WEBS INDEX FUND INC, 485APOS, 1997-08-21

WEBS INDEX FUND INC
485APOS, 1997-08-21

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<PAGE> 1

As filed with the Securities and Exchange Commission on August 21, 1997

Registration No. 33-97598
811-9102
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 8 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 11 /X/
(CHECK APPROPRIATE BOX OR BOXES)

WEBS INDEX FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

C/O PFPC INC. 19809
400 BELLEVUE PARKWAY (Zip Code)
WILMINGTON, DELAWARE
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (302) 791-3239

NATHAN MOST
PRESIDENT
WEBS INDEX FUND, INC.
C/O PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DELAWARE 19809
(Name and Address of Agent for Service)

COPIES TO:

DONALD R. CRAWSHAW, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004

It is proposed that this filing will become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:

/ / this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

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

THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE RULE 24f-2 NOTICE AND OPINION FOR THE REGISTRANT'S FISCAL YEAR
ENDED AUGUST 31, 1996 WAS FILED ON OCTOBER 25, 1996.

================================================================================
<PAGE> 2
CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------- --------
<S> <C> <C>
PART A
Item 1. Cover Page...................................................... Cover Page
Item 2. Synopsis........................................................ Summary Expenses
Item 3. Condensed Financial Information................................. Financial Highlights
Item 4. General Description of Registrant............................... Cover Page; WEBS Index Fund, Inc. and
its Investment Objective; Investment
Policies; General Information
Item 5. Management of the Fund.......................................... Summary Expenses; Management of the Fund
Item 6. Capital Stock and Other Securities.............................. Tax Matters; General Information
Item 7. Purchase of Securities Being Offered............................ Management of the Fund; Exchange Listing
and Trading of WEBS; Purchase and
Issuance of WEBS in Creation Units
Item 8. Redemption or Repurchase........................................ Redemption of WEBS in Creation Units
Item 9. Pending Legal Proceedings....................................... Not Applicable

PART B
Item 10. Cover Page...................................................... Cover Page
Item 11. Table of Contents............................................... Table of Contents
Item 12. General Information and History................................. General Description of the Fund
Item 13. Investment Objectives and Policies.............................. Investment Policies and Restrictions;
Brokerage Transactions
Item 14. Management of the Fund.......................................... Management of the Fund; Investment
Advisory, Management, Administrative and
Distribution Services
Item 15. Control Persons and Principal Holders of Securities............. Management of the Fund; Investment
Advisory, Management, Administrative and
Distribution Services
Item 16. Investment Advisory and Other Services.......................... Management of the Fund; Investment
Advisory, Management, Administrative and
Distribution Services; Counsel and
Independent Auditors
Item 17. Brokerage Allocation............................................ Brokerage Transactions
Item 18. Capital Stock and Other Securities.............................. Capital Stock and Shareholder Reports;
Taxes
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................................... Purchase and Issuance of WEBS in
Creation Units; Redemption of WEBS in
Creation Units; Determining Net Asset
Value
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
<S> <C> <C>
Item 20. Tax Status...................................................... Dividends and Distributions; Taxes
Item 21. Underwriters.................................................... Investment Advisory, Management,
Administrative and Distribution
Services; Purchase and Issuance of WEBS
in Creation Units
Item 22. Calculations of Performance Data................................ Performance Information
Item 23. Financial Statements............................................ Financial Statements
</TABLE>

PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C of this Registration Statement.
<PAGE> 4
WORLD EQUITY BENCHMARK SHARES(SM)
WEBS INDEX FUND, INC.

WEBS Index Fund, Inc. (the "Fund") is an index fund consisting of
separate series (each, a "WEBS Index Series"), each of which invests primarily
in common stocks in an effort to track the performance of a specified foreign
equity market index. The initial seventeen WEBS Index Series offered by this
Prospectus are the Australia WEBS Index Series, the Austria WEBS Index Series,
the Belgium WEBS Index Series, the Canada WEBS Index Series, the France WEBS
Index Series, the Germany WEBS Index Series, the Hong Kong WEBS Index Series,
the Italy WEBS Index Series, the Japan WEBS Index Series, the Malaysia (Free)
WEBS Index Series, the Mexico (Free) WEBS Index Series, the Netherlands WEBS
Index Series, the Singapore (Free) WEBS Index Series, the Spain WEBS Index
Series, the Sweden WEBS Index Series, the Switzerland WEBS Index Series and the
United Kingdom WEBS Index Series.

The investment objective of each WEBS Index Series of the initial
seventeen WEBS Index Series is to seek to provide investment results that
correspond generally to the price and yield performance of publicly traded
securities in the aggregate in particular markets, as represented by a
particular foreign equity securities index compiled by Morgan Stanley Capital
International ("MSCI"). THE MSCI INDICES (AS DEFINED HEREIN) UTILIZED BY THE
FUND REFLECT THE REINVESTMENT OF NET DIVIDENDS (EXCEPT FOR THE MSCI MEXICO
(FREE) INDEX UTILIZED BY THE MEXICO (FREE) WEBS INDEX SERIES, WHICH REFLECTS THE
REINVESTMENT OF GROSS DIVIDENDS).

The shares of common stock of each WEBS Index Series are sometimes
referred to as "World Equity Benchmark Shares(SM)" or "WEBS(SM)." The WEBS are
listed for trading on the American Stock Exchange, Inc. (the "AMEX"). The
non-redeemable WEBS trade on the AMEX during the day at prices that differ to
some degree from their net asset value. There can be no assurance that an active
trading market will develop or be maintained for the WEBS. See "Investment
Considerations and Risks" for a discussion of certain investment considerations
and risks that should be considered by potential investors.

The Fund issues and redeems WEBS of each WEBS Index Series only in
aggregations of a specified number of shares (each, a "Creation Unit") at net
asset value. EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE
SECURITIES OF THE FUND.

The Fund is managed and advised by Barclays Global Fund Advisors
(the "Adviser"). PFPC Inc. (the "Administrator") provides certain administrative
services to each WEBS Index Series of the Fund. Funds Distributor, Inc. (the
"Distributor") serves as the principal underwriter and distributor of the Fund's
shares. The Distributor does not maintain a secondary market in WEBS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.

This Prospectus sets forth the information about the Fund that an
investor should know before investing. It should be read and retained for future
reference. A Statement of Additional Information dated October ___, 1997
provides further discussion of certain topics referred to in this Prospectus and
other matters which may be of interest to investors. The Statement of Additional
Information has been filed with the Securities and Exchange Commission (the
"SEC") and is incorporated herein by reference. The Statement of Additional
Information may be obtained without charge by writing to the Fund or the
Distributor. The Statement of Additional Information, material incorporated by
reference herein and other information regarding the Fund is available at the
SEC's Web site (http://www.sec.gov). The Fund's and each WEBS Index Series'
address is WEBS Index Fund, Inc., c/o PFPC Inc., 400 Bellevue Parkway,
Wilmington, Delaware 19809.

DISTRIBUTOR:
FUNDS DISTRIBUTOR, INC.
INVESTOR INFORMATION: 1-800-810-WEBS(9327)
PROSPECTUS DATED OCTOBER ___, 1997

<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND'S SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY SHARES IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY MAY NOT LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.

2
<PAGE> 6
DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, ARE GENERALLY REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary....................................................................... 4
Summary of Fund Expenses................................................................. 6
Financial Highlights..................................................................... 11
The Fund and its WEBS Index Series....................................................... 13
WEBS Index Fund, Inc. and its Investment Objective..................................... 13
World Equity Benchmark Shares: "WEBS".................................................. 13
Who Should Invest?..................................................................... 13
Investment Policies.................................................................... 13
Implementation of Policies............................................................. 14
Investment Limitations................................................................. 15
The Benchmark MSCI Indices Utilized by the WEBS Index Series........................... 16
Management of the Fund................................................................. 20
Exchange Listing and Trading of WEBS................................................... 22
Investment Considerations and Risks.................................................... 22
Determination of Net Asset Value....................................................... 23
Creation Units......................................................................... 24
Purchase and Issuance of WEBS in Creation Units........................................ 24
Redemption of WEBS in Creation Units................................................... 24
Dividends and Capital Gains Distributions.............................................. 25
Tax Matters............................................................................ 25
Book-Entry Only System................................................................. 26
Performance............................................................................ 26
General Information.................................................................... 26
Available Information.................................................................. 27
</TABLE>

"World Equity Benchmark Shares" and "WEBS" are service marks of
Morgan Stanley, Dean Witter, Discover & Co. used under license by the Fund.
"MSCI" and "MSCI Indices" are service marks of Morgan Stanley & Co. Incorporated
used under license by the Fund.

3
<PAGE> 7
PROSPECTUS SUMMARY

<TABLE>
<CAPTION>
<S> <C>
The Fund and its WEBS Index
Series........................................ WEBS Index Fund, Inc. (the "Fund") is an index fund
consisting of separate series (each, a "WEBS Index
Series"), the Australia WEBS Index Series, the Austria WEBS
Index Series, the Belgium WEBS Index Series, the Canada
WEBS Index Series, the France WEBS Index Series, the
Germany WEBS Index Series, the Hong Kong WEBS Index Series,
the Italy WEBS Index Series, the Japan WEBS Index Series,
the Malaysia (Free) WEBS Index Series, the Mexico (Free)
WEBS Index Series, the Netherlands WEBS Index Series, the
Singapore (Free) WEBS Index Series, the Spain WEBS Index
Series, the Sweden WEBS Index Series, the Switzerland WEBS
Index Series and the United Kingdom WEBS Index Series.

Investment Objective of the WEBS
Index Series............................... The investment objective of each WEBS Index Series of the
initial seventeen WEBS Index Series is to seek to provide
investment results that correspond generally to the price
and yield performance of publicly traded securities in the
aggregate in particular markets, as represented by a
particular foreign equity securities index compiled by
Morgan Stanley Capital International ("MSCI"). Such indices
are referred to herein as "MSCI Indices." THE MSCI INDICES
UTILIZED BY THE FUND REFLECT THE REINVESTMENT OF NET
DIVIDENDS (EXCEPT FOR THE MSCI MEXICO (FREE) INDEX UTILIZED
BY THE MEXICO (FREE) WEBS INDEX SERIES, WHICH REFLECTS THE
REINVESTMENT OF GROSS DIVIDENDS).

WEBS........................................ The shares issued in respect of each WEBS Index Series are
referred to as "World Equity Benchmark Shares" or "WEBS."
WEBS of a WEBS Index Series are issued by the Fund only in
large aggregations of WEBS called "Creation Units" on a
continuous basis through Funds Distributor, Inc. at their
net asset value next determined after receipt of an order.
WEBS are not offered by the Fund in less than Creation Unit
aggregations, but shares of WEBS may be bought or sold in
the secondary market. EXCEPT WHEN AGGREGATED IN CREATION
UNITS, WEBS ARE NOT REDEEMABLE SECURITIES OF THE FUND.

Exchange Listing and Trading of
WEBS........................................ The WEBS have been listed for secondary market trading on
the American Stock Exchange, Inc. A "round lot" of WEBS is
100 shares. At ___________, 1997, the closing price per
share of the WEBS of each WEBS Index Series was between
$_____ (______ WEBS Index Series) and $_____ (______ WEBS
Index Series) although there can be no assurance of this
price range or that an active trading market will develop
or be maintained for WEBS of a particular WEBS Index
Series.

Who Should Invest?....................... WEBS are designed for investors who seek a relatively low-cost
"passive" approach for investing in a portfolio of equity
securities of companies located in the country of the subject MSCI
Index. Unlike equity mutual funds that seek to "beat" market
averages with unpredictable results, the WEBS Index Series seek to
provide investment results that correspond generally to the price
and yield performance of their respective benchmark indices. See
"Investment Considerations and Risks" for a discussion of certain
investment considerations and risks that should be considered by
potential investors.

Fund Management....................... ADVISER. Barclays Global Fund Advisors is the Adviser to the Fund
and, subject to the supervision of the Board of Directors of the
Fund, is responsible for the investment management of each WEBS
Index Series.

ADMINISTRATOR. PFPC Inc. is the Administrator of the Fund, and
performs certain clerical, fund accounting, recordkeeping and
bookkeeping services in such capacity.

DISTRIBUTOR. Funds Distributor, Inc. is the Distributor of
WEBS in Creation Unit aggregations.

CUSTODIAN, LENDING AGENT AND SUB-ADMINISTRATOR. Morgan Stanley
Trust Company ("MSTC") serves as the Custodian for the cash
and portfolio securities of each WEBS Index Series, as Lending
Agent of the portfolio securities of each WEBS Index Series
and as a Sub-Administrator of the Fund.
</TABLE>

4
<PAGE> 8
THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO.
INCORPORATED ("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A
SERVICE MARK OF MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY WEBS INDEX FUND,
INC. ("LICENSEE"). THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY
CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL
INTERNATIONAL S.A.

WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR
PROMOTED BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY
MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES
GENERALLY, OR IN THE WEBS OF ANY WEBS INDEX SERIES PARTICULARLY, OR THE ABILITY
OF THE INDICES IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE.
MORGAN STANLEY IS THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE
NAMES OF MORGAN STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL
SERVICE MARK ("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND
LICENSED TO MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED,
COMPOSED AND CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX SERIES OR
THE ISSUER THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE
THE NEEDS OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX SERIES OR THE OWNERS OF
THE WEBS OF ANY WEBS INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING
OR CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN
STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS
RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN, THE DETERMINATION OF THE TIMING
OF, PRICES OF, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED
OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY WEBS
INDEX SERIES.

ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE
IN THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS
OF THE COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES.
NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED UNDER ANY LICENSE AGREEMENT OR FOR ANY OTHER
USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED WARRANTIES,
AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MSCI INDICES OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY
OR CIPSA HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.

The information contained herein regarding MSCI, the MSCI Indices,
local securities markets and The Depository Trust Company ("DTC") was obtained
from publicly available sources.

5
<PAGE> 9

SUMMARY OF FUND EXPENSES

The purpose of the following tables is to assist investors in
understanding the various costs and expenses an investor will bear directly and
indirectly with respect to each WEBS Index Series of the Fund. The tables show
all expenses and fees the Fund is expected to incur. The information under
"Annual Series Operating Expenses" is based on actual expenses incurred by the
Fund in the fiscal year ended August 31, 1997, adjusted to reflect changes in
the rate of Rule 12b-1 and administration fees that became effective on
, 1997. The examples set forth below are presented for an investment
of $1,000 (see next paragraph) as required by rules of the SEC. THE EXAMPLES IN
THE TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
notes to the tables and the information under "Explanation of Tables" should be
carefully reviewed when reading the tables.

As of _________, 1997, the values of the portfolio of index
securities comprising a deposit of a designated portfolio of equity securities
constituting an optimized representation of the subject MSCI Index ("Deposit
Securities") for an in-kind purchase or redemption of a Creation Unit of WEBS of
each WEBS Index Series were as follows: the Australia WEBS Index Series,
$_________; the Austria WEBS Index Series, $________; the Belgium WEBS Index
Series, $________; the Canada WEBS Index Series, $________; the France WEBS
Index Series, $________; the Germany WEBS Index Series, $_________; the Hong
Kong WEBS Index Series, $________; the Italy WEBS Index Series, $________; the
Japan WEBS Index Series, $________; the Malaysia (Free) WEBS Index Series,
$________; the Mexico (Free) WEBS Index Series, $________; the Netherlands WEBS
Index Series, $________; the Singapore (Free) WEBS Index Series, $________; the
Spain WEBS Index Series, $________; the Sweden WEBS Index Series, $________; the
Switzerland WEBS Index Series, $________; and the United Kingdom WEBS Index
Series, $________. The foregoing values are based on information available on
________, 1997. The actual dollar values on any particular day will fluctuate
and may be greater or less than such values. For additional information, please
refer to "Creation Units" on page __ of this Prospectus.

6
<PAGE> 10

<TABLE>
<CAPTION>
AUSTRIA WEBS BELGIUM WEBS CANADA WEBS FRANCE WEBS
AUSTRALIA WEBS INDEX INDEX INDEX INDEX
INDEX SERIES SERIES SERIES SERIES SERIES
------------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
A. Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases of
Creation Units of WEBS
(as a percentage of
amount of investment) None None None None None
Maximum Transaction
Fee (a) for Purchase of
one Creation Unit of
WEBS:
In-kind and Cash
Purchases (b) $2,400 $2,200 $1,800 $4,400 $4,000
Additional Variable
Charge for Cash
Purchases (NOTE -
The Fund will not
ordinarily permit cash
purchases.)(b) .60% .67% .30% .30% .25%
Deferred Sales Load None None None None None
Maximum Redemption
Transaction Fee (a) for
Redemption of one
Creation Unit of WEBS:
In-kind and Cash
Redemptions (c) $2,400 $2,200 $1,800 $4,400 $4,000
Additional Variable
Charge for Cash
Redemptions (NOTE -
The Fund will not
ordinarily permit cash
redemptions.)(c) .60% .67% .30% .30% .25%
B. Annual Series Operating
Expenses (as a
percentage of average net
assets)
Management Fees .27% .27% .27% .27% .27%
12b-1 Fees (d) .20% .20% .20% .20% .20%
===== ===== ===== ===== =====
Other Expenses* % % % % %
===== ===== ===== ===== =====
Total Operating Expenses* % % % % %
===== ===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
GERMANY WEBS ITALY WEBS
INDEX HONG KONG WEBS INDEX JAPAN WEBS
SERIES INDEX SERIES SERIES INDEX SERIES
------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
A. Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases of
Creation Units of WEBS
(as a percentage of
amount of investment) None None None None
Maximum Transaction
Fee (a) for Purchase of
one Creation Unit of
WEBS:
In-kind and Cash
Purchases (b) $2,900 $3,400 $2,300 $8,900
Additional Variable
Charge for Cash
Purchases (NOTE -
The Fund will not
ordinarily permit cash
purchases.)(b) .25% .60% .30% .15%
Deferred Sales Load None None None None
Maximum Redemption
Transaction Fee (a) for
Redemption of one
Creation Unit of WEBS:
In-kind and Cash
Redemptions (c) $2,900 $3,400 $2,300 $8,900
Additional Variable
Charge for Cash
Redemptions (NOTE -
The Fund will not
ordinarily permit cash
redemptions.)(c) .25% .60% .30% .40%
B. Annual Series Operating
Expenses (as a
percentage of average net
assets)
Management Fees .27% .27% .27% .27%
12b-1 Fees (d) .20% .20% .20% .20%
===== ===== ===== ===== =====
Other Expenses* % % % %
===== ===== ===== ===== =====
Total Operating Expenses* % % % %
===== ===== ===== =====
</TABLE>

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

*These expense ratio percentages reflect the average daily net assets of the 17
WEBS Index Series for the fiscal year ended August 31, 1997, which totaled $
million. The net assets of the 17 WEBS Index Series totaled $ __________ million
as of August 31, 1997.

7
<PAGE> 11

<TABLE>
<CAPTION>
MALAYSIA MEXICO NETHERLANDS SINGAPORE
(FREE) WEBS INDEX (FREE) WEBS WEBS (FREE) WEBS SPAIN WEBS
SERIES INDEX SERIES INDEX SERIES INDEX SERIES INDEX SERIES
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
A. Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases of
Creation Units of
WEBS (as a percentage of
amount of investment) None None None None None
Maximum Transaction
Fee (a) for Purchase of
one Creation Unit of
WEBS:
In-kind and Cash
Purchases (b) $8,500 $2,700 $2,000 $2,200 $2,300
Additional Variable
Charge for Cash
Purchases (NOTE - The
Fund will not ordinarily
permit cash
purchases.) (b) 1.07% .50% .25% 1.30% .25%
Deferred Sales Load None None None None None
Maximum Redemption
Transaction Fee (a) for
Redemption of one
Creation Unit of WEBS:
In-kind and Cash
Redemptions (c) $5,500 $2,700 $2,000 $2,200 $2,300
Additional Variable
Charge for Cash
Redemptions (NOTE -
The Fund will not
ordinarily permit cash
redemptions.) (c) 1.07% .50% .25% 1.30% .45%
B. Annual Series Operating
Expenses (as a percentage
of average net assets)
Management Fees .27% .27% .27% .27% .27%
12b-1 Fees (d) .20% .20% .20% .20% .20%
===== ===== ===== ===== =====
Other Expenses* % % % % %
===== ===== ===== ===== =====
Total Operating Expenses* % % % % %
===== ===== ===== ===== =====
</TABLE>

<TABLE>
<CAPTION>
UNITED
SWEDEN WEBS SWITZERLAND WEBS KINGDOM WEBS
INDEX SERIES INDEX SERIES INDEX SERIES
------------ ------------ ------------
<S> <C> <C> <C>
A. Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases of
Creation Units of
WEBS (as a percentage of
amount of investment) None None None
Maximum Transaction
Fee (a) for Purchase of
one Creation Unit of
WEBS:
In-kind and Cash
Purchases (b) $2,900 $2,100 $5,900
Additional Variable
Charge for Cash
Purchases (NOTE - The
Fund will not ordinarily
permit cash
purchases.) (b) .30% .40% .25%
Deferred Sales Load None None None
Maximum Redemption
Transaction Fee (a) for
Redemption of one
Creation Unit of WEBS:
In-kind and Cash
Redemptions (c) $2,900 $2,100 $5,900
Additional Variable
Charge for Cash
Redemptions (NOTE -
The Fund will not
ordinarily permit cash
redemptions.) (c) .30% .40% .75%
B. Annual Series Operating
Expenses (as a percentage
of average net assets)
Management Fees .27% .27% .27%
12b-1 Fees (d) .20% .20% .20%
===== ===== =====
Other Expenses* % % %
===== ===== =====
Total Operating Expenses* % % %
===== ===== =====
</TABLE>

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

*These expense ratio percentages reflect the average daily net assets of the 17
WEBS Index Series for the fiscal year ended August 31, 1997, which totaled
$ ________ million. The net assets of the 17 WEBS Index Series totaled $ ______
million as of August 31, 1997.

8
<PAGE> 12
(a) In addition to Transaction Fees shown, an investor purchasing a
Creation Unit of WEBS will bear the costs of transferring the
securities in the Portfolio Deposit (defined herein) to the Fund and
an investor redeeming Creation Units will bear the costs of
transferring securities in the Portfolio Deposit from the Fund to
the investor. In each case, such costs will include settlement and
custody charges, registration costs, transfer taxes and similar
charges. As some of such costs are fixed, the cost of transferring
Deposit Securities relating to multiple Creation Units of WEBS of
the same WEBS Index Series may be proportionally less than the cost
of transferring Deposit Securities relating to one Creation Unit.
See "Purchase and Issuance of WEBS in Creation Units" and
"Redemption of WEBS in Creation Units."

