 $103,163,944 $9,317,920 $5,758,734 $6,961,819 $9,107,018 $4,227,376 =========== ============ ========== ========== ========== ========== ========== - -------- * Commencement of operations. Capital Share Transactions: Shares sold 2,700,000 7,200,000 675,000 500,000 400,000 900,000 525,000 Shares redeemed (150,000) -- -- -- -- (100,000) (225,000) ----------- ------------ ---------- ---------- ---------- ---------- ---------- Net increase in shares 2,550,000 7,200,000 675,000 500,000 400,000 800,000 300,000 =========== ============ ========== ========== ========== ========== ========== UNITED SWEDEN SWITZERLAND KINGDOM INDEX INDEX INDEX SERIES SERIES SERIES ---------- ----------- ----------- OPERATIONS: Net investment income/(loss) $ 51,107 $ 43,339 $ 195,730 Net realized gain/(loss) on investments and foreign currency related transactions 94,837 (107,039) 106,646 Net change in unrealized appreciation/ (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies 289,824 86,736 864,265 ---------- ---------- ----------- Net increase/(decrease) in net assets resulting from operations 435,768 23,036 1,166,641 ---------- ---------- ----------- DISTRIBUTIONS: Net investment income. (51,107) (35,720) (195,730) In excess of net investment income (16,685) -- (31,721) Net realized gains (26,271) -- (987) In excess of net realized gains -- -- -- Return of capital -- -- (26,817) ---------- ---------- ----------- Net decrease in net assets from distributions (94,063) (35,720) (255,255) ---------- ---------- ----------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares 5,130,382 10,622,671 17,417,928 Cost of shares redeemed (1,072,542) (4,464,972) (2,551,512) ---------- ---------- ----------- Net increase in net assets derived from capital share transactions 4,057,840 6,157,699 14,866,416 ---------- ---------- ----------- Total increase in net assets 4,399,545 6,145,015 15,777,802 NET ASSETS: Beginning of period 429 13,190 12,440 ---------- ---------- ----------- End of period $4,399,974 $6,158,205 $15,790,242 ========== ========== =========== - -------- * Commencement of operations. Capital Share Transactions: Shares sold 375,000 875,000 1,400,000 Shares redeemed (75,000) (375,000) (200,000) ---------- ---------- ----------- Net increase in shares 300,000 500,000 1,200,000 ========== ========== ===========
See accompanying notes to financial statements. 48 & 49 FOR THE PERIOD MARCH 12, 1996* THROUGH AUGUST 31, 1996 FINANCIAL HIGHLIGHTS FOREIGN FUND, INC. =============================================================================== (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY HONG KONG INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES -------- ---------- ------- -------- -------- -------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period (1) $ 9.95 $ 10.91 $ 14.92 $ 10.17 $ 12.42 $ 13.23 $ 12.83 -------- ---------- ------- -------- -------- -------- --------- Net investment income/ (loss) (DAGGER) 0.10 0.04 0.40 0.04 0.17 0.06 0.15 Net realized and unrealized gain/ (loss) on investments, foreign currency related transactions, and translation of other assets and liabilities denominated in foreign currencies 0.29 (0.41) 0.36 0.43 0.45 0.47 0.27 -------- ---------- ------- -------- -------- -------- --------- Net increase/(decrease) in net assets resulting from operations 0.39 (0.37) 0.76 0.47 0.62 0.53 0.42 -------- ---------- ------- -------- -------- -------- --------- LESS DISTRIBUTIONS Dividends from net investment income (0.08) (0.02) (0.54) (0.03) (0.09) (0.03) (0.13) Dividends from excess of net investment income (0.05) (0.01) (0.09) (0.01) (0.01) (0.01) (0.02) Distributions from net realized gains (0.02) (0.03) (0.06) -- 0.00** -- (0.01) Distributions from excess of net realized gains -- -- -- 0.00** -- (0.01) -- Return of capital (0.04) (0.08) -- 0.00** (0.21) (0.07) (0.04) -------- ---------- ------- -------- -------- -------- --------- Total dividends and distributions (0.19) (0.14) (0.69) (0.04) (0.31) (0.12) (0.20) -------- ---------- ------- -------- -------- -------- --------- Net asset value, end of period $ 10.15 $ 10.40 $ 14.99 $ 10.60 $ 12.73 $ 13.64 $ 13.05 ======== ========== ======= ======== ======== ======== ========= TOTAL INVESTMENT RETURN (2) (4) 3.88% (3.39)% 5.01% 4.63% 4.95% 4.00% 3.22% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) $12,177 $13,520 $1,800 $13,776 $22,930 $28,664 $ 7,845 Ratios of expenses to average net assets (3) (5) 1.59% 1.56% 2.29% 1.44% 1.84% 1.68% 1.52% Ratios of net investment income/ (loss) to average net assets (3) (5) 2.18% 0.87% 5.67% 0.79% 2.72% 1.00% 