[Federal Register Volume 62, Number 33 (Wednesday, February 19, 1997)]
[Notices]
[Pages 7481-7483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4047]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Rel. No. 22507; 812-10334]


WEBS Index Fund, Inc., et al; Notice of Application

February 12, 1997.
AGENCY: Securities and Exchange Commission (''SEC'').

ACTION: Notice of application for exemption Under the Investment 
Company Act of 1940 (``Act'').

-----------------------------------------------------------------------

APPLICANTS: WEBS Index Fund, Inc. (the ``Fund'') \1\ and Barclays 
Global Fund Advisors (the ``Adviser'') \2\.

    \1\ The Fund changed its name from foreign Fund, Inc. on January 
2, 1997.
    \2\ The Adviser changed its name from BZW Barclays Global Fund 
Advisors on October 15, 1996.
---------------------------------------------------------------------------

RELEVANT ACT SECTIONS: Order requested under section 17(d) of the Act 
and rule 17d-1 thereunder.

SUMMARY OF APPLICATION: Applicants seek an order that would permit the 
series of the fund to pool some or all of their uninvested cash 
balances and the cash collateral they receive in connection with 
securities lending activities (``Cash Collateral'') in one or more 
joint accounts (``Joint Accounts'') that invest in certain short-term 
high quality debt securities (``Short-Term Investments'')

FILING DATES: The application was filed on September 13, 1996, and 
amended on December 27, 1996. Applicants have agreed to file an 
additional amendment during the notice period, the substance of which 
is incorporated herein.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on March 10, 1997 
and should be accompanied by proof of service on applicants, in the 
form of an affidavit or, for lawyers, a certificate of service. Hearing 
requests should state the nature of the writer's interest, the reason 
for the request, and the issues contested. Persons who wish to be 
notified of a hearing may request such notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicants: WEBS Index Fund, Inc.,
c/o PFPC, Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809; BZW 
Barclays Global Fund Advisors, 45 Fremont Street, San Francisco, 
California 94105.

FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel, 
at (202) 942-0583, or Mary Kay Ferch, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicants' Representatives

    1. The Fund, a Maryland corporation, is an open-end management 
investment company that currently offers seventeen series (the 
``Series'').\3\ The Adviser provides investment advisory services for 
all of the Series.
---------------------------------------------------------------------------

    \3\ Shares of the Series (``World Equity Benchmark Shares'' or 
``WEBS'') are issued only in large aggregations of WEBS known as 
``Creation Units.'' WEBS are neither offered nor redeemed by the 
Series in less than Creation Unit aggregations, but WEBS may be 
bought or sold in smaller aggregations in the secondary market on 
the American Stock Exchange, were WEBS are listed and traded. 
Additional Series are expected to be added from time to time, and 
would be subject to the requested order.
---------------------------------------------------------------------------

    2. The investment objective of each of the Series is to provide 
investment results that correspond generally to the aggregate price and 
yield performance of publicly traded securities in particular markets, 
as represented by foreign equity securities indexes compiled by Morgan 
Stanley Capital International (each, an ``MSCI Index''). Each Series 
seeks to remain fully invested in a pool of equity securities the 
performance of which approximates that of the relevant MSCI Index. In 
addition, each Series may lend its portfolio securities to approved 
brokers, dealers, and other financial institutions. The Custodian 
serves as the lending agent of the Fund and, in that capacity, will 
share with the respective Series any net income earned on invested Cash 
Collateral in the proportion agreed between the Custodian and the 
Series from time to time.\4\
---------------------------------------------------------------------------

    \4\ The Custodian is not an affiliated person of either the Fund 
or the Adviser.
---------------------------------------------------------------------------

    3. Subject to guidelines adopted by the board of directors of the 
Fund (the ``Board'') and such additional limits as may be established 
by the Adviser, each Series may invest uncommitted cash balances and 
Cash Collateral temporarily in the following Short-Term Investments: 
(a) Obligations of the U.S. Government and its agencies and 
instrumentalities; (b) commercial paper rated Prime-1 by Moody's 
Investors Services, Inc. or A-1 by Standard & Poor's Corporation 
(``Commercial Paper''); (c) bank certificates of deposit and bankers' 
acceptances; (d) repurchase agreements collateralized by the foregoing 
securities;\5\ (e) participation interests in such securities; and (f) 
shares of unaffiliated money market funds (subject to applicable limits 
under the Act). The maximum possible maturity of each type of Short-
Term Investment (other than shares of money market funds) will be 397 
calendar days.
---------------------------------------------------------------------------