(b) Paid to the Fund to offset transaction costs incurred by each WEBS
Index Series in connection with the issuance of a Creation Unit. The
purchase transaction fee is not a sales charge. The purchase
transaction fees listed are the fees expected to be imposed in
connection with the purchase of Creation Units of a given WEBS Index
Series. The basic purchase transaction fees for in-kind and cash
purchases are the same no matter how many Creation Units of a given
WEBS Index Series are being purchased pursuant to any one purchase
order except in the case of the Malaysia (Free) WEBS Index Series
where the amount shown reflects inclusion of a variable charge based
on the total market value of one Creation Unit of the relevant WEBS
Index Series. The variable charge represents stamp duty or "put
through" fees imposed when securities are delivered in the local
market. The charge for Malaysia is .30% of market value. The Fund
may adjust such fees from time to time based upon actual experience.
Cash purchases of Creation Units, when available, are also subject
to an Additional Variable Charge, expressed as a percentage of the
value of the Portfolio Deposit. The Fund will not ordinarily permit
cash purchases. See "Purchase and Issuance of WEBS in Creation
Units."

(c) Paid to the Fund to offset transaction costs incurred by each WEBS
Index Series in connection with the redemption of a Creation Unit.
The redemption transaction fees listed are the fees expected to be
imposed in connection with the redemption of Creation Units of a
given WEBS Index Series. The basic redemption transaction fees are
the same no matter how many Creation Units of a given WEBS Index
Series are being redeemed pursuant to any one redemption request.
The Fund may adjust such fees from time to time based upon actual
experience. Cash redemptions of Creation Units, when available, are
also subject to an Additional Variable Charge, expressed as a
percentage of the value of the Creation Unit(s) being redeemed. The
Fund does not ordinarily permit cash redemptions. See "Redemption of
WEBS in Creation Units."

(d) All payments by the Fund to the Distributor will be made pursuant to
the Fund's Rule 12b-1 Plan at a rate set from time to time by the
Board of Directors, provided that the annual rate may not exceed
.25% of the Fund's average daily net assets. The Board of Directors
has determined to limit the annual fee payable under the Rule 12b-1
Plan with respect to each WEBS Index Series so as not to exceed .20%
of the average daily net assets of each WEBS Index Series until
further notice. See "Management of the Fund -- Distributor." A
long-term shareholder of a WEBS Index Series may pay more in total
sales charges than the economic equivalent of the maximum front-end
sales charges otherwise permitted by the rules of the National
Association of Securities Dealers, Inc. In addition, the Distributor
has entered into agreements whereby certain broker-dealers and/or
their salespersons may receive a portion of the Rule 12b-1 fee to
compensate them for their distribution of WEBS and/or for services
provided to their shareholders or to the Fund. For additional
information on these compensation arrangements, see "Investment
Advisory, Management, Administrative and Distribution Services --
The Distributor" in the Statement of Additional Information.

EXPLANATION OF TABLES
A. Shareholder Transaction Expenses are charges that investors pay to
buy or sell Creation Units of the Fund. The figures in the table are
estimates and actual shareholder transaction expenses may vary from
such estimates. See "Purchase and Issuance of WEBS in Creation
Units" and "Redemption of WEBS in Creation Units" in this Prospectus
and in the Statement of Additional Information for an explanation of
how these charges apply.

B. Annual Series Operating Expenses are based on actual expenses
incurred by the Fund for the fiscal year ended August 31, 1997, as
adjusted to reflect changes to the rates of Rule 12b-1 and
administration fees that became effective on _______________, 1997.
Actual expenses may vary and will be affected by, among other
things, the levels of average net assets of a WEBS Index Series and
the Fund. Management fees are paid to the Adviser to provide each
WEBS Index Series with investment advisory, management and certain
administrative services. "Other Expenses" include fees paid to the
Administrator to provide the Fund with administrative and fund
accounting services. From time to time, the Administrator may waive
the administration fees otherwise payable to it or may reimburse
the Fund for its operating expenses. Distribution fees are paid to
the Distributor, to compensate the Distributor and/or reimburse it
for certain expenses and for payments made to dealers and other
persons providing distribution, marketing and shareholder services
to the Fund. See "Management of the Fund" for additional
information.

9
<PAGE> 13
EXAMPLES OF EXPENSES
(a) WEBS in less than Creation Units are not redeemable. The Fund
redeems Creation Units principally on an in-kind basis for Deposit
Securities. See "Redemption of WEBS in Creation Units" herein and in
the Statement of Additional Information. If an investor were
permitted to purchase and redeem less than a Creation Unit of WEBS
on an in-kind basis, such investor would pay the following expenses
on a $1,000 investment (payment with a deposit of Deposit
Securities), assuming (1) a 5% annual return and (2) redemption
(delivery of Deposit Securities), at the end of each indicated time
period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
($) ($) ($) ($)
------ ------- ------- --------
<S> <C> <C> <C> <C>
Australia WEBS Index Series..................................................
Austria WEBS Index Series....................................................
Belgium WEBS Index Series....................................................
Canada WEBS Index Series.....................................................
France WEBS Index Series.....................................................
Germany WEBS Index Series....................................................
Hong Kong WEBS Index Series..................................................
Italy WEBS Index Series......................................................
Japan WEBS Index Series......................................................
Malaysia (Free) WEBS Index Series............................................
Mexico (Free) WEBS Index Series..............................................
Netherlands WEBS Index Series................................................
Singapore (Free) WEBS Index Series...........................................
Spain WEBS Index Series......................................................
Sweden WEBS Index Series.....................................................
Switzerland WEBS Index Series................................................
United Kingdom WEBS Index Series.............................................
</TABLE>

(b) Such an investor would pay the following expenses on the same investment,
assuming no redemptions:

The examples above illustrate the estimated expenses associated with
a $1,000 investment in a Creation Unit of WEBS on an in-kind basis over periods
of 1, 3, 5 and 10 years, based on the expenses in the table and an assumed
annual rate of return of 5%. The presentation of a $1,000 investment in a
Creation Unit is for illustration purposes only, as WEBS may only be purchased
from the Fund or redeemed by the Fund in Creation Units. Further, the return of
5% and estimated expenses are for ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE
CONSIDERED INDICATIONS OF EXPECTED WEBS INDEX SERIES EXPENSES OR PERFORMANCE,
BOTH OF WHICH MAY VARY. The expenses associated with a $1,000 investment in WEBS
include a pro rata portion of shareholder transaction expenses associated with
the purchase or sale of a Creation Unit, which would have been valued as of
__________, 1997 at between $________ and $________ depending on the WEBS Index
Series, assuming for this purpose that the net asset value of a Creation Unit
was the same as the value of the Deposit Securities as of such date. See the
second paragraph under "Summary of Fund Expenses."

10
<PAGE> 14

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following tables set forth certain information concerning the
investment results of each WEBS Index Series. The financial highlights for the
periods indicated have been audited by Ernst & Young LLP, independent auditors,
whose current report on the financial statements and financial highlights of the
Fund is incorporated by reference in the Statement of Additional Information.
The tables should be read in conjunction with the financial statements and
related notes incorporated by reference in the Statement of Additional
Information. The financial data for each WEBS Index Series for the period ending
August 31, 1996 is a part of previous financial statements audited by Ernst &
Young LLP. Further information about the performance of the Fund is available in
the annual report to shareholders, which may be obtained free of charge by
calling the Distributor at 1-800-810-WEBS (9327).

<TABLE>
<CAPTION>
Australia WEBS Index Austria WEBS Index Belgium WEBS Index
Series Series Series
For For For
For Year Period* For Year Period* For Year Period*
Ended Ended Ended Ended Ended Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of
period ........................................ -- $9.95(1) -- $10.91(1) -- $14.92(1)
-------------------------------------------------------------------

Net Investment Income/(loss) (+)................... -- 0.10 -- 0.04 -- 0.40
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
-------------------------------------------------------------------
Net increase/(decrease) in net assets resulting
from operations................................ -- 0.39 -- (0.37) -- 0.76
Less distributions
Dividends from net investment income............... -- (0.08) -- (0.02) -- (0.54)
Dividends from excess of net investment income..... -- (0.05) -- (0.01) -- (0.09)
Distributions from net realized capital gains...... -- (0.02) -- (0.03) -- (0.06)
Distributions from excess of net realized gains.... -- -- -- -- -- --
Return of capital.................................. -- (0.04) -- (0.08) -- --
--------------------------------------------------------------------
Total dividends and distributions.............. -- (0.19) -- (0.14) -- (0.69)
--------------------------------------------------------------------
Net asset value, end of period..................... -- $10.15 -- $10.40 -- $14.99
--------------------------------------------------------------------

Total Investment Return (2)(4)......................... -- 3.88% -- (3.39)% -- 5.01%
Ratios/Supplemental Data
Net assets, end of period (in 000's)............... -- $12,177 -- $13,520 -- $1,800
Ratios of expenses to average net
assets (3)(5).................................. -- 1.59% -- 1.56% -- 2.29%
Ratios of net investment income/(loss) to average
net assets (3)(5).............................. -- 2.18% -- 0.87% -- 5.67%
Portfolio turnover (4)(6).......................... -- 8.84% -- 9.60% -- 6.25%
Average commission rate paid....................... -- $0.0085 -- $0.2986 -- $0.4327
</TABLE>

* For the period March 12, 1996 (commencement of operations) through August
31, 1996.
** Less than one cent per share.
+ Based on average shares outstanding throughout the periods.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratios of expenses to average net assets
before waivers (3)............................. -- 1.60% -- 1.57% -- 2.30%
Ratios of net investment income/(loss) to
average net assets before waivers (3).......... -- 2.17% -- 0.86% -- 5.66%
(6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
</TABLE>

<TABLE>
<CAPTION>
Canada WEBS Index France WEBS Index Germany WEBS Index
Series Series Series
For For For
For Year Period* For Year Period* For Year Period*
Ended Ended Ended Ended Ended Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of
period ........................................ -- $10.17(1) -- $12.42(1) -- $13.23(1)
-----------------------------------------------------------------------

Net Investment Income/(loss) (+)................... -- 0.04 -- 0.17 -- 0.06
Net realized and unrealized gain/(loss) on
investments, foreign currency related
transactions, and translation of other assets
and liabilities denominated in foreign
currencies..................................... -- 0.43 -- 0.45 -- 0.47
-----------------------------------------------------------------------
Net increase/(decrease) in net assets resulting
from operations................................ -- 0.47 -- 0.62 -- 0.53
Less distributions
Dividends from net investment income............... -- (0.03) -- (0.09) -- (0.03)
Dividends from excess of net investment income..... -- (0.01) -- (0.01) -- (0.01)
Distributions from net realized capital gains...... -- -- -- 0.00** -- --
Distributions from excess of net realized gains.... -- 0.00** -- -- -- (0.01)
Return of capital.................................. -- 0.00** -- (0.21) -- (0.07)
-----------------------------------------------------------------------
Total dividends and distributions.............. -- (0.04) -- (0.31) -- (0.12)
-----------------------------------------------------------------------
Net asset value, end of period..................... -- $10.60 -- $12.73 -- $13.64
-----------------------------------------------------------------------

Total Investment Return (2)(4)......................... -- 4.63% -- 4.95% -- 4.00%
Ratios/Supplemental Data
Net assets, end of period (in 000's)............... -- $13,776 -- $22,930 -- $28,664
Ratios of expenses to average net assets (3)(5).... -- 1.44% -- 1.84% -- 1.68%
Ratios of net investment income/(loss) to average
net assets (3)(5).............................. -- 0.79% -- 2.72% -- 1.00%
Portfolio turnover (4)(6).......................... -- 0.00% -- 0.00% -- 0.00%
Average commission rate paid....................... -- -- -- $0.3956 -- --

</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratios of expenses to average net assets
before waivers (3)............................. -- 1.45% -- 1.85% -- 1.69%
Ratios of net investment income/(loss) to
average net assets before waivers (3).......... -- 0.78% -- 2.71% -- 0.99%
(6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).

</TABLE>

<TABLE>
<CAPTION>
Hong Kong WEBS Index Italy WEBS Index Japan WEBS Index
Series Series Series
For For
For Year Period* For Year Period* For
Ended Ended Ended Ended For Year Period*
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Ended Aug. Ended Aug.
1997 1996 1997 1996 31, 1997 31, 1996
---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of
period ........................................ -- $12.83(1) -- $13.62(1) -- $14.79(1)
----------------------------------------------------------------------

Net Investment Income/(loss) (+)................... -- 0.15 -- 0.25 -- (0.07)
Net realized and unrealized gain/(loss) on
investments, foreign currency related
transactions, and translation of other
assets and liabilities denominated in
foreign currencies............................. -- 0.27 -- 0.31 -- (0.39)
------------------------------------------------------------------------
Net increase/(decrease) in net assets
resulting from operations................... -- 0.42 -- 0.56 -- (0.46)
Less distributions
Dividends from net investment income............... -- (0.13) -- (0.14) -- --
Dividends from excess of net investment income..... -- (0.02) -- (0.03) -- --
Distributions from net realized capital gains...... -- (0.01) -- (0.14) -- --
Distributions from excess of net realized gains.... -- -- -- -- -- --
Return of capital.................................. -- (0.04) -- (0.08) -- --
----------------------------------------------------------------------
Total dividends and distributions.............. -- (0.20) -- (0.39) -- --
----------------------------------------------------------------------
Net asset value, end of period..................... -- $13.05 -- $13.79 -- 14.33
----------------------------------------------------------------------

Total Investment Return (2)(4)......................... -- 3.22% -- 4.11% -- (3.11)%
Ratios/Supplemental Data
Net assets, end of period (in 000's)............... -- $7,845 -- $35,170 -- $103,164
Ratios of expenses to average net assets (3)(5).... -- 1.52% -- 1.43% -- 1.37%
Ratios of net investment income/(loss) to average
net assets (3)(5).............................. -- 2.37% -- 3.69% -- (1.01)%
Portfolio turnover (4)(6).......................... -- 0.00% -- 19.80% -- 21.54%
Average commission rate paid....................... -- $0.0007 -- $0.0046 -- $0.0152
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Ratios of expenses to average net assets
before waivers (3)............................. -- 1.53% -- 1.44% -- 1.38%

Ratios of net investment income/(loss) to
average net assets before waivers (3).......... -- 2.36% -- 3.68% -- (1.02)%

(6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
</TABLE>

<PAGE> 15

<TABLE>
<CAPTION>
Malaysia (Free) WEBS Mexico (Free) WEBS
Index Series Index Series
--------------------------- ----------------------------
For For
For Year Period* For Year Period*
Ended Ended Ended Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period................... -- $13.24(1) -- $9.95(1)
------------- -------------- -------------- --------------
Net Investment Income/(loss) (+)....................... -- (0.02) -- 0.00**
Net realized and unrealized
gain/(loss) on investments,
foreign currency related
transactions, and translation of
other assets and liabilities
denominated in foreign currencies.................. -- 0.59 -- 1.59
------------- -------------- -------------- --------------
Net increase/(decrease) in net
assets resulting from
operations...................................... -- 0.57 -- 1.59
Less distributions
Dividends from net investment income................... -- -- -- --
Dividends from excess of net
investment income.................................. -- -- -- (0.01)
Distributions from net realized
capital gains...................................... -- -- -- --
Distributions from excess of net
realized gains..................................... -- -- -- --
Return of capital...................................... -- (0.01) -- (0.01)
------------- -------------- -------------- --------------
Total dividends and distributions.................. -- (0.01) -- (0.02)
------------- -------------- -------------- --------------
Net asset value, end of period......................... -- $13.80 -- $11.52
------------- -------------- -------------- --------------

Total Investment Return (2)(4)............................. -- 4.28% -- 15.93%
Ratios/Supplemental Data
Net assets, end of period (in 000's)................... -- $9,318 -- $5,759
Ratios of expenses to average net
assets (3)(5)...................................... -- 1.58% -- 1.75%
Ratios of net investment
income/(loss) to average net
assets (3)(5)...................................... -- (0.35%) -- 0.01%
Portfolio turnover (4)(6).............................. -- 0.00% -- 0.00%
Average commission rate paid........................... -- -- -- --

* For the period March 12, 1996 (commencement of operations) through August
31, 1996
** Less than one cent per share.
+ Based on average shares outstanding throughout the periods.
(1) Net asset value per share on March 12, 1996 (commencement of operations).
(2) Total investment return is calculated assuming a purchase of capital stock
at net asset value per share on the first day and a sale at the net asset
value per share on the last day of the period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at the net asset value per share on the ex-dividend date.
(3) Annualized
(4) Not Annualized
(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:

Ratios of expenses to -- 1.59% -- 1.76%
average net assets before
waivers (3)............................................
Ratios of net investment income/(loss) -- (0.36)% -- 0.00%
to average net assets before waivers
(3)....................................................
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
</TABLE>

<TABLE>
<CAPTION>
Netherlands WEBS Singapore (Free) WEBS
Index Series Index Series
------------------------------- ---------------------------------
For For
For Year Period* For Year Period*
Ended Ended Ended Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.................. -- $15.91(1) -- $12.24(1)
------------- -------------- -------------- --------------
Net Investment Income/(loss) (+)...................... -- 0.24 -- 0.04
Net realized and unrealized
gain/(loss) on investments,
foreign currency related
transactions, and translation of
other assets and liabilities
denominated in foreign currencies................. -- 1.54 -- (0.86)
------------- -------------- -------------- --------------
Net increase/(decrease) in net
assets resulting from
operations..................................... -- 1.78 -- (0.82)
Less distributions
Dividends from net investment income.................. -- (0.14) -- (0.03)
Dividends from excess of net
investment income................................. -- (0.01) -- (0.01)
Distributions from net realized
capital gains..................................... -- (0.08) -- --
Distributions from excess of net
realized gains.................................... -- (0.01) -- --
Return of capital..................................... -- (0.09) -- --
------------- -------------- -------------- --------------
Total dividends and distributions................. -- (0.33) -- (0.04)
------------- -------------- -------------- --------------
Net asset value, end of period........................ -- $17.36 -- $11.38
------------- -------------- -------------- --------------

Total Investment Return (2)(4)............................ -- 11.19% -- (6.73)%
Ratios/Supplemental Data
Net assets, end of period (in 000's).................. -- $6,962 -- $9,107
Ratios of expenses to average net
assets (3)(5)..................................... -- 1.63% -- 1.56%
Ratios of net investment
income/(loss) to average net
assets (3)(5)..................................... -- 2.93% -- 0.69%
Portfolio turnover (4)(6)............................. -- 4.32% -- 26.29%
Average commission rate paid.......................... -- $0.0651 -- $0.0118

(5) Includes voluntary waivers by the AMEX. If such waivers had not been made
the ratios of expenses to average net assets and ratios of net investment
income/(loss) to average net assets would have been as follows:

Ratios of expenses to -- 1.64% -- 1.57%
average net assets before
waivers (3)............................................
Ratios of net investment income/(loss) -- 2.92% -- 0.68%
to average net assets before waivers
(3)....................................................
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
</TABLE>

<TABLE>
<CAPTION>
Spain WEBS Index Sweden WEBS Index
Series Series
----------------------------- ------------------------------
For For
For Year Period* For Year Period*
Ended Ended Ended Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period................... -- $13.28(1) -- $13.22(1)
-------------- -------------- -------------- --------------
Net Investment Income/(loss) (+)....................... -- 0.14 -- 0.20
Net realized and unrealized
gain/(loss) on investments,
foreign currency related
transactions, and translation of
other assets and liabilities
denominated in foreign currencies.................. -- 0.98 -- 1.67
-------------- -------------- -------------- --------------
Net increase/(decrease) in net
assets resulting from
operations...................................... -- 1.12 -- 1.87
Less distributions
Dividends from net investment income................... -- (0.18) -- (0.23)
Dividends from excess of net
investment income.................................. -- -- -- (0.07)
Distributions from net realized
capital gains...................................... -- (0.13) -- (0.12)
Distributions from excess of net
realized gains..................................... -- -- -- --
Return of capital...................................... -- -- -- --
-------------- -------------- -------------- --------------
Total dividends and distributions.................. -- (0.31) -- (0.42)
-------------- -------------- -------------- --------------
Net asset value, end of period......................... -- $14.09 -- $14.67
-------------- -------------- -------------- --------------

Total Investment Return (2)(4)............................. -- 8.45% -- 14.13%
Ratios/Supplemental Data
Net assets, end of period (in 000's)................... -- $4,227 -- $4,400
Ratios of expenses to average net
assets (3)(5)...................................... -- 1.76% -- 1.75%
Ratios of net investment
income/(loss) to average net
assets (3)(5)...................................... -- 2.04% -- 3.05%
Portfolio turnover (4)(6).............................. -- 4.73% -- 5.87%
Average commission rate paid........................... -- $0.0723 -- $0.0561

Ratios of expenses to -- 1.77% -- 1.76%
average net assets before
waivers (3)...........................................
Ratios of net investment income/(loss) -- 2.03% -- 3.04%
to average net assets before waivers
(3)....................................................
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
</TABLE>

<TABLE>
<CAPTION>
Switzerland WEBS United Kingdom WEBS
Index Series Index Series
-------------------------------- ----------------------------------
For
For Year Period* For Year For
Ended Ended Ended Period*
Aug. 31, Aug. 31, Aug. 31, Ended Aug.
1997 1996 1997 31, 1996
---- ---- ---- --------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period................... -- $12.07(1) -- $12.14(1)
-------------- -------------- -------------- ---------------
Net Investment Income/(loss) (+)....................... -- 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.................. -- 0.24 -- 1.06
-------------- -------------- -------------- ---------------
Net increase/(decrease) in net
assets resulting from
operations...................................... -- 0.32 -- 1.27
Less distributions
Dividends from net investment income................... -- (0.10) -- (0.20)
Dividends from excess of net
investment income.................................. -- -- -- (0.03)
Distributions from net realized
capital gains...................................... -- -- -- 0.00**
Distributions from excess of net
realized gains..................................... -- -- -- --
Return of capital...................................... -- -- -- (0.03)
-------------- -------------- -------------- ---------------
Total dividends and distributions.................. -- (0.10) -- (0.26)
-------------- -------------- -------------- ---------------
Net asset value, end of period......................... -- $12.29 -- $13.15
-------------- -------------- -------------- ---------------

Total Investment Return (2)(4)............................. -- 2.60% -- 10.41%
Ratios/Supplemental Data
Net assets, end of period (in 000's)................... -- $6,158 -- $15,790
Ratios of expenses to average net
assets (3)(5)...................................... -- 1.82% -- 1.61%
Ratios of net investment
income/(loss) to average net
assets (3)(5)...................................... -- 1.39% -- 3.62%
Portfolio turnover (4)(6).............................. -- 17.06% -- 0.00%
Average commission rate paid........................... -- $0.7852 -- --

Ratios of expenses to -- 1.83% -- 1.62%
average net assets before
waivers (3)............................................
Ratios of net investment income/(loss) -- 1.38% -- 3.61%
to average net assets before waivers
(3)....................................................
(6) Excludes portfolio securities received or delivered as a result of
processing capital share transactions in Creation Unit(s).
</TABLE>

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<PAGE> 16

THE FUND AND
ITS WEBS INDEX SERIES

WEBS INDEX FUND, INC. AND ITS INVESTMENT OBJECTIVE

The Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended, (the "1940 Act"),
organized as a series fund. Seventeen WEBS Index Series of the Fund currently
issue shares: the Australia WEBS Index Series, the Austria WEBS Index Series,
the Belgium WEBS Index Series, the Canada WEBS Index Series, the France WEBS
Index Series, the Germany WEBS Index Series, the Hong Kong WEBS Index Series,
the Italy WEBS Index Series, the Japan WEBS Index Series, the Malaysia (Free)
WEBS Index Series, the Mexico (Free) WEBS Index Series, the Netherlands WEBS
Index Series, the Singapore (Free) WEBS Index Series, the Spain WEBS Index
Series, the Sweden WEBS Index Series, the Switzerland WEBS Index Series and the
United Kingdom WEBS Index Series. Each of the Canada WEBS Index Series, the
Japan WEBS Index Series and the United Kingdom WEBS Index Series is classified
as a "diversified" investment company under the 1940 Act. Each of the other WEBS
Index Series offered hereby is classified as a "non-diversified" investment
company under the 1940 Act. The Board of Directors of the Fund may authorize
additional WEBS Index Series in the future.