2.37% Portfolio turnover (4)(6) 8.84% 9.60% 6.25% 0.00% 0.00% 0.00% 0.00% Average commission rate paid $0.0085 $0.2986 $0.4327 -- $0.3956 -- $0.0007 * Commencement of operations. ** Less than one cent per share. (DAGGER) Based on average shares outstanding throughout the period. (1) Net asset value per share on March 12, 1996 (commencement of operations). (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized (4) Not Annualized (5) Includes voluntary waivers by the American Stock Exchange. If such waivers had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as follows: Ratios of expenses to average net assets before waivers (3) 1.60% 1.57% 2.30% 1.45% 1.85% 1.69% 1.53% Ratios of net investment income/ (loss) to average net assets before waivers (3) 2.17% 0.86% 5.66% 0.78% 2.71% 0.99% 2.36% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). MEXICO SINGAPORE ITALY JAPAN MALAYSIA (FREE) NETHERLANDS (FREE) SPAIN INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES --------- ----------- -------- -------- ----------- --------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period (1) $ 13.62 $ 14.79 $ 13.24 $ 9.95 $ 15.91 $ 12.24 $ 13.28 --------- ----------- -------- -------- ----------- --------- -------- Net investment income/ (loss) (DAGGER) 0.25 (0.07) (0.02) 0.00** 0.24 0.04 0.14 Net realized and unrealized gain/ (loss) on investments, foreign currency related transactions, and translation of other assets and liabilities denominated in foreign currencies 0.31 (0.39) 0.59 1.59 1.54 (0.86) 0.98 --------- ----------- -------- -------- ----------- --------- -------- Net increase/(decrease) in net assets resulting from operations 0.56 (0.46) 0.57 1.59 1.78 (0.82) 1.12 --------- ----------- -------- -------- ----------- --------- -------- LESS DISTRIBUTIONS Dividends from net investment income (0.14) -- -- -- (0.14) (0.03) (0.18) Dividends from excess of net investment income (0.03) -- -- (0.01) (0.01) (0.01) -- Distributions from net realized gains (0.14) -- -- -- (0.08) -- (0.13) Distributions from excess of net realized gains -- -- -- -- (0.01) -- -- Return of capital (0.08) -- (0.01) (0.01) (0.09) -- -- --------- ----------- -------- -------- ----------- --------- -------- Total dividends and distributions (0.39) -- (0.01) (0.02) (0.33) (0.04) (0.31) --------- ----------- -------- -------- ----------- --------- -------- Net asset value, end of period $ 13.79 $ 14.33 $ 13.80 $ 11.52 $ 17.36 $ 11.38 $ 14.09 ========= =========== ======== ======== =========== ========= ======== TOTAL INVESTMENT RETURN (2) (4) 4.11% (3.11)% 4.28% 15.93% 11.19% (6.73)% 8.45% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) $35,170 $103,164 $ 9,318 $ 5,759 $ 6,962 $ 9,107 $ 4,227 Ratios of expenses to average net assets (3) (5) 1.43% 1.37% 1.58% 1.75% 1.63% 1.56% 1.76% Ratios of net investment income/ (loss) to average net assets (3) (5) 3.69% (1.01)% (0.35)% 0.01% 2.93% 0.69% 2.04% Portfolio turnover (4)(6) 19.80% 21.54% 0.00% 0.00% 4.32% 26.29% 4.73% Average commission rate paid $0.0046 $ 0.0152 -- -- $0.0651 $0.0118 $0.0723 * Commencement of operations. ** Less than one cent per share. (DAGGER) Based on average shares outstanding throughout the period. (1) Net asset value per share on March 12, 1996 (commencement of operations). (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized (4) Not Annualized (5) Includes voluntary waivers by the American Stock Exchange. If such waivers had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as following Ratios of expenses to average net assets before waivers (3) 1.44% 1.38% 1.59% 1.76% 1.64% 1.57% 1.77% Ratios of net investment income/ (loss) to average net assets before waivers (3) 3.68% (1.02)% (0.36)% 0.00% 2.92% 0.68% 2.03% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). UNITED SWEDEN SWITZERLAND KINGDOM INDEX INDEX INDEX SERIES SERIES SERIES -------- ----------- ---------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period (1) $ 13.22 $ 12.07 $ 12.14 -------- ----------- ---------- Net investment income/ (loss) (DAGGER) 0.20 0.08 0.21 Net realized and unrealized gain/ (loss) on investments, foreign currency related transactions, and translation of other assets and liabilities denominated in foreign currencies 1.67 0.24 1.06 -------- ----------- ---------- Net increase/(decrease) in net assets resulting from operations 1.87 0.32 1.27 -------- ----------- ---------- LESS DISTRIBUTIONS Dividends from net investment income (0.23) (0.10) (0.20) Dividends from excess of net investment income (0.07) -- (0.03) Distributions from net realized gains (0.12) -- 0.00** Distributions