    \5\ The Series will engage in hold-in-custody repurchase 
agreements (i.e., repurchase agreements where the counterpart or one 
of its affiliated persons may have possession of, or control over, 
the collateral subject to the agreement) only when cash is received 
very late in the business day and otherwise would be unavailable for 
investment.
---------------------------------------------------------------------------

    4. Applicants believe that the separate purchase of Short-Term 
Investments by each Series could result in certain inefficiencies, a 
limitation on the return that the Series could otherwise achieve, and 
increased costs. Accordingly, applicants propose to deposit the Series' 
available cash balances in Joint Accounts and to invest the daily 
balance of the Joint Accounts in Short-Term Investments. Applicants 
also propose to deposit the Series' Cash Collateral in a separate Joint 
Account for investment in Short-Term Investments selected by the 
Adviser. The sole purpose of these Joint Accounts would be to provide a 
convenient means of aggregating what otherwise would be daily 
transactions for some or all of the Series to manage their daily 
account balances.
    5. The Adviser will not participate monetarily in the Joint 
Accounts, nor will it receive an additional fee for the administration 
of the Accounts. The Adviser will be responsible for directing the 
investment of funds held by the Joint Accounts, establishing accounting 
and control procedures, operating the Joint Accounts in accordance with 
established procedures, and ensuring the fair treatment of each Series. 
The

[[Page 7482]]

Adviser will manage investments made with the proceeds of the Joint 
Accounts in essentially the same manner as if it had made such 
investments on an individual basis for each Series.
    6. All purchases through the Joint Accounts will be subject to the 
same systems and standards for acquiring investments as are applicable 
to the individual Series. In addition, all purchases through the Joint 
Accounts will comply with all present and future SEC staff positions 
relating to the investment of cash collateral received in connection 
with securities lending activities.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 thereunder prohibit an 
affiliated person of a registered investment company, or an affiliated 
person of such a person, from participating as a principal in any joint 
enterprise or arrangement in which such investment company is a 
participant. Each Series may be deemed an affiliated person of each 
other Series under the definition set forth in section 2(a)(3) of the 
Act. Each Series, by participating in the proposed Joint Accounts, and 
the Adviser, by managing the proposed Joint Accounts, could be deemed 
to be joint participants in a transaction within the meaning of section 
17(d) of the Act. In addition, the proposed Joint Accounts could be 
deemed to be joint arrangements within the meaning of rule 17d-1.
    2. Applicants assert that the proposed method of operating the 
Joint Accounts would not result in any conflicts of interest among any 
of the Series, or between a Series and the Adviser. Each Series would 
participate in the Joint Accounts on the same basis as every other 
Series that participates therein and in conformity with its investment 
objective and fundamental policies and restrictions. Applicants also 
have determined that the operation of the Joint Accounts would be free 
of any inherent bias favoring one Series over another and should 
eliminate bias due to size or lack thereof in any Short-Term Investment 
transaction, and that the anticipated benefits flowing to each Series 
would fall within an acceptable range of fairness.
    3. Applicants argue that, although the Adviser and the Custodian 
would gain some benefit through administrative convenience and some 
possible reduction in clerical costs, the primary beneficiaries would 
be the Series and their shareholders, because the Joint Accounts would 
provide a more efficient and productive way of administering their 
daily investment transactions. Specifically, applicants believe that 
the proposed Joint Accounts would have the following benefits for the 
Series: (a) The Series collectively would save fees and expenses by 
reducing the number of transactions relative to the number of 
transactions in which they would engage individually; (b) the Series 
may earn a higher rate of return on Short-Term Investments through the 
Joint Accounts relative to the returns they could earn individually; 
(c) the Series may realize certain administrative efficiencies and a 
reduction of the potential for errors by reducing the number of trade 
tickets and cash wires that must be processed by the sellers of Short-
Term Investments, the Custodian, and the Adviser's trading departments; 
(d) by participating in larger repurchase agreements, the Series may 
benefit from an institution's willingness to increase the amount 
covered by such agreement near the end of the day; and (e) the Series 
may be able to investment in a greater variety of instruments and 
thereby obtain more favorable yield as market conditions change.
    4. For the reasons set forth above, applicants believe that 
granting the requested order would be consistent with the provisions, 
policies, and purposes of the Act, and that the Series' participation 
in the proposed Joint Accounts would not be on a basis different from 
or less advantageous than that of any other participant therein. 
Accordingly, applicants submit that the proposed transactions meet the 
criteria for issuance of an order under section 17(d) and rule 17d-1 
thereunder.