The investment objective of each of the initial seventeen WEBS Index
Series is to seek to provide investment results that correspond generally to the
price and yield performance of publicly traded securities in the aggregate in
particular markets, as represented by a particular foreign equity securities
index. Each of the WEBS Index Series utilizes an MSCI Index that reflects the
reinvestment of net dividends as its benchmark index (except for the MSCI Mexico
(Free) Index utilized by the Mexico (Free) WEBS Index Series, which reflects the
reinvestment of gross dividends). See "The Benchmark MSCI Indices Utilized by
the WEBS Index Series" below. Each MSCI Index is a market capital weighted index
of equity securities traded on the principal securities exchange(s) and, in some
cases, the over-the-counter market, of the respective country. The investment
objective of each WEBS Index Series is a fundamental policy and cannot be
changed without the approval of the holders of a majority of the respective WEBS
Index Series' voting securities (as defined in the 1940 Act).

There can be no assurance that the investment objective of any WEBS
Index Series will be achieved. In this regard, it should be noted that the
benchmark indices are unmanaged and bear no management, administration,
distribution, transaction or other expenses or taxes, while each WEBS Index
Series must bear these expenses and is also subject to a number of limitations
on its investment flexibility. The WEBS Index Series utilize a portfolio
sampling technique and do not invest in all of the securities in their
respective MSCI Indices. As a result, a WEBS Index Series' performance will
differ from that of the benchmark MSCI Index to a greater extent than if it
invested in all of the securities in the benchmark. In addition, the MSCI
Indices assume that dividends are received throughout a year ("dividend
smoothing") while the WEBS Index Series record them on the ex date and this can
cause the performance of a WEBS Index Series to diverge from that of its
benchmark, particularly over periods of less than a year. See "Implementation of
Policies." In addition, certain WEBS Index Series are subject to foreign tax
withholding at rates different than those assumed by the relevant benchmark
index. See "The Benchmark MSCI Indices Utilized by the WEBS Index Series."
Investing in WEBS of a WEBS Index Series involves special risks of investing in
securities of the relevant foreign country. For a discussion of certain special
considerations and risk factors relevant to an investment in WEBS, see
"Investment Considerations and Risks."

WORLD EQUITY BENCHMARK SHARES: "WEBS"
The shares of common stock, par value $.001 per share, of each WEBS
Index Series are referred to herein as "World Equity Benchmark Shares" or
"WEBS." EXCEPT WHEN AGGREGATED IN CREATION UNITS, WEBS ARE NOT REDEEMABLE
SECURITIES OF THE FUND. The WEBS are listed for trading on the American Stock
Exchange, Inc. (the "AMEX"). The non-redeemable WEBS trade on the AMEX during
the day at prices that differ to some degree from their net asset value. See
"Determination of Net Asset Value," "Exchange Listing and Trading of WEBS,"
"Investment Considerations and Risks" and "Redemption of WEBS in Creation
Units."

WHO SHOULD INVEST?
The WEBS of each WEBS Index Series of the Fund are designed for
investors who seek a relatively low-cost "passive" approach for investing in a
portfolio of equity securities of companies located in the country of the
subject MSCI Index. Unlike equity mutual funds that seek to "beat" market
averages with unpredictable results, the WEBS Index Series seek to provide
investment results that correspond generally to the price and yield performance
of their respective benchmark indices.

It is generally recognized that international diversification of an
investment portfolio reduces risk. Many of the foreign equity securities held by
the WEBS Index Series are difficult to purchase or hold, or are, as a practical
matter, not available to retail investors. The Fund offers investors a
convenient way to obtain indexed exposure to the equity markets of specific
foreign countries. It should be noted, however, that the prices of WEBS of a
particular WEBS Index Series may be volatile, and investors should be able to
tolerate sudden, sometimes substantial fluctuations in the value of their
investment. No assurance can be given that any WEBS Index Series will achieve
its stated objective and shareholders should understand that they will be
exposed to the risks inherent in international equity investing. Because of the
risks associated with international equity investments, a WEBS Index Series is
intended to be a long-term investment vehicle and is not designed to provide
investors with a means of speculating on short-term market movements. See
"Investment Considerations and Risks."

INVESTMENT POLICIES

The Fund is not managed according to traditional methods of
"active" investment management, which involve the buying and selling of
securities based upon economic, financial and market analysis and investment
judgment. Instead, each WEBS Index Series of the Fund, utilizing a "passive" or
indexing investment approach, attempts to approximate the investment
performance of its benchmark index by investing in a portfolio of stocks
selected through the use of quantitative analytical procedures. Stocks are
selected for inclusion in a WEBS Index Series in order to have aggregate
investment characteristics (based on market capitalization and industry
weightings), fundamental characteristics (such as return variability, earnings
valuation and yield) and liquidity measures similar to those of the subject
MSCI Index taken in its entirety. WEBS Index Series generally will not hold all
of the stocks in their respective benchmark indices but will typically hold a
representative subset of such stocks selected through the Adviser's application
of portfolio sampling techniques. However, each WEBS Index Series reserves the
right to invest in all of the stocks in its benchmark index and where a WEBS
Index Series benchmark index is comprised of relatively few securities it may
do so on a regular basis. In addition, a WEBS Index Series may hold stocks that
are not in the relevant MSCI Index if the Adviser determines this to be
appropriate in light of the WEBS Index Series' investment objective and
relevant investment constraints.

Each WEBS Index Series has the policy to remain as fully invested as
practicable in a pool of equity securities the performance of which will
approximate the performance of the subject MSCI Index taken in its entirety. A
WEBS Index Series will

13
<PAGE> 17
normally invest at least 95% of its total assets in stocks that are represented
in the relevant MSCI Index, and will at all times invest at least 90% of its
total assets in such stocks, except that in order to permit the Adviser
additional flexibility to comply with the requirements of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), and other regulatory
requirements and to manage future corporate actions and index changes in the
smaller markets, each of the Austria, Belgium, Hong Kong, Mexico (Free),
Netherlands, Spain, Sweden and Switzerland WEBS Index Series will at all times
invest at least 80% of its total assets in such stocks and at least 10% of the
remaining 20% of its total assets in such stocks or in stocks included in the
relevant market, but not in the relevant MSCI Index. A WEBS Index Series may
invest its remaining assets in Short-Term Investments (defined below), in stocks
that are in the relevant market but not the relevant MSCI Index, and/or in
combinations of certain stock index futures contracts, options on such futures
contracts, stock index options, stock index swaps, cash, local currency and
forward currency exchange contracts that are intended to provide the WEBS Index
Series with exposure to such stocks (the WEBS Index Series will not use such
instruments to leverage their investment portfolios). "Short-Term Investments"
are short-term high quality debt securities that include: obligations of the
United States Government and its agencies or instrumentalities; commercial paper
(rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's
Ratings Group), bank certificates of deposit and bankers' acceptances;
repurchase agreements collateralized by the foregoing securities; participation
interests in such securities; and shares of money market funds (subject to
applicable limits under the 1940 Act).

A WEBS Index Series will not invest in cash reserves or Short-Term
Investments or utilize futures contracts, options or swap agreements as part of
a temporary defensive strategy to protect against potential stock market
declines. A WEBS Index Series may enter into forward currency exchange contracts
in order to facilitate settlements in local markets, in connection with
positions in stock index futures and to protect against currency exposure in
connection with its distributions to shareholders, but not as part of a
defensive strategy to protect against fluctuations in exchange rates. See
"Implementation of Policies" for a description of these and other investment
practices of the Fund.

Each WEBS Index Series has 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,
a WEBS 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). No WEBS Index Series will concentrate its
investments otherwise. If the benchmark index for a WEBS Index Series has a
concentration of more than 25% because of a single stock (i.e., if one stock in
the benchmark index accounts for more than 25% of the index and it is the only
stock in the index in its industry), the WEBS Index Series will invest less than
25% of its assets in such stock and will reallocate the excess to stocks in
other industries. Changes in a WEBS Index Series' concentration (if any) and
non-concentration would be made "passively" -- that is, any such changes would
be made solely as a result of changes in the concentrations of the benchmark
index's constituents. As of ________, 1997, as a result of this policy, the
_______ WEBS Index Series concentrates in the ______ industry. Since the
concentration of each WEBS Index Series is based on that of its benchmark index,
changes in the market values of the WEBS Index Series' portfolio securities will
not necessarily trigger changes in the portfolio of such WEBS Index Series.

The concentration policy of each WEBS Index Series is a fundamental
policy that may be changed only with shareholder approval. Each of the other
investment policies of each WEBS Index Series is a nonfundamental policy that
may be changed by the Board of Directors without shareholder approval. However,
shareholders would be notified prior to any material change in these policies.
See "Investment Limitations" herein and "Investment Policies and Restrictions"
in the Statement of Additional Information for a listing of limitations on
investment practices that may only be changed with shareholder approval.

IMPLEMENTATION OF POLICIES
A WEBS Index Series generally will not hold all of the issues that
comprise the subject MSCI Index, due in part to the costs involved and, in
certain instances, the potential illiquidity of certain securities. Instead,
each WEBS Index Series will attempt to hold a representative sample of the
securities in the MSCI Index, which will be selected by the Adviser utilizing
quantitative analytical models in a technique known as "portfolio sampling."
Under this technique, each stock is considered for inclusion in the WEBS Index
Series based on its contribution to certain capitalization, industry and
fundamental investment characteristics. The Adviser will seek to construct the
portfolio of each WEBS Index Series so that, in the aggregate, its
capitalization, industry and fundamental investment characteristics perform like
those of the subject MSCI Index. Over time, the portfolio composition of a WEBS
Index Series may be altered (or "rebalanced") to reflect changes in the
characteristics of the subject MSCI Index or with a view to bringing the
performance and characteristics of the WEBS Index Series more in line with that
of the relevant MSCI Index. Such rebalancings will require the WEBS Index Series
to incur transaction costs and other expenses. As noted above, each WEBS Index
Series reserves the right to invest in all of the securities in the benchmark
index, and WEBS Index Series with benchmark indices comprised of relatively few
stocks may do so on a regular basis.

DUE TO THE USE OF THIS PORTFOLIO SAMPLING TECHNIQUE AND THE OTHER
FACTORS DISCUSSED HEREIN, A WEBS INDEX SERIES IS NOT EXPECTED TO TRACK ITS
BENCHMARK INDEX WITH THE SAME DEGREE OF ACCURACY AS WOULD AN INVESTMENT VEHICLE
THAT INVESTED IN EVERY COMPONENT SECURITY OF THE SUBJECT INDEX. The Adviser
expects that, over time, the "expected tracking error" of a WEBS Index Series
relative to the performance of its benchmark index will be less than 5% and that
the tracking error will generally be greater for WEBS Index Series that have
benchmark indices with fewer rather than greater numbers of component stocks. An
expected tracking error of 5% means that there is a 68% probability that the net
asset value of the WEBS Index Series will be within plus or minus 5% of the
subject MSCI Index level after one year, without rebalancing the portfolio
composition. A tracking error of 0% would indicate perfect tracking, which would
be achieved when the net asset value of the WEBS Index Series increases or
decreases in exact proportion to changes in its benchmark index. Factors such as
expenses of the Fund, taxes, the need to comply with the diversification and
other requirements of the Internal Revenue Code, the existence of uninvested
assets in the portfolios (including cash and deferred organizational expenses),
the fact that the MSCI Indices "smooth" dividend payments evenly over a year
while the Fund records dividends on the ex date, and the fact that the MSCI
Indicies utilized by certain WEBS Index Series assume a different foreign tax
withholding rate than that applicable to such WEBS Index Series, may adversely
impact the tracking of the performance of a WEBS Index Series to that of its
benchmark index. The Adviser will monitor the tracking error of each WEBS Index
Series on an ongoing basis and will seek to minimize tracking error to the
maximum extent possible. See also the discussion of portfolio sampling in the
preceding paragraph. There can be no assurance that any WEBS Index Series will
achieve any particular level of tracking error relative to the performance of
the relevant benchmark index. Semiannual and annual reports of the Fund disclose
tracking error over the previous six month periods, and in the event that
tracking error exceeds 5%, the Board will consider what action might be
appropriate.

14
<PAGE> 18
Although the policy of each WEBS Index Series of the Fund is to
remain substantially fully invested in equity securities, a WEBS Index Series
may also invest in combinations of certain stock index futures contracts,
options on such futures contracts, stock index options, stock index swaps and
cash and Short-Term Investments that are intended to provide the WEBS Index
Series with exposure to such equity securities, and in cash, local currency,
forward currency exchange contacts and certain Short-Term Investments that are
not associated with related positions in stock index futures contracts, options
on such futures contracts, stock index options or stock index swaps. Such
investments may be made to invest uncommitted cash balances or, in limited
circumstances, to assist in meeting shareholder redemptions of Creation Units of
WEBS.

A WEBS Index Series may purchase stock index futures contracts,
options on such futures contracts and stock index options and may enter into
stock index swaps to simulate full investment in the underlying index to a
limited extent. This may be done to facilitate trading (e.g., to rapidly gain
exposure to a market in anticipation of purchasing the underlying equities over
time), to reduce transaction costs or because the Adviser has determined that
the use of such instruments permits the WEBS Index Series to gain exposure to
the underlying equities at a lower cost than by making direct investments in the
cash market. While each of these instruments can be used to leverage an
investment portfolio, no WEBS Index Series may use them to leverage its net
assets.

A WEBS Index Series may enter into foreign currency forward and
foreign currency futures contracts to facilitate settlements in local markets,
in connection with stock index futures positions, and to protect against
currency exposure in connection with its distributions to shareholders, but may
not enter into such contracts for speculative purposes or as a way of protecting
against anticipated adverse changes in exchange rates between foreign currencies
and the U.S. dollar. A foreign currency forward contract is an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract.

The Fund may lend securities from the portfolio of a WEBS Index
Series to brokers, dealers and other financial institutions desiring to borrow
securities to complete transactions and for other purposes. Because the
government securities or other assets that are pledged as collateral to the Fund
in connection with these loans generate income, securities lending enables a
WEBS Index Series to earn income that may partially offset the expenses of the
WEBS Index Series, and thereby reduce the effect that expenses have on a WEBS
Index Series' ability to provide investment results that correspond generally to
the price and yield performance of its benchmark index. These loans may not
exceed 33% of a WEBS Index Series' total assets. The documentation for these
loans will provide that the WEBS Index Series will receive collateral equal to
at least 100% of the current market value of the loaned securities, as marked to
market each day that the net asset value of the WEBS Index Series is determined,
consisting of government securities or other assets permitted by applicable
regulations and interpretations. A WEBS Index Series will pay reasonable
administrative and custodial fees in connection with the loan of securities. The
WEBS Index Series will invest collateral in Short-Term Investments, and the WEBS
Index Series will bear the risk of loss of the invested collateral. In addition,
a WEBS Index Series will be exposed to the risk of loss should a borrower
default on its obligation to return the borrowed securities. MSTC serves as
Lending Agent of the Fund and, in such capacity, shares equally with the
respective WEBS Index Series any net income earned on invested collateral. A
WEBS Index Series' share of income from the loan collateral will be included in
the WEBS Index Series' gross investment income. The Fund will comply with the
conditions for securities lending established by the SEC staff.

Although each WEBS Index Series generally seeks to invest for the
long term, the WEBS Index Series retain the right to sell securities
irrespective of how long they have been held. However, because of the "passive"
investment management approach of the Fund, the portfolio turnover rate for each
WEBS Index Series is expected to be under 50%, a generally lower turnover rate
than for many other investment companies. A portfolio turnover rate of 50% would
occur if one half of a WEBS Index Series' securities were sold within one year.
Ordinarily, securities are sold by a WEBS Index Series only to reflect certain
administrative changes in an Index (including mergers or changes in the
composition of the Index) or to accommodate cash flows out of the WEBS Index
Series while seeking to keep the performance of the WEBS Index Series in line
with that of its benchmark index. In addition, securities may be sold from a
WEBS Index Series in certain circumstances to ensure the WEBS Index Series'
compliance with the diversification and other requirements of the Internal
Revenue Code and with other requirements, which would tend to raise the
portfolio turnover rate of such WEBS Index Series. Purchases and sales of
securities in connection with such compliance will involve transaction costs
which will be borne by the respective WEBS Index Series.

A WEBS Index Series may borrow money from a bank up to a limit of
33% of the market value of its assets, but only for temporary or emergency
purposes (e.g., to facilitate distributions to shareholders or to meet
redemption requests (in connection with Creation Units of WEBS that the Fund
agrees to redeem for cash) prior to the settlement of securities already sold or
in the process of being sold by the WEBS Index Series). To the extent that a
WEBS Index Series borrows money prior to receiving distributions on its
portfolio securities or prior to selling securities in connection with a
redemption, it may be leveraged; at such times, the WEBS Index Series may
appreciate or depreciate in value more rapidly than its benchmark index. A WEBS
Index Series will not make cash purchases of securities when the amount of money
borrowed exceeds 5% of the market value of its total assets.

INVESTMENT LIMITATIONS
Each WEBS Index Series of the Fund intends to observe certain
limitations on its investment practices. Specifically, a WEBS Index Series may
not:

(i) lend any funds or other assets except through the purchase
of all or a portion of an issue of securities or obligations of the
type in which it is permitted to invest (including participation
interests in such securities or obligations) and except that a WEBS
Index Series may lend its portfolio securities in an amount not to
exceed 33% of the value of its total assets;

(ii) issue senior securities or borrow money, except
borrowings from banks for temporary or emergency purposes in an
amount up to 33% of the value of the WEBS Index Series' total assets
(including the amount borrowed), valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) valued
at the time the borrowing is made, and the WEBS Index Series will
not purchase securities while borrowings in excess of 5% of the WEBS
Index Series' total assets are outstanding, provided, that for
purposes of this restriction, short-term credits necessary for the
clearance of transactions are not considered borrowings;

(iii) pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings; or

15
<PAGE> 19
(iv) purchase a security (other than obligations of the United
States Government, its agencies or instrumentalities) if as a result
25% or more of its total assets would be invested in a single
issuer.

Except with regard to a WEBS Index Series' borrowing policy and illiquid
securities policy, all percentage limitations apply immediately after a purchase
or initial investment, and any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the WEBS Index Series' portfolio.
The investment limitations described in (i) through (iv) above and the preceding
paragraph, and certain additional limitations described in the Statement of
Additional Information, may be changed with respect to a WEBS Index Series only
with the approval of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of such WEBS Index Series.

THE BENCHMARK MSCI INDICES UTILIZED BY THE WEBS INDEX SERIES

Each WEBS Index Series uses the corresponding MSCI Index listed
below as its benchmark (the Australia WEBS Index Series uses the MSCI Australia
Index, etc.). MSCI publishes several versions of each stock index that it
compiles. With the exception of the MSCI Mexico (Free) Index, the MSCI Indices
used by WEBS Index Series as benchmarks reflect the reinvestment of net
dividends. "Net dividends" means dividends after reduction for taxes withheld at
source at the rate applicable to holders of the underlying stocks that are
resident in Luxembourg. Such withholding rate currently differs from that
applicable to the Australia, Austria and Germany WEBS Index Series. So-called
"un-franked" dividends from Australian companies are withheld at a 30% rate to
Luxembourg residents and a 15% rate to the Australia WEBS Index Series (there is
no difference in the treatment of "franked" dividends). Austrian companies
impose a 15% dividend withholding on Luxembourg residents and an 11% rate on the
Austria WEBS Index Series. German companies impose a 15% dividend withholding on
Luxembourg residents and a 10% rate on the Germany WEBS Index Series. The Mexico
(Free) WEBS Index Series' benchmark index, the MSCI Mexico (Free) Index,
reflects the reinvestment of gross dividends. "Gross dividends" means dividends
before reduction for taxes withheld at source. Mexican companies do not
withhold tax to U.S. investors.

The stocks included in an MSCI Index are chosen by Morgan Stanley
Capital International on a statistical basis. Each stock in an MSCI Index is
weighted according to its market value as a percentage of the total market value
of all stocks in the Index. (A stock's market value equals the number of shares
outstanding times the most recent price of the security.) The inclusion of a
stock in an MSCI Index in no way implies that MSCI believes the stock to be an
attractive investment.