from excess of net realized gains -- -- -- Return of capital -- -- (0.03) -------- ----------- ---------- Total dividends and distributions (0.42) (0.10) (0.26) -------- ----------- ---------- Net asset value, end of period $ 14.67 $ 12.29 $ 13.15 ======== =========== ========== TOTAL INVESTMENT RETURN (2) (4) 14.13% 2.60% 10.41% RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) $ 4,400 $ 6,158 $15,790 Ratios of expenses to average net assets (3) (5) 1.75% 1.82% 1.61% Ratios of net investment income/ (loss) to average net assets (3) (5) 3.05% 1.39% 3.62% Portfolio turnover (4)(6) 5.87% 17.06% 0.00% Average commission rate paid $0.0561 $0.7852 -- * Commencement of operations. ** Less than one cent per share. (DAGGER) Based on average shares outstanding throughout the period. (1) Net asset value per share on March 12, 1996 (commencement of operations). (2) Total investment return is calculated assuming a purchase of capital stock at net asset value per share on the first day and a sale at the net asset value per share on the last day of the period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at the net asset value per share on the ex-dividend date. (3) Annualized (4) Not Annualized (5) Includes voluntary waivers by the American Stock Exchange. If such waivers had not been made the ratios of expenses to average net assets and ratios of net investment income/(loss) to average net assets would have been as following Ratios of expenses to average net assets before waivers (3) 1.76% 1.83% 1.62% Ratios of net investment income/ (loss) to average net assets before waivers (3) 3.04% 1.38% 3.61% (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 50 & 51 NOTES TO FINANCIAL STATEMENTS ================================================================================ GENERAL Foreign Fund, Inc. (the "Fund") was incorporated under the laws of the State of Maryland on September 1, 1994, and commenced operations on March 12, 1996. The Fund is registered under the Investment Company Act of 1940, as amended, (the "Act") as an open end management investment company. The shares of common stock of each Index Series are referred to as "World Equity Benchmark Shares" or "WEBS" and are traded on the American Stock Exchange, Inc. (the "AMEX") under the following symbols: INDEX SERIES SYMBOL ------------- -------- Australia Index Series EWA Austria Index Series EWO Belgium Index Series EWK Canada Index Series EWC France Index Series EWQ Germany Index Series EWG Hong Kong Index Series EWH Italy Index Series EWI Japan Index Series EWJ Malaysia Index Series EWM Mexico (Free) Index Series EWW Netherlands Index Series EWN Singapore (Free) Index Series EWS Spain Index Series EWP Sweden Index Series EWD Switzerland Index Series EWL United Kingdom Index Series EWU 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). Each Index Series of the Fund utilizes a "passive" or indexing investment approach to approximate the investment performance of its benchmark index through the use of quantitative analytical procedures. The Fund issues and redeems 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 Index Series. 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. The Depository Trust Company ("DTC") acts as the securities depository for the WEBS. WEBS are represented by global securities, registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. 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 Act. Each of the other Index Series is classified as a "non-diversified" investment company under the Act. The Index Series had no operations prior to their commencement of operations on March 12, 1996, other than the sale of the following Index Series shares to Funds Distributor, Inc. (the "Distributor") for the noted amounts: Australia Index Series - 30 shares for proceeds of $305; Austria Index Series - 30 shares for proceeds of $335; Belgium Index Series - 30 shares for proceeds of $455; Canada Index Series - 30 shares for proceeds of $303; France Index Series - - 1,000 shares for proceeds of $12,820; Germany Index Series - 1,000 shares for proceeds of $13,620; Hong Kong Index Series - 1,000 shares for proceeds of $13,410; Italy Index Series - 30 shares for proceeds of $426; Japan Index Series - - 1,000 shares for proceeds of $14,920; Malaysia Index Series - 30 shares for proceeds of $400; Mexico (Free) Index Series - 30 shares for proceeds of $287; Netherlands Index Series - 1,000 shares for proceeds of $15,950; Singapore (Free) Index Series - 30 shares for proceeds of $386; Spain Index Series - 30 shares for proceeds of $429; Sweden Index Series - 30 shares for proceeds of $429; Switzerland Index Series - 1,000 shares for proceeds of $13,190 and United Kingdom Index Series - 1,000 shares for proceeds of $12,440. 