Applicants' Conditions

    Applicants agree that any order issued by the SEC will be subject 
to the following conditions:
    1. The Joint Accounts will be established on behalf of the Series 
with the Custodian as one or more separate cash accounts into which the 
Series may deposit daily all or a portion of their uninvested cash 
balances and Cash Collateral. The Joint Accounts will not be 
distinguishable from any other accounts maintained by a Series with the 
Custodian except that monies from the various Series will be deposited 
in the Joint Accounts on a commingled basis. The Joint Accounts will 
not have any separate existence with indicia of a separate legal 
entity. The sole function of the Joint Accounts will be to provide a 
convenient and productive way of aggregating individual transactions 
that would otherwise require daily management and investment by each 
Series of its uninvested cash balances and Cash Collateral.
    2. Cash and Cash Collateral in the Joint Accounts will be invested 
in one or more of the following Short-Term Investments, as determined 
by the Adviser: (a) Obligations of the U.S. Government and its agencies 
and instrumentalities; (b) Commercial Paper; (c) bank certificates of 
deposit and bankers' acceptances; (d) repurchase agreements 
``collateralized fully'' (as that tern is defined in rule 2a-7 under 
the Act) by the foregoing securities; (e) participation interests in 
such securities; and (f) shares of money market funds that are not 
affiliated persons of applicants (subject to applicable limits under 
the Act).
    3. All assets held in the Joint Accounts will be valued on an 
amortized cost basis to the extent permitted by applicable SEC 
releases, rules, or orders.
    4. In order to ensure that there will be no opportunity for one 
Series to use any part of the balance of the Joint Accounts credited to 
another Series, no Series will be allowed to create a negative balance 
in any of the Joint Accounts for any reason, although each Series will 
be permitted to draw down its pro rata share of the entire balance at 
any time. Each Series' decision to invest through the Joint Accounts 
will be solely at the option of the Series and the Adviser, and no 
Series will be obligated to invest through, or to maintain any minimum 
balance in, any of the Joint Accounts. In addition, each Series will 
retain the sole rights of ownership over any of its assets invested in 
the Joint Accounts, including interest payable on such assets.
    5. Each Series will participate in the income earned or accrued in 
each Joint Account in which it is invested, including all investments 
held by such Joint Account, on the basis of the percentage of the total 
amount in such Joint Account on any day represented by its share of 
such Joint Account.
    6. The Adviser will (a) administer, manage and invest, or cause any 
investment of, the uninvested cash balances, and (b) direct, supervise, 
and monitor the investment of Cash Collateral, in the Joint Accounts in 
accordance with and as part of its duties under the existing or any 
future investment advisory contracts with the Fund, and will not 
collect any additional or separate fee for the administration of the 
Joint Accounts.
    7. The administration of the Joint Accounts will be within the 
fidelity bond coverage required by section 17(g) of the Act and rule 
17g-1 thereunder.
    8. The Board will adopt procedures pursuant to which the Joint 
Accounts will operate, which will be reasonable

[[Page 7483]]

designed to provide that the requirements of the application will be 
met. In addition, the Board will evaluate each Joint Account 
arrangement annually and will authorize continued participation in such 
Joint Account only if it determines that there is a reasonable 
likelihood that such continued participation will benefit each Series 
and its shareholders.
    9. Each Series' investment in a Joint Account will be documented 
daily on the books of the Series and the books of the Custodian.
    10. Short-Term Investments held in a Joint Account generally will 
not be sold prior to maturity unless: (a) The Adviser believes that the 
investment no longer presents minimal credit risks; (b) the investment 
no longer satisfies the investment criteria of the Series because of a 
credit downgrading or otherwise; or (c) in the case of a repurchase 
agreement, the counterparty defaults. The Adviser may, however, sell 
any Short-Term Investment (or any fractional portion thereof) on behalf 
of some or all Series prior to maturity of the investment if the cost 
of such transactions will be borne soley by the selling Series, and the 
transaction will not adversely affect the other Series. Each Series 
will be deemed to have consented to such sale and partition of the 
investments in the Joint Account.
    11. Short-Term Investments held through a Joint Account with a 
remaining maturity of more than seven days will be considered illiquid 
and subject to the restriction that the Series may not invest more than 
15% (or such other percentage as set forth by the SEC from time to 
time) of its assets in illiquid securities, if the Series cannot sell 
its fractional interest in the investment in such Joint Account 
pursuant to the requirements described in the preceding condition.
    12. All joint repurchase transactions will be effected in 
accordance with Investment Company Act Release No. 13005 (February 2, 
1983) and with other existing and future positions taken by the SEC or 
its staff by rule, interpretive release, no-action letter, any release 
adopting any new rule, or any release adopting any amendments to any 
existing rule.
    13. Any investment made through a Joint Account will satisfy the 
investment policies or criteria of all Series participating in that 
investment.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4047 Filed 2-18-97; 8:45 am]
BILLING CODE 8010-01-M