In General
The Indices were founded in 1969 by Capital International S.A. as
the first international performance benchmarks constructed to facilitate
accurate comparison of world markets. Morgan Stanley acquired rights to the
Indices in 1986. The MSCI Indices have covered the world's developed markets
since 1969, and in 1988, MSCI commenced coverage of the emerging markets.

Although local stock exchanges have traditionally calculated their
own indices, these are generally not comparable with one another, due to
differences in the representation of the local market, mathematical formulas,
base dates and methods of adjusting for capital changes. MSCI applies the same
criteria and calculation methodology across all markets for all indices,
developed and emerging.

MSCI Indices are notable for the depth and breadth of their
coverage. MSCI generally seeks to have 60% of the capitalization of a country's
stock market reflected in the MSCI Index for such country. Thus, the MSCI
Indices balance the inclusiveness of an "all share" index against the
replicability of a "blue chip" index.

Weighting
All single-country MSCI Indices are market capitalization weighted,
i.e., companies are included in the indices at their full market value (total
number of shares issued and paid up, multiplied by price). MSCI believes full
market capitalization weighting is preferable to other weighting schemes for
both theoretical and practical reasons.

MSCI calculates two indices in some countries in order to address
the issue of restrictions on foreign ownership in such countries. The additional
indices are called "Free" indices, and they exclude companies and share classes
not purchasable by foreigners. Free indices are currently calculated for China,
Indonesia, Malaysia, Mexico, the Philippines, Singapore and Thailand, and for
those regional and international indices which include such markets.

Indonesia, Malaysia, Singapore and Thailand currently impose foreign
ownership limits on domestic stock, and when the foreign ownership limit is
reached, foreigners may only trade with other foreigners, frequently at a price
that is higher than the price available to domestic investors. The Free Indices
for such countries are designed to reflect the actual investment conditions for
international investors by using the foreign prices for stocks where relevant.
The Free Indices for Indonesia, Malaysia, Singapore and Thailand will use
foreign prices only when a foreign ownership limit is reached on a constituent
stock and a determination is made that there is sufficient long-term liquidity
at the foreign price. To compensate for the distorting inflation of a company's
weight that may occur as a result of using the higher foreign prices for its
shares, a compensating factor called a Free Market Capitalization Factor
("FMCF") may be applied to the total number of shares of a "foreign priced"
constituent stock in the respective Index. A FMCF is the approximate ratio of
domestic price to foreign price and is applied in an effort to align the free
market capitalization weight with the domestic market capitalization weight.

Market capitalization weighting, combined with a consistent target
of 60% of market capitalization, helps ensure that each country's weight in
regional and international indices approximates its weight in the total universe
of developing and emerging markets. Maintaining consistent policy among MSCI
developed and emerging market indices is also critical to the calculation of
certain combined developed and emerging market indices published by MSCI.

The MSCI Australia Index ("MSCI Australia"). The MSCI Australia
consists primarily of stocks that are traded on the Australian Stock Exchange.
On August 31, 1997, the MSCI Australia consisted of __ stocks. The three largest
constituents of the MSCI Australia and the respective approximate percentages of
the MSCI Australia represented thereby were ___________ (_____%), ____________
(____%) and _________ (____%) for a total of approximately _____% of the MSCI
Australia. As of August 31, 1997, the ten largest constituents comprised
approximately _____% of the market capitalization of the MSCI Australia. As of
August 31, 1997, the three most highly represented industry sectors in the MSCI
Australia, and the approximate percentages of the MSCI Australia represented
thereby, were ___________ (____%), _______ (____%) and ______ (____%), for a
total of

16
<PAGE> 20

approximately ____% of the MSCI Australia. The MSCI Australia represented
approximately ____% of the aggregate capitalization of the Australian equity
markets at August 31, 1997.

The MSCI Austria Index ("MSCI Austria"). The MSCI Austria consists
primarily of stocks that are traded on the Vienna Stock Exchange. On August 31,
1997, the MSCI Austria consisted of __ stocks. The three largest constituents of
the MSCI Austria and the respective approximate percentages of the MSCI Austria
represented thereby were _______ (____%), ______ (____%) and ________ (____%)
for a total of approximately ____% of the MSCI Austria. As of August 31, 1997,
the ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI Austria. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Austria, and the approximate
percentages of the MSCI Austria represented thereby, were ________ (____%),
________ (_____%) and ________ (____%), for a total of approximately ____% of
the MSCI Austria. The MSCI Austria represented approximately ____% of the
aggregate capitalization of the Austrian equity markets at August 31, 1997.

The MSCI Belgium Index ("MSCI Belgium"). The MSCI Belgium consists
primarily of stocks that are traded on the Brussels Stock Exchange. On August
31, 1997, the MSCI Belgium consisted of __ stocks. As of August 31, 1997, the
three largest constituents of the MSCI Belgium and the respective approximate
percentages of the MSCI Belgium represented thereby were ________ (____%),
________ (____%) and ________ (____%), for a total of approximately ____% of the
MSCI Belgium. As of August 31, 1997, the ten largest constituents comprised
approximately ____% of the market capitalization of the MSCI Belgium. As of
August 31, 1997, the three most highly represented industry sectors in the MSCI
Belgium, and the approximate percentages of the MSCI Belgium represented
thereby, were ________ (____%), ________ (____%) and _______ (____%), for a
total of approximately ____% of the MSCI Belgium. The MSCI Belgium represented
approximately ____% of the aggregate capitalization of the Belgian equity
markets at August 31, 1997.

The MSCI Canada Index ("MSCI Canada"). The MSCI Canada consists
primarily of stocks that are traded on the Toronto Stock Exchange. On August 31,
1997, the MSCI Canada consisted of __ stocks. The three largest constituents of
the MSCI Canada and the respective approximate percentages of the MSCI Canada
represented thereby were ________ (____%), ________ (____%) and _______ (____%)
for a total of approximately ____% of the MSCI Canada. As of August 31, 1997,
the ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI Canada. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Canada, and the approximate percentages
of the MSCI Canada represented thereby, were _______ (____%), ________ (____%)
and ________ (____%), for a total of approximately ____% of the MSCI Canada. The
MSCI Canada represented approximately ____% of the aggregate capitalization of
the Canadian equity markets at August 31, 1997.

The MSCI France Index ("MSCI France"). The MSCI France consists
primarily of stocks that are traded on the Paris Stock Exchange. On August 31,
1997, the MSCI France consisted of __ stocks. The three largest constituents of
the MSCI France and the respective approximate percentages of the MSCI France
represented thereby were _______ (____%), ________ (____%) and ________ (____%)
for a total of approximately ____% of the MSCI France. As of August 31, 1997,
the ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI France. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI France, and the approximate percentages
of the MSCI France represented thereby, were ________ (____%), ________ (____%)
and ________ (____%), for a total of approximately ____% of the MSCI France. The
MSCI France represented approximately ____% of the aggregate capitalization of
the French equity markets at August 31, 1997.

The MSCI Germany Index ("MSCI Germany"). The MSCI Germany consists
primarily of stocks that are traded on the Frankfurt Stock Exchange. On August
31, 1997, the MSCI Germany consisted of __ stocks. The three largest
constituents of the MSCI Germany and the respective approximate percentages of
the MSCI Germany represented thereby were _______ (____%), ________ (____%) and
_______ (____%) for a total of approximately ____% of the MSCI Germany. As of
August 31, 1997, the ten largest constituents comprised approximately ____% of
the market capitalization of the MSCI Germany. As of August 31, 1997, the three
most highly represented industry sectors in the MSCI Germany, and the
approximate percentages of the MSCI Germany represented thereby, were ________
(____%), ________ (____%) and _______ (____%), for a total of approximately
____% of the MSCI Germany. The MSCI Germany represented approximately ____% of
the aggregate capitalization of the German equity markets at August 31, 1997.

The MSCI Hong Kong Index ("MSCI Hong Kong"). The MSCI Hong Kong
consists primarily of stocks that are traded on The Stock Exchange of Hong Kong
Limited (SEHK). On August 31, 1997, the MSCI Hong Kong consisted of __ stocks.
The three largest constituents of the MSCI Hong Kong and the respective
approximate percentages of the MSCI Hong Kong represented thereby were ________
(____%), ________ (____%) and ________ (____%), for a total of approximately
____% of the MSCI Hong Kong. As of August 31, 1997, the ten largest constituents
comprised approximately ____% of the market capitalization of the MSCI Hong
Kong. As of August 31, 1997, the three most highly represented industry sectors
in the MSCI Hong Kong, and the approximate percentages of the MSCI Hong Kong
represented thereby, were ________ (____%), ________ (____%) and _______
(____%), for a total of approximately ____% of the MSCI Hong Kong. The MSCI Hong
Kong represented approximately ____% of the aggregate capitalization of the Hong
Kong equity markets at August 31, 1997.

The MSCI Italy Index ("MSCI Italy"). The MSCI Italy consists
primarily of stocks that are traded on the Milan Stock Exchange. On August 31,
1997, the MSCI Italy consisted of __ stocks. The three largest constituents of
the MSCI Italy and the respective approximate percentages of the MSCI Italy
represented thereby were ________ (____%), ________ (____%) and ________
(____%), for a total of approximately ____% of the MSCI Italy. As of August 31,
1997, the ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI Italy. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Italy, and the approximate percentages
of the MSCI Italy represented thereby, were ________ (____%), ________ (____%)
and ________ (____%), for a total of approximately ____% of the MSCI Italy. The
MSCI Italy represented approximately ____% of the aggregate capitalization of
the Italian equity markets at August 31, 1997.

The MSCI Japan Index ("MSCI Japan"). The MSCI Japan consists
primarily of stocks that are traded on the Tokyo Stock Exchange. On August 31,
1997, the MSCI Japan consisted of ___ stocks. The three largest constituents of
the MSCI Japan and the respective approximate percentages of the MSCI Japan
represented thereby were ________ (____%), ________ (____%) and ________ (____%)
for a total of approximately ____% of the MSCI Japan. As of August 31, 1997, the
ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI Japan. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Japan, and the approximate percentages
of the MSCI Japan represented thereby, were

17
<PAGE> 21

_______ (____%), ________ (____%) and ________ (____%), for a total of
approximately ____% of the MSCI Japan. The MSCI Japan represented approximately
____% of the aggregate capitalization of the Japanese equity markets at August
31, 1997.

The MSCI Malaysia (Free) Index ("MSCI Malaysia (Free)"). The MSCI
Malaysia (Free) consists primarily of stocks that are traded on the Kuala Lumpur
Stock Exchange. On August 31, 1997, the MSCI Malaysia (Free) consisted of __
stocks. As of August 31, 1997, the three largest constituents of the MSCI
Malaysia (Free) and the respective approximate percentages of the MSCI Malaysia
(Free) represented thereby were ________ (____%), ________ (____%) and ________
(____%), for a total of approximately ____% of the MSCI Malaysia (Free). As of
August 31, 1997, the ten largest constituents comprised approximately ____% of
the market capitalization of the MSCI Malaysia (Free). As of August 31, 1997,
the three most highly represented industry sectors in the MSCI Malaysia (Free),
and the approximate percentages of the MSCI Malaysia (Free) represented thereby,
were ________ (____%), ________ (____%) and _______ (____%), for a total of
approximately ____% of the MSCI Malaysia (Free). The MSCI Malaysia (Free)
represented approximately ____% of the aggregate capitalization of the Malaysian
equity markets at August 31, 1997.

The MSCI Mexico (Free) Index ("MSCI Mexico (Free)"). The MSCI Mexico
(Free) consists primarily of stocks that are traded on the Mexican Stock
Exchange. On August 31, 1997, the MSCI Mexico (Free) consisted of __ stocks. As
of August 31, 1997, the three largest constituents of the MSCI Mexico (Free) and
the respective approximate percentages of the MSCI Mexico (Free) represented
thereby were ________ (____%), ________ (____%) and _________ (____%), for a
total of approximately ____% of the MSCI Mexico (Free). As of August 31, 1997,
the ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI Mexico (Free). As of August 31, 1997, the three most
highly represented industry sectors in the MSCI Mexico (Free), and the
approximate percentages of the MSCI Mexico (Free) represented thereby, were
________ (____%), ________ (____%) and ________ (____%), for a total of
approximately ____% of the MSCI Mexico (Free). The MSCI Mexico (Free)
represented approximately ____% of the aggregate capitalization of the Mexican
equity markets at August 31, 1997.

The MSCI Netherlands Index ("MSCI Netherlands"). The MSCI
Netherlands consists primarily of stocks that are traded on the Amsterdam Stock
Exchange. On August 31, 1997, the MSCI Netherlands consisted of __ stocks. The
three largest constituents of the MSCI Netherlands and the respective
approximate percentages of the MSCI Netherlands represented thereby were Royal
Dutch ________ (____%), ________ (____%) and ________ (____%) for a total of
approximately ____% of the MSCI Netherlands. As of August 31, 1997, the ten
largest constituents comprised approximately ____% of the market capitalization
of the MSCI Netherlands. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Netherlands, and the approximate
percentages of the MSCI Netherlands represented thereby, were ________ (____%),
________ (____%) and ________ (____%), for a total of approximately ____% of the
MSCI Netherlands. The MSCI Netherlands represented approximately ____% of the
aggregate capitalization of the Dutch equity markets at August 31, 1997.

The MSCI Singapore (Free) Index ("MSCI Singapore (Free)"). The MSCI
Singapore (Free) consists primarily of stocks that are traded on the Singapore
Stock Exchange. On August 31, 1997, the MSCI Singapore (Free) consisted of __
stocks. The three largest constituents of the MSCI Singapore (Free) and the
respective approximate percentages of the MSCI Singapore (Free) represented
thereby were ________ (____%), _________ (____%) and _________ (____%) for a
total of approximately ____% of the MSCI Singapore (Free). As of August 31,
1997, the ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI Singapore (Free). As of August 31, 1997, the three
most highly represented industry sectors in the MSCI Singapore (Free), and the
approximate percentages of the MSCI Singapore (Free) represented thereby, were
_______ (____%), ________ (____%) and ________ (____%), for a total of
approximately ____% of the MSCI Singapore (Free). The MSCI Singapore (Free)
represented approximately ____% of the aggregate capitalization of the
Singaporean equity markets at August 31, 1997.

The MSCI Spain Index ("MSCI Spain"). The MSCI Spain consists
primarily of stocks that are traded on the Madrid Stock Exchange. On August 31,
1997, the MSCI Spain consisted of __ stocks. The three largest constituents of
the MSCI Spain and the respective approximate percentages of the MSCI Spain
represented thereby were ________ (____%), ______ (____%) and ________ (____%),
for a total of approximately ____% of the MSCI Spain. As of August 31, 1997, the
ten largest constituents comprised approximately ____% of the market
capitalization of the MSCI Spain. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Spain, and the approximate percentages
of the MSCI Spain represented thereby, were ________ (____%),________ (____%)
and ________ (____%), for a total of approximately ____% of the MSCI Spain. The
MSCI Spain represented approximately ____% of the aggregate capitalization of
the Spanish equity markets at August 31, 1997.

The MSCI Sweden Index ("MSCI Sweden"). The MSCI Sweden consists
primarily of stocks that are traded on the Stockholm Stock Exchange. On August
31, 1997, the MSCI Sweden consisted of __ stocks. As of August 31, 1997, the
three largest constituents of the MSCI Sweden and the respective approximate
percentages of the MSCI Sweden represented thereby were ________ (____%),
_______ (____%), and ________ (____%), for a total of approximately ____% of the
MSCI Sweden. As of August 31, 1997, the ten largest constituents comprised
approximately ____% of the market capitalization of the MSCI Sweden. As of
August 31, 1997, the three most highly represented industry sectors in the MSCI
Sweden, and the approximate percentages of the MSCI Sweden represented thereby,
were ________ (____%), ________ (____%) and _______ (____%), for a total of
approximately ____% of the MSCI Sweden. The MSCI Sweden represented
approximately ____% of the aggregate capitalization of the Swedish equity
markets at August 31, 1997.

The MSCI Switzerland Index ("MSCI Switzerland"). The MSCI
Switzerland consists primarily of stocks that are traded on the Zurich Stock
Exchange. On August 31, 1997, the MSCI Switzerland consisted of __ stocks. The
three largest constituents of the MSCI Switzerland and the respective
approximate percentages of the MSCI Switzerland represented thereby were
________ (____%), ________ (____%) and ________ (____%), for a total of
approximately ____% of the MSCI Switzerland. As of August 31, 1997, the ten
largest constituents comprised approximately ____% of the market capitalization
of the MSCI Switzerland. As of August 31, 1997, the three most highly
represented industry sectors in the MSCI Switzerland, and the approximate
percentages of the MSCI Switzerland represented thereby, were ________ (____%),
_______ (____%) and ________ (____%), for a total of approximately ____% of the
MSCI Switzerland. The MSCI Switzerland represented approximately ____% of the
aggregate capitalization of the Swiss equity markets at August 31, 1997.

The MSCI United Kingdom Index ("MSCI UK"). The MSCI UK consists
primarily of stocks that are traded on the London Stock Exchange. On August 31,
1997, the MSCI UK consisted of ___ stocks. The three largest constituents of the
MSCI UK and

18
<PAGE> 22

the respective approximate percentages of the MSCI UK represented thereby were
________ (____%), ________ (____%) and ________ (____%), for a total of
approximately ____% of the MSCI UK. As of August 31, 1997, the ten largest
constituents comprised approximately ____% of the market capitalization of the
MSCI UK. As of August 31, 1997, the three most highly represented industry
sectors in the MSCI UK, and the approximate percentages of the MSCI UK
represented thereby, were ________ (____%), ________ (____%) and ________
(____%), for a total of approximately ____% of the MSCI UK. The MSCI UK
represented approximately ____% of the aggregate capitalization of the United
Kingdom equity markets at August 31, 1997.

The graphs below present certain historical performance information,
as calculated by MSCI, for the MSCI Indices that are the benchmark indices for
each of the seventeen WEBS Index Series of the Fund. The MSCI Indices are
unmanaged securities indices and do not bear transactional or operating costs
and expenses, whereas the WEBS Index Series bear fees and expenses as described
herein. See "Summary of Fund Expenses." Such fees and expenses reduce the return
of each WEBS Index Series in comparison with its benchmark index. In addition,
because each WEBS Index Series does not invest in all the securities in its
benchmark index, the investment results do not necessarily correspond to those
of its benchmark index. Moreover, the WEBS Index Series are subject to various
limitations on their investment flexibility and these limits adversely affect
their ability to meet their investment objective. See "Investment Policies" and
"Implementation of Policies." The graphs measure total return based on the
period's change in price, dividends paid on stocks in the index, and the effect
of reinvesting dividends with adjustments for dividend withholding by foreign
governments (except for the graph relating to the MSCI Mexico (Free), which
reflects the reinvestment of dividends without adjustments for dividend
withholding). The withholding tax rates applicable to the Australia, Austria and
Germany WEBS Index Series vary from the rates utilized by MSCI in computing the
benchmark indices for such WEBS Index Series. See the first paragraph of this
section. The figures provided below for 1997 are for the period , 1996
to August 31, 1997.

MSCI AUSTRALIA INDEX
1988 - 36.40% 1993 - 35.17%
1989 - 9.30% 1994 - 5.40%
1990 - (17.54%) 1995 - 11.19%
1991 - 33.64% 1996 -
1992 - (10.82%) 1997 -

MSCI AUSTRIA INDEX
1988 - 0.57% 1993 - 28.09%
1989 - 103.91% 1994 - (6.28%)
1990 - 6.33% 1995 - 4.72%
1991 - (12.23%) 1996 -
1992 - (10.65%) 1997 -

MSCI BELGIUM INDEX
1988 - 53.63% 1993 - 23.51%
1989 - 17.29% 1994 - 8.24%
1990 - (10.98%) 1995 - 25.88%
1991 - 13.77% 1996 -
1992 - (1.47%) 1997 -

MSCI CANADA INDEX
1988 - 17.07% 1993 - 17.58%
1989 - 24.30% 1994 - (3.04%)
1990 - (13.00%) 1995 - 18.31%
1991 - 11.08% 1996 -
1992 - (12.15%) 1997 -

MSCI FRANCE INDEX
1988 - 37.87% 1993 - 20.91%
1989 - 36.15% 1994 - (5.18%)
1990 - (13.83%) 1995 - 14.12%
1991 - 17.83% 1996 -
1992 - 2.81% 1997 -

MSCI GERMANY INDEX
1988 - 20.60% 1993 - 35.64%
1989 - 46.26% 1994 - 4.66%
1990 - (9.36%) 1995 - 16.41%
1991 - 8.16% 1996 -
1992 - (10.27%) 1997 -

MSCI HONG KONG INDEX
1988 - 28.12% 1993 - 116.70%
1989 - 8.39% 1994 - (28.90%)
1990 - 9.17% 1995 - 22.57%
1991 - 49.52% 1996 -
1992 - 32.29% 1997 -

MSCI ITALY INDEX
1988 - 11.46% 1993 - 28.53%
1989 - 19.42% 1994 - 11.56%
1990 - (19.19%) 1995 - 1.05%
1991 - (1.82%) 1996 -
1992 - (22.22%) 1997 -

19
<PAGE> 23

MSCI JAPAN INDEX
1988 - 35.39% 1993 - 25.48%
1989 - 1.71% 1994 - 21.44%
1990 - (36.10%) 1995 - 0.69%
1991 - 8.92% 1996 -
1992 - (21.45%) 1997 -

MSCI MALAYSIA (FREE) INDEX
1988 - 26.54% 1993 - 110.00%
1989 - 55.76% 1994 - (19.94%)
1990 - (7.91%) 1995 - 5.16%
1991 - 4.95% 1996 -
1992 - 17.76% 1997 -

MSCI MEXICO (FREE) INDEX
1988 - 71.98% 1993 - 49.35%
1989 - 89.20% 1994 - (40.55%)
1990 - 62.65% 1995 - (20.37%)
1991 - 126.04% 1996 -
1992 - 24.98% 1997 -

MSCI NETHERLANDS INDEX
1988 - 14.19% 1993 - 35.28%
1989 - 35.79% 1994 - 11.70%
1990 - (3.19%) 1995 - 27.71%
1991 - 17.80% 1996 -
1992 - 2.30% 1997 -

MSCI SINGAPORE (FREE) INDEX
1988 - 34.18% 1993 - 73.41%
1989 - 44.88% 1994 - 5.81%
1990 - (14.59%) 1995 - 12.19%
1991 - 43.61% 1996 -
1992 - 4.49% 1997 -

MSCI SPAIN INDEX
1988 - 13.53% 1993 - 29.78%
1989 - 9.76% 1994 - (4.80)%
1990 - (13.85%) 1995 - 29.83%
1991 - 15.63% 1996 -
1992 - (21.87%) 1997 -

MSCI SWEDEN INDEX
1988 - 48.33% 1993 - 36.99%
1989 - 31.79% 1994 - 18.34%
1990 - (20.99%) 1995 - 33.36%
1991 - 14.42% 1996 -
1992 - (14.41%) 1997 -

MSCI SWITZERLAND INDEX
1988 - 6.18% 1993 - 45.79%
1989 - 26.21% 1994 - 3.54%
1990 - (6.23%) 1995 - 44.12%
1991 - 15.77% 1996 -
1992 - 17.23% 1997 -

MSCI UNITED KINGDOM INDEX
1988 - 5.95% 1993 - 24.44%
1989 - 21.87% 1994 - (1.63%)
1990 - 10.29% 1995 - 21.27%
1991 - 16.02% 1996 -
1992 - (3.65%) 1997 -

MANAGEMENT OF THE FUND
Board of Directors. The Board has responsibility for the overall
management of the Fund, including general supervision of the duties performed by
the Adviser and other service providers. Additional information about the Board
and the officers of the Fund appears in the Statement of Additional Information
under the heading "Management of the Fund."