52 FOREIGN FUND, INC. ================================================================================ SIGNIFICANT ACCOUNTING POLICIES Each Index Series' financial statements are prepared in accordance with generally accepted accounting principles which may require the use of management estimates and assumptions. Actual results could differ from those estimates. PORTFOLIO VALUATION Investments are stated at value. All securities for which market quotations are readily available are valued at (i) the last sales price prior to the time of determination, if there was a sale on the date of determination, (ii) at the mean between the last current bid and asked prices if there was no sales price on such date and bid and asked quotations are available, or (iii) at the bid price if there was no sales price on such date and only bid quotations are available. Securities that are traded over-the-counter are valued at the last quoted bid price. Securities for which market values are not readily available, are carried at fair value as determined in good faith by the Adviser in accordance with procedures adopted by the Fund's Board of Directors. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are accounted for on trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis; dividend income is recorded on the ex-dividend date. TAX STATUS No provision is made for U.S. Federal income or excise taxes as it is each Index Series' intention to qualify as a regulated investment company and to make the requisite distributions to its shareholders which will be sufficient to relieve it from all or substantially all Federal income and excise taxes. If so elected, each Index Series' realized net foreign exchange losses and realized net capital losses incurred since the commencement of operations will be deemed to arise on the first business day of the following year. Each Index Series incurred and will elect to defer such losses as follows:
FOREIGN EXCHANGE NET REALIZED CAPITAL INDEX SERIES LOSSES LOSSES ------------ ----------------- -------------------- Australia Index Series $1,056 -- Austria Index Series $ 194 -- Belgium Index Series -- -- Canada Index Series -- -- France Index Series -- -- Germany Index Series -- -- Hong Kong Index Series $ 8 -- Italy Index Series -- -- Japan Index Series $6,564 -- Malaysia Index Series $ 7 -- Mexico (Free) Index Series $ 165 -- Netherlands Index Series $ 188 -- Singapore (Free) Index Series -- $11,989 Spain Index Series -- -- Sweden Index Series -- -- Switzerland Index Series $ 67 $15,017 United Kingdom Index Series -- --
If any Index Series owns shares in certain foreign investment entities, referred to, under U.S. tax law principles, as "passive foreign investment companies", the Index Series may elect 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. FOREIGN CURRENCY TRANSLATION The books and records of the Index Series are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: (i) Market value of investment securities, assets and liabilities at the prevailing rates of exchange on the valuation date; and (ii) Purchases and sales of investment securities and investment income at the relevant rates of exchange prevailing on the respective dates of such transactions. 53 NOTES TO FINANCIAL STATEMENTS (CONTINUED) =============================================================================== Foreign currency and assets and liabilities denominated in foreign currency are converted into U.S. dollars using the same exchange rates utilized by MSCI in the calculation of the relevant MSCI Indices (currently, exchange rates as of 4:00 p.m. London time, except that the exchange rate for the MSCI Mexico (Free) Index is that as of 3:00 p.m. New York City time). The Index Series generally do not isolate the effect of fluctuations in foreign exchange rates from the effect of fluctuations in the market prices of securities. The Index Series report certain foreign exchange realized gains and losses on foreign currency related transactions as components of realized gains and losses for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the level of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability, and the fact that foreign securities markets may be smaller, less developed and have less reliable settlement and share registration procedures. DISTRIBUTION OF INCOME AND GAINS Each Index Series intends to distribute, at least annually, to shareholders, substantially all of its net investment income, including foreign currency gains, if any, and any realized net capital gains after the utilization of available capital loss carryovers. An additional distribution may be made to the extent necessary to avoid payment of a 4% Federal excise tax. In addition, each Index Series intends to distribute at least annually, amounts representing the dividend yield on the underlying portfolio securities of each Index Series, net of expenses, 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. Dividends and distributions are paid in U.S. dollars and cannot be automatically reinvested in additional WEBS. Distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized gains are determined in accordance with U.S. tax law principles, which may differ from generally accepted accounting principles. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within each Index Series' capital accounts based on their Federal tax treatment. Dividends and distributions which exceed net investment income and realized net capital gains for financial reporting purposes but not for tax purposes are reported as distributions in excess of net investment income and realized net capital gains. To the extent they exceed net investment income and net realized gains for tax purposes, they are reported as return of capital distributions. During the period ended August 31, 1996, each Index Series reclassified certain amounts from accumulated net realized gain (loss) on investments and foreign currency transactions and accumulated net investment income (loss), respectively, as a result of permanent book and tax differences relating to net investment loss, return of capital, realized foreign currency gains and losses and gains and losses on in-kind redemptions. 54 FOREIGN FUND, INC. ================================================================================ ORGANIZATION COSTS A portion of the costs of organizing the Fund and registering its shares were paid by Morgan Stanley & Co. Incorporated ("Morgan Stanley") and will be reimbursed by each Index Series. These organization costs were allocated to each Index Series based on the net assets of each Index Series. Such organization costs have been deferred and are amortized ratably on the reverse sum of the years digits method over a period of sixty months from the commencement of operations. The amounts of deferred organization costs payable to Morgan Stanley at August 31, 1996 are as follows: INDEX SERIES ------------- Australia Index Series $ 72,096 Austria Index Series $ 49,058 Belgium Index Series $ 20,564 Canada Index Series $ 49,932 France Index Series $140,174 Germany Index Series $132,634 Hong Kong Index Series $ 35,079 Italy Index Series $ 69,106 Japan Index Series $298,107 Malaysia Index Series $ 37,870 Mexico (Free) Index Series $ 38,252 Netherlands Index Series $ 31,651 Singapore (Free) Index Series $ 43,528 Spain Index Series $ 56,208 Sweden Index Series $ 35,398 Switzerland Index Series $ 85,208 United Kingdom Index Series $ 82,009 If any of the shares initially issued to the Distributor are redeemed before the end of the amortization period, the proceeds of the redemption will be reduced by their 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. FEE ARRANGEMENTS The Fund has an Investment Management Agreement (the "Management Agreement") with Barclays Global Fund Advisors (the "Adviser"). The Adviser manages the investments of each of the Index Series. For its services to each Index Series, the Adviser receives fees based on the Fund's aggregate average daily net assets equal to .27% per annum up to aggregate net assets of $1.7 billion; plus .15% per annum of the aggregate net assets between $1.7 billion and $7 billion; plus .12% per annum of the aggregate net assets between $7 billion and $10 billion; plus .08% per annum of the aggregate net assets in excess of $10 billion. The Fund has an Administration and Accounting Services Agreement with PFPC Inc. ("PFPC" or the "Administrator"). Under the Administration and Accounting Services Agreement, PFPC assists in supervising the operations of each Index Series. For its administrative services and Fund accounting services, PFPC is paid aggregate fees equal to each Index Series' allocable portion of: .10% per annum of the aggregate average daily net assets less than $3 billion, plus .09% per annum of the aggregate net assets between $3 billion and $5 billion, plus .08% per annum of the aggregate net assets between $5 billion and $7.5 billion, plus .065% per annum of the aggregate net assets between $7.5 billion and $10 billion, plus .05% per annum of the aggregate net assets in excess of $10 billion ("Standard Fee Schedule"). Pursuant to a revised fee schedule with the Fund, PFPC will charge an annual minimum fee of $850,000 for fiscal year one, $1,275,000 for fiscal year two, and $1,700,000 for fiscal year three and thereafter (based on an annual minimum of $50,000, $75,000 and $100,000 per Index Series, respectively). PFPC will cap its minimum fees at the annual rate of .17% of average daily net assets. Any resulting shortfall between the above required minimums and the asset based fee of .17% will be recouped as each Index Series' asset level reach the threshold to permit such recovery of fees. Once the aggregate minimum fees are recouped, the Standard Fee Schedule, including minimum fee rates, would apply, subject to the maximum charge of .17% of average daily net assets and future recoupment of any deferred minimum fees. If the Administrator is terminated within the first three years of the Fund's operations, each Index Series will repay the Administrator the difference between the amounts calculated under the Standard Fee Schedule and the amounts paid during the first year of operations. 55 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ================================================================================ PNC Bank, N.A., an affiliate of the Administrator, serves as each Index Series' Transfer Agent and Dividend Disbursement Agent. The Fund has a Licensing Agreement with MSCI for the use of the relevant MSCI Index. Each Index Series pays a license fee equal to .03% per annum of the aggregate net assets of each of the Index Series. The Fund has adopted a Distribution Plan, pursuant to Rule 12b-1 under the Act ("Rule 12b-1 Plan") with respect to each Index Series. 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 fee paid to the Distributor under the Rule 12b-1 Plan is accrued daily 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 fee. Morgan Stanley Trust Company ("MSTC") serves as custodian as well as the Securities Lending Agent to each of the Index Series. For its custody services to each Index Series, MSTC is 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%). The AMEX has agreed to voluntarily waive its annual listing fee through December 31,1996. The Fund pays each director who is not a director, officer or employee of the Adviser, Administrator, Distributor or any affiliate thereof, an annual fee of $20,000 plus $5,000 for each Board of Directors meeting attended. In addition, the Fund reimburses the directors for travel and out-of-pocket expenses incurred in connection with the Board of Directors meetings. FOREIGN CURRENCY At August 31, 1996, each Index Series' cash balance included the following amount of foreign currency:
VALUE COST ------ ------ Australia Index Series $ 73,495 $ 73,453 Austria Index Series $ 65 $ 65 Belgium Index Series $ 28 $ 28 Canada Index Series $ 54,516 $ 54,306 France Index Series $ 39,099 $ 39,099 Germany Index Series $ 1,025 $ 1,017 Hong Kong Index Series $ 169 $ 169 Italy Index Series $341,123 $335,591 Japan Index Series $447,814 $445,773 Malaysia Index Series $ 3,796 $ 3,797 Mexico (Free) Index Series $ 78 $ 78 Netherlands Index Series $ 21,765 $ 21,268 Singapore (Free) Index Series $126,240 $125,645 Spain Index Series $ 55,852 $ 55,401 Sweden Index Series $ 719 $ 720 Switzerland Index Series $ 19,064 $ 19,037 United Kingdom Index Series $ 5,040 $ 5,016
STOCK LOAN Each Index Series may lend securities from its portfolio to brokers, dealers and other financial institutions. Because the collateral pledged to each Index Series in connection with these loans generates income, securities lending enables an Index Series to earn income that may partially offset the expenses of the Index Series. Each Index Series receives collateral equal to at least 100% of the current market value of the loaned securities. The Index Series invests collateral in short-term investments, and bears the risk of loss of the invested collateral. In addition, an Index Series is exposed to the risk of loss should a borrower default on its obligation to return the borrowed securities. MSTC serves as the securities lending agent of the Fund and, in such capacity, shares equally with the respective Index Series any net income earned on invested collateral. For its services as the securities lending agent, the Fund pays MSTC, in respect of each Index Series, 50% of the net investment income earned on the collateral for securities loaned. 56 FOREIGN FUND, INC. ================================================================================ The market values of securities on loan to broker/dealers at August 31, 1996, and the collateral received with respect to such loans were as follows:
MARKET VALUE OF COLLATERAL INDEX SERIES LOANED SECURITIES RECEIVED ------------ ------------------ ----------- Australia Index Series $ 3,900,357 $ 4,206,050 Austria Index Series $ 198,882 $ 211,480 Belgium Index Series -- -- Canada Index Series -- -- France Index Series $ 186,453 $ 196,094 Germany Index Series $ 4,371,043 $ 4,724,876 Hong Kong Index Series $ 1,120,597 $ 1,299,323 Italy Index Series $ 3,270,387 $ 3,716,453 Japan Index Series $21,044,290 $22,309,896 Malaysia Index Series -- -- Mexico (Free) Index Series -- -- Netherlands Index Series $ 1,578,795 $ 1,678,071 Singapore (Free) Index Series -- -- Spain Index Series $ 133,512 $ 143,279 Sweden Index Series $ 188,009 $ 195,386 Switzerland Index Series $ 432,720 $ 454,396 United Kingdom Index Series -- --
CAPITAL SHARES The Fund currently is authorized to issue 6 billion shares of common stock, with the following number of shares allocated 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 (943.2 million shares). The shares will not be issued or redeemed individually, but only in specified aggregations of shares. The consideration for purchase of a Creation Unit of WEBS of an Index Series is the in-kind deposit of a designated portfolio of equity securities constituting an optimized representation of the corresponding MSCI Index (the "Basket Securities") and an amount of cash (the "Cash Component"). Such in-kind deposit is designated as the "liability for in-kind subscriptions" on the Statements of Assets and Liabilities. Non-Basket Securities may be held by an Index Series as a result of corporate actions, odd share lots, or as a result of rebalancing of the Basket Securities. Shares of each Index Series are offered in Creation Units 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 and a purchase transaction fee. Shares of each Index Series may also be issued in the specified aggregations for cash in the sole discretion of the Fund. Redemptions of the shares of each Index Series in the specified aggregations are made in portfolio securities, plus or minus a specified amount of cash, and minus a specified redemption transaction fee. Shares of each Index Series may also be redeemed in the specified aggregations for cash in the sole discretion of the Fund. 57 NOTES TO FINANCIAL STATEMENTS (CONTINUED) =============================================================================== LOAN AGREEMENT Effective August 26, 1996, each of the Index Series has entered into a Line of Credit Agreement ("Agreement") with PNC Bank, N.A., an affiliate of the Administrator. Under the terms of the Agreement, any of the Index Series may request an advance of the full amount of the $5,000,000 line of credit; provided, however, that: (i) Total outstanding advances to all Index Series under the line of credit may not exceed $5,000,000 and (ii) The aggregate amount outstanding under the line of credit to any one Index Series may not exceed the lowest of (a) $5,000,000 (b) one-quarter of that Index Series' net assets, (c) any lower leverage limit set forth in the Fund's prospectus or (d) the maximum amount permitted to be borrowed by such Index Series under the Act. Each Index Series shall be severally, and not jointly, liable for its particular advances under the line. Advances made under the line of credit are due and payable on demand and will bear interest at a rate per annum equal to the sum of the Federal Funds Rate plus 1%. The interest rate at August 31, 1996 is 6.375%. The following Index Series had advances on the line of credit outstanding at August 31, 1996: Australia Index Series $ 30,000 Belgium Index Series $ 35,000 France Index Series $105,000 Sweden Index Series $ 60,000 United Kingdom Index Series $105,000 Average borrowings under the line of credit did not exceed 10% of net assets of any of the above Index Series during the period ended August 31, 1996. PORTFOLIO ACTIVITY The Index Series' purchases and sales of securities (excluding in-kind transactions), other than short-term obligations, were as follows, for the period ended August 31, 1996:
PURCHASES OF SALES OF INDEX SERIES SECURITIES SECURITIES ------------ ------------- ---------- Australia Index Series $ 766,594 $ 845,975 Austria Index Series $ 769,158 $ 811,984 Belgium Index Series $ 105,993 $ 107,302 Canada Index Series -- $ 61,202 France Index Series -- $ 59,684 Germany Index Series -- $ 14,044 Hong Kong Index Series -- $ 3,153 Italy Index Series $ 4,305,861 $ 4,551,484 Japan Index Series $18,776,247 $18,832,323 Malaysia Index Series -- $ 12,961 Mexico (Free) Index Series -- -- Netherlands Index Series $ 192,484 $ 337,768 Singapore (Free) Index Series $ 1,883,628 $ 2,024,777 Spain Index Series $ 230,547 $ 387,512 Sweden Index Series $ 218,165 $ 219,331 Switzerland Index Series $ 1,155,234 $ 1,205,759 United Kingdom Index Series -- $ 987
58 FOREIGN FUND, INC. ================================================================================ FOREIGN INCOME TAXES For the period ended August 31, 1996, each Index Series' net foreign withholding taxes deducted from foreign dividends received were as follows: FOREIGN WITHOLDING INDEX SERIES TAX ------------- ------------ Australia Index Series $ 2,788 Austria Index Series $10,470 Belgium Index Series $10,516 Canada Index Series $20,684 France Index Series $43,823 Germany Index Series $17,224 Hong Kong Index Series -- Italy Index Series $78,209 Japan Index Series $19,933 Malaysia Index Series $11,813 Mexico (Free) Index Series -- Netherlands Index Series $15,732 Singapore (Free) Index Series -- Spain Index Series $14,641 Sweden Index Series $13,875 Switzerland Index Series $17,211 United Kingdom Index Series $46,773 MARKET AND PORTFOLIO 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 less liquid and less efficient securities markets; 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 in settlement; difficulties in enforcing contractual obligations; less liquidity and smaller market capitalization of most non-U.S. securities markets; lower 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. 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 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). 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 may adversely affect the peformance of such Index Series or subject such Index Series to greater price volatility than that experienced by more diversified investment companies. 59 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ================================================================================ - -------------------------------------------------------------------------------- FEDERAL TAXATION NOTICE (UNAUDITED) The Index Series paid the following foreign taxes during the period ended August 31, 1996 which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code. In addition, each of the Index Series earned the following foreign source income:
FOREIGN SOURCE INDEX SERIES INCOME FOREIGN TAXES ------------ --------------- -------------- Australia Index Series $187,440 $ 2,788 Austria Index Series $ 94,938 $10,470 Belgium Index Series $ 81,098 $10,516 Canada Index Series $133,921 $20,684 France Index Series $293,728 $43,823 Germany Index Series $172,663 $17,224 Hong Kong Index Series $115,449 -- Italy Index Series $608,313 $78,209 Japan Index Series $152,061 $19,933 Malaysia Index Series $ 46,684 $11,813 Mexico (Free) Index Series $ 35,713 -- Netherlands Index Series $105,055 $15,732 Singapore (Free) Index Series $ 70,836 -- Spain Index Series $ 98,474 $14,641 Sweden Index Series $118,888 $13,875 Switzerland Index Series $114,880 $17,211 United Kingdom Index Series $353,748 $46,773
Shareholders will receive more detailed information along with Form 1099-DIV in January 1997. 60 REPORT OF INDEPENDENT AUDITORS FOREIGN FUND, INC. ================================================================================ Shareholders and Board of Directors Foreign Fund, Inc. We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Foreign Fund, Inc. (comprising 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) (collectively, the "Fund") as of August 31, 1996, and the related statements of operations and changes in net assets and financial highlights for the period fromMarch 12, 1996 (commencement of operations) to August 31, 1996. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.Our procedures included confirmation of securities owned as of August 31, 1996 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Index Series comprising Foreign Fund, Inc. at August 31, 1996, and the results of their operations, the changes in their net assets and the financial highlights for the period from March 12, 1996 to August 31, 1996, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP New York, New York October 14, 1996 61 FOREIGN FUND, INC. INVESTMENT ADVISER BARCLAYS GLOBAL FUND ADVISORS ADMINISTRATOR PFPC INC. DISTRIBUTOR FUNDS DISTRIBUTOR INC. TRANSFER AGENT PNC BANK, N.A. CUSTODIAN MORGAN STANLEY TRUST CO. 400 BELLEVUE PARKWAY WILMINGTON, DE 19809 -----END PRIVACY-ENHANCED MESSAGE-----