Adviser. Barclays Global Fund Advisors is the Adviser to the Fund and,
subject to the supervision of the Board of the Fund, is responsible for the
investment management of each WEBS Index Series, which includes application of
portfolio optimization techniques. The Adviser is located at 45 Fremont Street,
San Francisco, California 94105. The Adviser is a California Corporation
indirectly owned by Barclays Bank PLC and is registered as an investment adviser
under the Investment Advisers Act of 1940. The Adviser and its parent, Barclays
Global Investors, N.A., are responsible for managing or providing investment
advice for assets aggregating in excess of $____ billion as of August 31, 1997.
For its investment management services to each WEBS Index Series, the Adviser is
paid management fees equal to each WEBS Index Series' allocable portion of: .27%
per annum of the aggregate net assets of the Fund less than or equal to $1.7
billion, plus .15% per annum of the aggregate net assets of the Fund between
$1.7

20
<PAGE> 24
billion and $7 billion, plus .12% per annum of the aggregate net assets of
the Fund between $7 billion and $10 billion, plus .08% per annum of the
aggregate net assets of the Fund in excess of $10 billion. The management fees
are accrued daily and paid by the Fund as soon as practical after the last day
of each calendar quarter. From time to time, a WEBS Index Series, to the extent
consistent with its investment objective, policies and restrictions, may invest
in the securities of companies with which the Adviser has a lending
relationship.

Administrator. PFPC Inc. (the "Administrator"), an indirect wholly owned
subsidiary of PNC Bank Corp., is the Administrator of the Fund, and is
responsible for certain clerical, recordkeeping and bookkeeping services, except
those performed by the Adviser, by MSTC in its capacity as Custodian, or by PNC
Bank, N.A. in its capacity as Transfer Agent. The Administrator has no role in
determining the investment policies of the Fund or which securities are to be
purchased or sold by the Fund. For the administrative and fund accounting
services the Administrator provides to the Fund, the Administrator is paid
aggregate fees equal to each WEBS Index Series' allocable portion of: .22% per
annum of the aggregate average daily net assets of the Fund up to $1.5 billion;
plus .15% per annum of the aggregate average daily net assets of the Fund
between $1.5 billion and $3 billion, plus .14% per annum of the aggregate
average daily net assets of the Fund between $3 billion and $5 billion, plus
.13% per annum of the aggregate average daily net assets of the Fund between $5
billion and $7.5 billion, plus .115% per annum of the aggregate average daily
net assets of the Fund between $7.5 billion and $10 billion, plus .10% per annum
of the aggregate average daily net assets of the Fund in excess of $10 billion
(the "Standard Fee Schedule"). The Administrator pays Morgan Stanley Trust
Company a fee of .05% of the average daily net assets of the Fund for
sub-administration services as described under "Custodian, Lending Agent and
Sub-Administrator" below. From time to time the Administrator may waive all or a
portion of its fees. See "Investment Advisory, Management, Administrative and
Distribution Services -- The Administrator" in the Statement of Additional
Information.

Distributor. Funds Distributor, Inc. (the "Distributor") is the
distributor of WEBS. Its address is 60 State Street, Suite 1300, Boston, MA
02109. Investor information can be obtained by calling 1-800-810-WEBS(9327).
WEBS are sold by the Fund and distributed only in Creation Units, as described
below under "Purchase and Issuance of WEBS in Creation Units." WEBS in less than
Creation Units will not be distributed by the Distributor. The Distributor is a
registered broker-dealer under the Securities Exchange Act of 1934 (the
"Exchange Act") and a member of the National Association of Securities Dealers,
Inc. (the "NASD"). The Fund has a distribution plan pursuant to Rule 12b-1 under
the 1940 Act ("Rule 12b-1 Plan"). Each WEBS Index Series operates the Rule 12b-1
Plan in accordance with its terms and the NASD Rules concerning maximum sales
charges. Under the Rule 12b-1 Plan, the Distributor is paid an annual fee as
compensation in connection with the offering and sale of shares of each WEBS
Index Series. The fees to be paid to the Distributor under the Rule 12b-1 Plan
are calculated and paid monthly with respect to each WEBS Index Series at a rate
set from time to time by the Board of Directors, provided that the annual rate
may not exceed .25% of the average daily net assets of such WEBS Index Series.
The Board of Directors has determined to limit the annual fee payable under the
12b-1 Plan with respect to each WEBS Index Series so as not to exceed .20% of
the average daily net assets of each WEBS Index Series until further notice.
From time to time the Distributor may waive all or a portion of the fees. These
fees may be used to cover the expenses of the Distributor primarily intended to
result in the sale of shares of each WEBS Index Series including payments for
any activities or expenses primarily intended to result in or required for the
sale of the WEBS Index Series' shares, including promotional and marketing
activities related to the sale of shares of the WEBS Index Series, expenses
related to the preparation, printing and distribution of prospectuses and sales
literature, certain communications to and with shareholders, advertisements, and
payments made to representatives or others for selling shares of the WEBS Index
Series or for providing ongoing distribution assistance, shareholder services
and/or maintenance of shareholder accounts. The Distributor has entered into
sales and investor services agreements with broker-dealers or other persons that
are DTC Participants (as defined under "Book-Entry Only System" below) to
provide distribution assistance, including broker-dealer and shareholder support
and educational and promotional services. Under the terms of each sales and
investor services agreement, the Distributor will pay such broker-dealers or
other persons, out of 12b-1 fees received from the WEBS Index Series, at the
annual rate of .08% of 1% of the average daily net asset value of WEBS held
through DTC for the account of such DTC Participant. The Distributor may retain
any amount of its fee that is not expended for the foregoing purposes. The
amount of such fee is not dependent upon the distribution expenses actually
incurred by the Distributor. The Distributor has no role in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. See "Investment Advisory, Management, Administrative and
Distribution Services" in the Statement of Additional Information.

Custodian, Lending Agent and Sub-Administrator. Morgan Stanley Trust
Company ("MSTC") serves as the Custodian for the cash and portfolio securities
of each WEBS Index Series of the Fund, as Lending Agent for each WEBS Index
Series and as Sub-Administrator. As Lending Agent, MSTC causes the delivery of
loaned securities from the Fund to borrowers, arranges for the return of loaned
securities to the Fund at the termination of the loans, requests deposit of
collateral, monitors daily the value of the loaned securities and collateral,
requests that borrowers add to the collateral when required by the loan
agreements, and provides recordkeeping and accounting services necessary for the
operation of the program. For its services as Lending Agent, the Fund will pay
MSTC, in respect of each WEBS Index Series, 50% of the net investment income
earned on the collateral for securities loaned. MSTC also provides certain
sub-administrative services relating to the Fund pursuant to a
Sub-Administration Agreement and receives a fee from the Administrator equal to
.05% of the Fund's average daily net assets for providing such services. MSTC,
as Custodian, Lending Agent and Sub-Administrator has no role in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. The principal business address of MSTC is One Pierrepont Plaza,
Brooklyn, New York 11201.

Transfer Agent. PNC Bank, N.A. ("PNC"), an indirect wholly owned
subsidiary of PNC Bank Corp., provides transfer agency services to the Fund.
PNC, as transfer agent (the "Transfer Agent"), has no role in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. The principal business address of PNC is Broad and Chestnut
Streets, Philadelphia, Pennsylvania 19110.

The Glass-Steagall Act and other applicable laws may limit the ability
of a bank or other depositary institution to become an underwriter or
distributor of securities. However, in the opinion of the Fund, these laws do
not prohibit such depository institutions from providing services for investment
companies such as the administrative, accounting and other services. In the
event that a change in these laws prevented a bank from providing such services,
it is expected that other services arrangements would be made and that
shareholders would not be adversely affected.

21
<PAGE> 25
In addition to the fees described above, the Fund is responsible for
the payment of expenses that include, among other things, organizational
expenses, compensation of the Directors of the Fund, reimbursement of
out-of-pocket expenses incurred by the Administrator, exchange listing fees,
brokerage and other costs (including costs incurred by a WEBS Index Series in
connection with any rebalancing of its portfolio), legal and audit fees, and
litigation and extraordinary expenses.

EXCHANGE LISTING AND TRADING OF WEBS
The WEBS of each WEBS Index Series have been listed for trading on the
AMEX. WEBS trade on the AMEX at prices that differ to some degree from their net
asset value. See "Investment Considerations and Risks" and "Determination of Net
Asset Value." However, given that WEBS can be created or redeemed in Creation
Unit aggregations, the Fund believes that large discounts or premiums to the net
asset value of WEBS should not be sustainable. There can be no assurance that
the requirements of the AMEX necessary to maintain the listing of WEBS will
continue to be met or will remain unchanged or that an active trading market
will develop or be maintained for the WEBS of any particular WEBS Index Series.
The AMEX may remove the WEBS of a WEBS Index Series from listing if (1)
following the initial twelve-month period beginning upon the commencement of
trading of a WEBS Index Series, there are fewer than 50 beneficial holders of
the WEBS of such WEBS Index Series for 30 or more consecutive trading days, (2)
the value of the underlying index or portfolio of securities on which such WEBS
Index Series is based is no longer calculated or available or (3) such other
event occurs or condition exists that, in the opinion of the AMEX, makes further
dealings on the AMEX inadvisable. In addition, the AMEX will remove the WEBS
from listing and trading upon termination of the Fund.

The AMEX disseminates during its trading day an indicative optimized
portfolio value ("IOPV") for each WEBS Index Series. The IOPV on a per WEBS
basis should not be viewed as a real time update of the net asset value per WEBS
share of the Fund, which is calculated only once a day. See "Exchange Listing
and Trading" in the Statement of Additional Information for additional details.

INVESTMENT CONSIDERATIONS AND RISKS
An investment in the WEBS of a WEBS Index Series involves risks
similar to those of investing in a broadly-based portfolio of equity securities
traded on exchanges in the relevant foreign securities market, such as market
fluctuations caused by such factors as economic and political developments,
changes in interest rates and perceived trends in stock prices. Investing in
WEBS generally involves certain risks and considerations not typically
associated with investing in a fund that invests in the securities of U.S.
issuers. These risks could include generally less liquid and less efficient
securities markets; generally greater price volatility; exchange rate
fluctuations and exchange controls; less publicly available information about
issuers; the imposition of withholding or other taxes; restrictions on the
expatriation of funds or other assets of a WEBS Index Series; higher transaction
and custody costs; delays attendant in settlement procedures; difficulties in
enforcing contractual obligations; lesser liquidity and the significantly
smaller market capitalization of most non-U.S. securities markets; lesser levels
of regulation of the securities markets; different accounting, disclosure and
reporting requirements; more substantial government involvement in the economy;
higher rates of inflation; greater social, economic, and political uncertainty
and the risk of nationalization or expropriation of assets and risk of war.
Certain WEBS Index Series' specific considerations are set forth in the
Statement of Additional Information.

Volatility of Foreign Equity Markets
The U.S. dollar performance of foreign equity markets, particularly
emerging markets, has generally been substantially more volatile than that of
U.S. markets. For example, from August 1993-August 1997, the average price
volatility of the Standard and Poor's 500 Index, a broad measure of the U.S.
equity market, was ___%. In contrast, during the same period, the average price
volatility of the respective MSCI Indices was as follows: the MSCI Australia
(____%), the MSCI Austria (___%), the MSCI Belgium (____%), the MSCI Canada
(____%), the MSCI France (____%), the MSCI Germany (____%), the MSCI Hong Kong
(____%), the MSCI Italy (____%), the MSCI Japan (____%), the MSCI Malaysia
(Free) (____%), the MSCI Mexico (Free) (____%), the MSCI Netherlands (____%),
the MSCI Singapore (Free) (____%), the MSCI Spain (____%), the MSCI Sweden
(____%), the MSCI Switzerland (____%), and the MSCI United Kingdom (____%).
Short-term volatility in these markets can be significantly greater.

Foreign Currency Fluctuations
Because each WEBS Index Series' assets are generally invested in
non-U.S. securities, and because a substantial portion of the revenues and
income of each WEBS Index Series are received in a foreign currency, while WEBS
Index Series dividends and other distributions are paid in U.S. dollars, the
dollar value of a WEBS Index Series' net assets are adversely affected by
reductions in the value of subject foreign currency relative to the dollar and
are positively affected by increases in the value of such currency relative to
the dollar. Also, government or monetary authorities have imposed and may in the
future impose exchange controls that could adversely affect exchange rates. Any
such currency fluctuations will affect the net asset value of a WEBS Index
Series irrespective of the performance of its underlying portfolio. Other than
to facilitate settlements in local markets or to protect against currency
exposure in connection with its distributions to shareholders or borrowings, the
Fund does not expect to engage in currency transactions for the purpose of
hedging against the decline in value of any foreign currencies.

Concentration and Lack of Diversification of Certain WEBS Index Series
Each WEBS Index Series of the Fund (except for the Canada WEBS Index
Series, the Japan WEBS Index Series and the United Kingdom WEBS Index Series) is
classified as "non-diversified" for purposes of the 1940 Act, which means each
of those WEBS Index Series is not limited by the 1940 Act with regard to the
portion of its assets that may be invested in the securities of a single issuer.
In addition, a number of WEBS Index Series concentrate their investments in
particular industries. See "Investment Policies" herein. However, each WEBS
Index Series, regardless of whether classified as non-diversified, intends to
maintain the required level of diversification and otherwise conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code, in order to relieve the WEBS Index Series of any
liability for Federal income tax to the extent that its earnings are distributed
to shareholders. See "Dividends and Capital Gains Distributions" and "Tax
Matters" in this Prospectus. Compliance with the diversification requirements of
the Internal Revenue Code severely limits the investment flexibility of certain
WEBS Index Series and makes it less likely that such WEBS Index Series will meet
their investment objectives.

The stocks of particular issuers, or of issuers in particular
industries, may dominate the benchmark indices of certain WEBS Index Series and,
consequently, the investment portfolios of such WEBS Index Series, which may
adversely affect the performance of such WEBS Index Series or subject such WEBS
Index Series to greater price volatility than that experienced by more
diversified investment companies. The WEBS of a WEBS Index Series may be more
susceptible to any single economic, political or regulatory occurrence than the
portfolio securities of an investment company that is more broadly invested than
the subject WEBS Index Series in the equity securities of the relevant market.
Information concerning the companies and industry sectors that represent the
largest

22
<PAGE> 26
components of the various benchmark indices is set forth above under "The
Benchmark MSCI Indices Utilized by the WEBS Index Series."

As indicated above, the WEBS have been listed for trading on the AMEX.
There can be no assurance that active trading markets for the WEBS will develop
or be maintained. The Distributor does not maintain a secondary market in WEBS.
Trading in WEBS on the AMEX may be halted due to market conditions or for
reasons that, in the view of the AMEX, make trading in WEBS inadvisable. In
addition, trading in WEBS on the AMEX is subject to trading halts caused by
extraordinary market volatility pursuant to AMEX "circuit breaker" rules that
require trading in securities on the AMEX to be halted in the event of specified
market moves. There can be no assurance that the requirements of the AMEX
necessary to maintain the listing of any WEBS Index Series will continue to be
met or will remain unchanged. See "Exchange Listing and Trading of WEBS."

The net asset value of the WEBS of a WEBS Index Series fluctuate with
changes in the market value of the portfolio securities of the WEBS Index Series
and changes in the market rate of exchange between the U.S. dollar and the
subject foreign currency. The market prices of WEBS fluctuate in accordance with
changes in net asset value and supply and demand on the AMEX. The Fund cannot
predict whether WEBS will trade below, at or above their net asset value. Price
differences may be due, in large part, to the fact that supply and demand forces
at work in the secondary trading market for WEBS will be closely related to, but
not identical to, the same forces influencing the prices of the stocks of the
subject MSCI Index trading individually or in the aggregate at any point in
time. However, given that WEBS can be created and redeemed in Creation Unit
aggregations (unlike shares of many closed-end funds, which frequently trade at
appreciable discounts from, and sometimes at premiums to, their net asset
value), the Fund believes that large discounts or premiums to the net asset
value of WEBS should not be sustainable.

Lending of Securities
Although each WEBS Index Series receives collateral in connection with
all loans of portfolio securities, and such collateral is marked to market, the
WEBS Index Series would be exposed to the risk of loss should a borrower default
on its obligation to return the borrowed securities (e.g., the loaned securities
may have appreciated beyond the value of the collateral held by the Fund). In
addition, each WEBS Index Series bears the risk of loss of any collateral that
it invests in Short-Term Investments.

Use of Certain Instruments
The risk of loss associated with futures contracts is potentially
unlimited due both to the low margin deposits required and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively small
price movement in a futures contract may result in an immediate and substantial
loss or gain. However, no WEBS Index Series will use futures contracts, options
or swap agreements for speculative purposes or to leverage its net assets and
each WEBS Index Series will comply with applicable SEC requirements regarding
the segregation of assets in connection with futures positions. Accordingly, the
primary risks associated with the use of futures contracts, options and swap
agreements by a WEBS Index Series are: (i) imperfect correlation between the
change in market value of the stocks included in the benchmark index or held by
the WEBS Index Series and the prices of futures contracts, options and swap
agreements; (ii) possible lack of a liquid secondary market for a futures
contract or listed option and the resulting inability to close futures or listed
option positions prior to their maturity date; and (iii) the risk of the
counterparty or guaranteeing agent defaulting. Over-the-counter options and swap
agreements are generally less liquid than exchange traded securities and the SEC
staff considers most over-the-counter options to be illiquid. The Fund will
treat such options as illiquid to the extent required by applicable SEC staff
positions. Illiquid assets may not represent more than 15% of the net assets of
a WEBS Index Series.

Since there are generally no futures traded on the MSCI Indices, it
may be necessary for a WEBS Index Series to utilize other futures contracts or
combinations thereof to simulate the performance of the relevant MSCI Index.
This process may magnify the "tracking error" of the WEBS Index Series'
performance compared to that of the MSCI Index, due to the lower correlation of
the selected futures with the MSCI Index. The Adviser will attempt to reduce
this tracking error by investing in futures contracts whose behavior is expected
to represent the market performance of the WEBS Index Series' underlying
securities, although there can be no assurance that these selected futures will
in fact correlate with the performance of the relevant MSCI Index. Certain
foreign stock index futures contracts and options thereon are not currently
available to U.S.
persons such as the Fund under applicable law.

See also "Special Considerations and Risks" in the Statement of
Additional Information.

DETERMINATION OF NET ASSET VALUE
Net asset value per share for each WEBS Index Series of the Fund is
computed by dividing the value of the net assets of such WEBS Index Series
(i.e., the value of its total assets less total liabilities) by the total number
of WEBS outstanding, rounded to the nearest cent. Expenses and fees, including
the management, administration and distribution fees, are accrued daily and
taken into account for purposes of determining net asset value. The net asset
value of each WEBS Index Series is determined as of the close of the regular
trading session on the New York Stock Exchange, Inc. (ordinarily 4:00 p.m., New
York City time) on each day that such exchange is open.

In computing a WEBS Index Series' net asset value, the WEBS Index
Series' portfolio securities are valued based on their last quoted current
price. Price information on listed securities is taken from the exchange where
the security is primarily traded. Securities regularly traded in the
over-the-counter market are valued at the latest quoted bid price. Other
portfolio securities and assets for which market quotations are not readily
available are valued based on fair value as determined in good faith by the
Adviser in accordance with procedures adopted by the Board of Directors of the
Fund. Foreign currency values 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).

23
<PAGE> 27

CREATION UNITS
The Fund issues and redeems WEBS of each WEBS Index Series only in
aggregations of WEBS specified for each WEBS Index Series. The following table
sets forth the number of WEBS of a WEBS Index Series that constitute a Creation
Unit for such WEBS Index Series and the value of such Creation Unit at August
31, 1997:

<TABLE>
<CAPTION>
VALUE PER
WEBS INDEX SERIES WEBS PER CREATION UNIT CREATION UNIT
(IN DOLLARS)
- ----------------- ---------------------- -------------
<S> <C> <C>
Australia WEBS Index Series.........................................
Austria WEBS Index Series...........................................
Belgium WEBS Index Series...........................................
Canada WEBS Index Series............................................
France WEBS Index Series............................................
Germany WEBS Index Series...........................................
Hong Kong WEBS Index Series.........................................
Italy WEBS Index Series.............................................
Japan WEBS Index Series.............................................
Malaysia (Free) WEBS Index Series...................................
Mexico (Free) WEBS Index Series.....................................
Netherlands WEBS Index Series.......................................
Singapore (Free) WEBS Index Series..................................
Spain WEBS Index Series.............................................
Sweden WEBS Index Series............................................
Switzerland WEBS Index Series.......................................
United Kingdom WEBS Index Series....................................
</TABLE>

See "Purchase and Issuance of WEBS in Creation Units" and
"Redemption of WEBS in Creation Units." The Board of Directors of the Fund
reserves the right to declare a split in the number of WEBS outstanding of any
WEBS Index Series of the Fund, and to make a corresponding change in the number
of WEBS constituting a Creation Unit, in the event that the per WEBS price in
the secondary market rises to an amount that exceeds the range deemed desirable
by the Board.

PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS
THE FUND ISSUES AND SELLS WEBS OF A WEBS INDEX SERIES ONLY IN
CREATION UNITS ON A CONTINUOUS BASIS THROUGH THE DISTRIBUTOR AT THEIR NET ASSET
VALUE NEXT DETERMINED AFTER RECEIPT OF AN ORDER IN PROPER FORM, WITHOUT AN
INITIAL SALES LOAD. The consideration for purchase of a Creation Unit of WEBS of
a WEBS Index Series is the in-kind deposit of a designated portfolio of equity
securities constituting an optimized representation of the corresponding MSCI
Index (the "Deposit Securities") and an amount of cash computed as described
below (the "Cash Component"). The Cash Component is a balancing amount to cover
accrued dividends and to equalize any difference between the value of the
Deposit Securities and the net asset value of a Creation Unit of WEBS as
determined on the date on which WEBS are to be purchased and issued. Together,
the Deposit Securities and the Cash Component constitute the "Portfolio Deposit"
which represents the minimum initial and subsequent investment amount for shares
of any WEBS Index Series from the Fund. Tendered securities in the Portfolio
Deposit are valued in the same manner as the relevant WEBS Index Series values
its portfolio securities. WEBS may also be issued and sold in Creation Units for
cash in certain circumstances; however, the Fund does not ordinarily permit cash
purchases of Creation Units and any WEBS Index Series that permits cash sales
reserves the right to suspend such sales at any time.

The Deposit Securities for each WEBS Index Series generally change
with changes in the corresponding MSCI Index. In addition, the Adviser reserves
the right to permit or require the substitution of an amount of cash to be added
to the Cash Component to replace any security in the portfolio constituting the
Deposit Securities which may not be available in sufficient quantity for
delivery or for other similar reasons. The Deposit Securities must be delivered
for receipt in an account of the Fund maintained at the applicable local
subcustodian.

A purchase transaction fee payable to the Fund is imposed to
compensate the Fund for the transaction costs of each WEBS Index Series
associated with issuance of Creation Units of WEBS. The purchase transaction
fees for in-kind purchases and cash purchases (when available) are listed in the
Shareholder Transaction Expenses table in "Summary of Fund Expenses." The
Shareholder Transaction Expenses table is subject to revision from time to time.
Investors are also responsible for payment of the costs of transferring the
Deposit Securities to the Fund.

The foregoing description of the issuance of Creation Units of WEBS
is only a summary. Investors interested in purchasing Creations Units of WEBS
from the Fund will need to refer to "Purchase and Issuance of WEBS in Creation
Units" in the Statement of Additional Information for additional details.

REDEMPTION OF WEBS IN CREATION UNITS
WEBS OF A WEBS INDEX SERIES ARE REDEEMED BY THE FUND ONLY IN
CREATION UNITS AT THEIR NET ASSET VALUE NEXT DETERMINED AFTER RECEIPT OF A
REDEMPTION REQUEST IN PROPER FORM BY THE DISTRIBUTOR. WEBS IN AMOUNTS LESS THAN
CREATION UNITS ARE NOT REDEEMABLE. The Fund generally redeems a Creation Unit of
WEBS principally on an in-kind basis for Deposit Securities as announced by the
Distributor, plus cash in an amount equal to the difference between the net
asset value of the WEBS being redeemed, as next determined after receipt of a
request in proper form, and the value of the Deposit Securities, less the
redemption transaction fee described below. A WEBS Index Series may also redeem
Creation Units for cash in certain circumstances; however, the Fund does not
ordinarily permit cash redemptions and any WEBS Index Series that permits cash
redemptions reserves the right to suspend such redemptions at any time.

Investors may purchase WEBS in the secondary market and aggregate
such purchases into a Creation Unit for redemption. There can be no assurance,
however, that there always will be sufficient liquidity in the public trading
market to permit assembly of a Creation Unit of WEBS. Investors should expect to
incur brokerage and other costs in connection with assembling a sufficient
number of WEBS to constitute a redeemable Creation Unit. The approximate cost of
a Creation Unit of each WEBS Index Series is indicated under the heading
"Creation Units."

24
<PAGE> 28
A redemption transaction fee payable to the Fund is imposed to
offset transaction costs that may be incurred by a WEBS Index Series in
connection with redemption of Creation Units of WEBS. The redemption transaction
fee for redemptions in kind and for cash (when available) are listed in the
Shareholder Transaction Expenses table in "Summary of Fund Expenses." The
Shareholder Transaction Expenses table may be subject to revision from time to
time. Investors also bear the costs of transferring the Portfolio Deposit from
the Fund to their account or on their order.

Because the portfolio securities of a WEBS Index Series may trade on
the relevant exchange(s) on days that the AMEX is closed, shareholders may not
be able to redeem their Creation Units of such WEBS Index Series, or to purchase
or sell WEBS on the AMEX, on days when the net asset value of such WEBS Index
Series could be significantly affected by events in the relevant foreign
markets.

The foregoing description of the redemption of Creation Units of
WEBS is only a summary. Investors interested in redeeming Creation Units of WEBS
need to refer to "Redemption of WEBS in Creation Units" in the Statement of
Additional Information for additional details.

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Dividends from net investment income, including net foreign currency
gains, if any, are declared and paid at least annually and net realized
securities gains, if any, are distributed at least annually. Dividends may be
declared and paid more frequently than annually for certain WEBS Index Series to
improve tracking error or to comply with the distribution requirements of the
Internal Revenue Code. In addition, the Fund intends to distribute at least
annually amounts representing the full dividend yield on the underlying
portfolio securities of each WEBS Index Series net of expenses of such WEBS
Index Series, as if such WEBS Index Series owned such underlying portfolio
securities for the entire dividend period. As a result, some portion of each
distribution may result in a return of capital. See "Tax Matters." Dividends and
securities gains distributions are distributed in U.S. dollars and cannot be
automatically reinvested in additional WEBS. The Fund will inform shareholders
within 60 days after the close of the WEBS Index Series' taxable year of the
amount and nature of all distributions made to them.

TAX MATTERS
A person other than a tax-exempt entity who exchanges securities for
Creation Units of WEBS generally will recognize gain and generally should
recognize loss equal to the difference between the market value of the Creation
Units and the sum of his aggregate basis in the securities surrendered and the
Cash Component paid. It is possible, however, that the Internal Revenue Service
may assert that a loss realized upon an exchange of securities for Creation
Units cannot be deducted currently under the rules governing "wash sales," and
persons exchanging securities should consult their own tax advisors with respect
to when such a loss might be deductible.

Each WEBS Index Series of the Fund intends to qualify for and to
elect treatment as a "regulated investment company" under Subchapter M of the
Internal Revenue Code. As a regulated investment company, a WEBS Index Series is
not subject to U.S. federal income tax on its income and gains that it
distributes to shareholders, provided that it distributes annually at least 90%
of its investment company taxable income. Investment company taxable income
generally includes income from dividends and interest and gains and losses from
currency transactions net of operating expenses plus the WEBS Index Series' net
short-term capital gains in excess of its net long-term capital losses. Each
WEBS Index Series distributes to its shareholders at least annually all of its
investment company taxable income and any realized net long-term capital gains.

Dividends paid out of a WEBS Index Series' investment company
taxable income are taxable to a U.S. investor as ordinary income. Distributions
of net long-term capital gains, if any, in excess of net short-term capital
losses are taxable to a U.S. investor as long-term capital gains, regardless of
how long the investor has held the WEBS. Dividends paid by a WEBS Index Series
generally will not qualify for the deduction for dividends received by
corporations. Distributions in excess of a WEBS Index Series' current and
accumulated earnings and profits are treated as a tax-free return of capital to
each of the WEBS Index Series' investors to the extent of the investor's basis
in its WEBS, and as capital gain thereafter. Any dividend declared by a WEBS
Index Series in October, November or December of any calendar year and payable
to investors of record on a specified date in such a month shall be deemed to
have been received by each investor on December 31 of such calendar year and to
have been paid by the WEBS Index Series not later than such December 31 so long
as the dividend is actually paid by the WEBS Index Series during January of the
following calendar year. A distribution by a WEBS Index Series will reduce its
net asset value per share and may be taxable to the investor as ordinary income
or net capital gain as described above even though, from an investment
standpoint, it may constitute a return of capital and this phenomenon may be
more pronounced given the WEBS Index Series' policy of making distributions in
excess of the sum of its investment company taxable income and its net long-term
capital gains.

Any gain or loss realized upon a sale or redemption of WEBS by a
shareholder that is not a dealer in securities is generally treated as a
long-term capital gain or loss if the WEBS have been held for more than eighteen
months, and otherwise as a short-term capital gain or loss. However, if WEBS on
which a long-term capital gain distribution has been received are subsequently
sold or redeemed and such WEBS have been held for six months or less, any loss
realized will be treated as a long-term capital loss to the extent that it
offsets the long-term capital gain distribution. Moreover, any loss realized on
a sale or exchange of WEBS will be deferred to the extent that the shares
disposed of are replaced within a 61-day period beginning 30 days before and
ending 30 days after the disposition of the shares, in which case the basis of
the shares acquired will be adjusted upward to reflect the deferred loss.

Each WEBS Index Series may be subject to foreign income taxes
withheld at source. As more than 50% of the value of the total assets of each
WEBS Index Series at the close of its taxable year will consist of stock or
securities of foreign corporations, a WEBS Index Series will be eligible (and
intends) to file an election with the Internal Revenue Service to "pass through"
to its investors the amount of foreign income taxes (including withholding
taxes) paid by the WEBS Index Series. Subject to certain limitations, the
foreign income taxes passed through may qualify as a deduction in calculating
U.S. taxable income or as a credit in calculating U.S. federal income tax. Each
investor will be notified of the investor's portion of the foreign income taxes
paid to each country and the portion of dividends that represents income derived
from sources within each country.

The Fund may be required to withhold for U.S. federal income tax
purposes 31% of the dividends and distributions payable to investors who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the U.S. Internal Revenue
Service that they are subject to backup withholding. Backup withholding is not
an additional tax; amounts withheld may be credited against the investor's U.S.
federal income tax liability.

25
<PAGE> 29
An investor in a WEBS Index Series that is a foreign corporation or
an individual who is a nonresident alien for U.S. tax purposes will be subject
to significant adverse U.S. tax consequences. For example, dividends paid out of
a WEBS Index Series' investment company taxable income will generally be subject
to U.S. federal withholding tax at a rate of 30% (or lower treaty rate if the
foreign investor is eligible for the benefits of an income tax treaty). Foreign
investors are urged to consult their own tax advisors regarding the U.S. tax
treatment, in their particular circumstances, of ownership of shares in a WEBS
Index Series.

For further information on taxes see "Taxes" in the Statement of
Additional Information.

BOOK-ENTRY ONLY SYSTEM
DTC acts as securities depositary for the WEBS. WEBS are represented
by global securities, which are registered in the name of DTC or its nominee and
deposited with, or on behalf of, DTC.

DTC has advised the Fund as follows: DTC was created to hold
securities of its participants (the "DTC Participants") and to facilitate the
clearance and settlement of securities transactions among the DTC Participants
in such securities through electronic book-entry changes in accounts of the DTC
Participants. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly
(the "Indirect Participants").

Beneficial ownership of WEBS is limited to DTC Participants,
Indirect Participants and persons holding interests through DTC Participants and
Indirect Participants. Ownership of beneficial interests in WEBS (owners of such
beneficial interests are referred to herein as "Beneficial Owners") is shown on,
and the transfer of ownership is effected only through, records maintained by
DTC (with respect to DTC Participants) and on the records of DTC Participants
(with respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners receive from or through the DTC Participant a
written confirmation relating to their purchase of WEBS. The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the ability
of certain investors to acquire beneficial interests in WEBS. Beneficial Owners
of WEBS are not entitled to have WEBS registered in their names, will not
receive or are not entitled to receive physical delivery of certificates in
definitive form and are not considered the registered holders thereof.
Accordingly, each Beneficial Owner must rely on the procedures of DTC, the DTC
Participant and any Indirect Participant through which such Beneficial Owner
holds its interests, to exercise any rights of a holder of WEBS.

WEBS distributions are made to DTC or its nominee, Cede & Co., as
the registered holder of all WEBS. DTC or its nominee, upon receipt of any such
distributions, will immediately credit DTC Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in WEBS as
shown on the records of DTC or its nominee. Payments by DTC Participants to
Indirect Participants and Beneficial Owners of WEBS held through such DTC
Participants are governed by standing instructions and customary practices, as
is the case with securities held for the accounts of customers in bearer form or
registered in a "street name," and are the responsibility of such DTC
Participants.

See "Book-Entry Only System" in the Statement of Additional
Information for additional details.

PERFORMANCE
The performance of the WEBS Index Series may be quoted in
advertisements, sales literature or reports to shareholders in terms of average
annual total return, cumulative total return and yield.

Quotations of average annual total return will be expressed in terms
of average annual rate of return of a hypothetical investment in a WEBS Index
Series over periods of 1, 5 and 10 years (or the life of the WEBS Index Series,
if shorter). Such total return figures reflect the deduction of a proportional
share of such WEBS Index Series' expenses on an annual basis, and assume that
all dividends and distributions are reinvested when paid.

Quotations of a cumulative total return are calculated for any
specified period by assuming a hypothetical investment in a WEBS Index Series on
the date of the commencement of the period and assume that all dividends and
distributions are reinvested on ex date. However, currently there is no dividend
reinvestment option available to shareholders of WEBS and such calculation is
provided for informational purposes only. The net increase or decrease in the
value of the investment over the period is divided by its beginning value to
arrive at cumulative total return. Total return calculated in this manner will
differ from the calculation of average annual total return in that it is not
expressed in terms of an average rate of return.

The yield of a WEBS Index Series refers to income generated by an
investment in such WEBS Index Series over a specified 30-day (one month) period.
Yields for the WEBS Index Series are expressed as annualized percentages.

Quotations of average annual total return, cumulative total return
or yield reflect only the performance of a hypothetical investment in a WEBS
Index Series during the particular time period on which the calculations are
based. Such quotations for a WEBS Index Series will vary based on changes in
market conditions and the level of such WEBS Index Series' expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.

GENERAL INFORMATION
The Fund is organized as a Maryland corporation. The Articles of
Incorporation, as amended, currently permit the Fund to issue 6 billion shares
of common stock with a par value of $.001 per share. Fractional shares will not
be issued. In addition to the seventeen WEBS Index Series described herein, the
Board of Directors of the Fund may designate additional series of common stock
and classify shares of a particular series into one or more classes of that
series. Any such additional series may seek to track the investment results
represented by an equity securities index compiled by MSCI or by another index
compiler. The shares of each series are fully paid and non-assessable; have no
preference as to conversion, exchange, dividends, retirement or other features;
and have no pre-emptive rights. Each share has one vote with respect to matters
upon which a shareholder vote is required; shareholders have no cumulative
voting rights with respect to their shares. Shares of all series vote together
as a single class except that if the matter being voted on affects only a
particular WEBS Index Series it will be voted on only by that WEBS Index Series
and if a matter

26
<PAGE> 30
affects a particular WEBS Index Series differently from other WEBS Index Series,
that WEBS Index Series will vote separately on such matter. Annual meetings of
shareholders will not be held except as required by the 1940 Act and other
applicable law.

Absent an applicable exemption, beneficial owners of 10% of the WEBS
of a WEBS Index Series are subject to the insider reporting, short-swing profit
and short sale provisions under the Exchange Act. The Exchange Act provides
that, with certain exceptions, any gain realized by any such beneficial owner
from any purchase and sale or sale and purchase of WEBS within any period of
less than six months is recoverable by the WEBS Index Series. Additionally,
every such beneficial owner must file with the SEC a statement showing ownership
and change in ownership of WEBS within ten days after the end of any calendar
month in which there has been a change in such beneficial owner's ownership of
WEBS.

The acquisition of WEBS of each WEBS Index Series by investment
companies is subject to the restrictions of Section 12(d)(1) of the 1940 Act and
applicable state regulations.

Ernst & Young LLP serves as independent auditors for the Fund and
audits its financial statements annually.

AVAILABLE INFORMATION
This Prospectus does not contain all the information included in the
Registration Statement filed with the SEC under the Securities Act of 1933 with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. The Registration
Statement, including the exhibits filed therewith and the Statement of
Additional Information, may be examined at the offices of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. Such documents
and other information concerning the Fund may also be inspected at the offices
of the American Stock Exchange, Inc., 86 Trinity Place, New York, New York
10006.

Statements contained in this Prospectus as to the contents of any
agreement or other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such agreement or other document
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part, each such statement being qualified in all respects by such reference.

Shareholder inquiries may be directed to the Fund in writing, to c/o
PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809.

27
<PAGE> 31

WEBS INDEX FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER __, 1997

This Statement of Additional Information is not a Prospectus, and
should be read in conjunction with the Prospectus dated October __, 1997 (the
"Prospectus") for WEBS Index Fund, Inc. (the "Fund"), as it may be revised from
time to time. A copy of the Prospectus for the Fund may be obtained without
charge by writing to the Fund or the Distributor. The Fund's address is WEBS
Index Fund, Inc., c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
Capitalized terms used herein but not defined have the same meaning as in the
Prospectus, unless otherwise noted.

<PAGE> 32
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
General Description of the Fund.................................................................. 1
Investment Policies and Restrictions ........................................................... 1
Special Considerations and Risks................................................................. 12
The MSCI Indices................................................................................. 21
Exchange Listing and Trading..................................................................... 36
Management of the Fund .......................................................................... 37
Investment Advisory, Management, Administrative and Distribution Services........................ 40
Brokerage Transactions .......................................................................... 43
Book Entry Only System .......................................................................... 44
Purchase and Issuance of WEBS in Creation Units.................................................. 45
Redemption of WEBS in Creation Units ........................................................... 48
Determining Net Asset Value...................................................................... 50
Dividends and Distributions...................................................................... 50
Taxes ........................................................................................... 50
Capital Stock and Shareholder Reports .......................................................... 51
Performance Information ........................................................................ 52
Counsel and Independent Auditors................................................................. 56
Financial Statements............................................................................. 56
</TABLE>

Appendices
APPENDIX A: MSCI Indices as of August 31, 1997
APPENDIX B: Holidays Applicable to Each WEBS Index Series
APPENDIX C: Supplemental Educational Information on WEBS
- The Case For International Index Investing
- WEBS Investment Highlights
- Frequently Asked Questions (Q & A)
- MSCI Index Performance Charts

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

THE MSCI INDICES ARE THE PROPERTY OF MORGAN STANLEY & CO. INCORPORATED
("MORGAN STANLEY"). MORGAN STANLEY CAPITAL INTERNATIONAL IS A SERVICE MARK OF
MORGAN STANLEY AND HAS BEEN LICENSED FOR USE BY WEBS INDEX FUND, INC.
("LICENSEE"). THE MSCI INDICES ARE DETERMINED, COMPOSED AND CALCULATED BY
CAPITAL INTERNATIONAL PERSPECTIVE S.A. ("CIPSA"), A SUBSIDIARY OF CAPITAL
INTERNATIONAL S.A.

WORLD EQUITY BENCHMARK SHARES ARE NOT SPONSORED, ENDORSED, OR PROMOTED
BY MORGAN STANLEY. MORGAN STANLEY MAKES NO REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, TO THE OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES OR ANY MEMBER OF
THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY, OR
IN THE WEBS OF ANY WEBS INDEX SERIES PARTICULARLY, OR THE ABILITY OF THE INDICES
IDENTIFIED HEREIN TO TRACK GENERAL STOCK MARKET PERFORMANCE. MORGAN STANLEY IS
THE LICENSOR OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES OF MORGAN
STANLEY, INCLUDING THE MORGAN STANLEY CAPITAL INTERNATIONAL SERVICE MARK
("MSCI") WHICH MARK IS ASCRIBED TO THE INDICES CREATED BY CIPSA AND LICENSED TO
MORGAN STANLEY. THE MSCI INDICES IDENTIFIED HEREIN ARE DETERMINED, COMPOSED AND
CALCULATED WITHOUT REGARD TO THE WEBS OF ANY WEBS INDEX SERIES OR THE ISSUER
THEREOF. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY OBLIGATION TO TAKE THE NEEDS
OF THE ISSUER OF THE WEBS OF ANY WEBS INDEX SERIES OR THE OWNERS OF THE WEBS OF
ANY WEBS INDEX SERIES INTO CONSIDERATION IN DETERMINING, COMPOSING OR
CALCULATING, IN THE CASE OF CIPSA, OR DISSEMINATING, IN THE CASE OF MORGAN
STANLEY, THE RESPECTIVE MSCI INDICES. NEITHER MORGAN STANLEY NOR CIPSA IS
RESPONSIBLE FOR, NOR HAVE THEY PARTICIPATED IN THE DETERMINATION OF THE TIMING
OF, PRICES OF, OR QUANTITIES OF THE WEBS OF ANY WEBS INDEX SERIES TO BE ISSUED
OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE WEBS OF ANY
WEBS INDEX SERIES ARE REDEEMABLE. NEITHER MORGAN STANLEY NOR CIPSA HAS ANY
OBLIGATION OR LIABILITY TO OWNERS OF THE WEBS OF ANY WEBS INDEX SERIES IN
CONNECTION WITH THE ADMINISTRATION, MARKETING OR TRADING OF THE WEBS OF ANY WEBS
INDEX SERIES.

ALTHOUGH CIPSA SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN
THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH IT CONSIDERS RELIABLE,
NEITHER MORGAN

i
<PAGE> 33
STANLEY NOR CIPSA GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE
COMPONENT DATA OF ANY MSCI INDEX OBTAINED FROM INDEPENDENT SOURCES. NEITHER
MORGAN STANLEY NOR CIPSA MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCTS, OR ANY OTHER PERSON OR
ENTITY FROM THE USE OF THE MSCI INDICES OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THE RIGHTS LICENSED UNDER ANY LICENSE AGREEMENT OR FOR ANY OTHER
USE. NEITHER MORGAN STANLEY NOR CIPSA MAKES ANY EXPRESS OR IMPLIED WARRANTIES,
AND EACH HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE MSCI INDICES OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY
OR CIPSA HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.

The information contained herein regarding MSCI, the MSCI Indices, local
securities markets and The Depository Trust Company ("DTC") was obtained from
publicly available sources.

Unless otherwise specified, all references in this Statement of Additional
Information to "dollars," "USD," "US$" or "$" are to United States Dollars, all
references to "AUD," or "A$" are to Australian Dollars, all references to "ATS"
are to Austrian Schillings, all references to "BEF" are to Belgian Francs, all
references to "CAD" or "CA$" are to Canadian Dollars, all references to "FRF" or
"FF" are to French Francs, all references to "DEM" or "DM" are to the German
Deutsche Mark, all references to "HKD" or "HK$" are to Hong Kong Dollars, all
references to "ITL" or "LL" are to Italian Lira, all references to "JPY" or "Y"
are to Japanese Yen, all references to "MYR" are to Malaysian Ringgits, all
references to "MXN" are to Mexican Pesos, all references to "NLG" are to
Netherlands Guilders, all references to "SGD" are to Singapore Dollars, all
references to "ESP" are to Spanish Pesetas, all references to "SEK" are to
Swedish Krona, all references to "CHF" are to Swiss Francs, and all references
to "GBP," "pound sterling" or "L" are to British Pounds Sterling. On August 31,
1997, the noon buying rates in New York City for cable transfers payable in the
applicable currency, as certified for customs purposes by the Federal Reserve
Bank of New York, were as follows for each US $1.00: AUD ____, ATS ____, BEF
____, CAD ____, FRF ____, DEM ____, HKD ____, ITL ____, JPY ____, MYR ____, MXN
____, NLG ____, SGD ____, ESP ____, SEK ____, CHF ____ and GBP ____. Some
numbers in this Statement of Additional Information have been rounded. All US
Dollar equivalents provided in this Statement of Additional Information are
calculated at the exchange rate prevailing on the date to which the
corresponding foreign currency amount refers.

ii
<PAGE> 34
GENERAL DESCRIPTION OF THE FUND

WEBS Index Fund, Inc. (the "Fund") is a management investment company
organized as a series fund. The Fund currently consists of seventeen series
(each, a "WEBS Index Series"), each of which invests in a portfolio of common
stocks (the "Portfolio Securities") consisting of some or all of the component
securities of a specified foreign securities index, selected to reflect the
performance thereof. The Fund was incorporated under the laws of the State of
Maryland on August 31, 1994. The shares of each WEBS Index Series are referred
to herein as "World Equity Benchmark Shares(sm)" or "WEBS(sm)". The seventeen
WEBS Index Series offered by the Fund are the Australia WEBS Index Series, the
Austria WEBS Index Series, the Belgium WEBS Index Series, the Canada WEBS Index
Series, the France WEBS Index Series, the Germany WEBS Index Series, the Hong
Kong WEBS Index Series, the Italy WEBS Index Series, the Japan WEBS Index
Series, the Malaysia (Free) WEBS Index Series, the Mexico (Free) WEBS Index
Series, the Netherlands WEBS Index Series, the Singapore (Free) WEBS Index
Series, the Spain WEBS Index Series, the Sweden WEBS Index Series, the
Switzerland WEBS Index Series and the United Kingdom WEBS Index Series.

Each WEBS Index Series offers and issues WEBS at their net asset value
only in aggregations of a specified number of shares (each, a "Creation Unit"),
usually in exchange for a basket of Portfolio Securities (together with the
deposit of a specified cash payment). Such Creation Units of WEBS are separable
upon issue into identical shares which are listed and traded on the American
Stock Exchange (the "AMEX"). WEBS are also redeemable only in Creation Units,
also usually in exchange for Portfolio Securities and a specified cash payment.
The Fund reserves the right to offer a "cash" option for sales and redemptions
of WEBS (subject to applicable legal requirements), as well as the option to
offer WEBS on a "cash only" basis. In each instance of such cash sales or
redemptions, the Fund will impose transaction fees based on transaction expenses
in the particular country that will be higher than the transaction fees
associated with in-kind purchases or redemptions. In all cases, such fees will
be limited in accordance with the requirements of the Securities and Exchange
Commission (the "SEC") applicable to management investment companies offering
redeemable securities.

INVESTMENT POLICIES AND RESTRICTIONS

The following information supplements and should be read in conjunction
with the sections entitled "Investment Policies" and "Investment Limitations" in
the Prospectus.

Each of the seventeen WEBS Index Series has the policy to remain as
fully invested as practicable in a pool of equity securities the performance of
which will approximate the performance of the subject MSCI Index taken in its
entirety. A WEBS Index Series will normally invest at least 95% of its total
assets in stocks that are represented in the relevant MSCI Index and will at all
times invest at least 90% of its total assets in such stocks except, that in
order to permit the Adviser additional flexibility to comply with the
requirements of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and other regulatory requirements and to manage future corporate
actions and index changes in the smaller markets, each of the Austria, Belgium,
Hong Kong, Mexico (Free), Netherlands, Spain, Sweden, and Switzerland WEBS Index
Series will at all times invest at least 80% of its total assets in such stocks
and at least 10% of the remaining 20% of its total assets in such stocks or in
stocks included in the revelant market, but not in the relevant MSCI Index. A
WEBS Index Series may invest its remaining assets in Short-Term Investments
(defined below), in stocks that are in the relevant market but not the relevant
MSCI Index, and/or in combinations of certain stock index futures contracts,
options on such futures contracts, stock index options, stock index swaps, cash,
local currency and forward currency exchange contracts that are intended to
provide the WEBS Index Series with exposure to such stocks (the WEBS Index
Series will not use such instruments to leverage their investment portfolios).
"Short-Term Investments" are short-term high quality debt securities that
include: obligations of the United States Government and its agencies or
instrumentalities; commercial paper (rated Prime-1 by Moody's Investors
Services, Inc. or A-1 by Standard & Poor's Rating Group), bank certificates of
deposit and bankers' acceptances; repurchase agreements collateralized by the
foregoing securities; participation interests in such securities; and shares of
money market funds (subject to applicable limits under the Investment Company
Act of 1940, as amended, (the "1940 Act")).

A WEBS Index Series will not invest in cash reserves or Short-Term
Investments, or utilize futures contracts, options on futures contracts, options
or swap agreements as part of a temporary defensive strategy to protect against
potential stock market declines. A WEBS Index Series may enter into forward
currency exchange contracts and foreign currency futures contracts in order to
facilitate settlements in local markets in connection with stock index futures,
and to protect against currency exposure in connection with its distributions to
shareholders, but not as part of a defensive strategy to protect against
fluctuations in exchange rates.

INVESTMENTS IN SUBJECT EQUITY MARKETS

Brief descriptions of the equity markets in which the respective WEBS
Index Series are invested are provided below.

The Australian Equity Markets

General Background. Trading shares has taken place in Australia since
1828, but did not become significant until

1
<PAGE> 35
the latter half of the nineteenth century when there was strong demand for
equity capital to support the growth of mining activities. A stock market was
first formed in Melbourne in 1865. In 1885, the Melbourne market became the
stock exchange of Melbourne, in which form it has remained until recently. Other
stock exchanges were also established in Sydney (1871), Brisbane (1884),
Adelaide (1887), Hobart (1891) and Perth (1891). In 1937, the six capital city
stock exchanges established the Australian Associated Stock Exchanges (AASE) to
represent them at a national level. In 1987, the regional exchanges merged to
create the single entity -- The Australian Stock Exchange (ASX). Trading is done
via a computer link-up called "SEATS." SEATS enables all exchanges to quote
uniform prices. All the exchanges are members of the ASX and are subject to the
Securities Industry Act, which regulates the major aspects of stock exchange
operations. Although there are stock exchanges in all six states, the Melbourne
and Sydney Stock Exchanges are the major centers, covering 90% of all trades.

Reporting, Accounting and Auditing. Australian reporting, accounting
and auditing standards differ substantially from U.S. standards. In general
Australian corporations do not provide all of the disclosure required by U.S.
law and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Australian equity markets was approximately AUD ____
billion or US $____ billion.

The Austrian Equity Markets

General Background. Relative to international standards, the Vienna
stock market is small in terms of total capitalization and yearly turnover. The
Vienna Stock Exchange (VSE) is one of the oldest in the world and was founded in
1771 as a state institution to provide a market for state-issued bonds, as well
as for exchange transactions. The Stock Exchange Act of 1875 (the "Act")
established the VSE as an autonomous institution. The Act is still in force,
placing control and administration of the exchange in the hands of the
Borsekammer (Board of Governors), chosen from among the members of the exchange.
The Borsekammer consists of 25 individuals with the title of Borserat (stock
exchange councillor). Some are elected by members and some are designated by
organizations of the securities industry for a period of five years. The
councillors must be members of the exchange and they elect from amongst
themselves a President and three Vice Presidents. Shares account for about 80%
and investment fund certificates for about 20% of total listed securities on the
VSE. Business of the exchange can be transacted only by members. Almost all the
credit institutions in Vienna, some in the Austrian provinces and the joint
stock banks are represented on the stock exchange, as well as the private banks,
savings banks and other credit institutions. Certain securities which do not
have an official listing may be dealt in on the floor of the stock exchange with
permission of the management. This unlisted trading is the main activity of the
free brokers (Frei Makeler), of whom there are three.

Reporting, Accounting and Auditing. Austrian reporting, accounting and
auditing standards differ from U.S. standards. In general, Austrian corporations
do not provide all of the disclosure required by U.S. law and accounting
practice, and such disclosure may be less timely and less frequent than that
required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Austrian equity markets was approximately ATS ____ billion
or US$____ billion.

The Belgian Equity Markets

General Background. The Brussels Stock Exchange (BSE) was founded by
Napoleonic decree in 1801. Since January 1, 1991 the BSE has been officially
organized as the "Societe de la Bourse de Valeurs Mobileres de Bruxelles" (SBVM)
the shareholders of which are Belgian securities houses. The law of December 4,
1990 on financial operations and markets terminated the monopoly of the
individual brokers. Now only securities houses are allowed to carry out stock
exchange orders. Brokers, banks, brokerage firms and insurance companies can
participate in the capital of a securities house. Its management is composed of
a majority of qualified people bearing the title of stockbroker. The Banking and
Finance Commission was granted the power to approve securities houses by this
law. The Board of Directors of the SBVM, the Stock Exchange Committee organizes
and supervises the different markets and ensures market transparency. The Stock
Exchange Committee also admits or dismisses brokerage firms and ensures
compliance with all regulations. The Stock Exchange Committee is also in charge
of the admission to listing and suspension of listing. On the Brussels Stock
Exchange equities are traded on three different markets: the Official Market,
which includes a Cash and a Forward Market, the Second Market and an "Over the
Counter Market."

Reporting, Accounting and Auditing. Belgian reporting, accounting and
auditing standards differ substantially from U.S. standards. In general Belgian
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Belgian equity markets was approximately BEF ____ billion
or US$____ billion.

2
<PAGE> 36
The Canadian Equity Markets

General Background. The first Canadian stock exchange appeared in the
1870s. Today, Canada is the world's fourth largest public equity market by
trading volume and the fifth largest by market capitalization. There are five
stock exchanges across Canada, located in Toronto, Montreal, Vancouver, Calgary
and Winnipeg. Of these, the Toronto Stock Exchange is the largest, accounting
for almost 80% of Canadian trading volumes. Measured by the value of shares
traded, the Toronto Stock Exchange is the second largest in North America and
among the ten largest in the world.

Reporting, Accounting and Auditing. As recognized by the Securities and
Exchange Commission in one of the proposing releases relating to the
Multijurisdictional Disclosure System, Canadian reporting, accounting and
auditing practices are closer to U.S. standards than those of any other foreign
jurisdiction. Every issuer that qualifies an offering of securities for
distribution in Canada becomes subject to periodic disclosure requirements.
Authoritative accounting and auditing standards, which are uniform across
Canada, are developed by a national body, the Canadian Institute of Chartered
Accountants ("CICA"). Although promulgated auditing standards in Canada differ
from U.S. standards in some respects, generally accepted practices in Canada
routinely encompass all significant auditing procedures required by U.S.
standards. Further, CICA periodically evaluates new auditing standards adopted
by the American Institute of Certified Public Accountants, CICA's U.S.
counterpart, to determine whether similar guidelines may be appropriate for
Canadian auditors. Canadian GAAP are similar to their U.S. counterparts,
although there are some differences in measurement and disclosure.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Canadian markets was approximately CAD ____ billion or US$
____ billion.

The French Equity Markets

General Background. Trading of securities in France is subject to the
monopoly of the Societe de Bourse, which replaced the individual agents de
change in 1991 in order to increase the cohesion of the French equity market.
All purchases or sales of equity securities in listed companies on any one of
the French exchanges must be executed through the Societe de Bourse. There are
three different markets on which French securities may be listed: (1) the
official list (La Cote Officielle), comprised of equity securities of large
French and foreign companies and most bond issues; (2) the second market (Le
Second Marche), designed for the trading of equity securities of smaller
companies; and (3) the "Hors-Cote" Market. Securities may only be traded on the
official list and the second market after they have been admitted for the
listing by the Conseil des Bourses de Valeurs (the "CBV"). By contrast, the
Hors-Cote Market has no prerequisites to listing, and shares of otherwise
unlisted companies may be freely traded there, once they have been introduced on
the market by the Societe de Bourse. Although the Hors-Cote Market is frequently
referred to as an over-the-counter market, this term is inaccurate in that, like
the official list and the second market, it is supervised by Societes des
Bourses Francaises and regulated by the CBV.

Although there are seven stock exchanges in France (located in Paris,
Bordeaux, Lille, Lyon, Marseille, Nancy and Nantes), the Paris Stock Exchange
handles more than 95% of transactions in the country. All bonds and shares,
whether listed or unlisted, must be traded on one of the seven exchanges.
Trading in most of the Paris exchange-listed stocks takes place through the
computer order-driven trading system CAC, launched in 1988. French market
capitalization constitutes approximately 30% of the French Gross Domestic
Product. Securities are denominated in the official unit of currency, the French
Franc. Unless otherwise provided by a double tax treaty, dividends on French
shares are subject to a withholding tax of 25%.

Reporting, Accounting and Auditing. Although French reporting,
accounting and auditing standards are considered rather rigorous by European
standards, they differ from U.S. standards in certain material respects. In
general, French corporations are not required to provide all of the disclosure
required by U.S. law and accounting practice, and such disclosure may be less
timely and less frequent than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the French equity markets was approximately FRF ____ billion
or US$____ billion.

The German Equity Markets

General Background. The history of Frankfurt as a financial center can
be traced back to the early Middle Ages. Frankfurt had the right to issue coins
as early as 1180; the first exchange office was opened in 1402. Germany has been
without a central stock exchange, the position formerly held by the Berlin
exchange, since 1945. Today there are eight independent stock exchanges, of
which Dusseldorf and Frankfurt account for over three-quarters of the total
volume. Frankfurt is the main exchange in Germany. Exchange securities are
denominated in German Marks, the official currency of Germany. Equities may be
traded in Germany in one of three markets: (i) the official market, comprised of
trading in shares which have been formally admitted to official listing by the
admissions committee of the relevant stock exchange, based on disclosure in the
listing application; (ii) the "semi-official" unlisted market, comprised of
trading in shares not in the official listing; and (iii) the unofficial,
over-the-counter market, which is governed by the provisions of the Civil Code

3
<PAGE> 37
and the Merchant Code and not by the provisions of any stock exchange. There is
no stamp duty in Germany, but a nonresident capital gains tax may apply in
certain circumstances.

Reporting, Accounting and Auditing. German reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, German
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Germany equity markets was approximately DEM ____ billion
or US$____ billion.

The Hong Kong Equity Markets

General Background. Trading in equity securities in Hong Kong began in
1891 with the formation of the Association of Stockbrokers, which was changed in
1914 to the Hong Kong Stock Exchange. In 1921, a second stock exchange, The Hong
Kong Stockbrokers' Association, was established. In 1947, these two exchanges
were merged under the name The Hong Kong Stock Exchange Limited. Three
additional exchanges, the Far East Exchange Limited (1969), The Kam Ngan Stock
Exchange Limited (1971) and The Kowloon Stock Exchange (1972) also commenced
trading activities. These four exchanges were unified in 1986 to form The Stock
Exchange of Hong Kong Limited (the "SEHK"). The value of the SEHK constitutes
more than 100% of Hong Kong's Gross Domestic Product. Trading on the SEHK is
conducted in the post trading method, matching buyers and sellers through public
outcry. Securities are denominated in the official unit of currency, the Hong
Kong Dollar. Foreign investment in Hong Kong is generally unrestricted. All
investors are subject to a small stamp duty and a stock exchange levy, but
capital gains are tax-exempt.

Reporting, Accounting and Auditing. Hong Kong has significantly
upgraded the required presentation of financial information in the past decade.
Nevertheless, reporting, accounting and auditing practices remain significantly
less rigorous than U.S. standards. In general, Hong Kong corporations are not
required to provide all of the disclosure required by U.S. law and accounting
practice, and such disclosure may be less timely and less frequent than that
required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Hong Kong equity markets was approximately HKD ____
billion or US$____ billion.

The Italian Equity Markets

General Background. The first formal exchange was created in Italy in
1808 with the establishment of the Milan Stock Exchange. Since then nine other
exchanges have been founded. Milan is the most important exchange, accounting
for 90% of total equity volume and about 80% of turnover in fixed income
securities. After the Milan Stock Exchange the other exchanges, in order of
importance are: Rome, Turin, Genoa, Bologna, Florence, Naples, Palermo, Trieste
and Venice. By law the only persons allowed to trade in the official posts of
the stock exchange are the stockbrokers, who must act as brokers and not trade
for their own account. Banks and intermediaries are allowed to enter the trading
post as observers. In 1991, the Parliament passed legislation creating Societa
di intermediazone mobiliare (SIMs). SIMs were created to regulate brokerage
activities in the securities market and are allowed to trade on their own and
for customers' accounts. In 1986, the Centro Elaboraizione Dati (C.E.D. Borsa),
a subsidiary of the Milan Stock Exchange, developed a supporting service called
Borsamat. The Borsamat records all trading floor orders, links all Italian
exchanges, checks transaction details and issues confirmations. Italy has the
world's largest government securities market after the United States and Japan.
At the end of 1993, issues of treasury bills, notes and bonds outstanding
totaled US$1,133 billion.

Reporting, Accounting and Auditing. Italian reporting, accounting and
auditing practices are regulated by Italy's National Control Commission. These
practices bear some similarities to United States standards, but differ
significantly in many important respects. In general, Italian corporations do
not provide all of the disclosure required by U.S. law and accounting practice,
and such disclosure may be less timely, less frequent and less consistent than
that required of U.S.
corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Italian markets was approximately ITL ____ billion or
US$____ billion.

The Japanese Equity Markets

General Background. The Japanese stock market has a history of over 100
years beginning with the establishment of the Tokyo Stock Exchange Company Ltd.
in 1878. Stock exchanges are located in eight cities in Japan (Tokyo, Osaka,
Nagoya, Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo). There is also an
over-the-counter market. There are three distinct sections on the main Japanese
stock exchanges. The First Section trades in over 1,100 of the largest and most
active stocks, which account for over 95% of total market capitalization. The
Second Section consists of over 400 issues with lower turnover than the First
Section, which are newly quoted on the exchange or which are not listed and
would otherwise be traded over-the-counter. The Third Section consists of
foreign stocks which are traded over-the-counter. The main activity

4
<PAGE> 38
of the regular exchange members is the buying and selling of securities on the
floor of an exchange, both for their customers and for their own account. Japan
is second only to the United States in aggregate stock market capitalization.
Securities are denominated in the official unit of currency, the Japanese Yen.
Takeover activity is negligible in Tokyo, and although foreign investors play a
significant role, the trend of the market is set by the domestic investor. The
statutory at-source withholding is 20% on dividends. There also is a transaction
tax on share trades and a small stamp duty.

Reporting, Accounting and Auditing. Although some Japanese reporting,
accounting and auditing practices are based substantially on U.S. principles,
they are not identical to U.S. standards in some important respects,
particularly with regard to unconsolidated subsidiaries and related structures.
In general, Japanese corporations are not required to provide all of the
disclosure required by U.S. law and accounting practice, and such disclosure may
be less timely and less frequent than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Japanese equity markets was approximately JPY ____ billion
or US$____ billion.

The Malaysian Equity Markets

General Background. The securities industry in Malaysia dates back to
the early 1930's. Kuala Lumpur and Singapore were a single exchange until 1973
when they separated and the Kuala Lumpur Stock Exchange (KLSE) was formed. The
KLSE operated under a provisional set of rules until 1983 when a new Securities
Industry Act came into force. As of April 30, 1993, 320 companies were listed on
the KLSE main board. A Second Board, established in 1988, allows smaller
companies to tap additional capital. Fifty-seven companies were listed on the
Second Board as of April 30, 1993. Over the years, the KLSE's close links with
the Stock Exchange of Singapore (SES) has rendered it very vulnerable to
developments in Singapore. Consequently, the Government decided, as a matter of
national policy, on a delisting of Malaysian incorporated companies from the
SES. This was effected on January 1, 1990. A similar move was made by Singapore,
resulting in the delisting of all Singapore companies on the KLSE on January 1,
1990. There are two main stock indices in Malaysia. The wider ranging KLSE
Composite represents 80 counters. The New Straits Times Industrial Index is an
average of 30 industrial stocks.

Reporting, Accounting and Auditing. Malaysian reporting, accounting and
auditing standards differ substantially from U.S. standards. In general,
Malaysian corporations do not provide all of the disclosure required by U.S. law
and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Malaysian equity markets was approximately MYR ____
billion or US$____ billion.

The Mexican Equity Markets

General Background. There is only one stock exchange in Mexico, the
Bolsa Mexicana de Valores (BMV), which was established in 1894 and is located in
Mexico City. The stock exchange is a private corporation whose shares are owned
solely by its authorized members and operates under the stock market laws passed
by the government. The National Banking and Securities Commission (CNV)
supervises the stock exchange. The Mexican exchange operates primarily via the
open outcry method. However, firm orders in writing can supersede this system,
provided there is a perfect match of the details of a buy and sell order.
Executions on the exchange can be done by members only. Membership of the stock
exchange is restricted to "Casas de Bolsa" ("brokerage houses") and
"Especialistas Bursatiles" (stock exchange specialists).

Reporting, Accounting and Auditing. Mexican reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Mexican
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Mexican equity markets was approximately MXN ____ billion
or US$ ____ billion.

The Netherlands Equity Markets

General Background. Trading securities on the AEX Stock Exchange (AEX)
(formerly the "Amsterdam Stock Exchange") started at the beginning of the
seventeenth century. The United East India Company was the first company in the
world financed by an issue of shares, and such issue was effected through the
exchange. The Netherlands claims the honor of having the oldest established
stock exchange in existence. In 1611 a stock market began trading in the coffee
houses along the Dam Square. A more formal establishment, the Amsterdam Stock
Exchange Association, began trading industrial stocks in 1876 and until World
War II, Amsterdam ranked after New York and London as the third most important
stock market in the world. After the war, the AEX Stock Exchange only gradually
began to resume its activities, as members felt threatened by what they saw as
an impending socialist order which would leave little of the stock market
intact. Since the end of the war, the Dutch market has remained relatively
neglected, as local companies have found it more favorable to use

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<PAGE> 39

bank financing to meet their capital requirements. Trading in shares on the AEX
may take place on the official market or on the parallel market, which is
available to medium-sized and smaller companies that cannot yet meet the
requirements demanded for the official market.

Reporting, Accounting and Auditing. Dutch reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Dutch
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Dutch equity markets was approximately NLG ____ billion or
US$____ billion.

The Singaporean Equity Markets

General Background. The Stock Exchange of Singapore (SES) was formed in
1973 with the separation of the joint stock exchange with Malaysia, which had
been in existence since 1938. The linkage between the SES and the Kuala Lumpur
Stock Exchange (KLSE) remained strong as many companies in Singapore and
Malaysia jointly listed on both exchanges, until January 1, 1990 when the dual
listing was terminated. SES has a tiered market, with the formation of the
second securities market, SESDAQ (Stock Exchange of Singapore Dealing and
Automated Quotation System) in 1987. SESDAQ was designed to provide an avenue
for small and medium-sized companies to raise funds for expansion. In 1990, SES
introduced an over-the-counter (OTC) market known as CLOB International, to
allow investors access to international securities listed on foreign exchanges.
SES also has a direct link with the National Association of Securities Dealers
Automated Quotation (NASDAQ) system, which was set up in March 1988 to allow
traders in the Asian time zone access to selected securities on the U.S. OTC
markets. This is made possible through a daily exchange of trading prices and
volumes of the stocks quoted on NASDAQ. The Singapore Stock Exchange is one of
the most developed in Asia and has a strong international orientation.

Reporting, Accounting and Auditing. Singaporean reporting, accounting
and auditing standards differ substantially from U.S. standards. In general,
Singaporean corporations do not provide all of the disclosure required by U.S.
law and accounting practice, and such disclosure may be less timely and less
frequent than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Singaporean markets was approximately SGD ____ billion or
US$____ billion.

The Spanish Equity Markets

General Background. The trading of shares in Spain dates back to 1831
when the Madrid Stock Exchange was founded. Since that time other exchanges have
been established in Barcelona, Bilbao and Valencia, although the latter remains
purely a local market. Madrid is by far the most active and the most
international market exchange, accounting for nearly 50% of total market
capitalization of both bonds and stocks. The next largest exchange is Barcelona,
founded in 1915. Membership at each stock exchange in Spain is restricted to
stockbrokers nominated by the Ministry of Finance. In order to practice their
profession, a broker must belong to the Association of Brokers. In November
1986, the Madrid Stock Exchange opened the new second market, or unlisted
securities market, as part of an effort to expand the range of Spanish companies
whose shares are publicly quoted. The second market provides small and
medium-sized companies with access to the trading market of the Madrid Stock
Exchange.

Reporting, Accounting and Auditing. Spanish reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Spanish
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Spanish equity markets was approximately ESP ____ billion
or US$____ billion.

The Swedish Equity Markets

General Background. Organized trading of securities in Sweden can be
traced back to 1776. Although the Stockholm Stock Exchange was founded in 1864,
the real formation of a stock exchange in an international sense took place in
1901. The statutes of the stock exchange were modified in 1906 and, from the
beginning of 1907, commercial banks were admitted as members. During the 1970's
the Stockholm market was characterized by limited turnover and dull trading
conditions. In 1980 the market started to climb and for several years Stockholm
was one of the best performing stock markets in both price and volume growth.
This regeneration of a market for risk capital was reflected in the large number
of companies introduced in the early 1980's. The Stockholm Stock Exchange is
structured on a membership basis, with the Bank Inspection Board being the
supervising authority. The board consists of 11 directors and one chief
executive. The directors of the board are elected by the Swedish government, and
the Association of the Swedish Chamber of Commerce, the Federation of Swedish

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<PAGE> 40
Industries and the member companies of the Stock Exchange. There are three
different markets for trading shares in Sweden. The dominant market is the A1
list, for the largest and most heavily traded companies. The second distinct
market is the Over-the-Counter Market, which is more loosely regulated than the
official market and caters to small and medium sized companies. The other market
is the unofficial parallel market which deals in unlisted shares, both on and
off the exchange floor. The shares most frequently traded on this market are
those which have been delisted from the other markets and those which are only
occasionally available for trading.

There are also two independent markets for options -- the Swedish
Options Market (OM) and the Swedish Options and Futures Exchange (SOFE). They
offer calls, puts and forwards on Swedish stocks and stock market index.

Reporting, Accounting and Auditing. Swedish reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Swedish
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Swedish equity markets was approximately SEK ____ billion
or US$____ billion.

The Swiss Equity Markets

General Background. There are three principal stock exchanges in
Switzerland, the largest of which is Zurich, followed by Geneva and Basle. The
Geneva exchange is the oldest and was formally organized in 1850. The Basle and
the Zurich exchanges were founded in 1876 and 1877, respectively. The Geneva
Exchange is a corporation under public law and in Zurich and Basle the exchanges
are institutions under public law. There are three different market segments for
the trading of equities in Switzerland. The first is the official market, the
second is the semi-official market, and the third is the unofficial market. On
the official market, trading takes place among members of the exchange on the
official trading floors. Trading in the semi-official market also takes place on
the floors of the exchanges, but this market has traditionally been reserved for
smaller companies not yet officially accepted on the exchange. Unofficial market
trading is conducted by members and non-members alike. Typical trading on this
market involves shares with small turnover. Both listed and unlisted securities
can, however, be traded on this market.

Reporting, Accounting and Auditing. Swiss reporting, accounting and
auditing standards differ substantially from U.S. standards. In general, Swiss
corporations do not provide all of the disclosure required by U.S. law and
accounting practice, and such disclosure may be less timely and less frequent
than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the Swiss equity markets was approximately CHF ____ billion or
US$____ billion.

The United Kingdom Equity Markets

General Background. The United Kingdom is Europe's largest equity
market in terms of aggregate market capitalization. Trading is fully
computerized under the Stock Exchange Automated Quotation System. There are 14
stock exchanges in the United Kingdom and Ireland which comprise the Associated
Stock Exchange. The most important exchange and the one that has the major share
of the business is the London Stock Exchange. The London Stock Exchange has the
largest volume of trading in international equities in the world.

Reporting, Accounting and Auditing. Although UK reporting, accounting
and auditing standards are among the most stringent outside the United States,
such standards are not identical to U.S. standards in important respects. Some
UK corporations are not required to provide all of the disclosure required by
U.S. law and accounting practice, and such disclosure may, in certain cases, be
less timely and less frequent than that required of U.S. corporations.

Size of Equity Markets. As of August 31, 1997, the total market
capitalization of the United Kingdom equity markets was approximately GBP ____
billion or US$____ billion.

OTHER FUND INVESTMENTS

Although the policy of each WEBS Index Series of the Fund is to remain
substantially fully invested in equity securities, a WEBS Index Series may also
invest in combinations of certain stock index futures contracts, options on such
futures contracts, stock index options, stock index swaps, cash, local currency
and forward currency exchange contracts that are intended to provide the WEBS
Index Series with exposure to such equity securities. A WEBS Index Series may
invest temporarily in cash, local currency, forward currency contracts and
certain Short-Term Investments. Such investments may be used to invest
uncommitted cash balances or, in limited circumstances, to assist in meeting
shareholder redemptions of Creation Units of WEBS.

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<PAGE> 41
Although each WEBS Index Series generally seeks to invest for the long
term, the WEBS Index Series retain the right to sell securities irrespective of
how long they have been held. However, because of the "passive" investment
management approach of the Fund, the portfolio turnover rate for each WEBS Index
Series is expected to be under 50%, a generally lower turnover rate than for
many other investment companies. A portfolio turnover rate of 50% would occur if
one half of a WEBS Index Series' securities were sold within one year. (For
purposes of calculating portfolio turnover rate, the Fund does not take into
account "sales" of securities by means of in-kind redemptions, since such
transactions do not impact a WEBS Index Series' portfolio composition or
weighting.) Ordinarily, securities will be sold from a WEBS Index Series only to
reflect certain administrative changes in an MSCI Index (including mergers or
changes in the composition of the Index) or to accommodate cash flows out of the
WEBS Index Series while seeking to keep the performance of the WEBS Index Series
in line with that of its benchmark index. In addition, securities may be sold
from a WEBS Index Series in certain circumstances to ensure the WEBS Index
Series' compliance with the diversification and other requirements of the
Internal Revenue Code and with other requirements, which would tend to raise the
portfolio turnover rate of such WEBS Index Series. Purchases and sales of
securities involve transaction costs borne by the respective WEBS Index Series.

A WEBS Index Series may borrow money from a bank up to a limit of 33%
of the market value of its assets, but only for temporary or emergency purposes.
A WEBS Index Series may borrow money only to facilitate distributions to
shareholders or meet redemption requests (in connection with Creation Units of
WEBS that the Fund agrees to redeem for cash) prior to the settlement of
securities already sold or in the process of being sold by such WEBS Index
Series. To the extent that a WEBS Index Series borrows money prior to receiving
distributions on its portfolio securities or prior to selling securities in
connection with a redemption, it may be leveraged; at such times, the WEBS Index
Series may appreciate or depreciate in value more rapidly than its benchmark
index. A WEBS Index Series will not make cash purchases of securities when the
amount of money borrowed exceeds 5% of the market value of its total assets.

LENDING PORTFOLIO SECURITIES

The Fund may lend portfolio securities to brokers, dealers and other
financial institutions needing to borrow securities to complete transactions and
for other purposes. Because the government securities or other assets that are
pledged as collateral to the Fund in connection with these loans generate
income, securities lending enables a WEBS Index Series to earn additional income
that may partially offset the expenses of such WEBS Index Series, and thereby
reduce the effect that expenses have on such WEBS Index Series' ability to
provide investment results that substantially correspond to the price and yield
performance of its respective MSCI Index. These loans may not exceed 33% of a
WEBS Index Series' total assets. The documentation for these loans provide that
the WEBS Index Series will receive collateral equal to at least 100% of the
current market value of the loaned securities, as marked to market each day that
the net asset value of the WEBS Index Series is determined, consisting of
government securities or other assets permitted by applicable regulations and
interpretations. A WEBS Index Series pays reasonable administrative and
custodial fees in connection with the loan of securities. The WEBS Index Series
invests collateral in Short-Term Investments. Morgan Stanley Trust Company
("MSTC") serves as Lending Agent of the Fund and, in such capacity, shares
equally with the respective WEBS Index Series any net income earned on invested
collateral. A WEBS Index Series' share of income from the loan collateral is
included in the WEBS Index Series' gross investment income.

The Fund will comply with the conditions for lending established by the
Securities and Exchange Commission (the "SEC"). The SEC currently requires that
the following conditions be met whenever portfolio securities are loaned: (1)
the WEBS Index Series must receive at least 100% collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities lent rises above the level of the collateral; (3) the WEBS Index
Series must be able to terminate the loan at any time; (4) the WEBS Index Series
must receive reasonable interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities, and any increase in market
value; (5) the WEBS Index Series may pay only reasonable custodian fees in
connection with the loan and will pay no finder's fees; and (6) while voting
rights on the loaned securities may pass to the borrower, the Fund's Board of
Directors (the "Board" or the "Directors") must terminate the loan and regain
the right to vote the securities if a material event adversely affecting the
investment occurs. Although each WEBS Index Series will receive collateral in
connection with all loans of portfolio securities, and such collateral will be
marked to market, the WEBS Index Series will be exposed to the risk of loss
should a borrower default on its obligation to return the borrowed securities
(e.g., the loaned securities may have appreciated beyond the value of the
collateral held by the Fund). In addition, each WEBS Index Series bears the risk
of loss of any cash collateral that it invests in Short-Term Investments.

CURRENCY TRANSACTIONS

The investment policy of each WEBS Index Series is to remain as fully
invested as practicable in the equity securities of the relevant market. Hence,
no WEBS Index Series of the Fund expects to engage in currency transactions for
the purpose of hedging against declines in the value of the WEBS Index Series'
currency. A WEBS Index Series may enter into foreign currency forward and
foreign currency futures contracts to facilitate local securities settlement or
to protect against currency exposure in connection with its distributions to
shareholders, but may not enter into such contracts for speculative purposes or
as a way of protecting against anticipated adverse changes in exchange rates
between foreign currencies and the U.S. dollar.

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<PAGE> 42
A forward currency contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. A currency futures contract is a contract involving an
obligation to deliver or acquire the specified amount of currency at a specified
price at a specified future time. Futures contracts may be settled on a net cash
payment basis rather than by the sale and delivery of the underlying currency.

REPURCHASE AGREEMENTS

Each WEBS Index Series may invest in repurchase agreements with
commercial banks, brokers or dealers to generate income from its excess cash
balances and to invest securities lending cash collateral. A repurchase
agreement is an agreement under which a WEBS Index Series acquires a money
market instrument (generally a security issued by the U.S. Government or an
agency thereof, a banker's acceptance or a certificate of deposit) from a
seller, subject to resale to the seller at an agreed upon price and date
(normally, the next business day). A repurchase agreement may be considered a
loan collateralized by securities. The resale price reflects an agreed upon
interest rate effective for the period the instrument is held by a WEBS Index
Series and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by a WEBS Index Series (including
accrued interest earned thereon) must have a total value in excess of the value
of the repurchase agreement and are held by the Fund's custodian bank until
repurchased. In addition, the Fund's Board of Directors monitors the Fund's
repurchase agreement transactions generally and has established guidelines and
standards for review of the creditworthiness of any bank, broker or dealer
counterparty to a repurchase agreement with a WEBS Index Series. No more than an
aggregate of 15% of the WEBS Index Series' net assets will be invested in
repurchase agreements having maturities longer than seven days and securities
subject to legal or contractual restrictions on resale, or for which there are
no readily available market quotations. A WEBS Index Series will enter into
repurchase agreements only with Federal Reserve member banks with minimum assets
of at least $2 billion or registered securities dealers.

The use of repurchase agreements involves certain risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by a WEBS Index Series not within
the control of the WEBS Index Series and therefore the WEBS Index Series may not
be able to substantiate its interest in the underlying security and may be
deemed an unsecured creditor of the other party to the agreement. While the
Fund's management acknowledges these risks, it is expected that they can be
controlled through careful monitoring procedures.

FUTURES CONTRACTS, OPTIONS AND SWAP AGREEMENTS

Each WEBS Index Series may utilize futures contracts, options and swap
agreements to the extent described in the Prospectus. Futures contracts
generally provide for the future sale by one party and purchase by another party
of a specified commodity at a specified future time and at a specified price.
Stock index futures contracts are settled by the payment by one party to the
other of a cash amount based on the difference between the level of the stock
index specified in the contract and at maturity of the contract. Futures
contracts are standardized as to maturity date and underlying commodity and are
traded on futures exchanges. At the present time, there are no liquid futures
contracts traded on most of the benchmark indices of the WEBS Index Series. In
such circumstances a WEBS Index Series may use futures contracts, and options on
futures contracts, based on other local market indices or may utilize futures
contracts, and options on such contracts, on other indices or combinations of
indices that the Adviser believes to be representative of the relevant benchmark
index.

Although futures contracts (other than cash settled futures contracts
including most stock index futures contracts) by their terms call for actual
delivery or acceptance of the underlying commodity, in most cases the contracts
are closed out before the settlement date without the making or taking of
delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold," or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract position is
opened or closed.

Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
commodity or payment of the cash settlement amount) if it is not terminated
prior to the specified delivery date. Relatively low initial margin requirements
are established by the futures exchanges and may be changed. Brokers may
establish deposit requirements which are higher than the exchange minimums.
Futures contracts are customarily purchased and sold on margin deposits which
may range upward from less than 5% of the value of the contract being traded.

After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as

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<PAGE> 43
the contract remains open. The Fund expects to earn interest income on its
margin deposits.

Each WEBS Index Series may use futures contracts and options thereon,
together with positions in cash and Short-Term Investments, to simulate full
investment in the underlying index. As noted above, liquid futures contracts are
not currently available for the benchmark indices of many WEBS Index Series. In
addition, the Fund is not permitted to utilize certain stock index futures under
applicable law. Under such circumstances, the Adviser may seek to utilize other
instruments that it believes to be correlated to the underlying index.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

A WEBS Index Series will not enter into futures contract transactions
for purposes other than hedging to the extent that, immediately thereafter, the
sum of its initial margin deposits on open contracts exceeds 5% of the market
value of a WEBS Index Series' total assets. Assets committed to initial margin
deposits for futures and options on futures are held in a segregated account at
the Fund's custodian bank. Each WEBS Index Series will take steps to prevent its
futures positions from "leveraging" its portfolio. When it has a long futures
position, it will maintain in a segregated account with its custodian bank, cash
or high quality debt securities having a value equal to the purchase price of
the contract (less any margin deposited in connection with the position). When
it has a short futures position, it will maintain in a segregated account with
its custodian bank assets substantially identical to those underlying the
contract or cash and high quality debt securities (or a combination of the
foregoing) having a value equal to its obligations under the contract (less the
value of any margin deposits in connection with the position).

SWAP AGREEMENTS

Swap agreements are contracts between parties in which one party agrees
to make payments to the other party based on the change in market value or level
of a specified index or asset. In return, the other party agrees to make
payments to the first party based on the return of a different specified index
or asset. Although swap agreements entail the risk that a party will default on
its payment obligations thereunder, each WEBS Index Series seeks to reduce this
risk by entering into agreements that involve payments no less frequently than
quarterly. The net amount of the excess, if any, of a WEBS Index Series'
obligations over its entitlements with respect to each swap is accrued on a
daily basis and an amount of cash or high quality debt securities having an
aggregate value at least equal to the accrued excess is maintained in a
segregated account at the Fund's custodian bank.

FUTURE DEVELOPMENTS

Each WEBS Index Series may take advantage of opportunities in the area
of options, and futures contracts, options on futures contracts, warrants, swaps
and any other investments which are not presently contemplated for use by such
WEBS Index Series or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with a WEBS
Index Series' investment objective and legally permissible for the WEBS Index
Series. Before entering into such transactions or making any such investment,
the WEBS Index Series will provide appropriate disclosure.

INVESTMENT RESTRICTIONS

The Fund has adopted the following investment restrictions as
fundamental policies with respect to each WEBS Index Series. These restrictions
cannot be changed with respect to a WEBS Index Series without the approval of
the holders of a majority of such WEBS Index Series' outstanding voting
securities. For purposes of the 1940 Act, a majority of the outstanding voting
securities of a WEBS Index Series means the vote, at an annual or a special
meeting of the security holders of the Fund, of the lesser of (1) 67% or more of
the voting securities of the WEBS Index Series present at such meeting, if the
holders of more than 50% of the outstanding voting securities of such WEBS Index
Series are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the WEBS Index Series. A WEBS Index Series may
not:

1. Change its investment objective;

2. Lend any funds or other assets except through the purchase of
all or a portion of an issue of securities or obligations of
the type in which it is permitted to invest (including
participation interests in such securities or obligations) and
except that a WEBS Index Series may lend its portfolio
securities in an amount not to exceed 33% of the value of its
total assets;

3. Issue senior securities or borrow money, except borrowings
from banks for temporary or emergency purposes in an amount up
to 33% of the value of the WEBS Index Series' total assets
(including the amount borrowed), valued at the lesser of cost
or market, less liabilities (not including the amount
borrowed) valued at the time the borrowing is made, and the
WEBS Index Series will not purchase securities while
borrowings in excess of 5% of the WEBS Index Series' total
assets are outstanding, provided, that for purposes of this
restriction, short-term credits necessary for the clearance of
transactions are not considered borrowings;

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<PAGE> 44
4. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings. (The deposit of
underlying securities and other assets in escrow and
collateral arrangements with respect to initial or variation
margin for currency transactions and futures contracts will
not be deemed to be pledges of the WEBS Index Series' assets);

5. Purchase a security (other than obligations of the United
States Government, its agencies or instrumentalities) if as a
result 25% or more of its total assets would be invested in a
single issuer;

6. Purchase, hold or deal in real estate, or oil, gas or mineral
interests or leases, but a WEBS Index Series may purchase and
sell securities that are issued by companies that invest or
deal in such assets;

7. Act as an underwriter of securities of other issuers, except
to the extent the WEBS Index Series may be deemed an
underwriter in connection with the sale of securities in its
portfolio;

8. Purchase securities on margin, except for such short-term
credits as are necessary for the clearance of transactions,
except that a WEBS Index Series may make margin deposits in
connection with transactions in currencies, options, futures
and options on futures;

9. Sell securities short; or

10. Invest in commodities or commodity contracts, except that a
WEBS Index Series may buy and sell currencies and forward
contracts with respect thereto, and may transact in futures
contracts on securities, stock indices and currencies and
options on such futures contracts and make margin deposits in
connection with such contracts.

In addition to the investment restrictions adopted as fundamental policies
as set forth above, each WEBS Index Series observes the following restrictions,
which may be changed by the Board without a shareholder vote. A WEBS Index
Series will not:

1. Invest in the securities of a company for the purpose of
exercising management or control, or in any event purchase and
hold more than 10% of the securities of a single issuer,
provided that the Fund may vote the investment securities
owned by each WEBS Index Series in accordance with its views;
or

2. Hold illiquid assets in excess of 15% of its net assets. An
illiquid asset is any asset which may not be sold or disposed
of in the ordinary course of business within seven days at
approximately the value at which the WEBS Index Series has
valued the investment.

For purposes of the percentage limitation on each WEBS Index Series'
investments in illiquid securities, with respect to each WEBS Index Series,
foreign equity securities, though not registered under the Securities Act of
1933 (the "Securities Act"), are not deemed illiquid if they are otherwise
readily marketable. Such securities ordinarily are considered to be"readily
marketable" if they are traded on an exchange or other organized market and are
not legally restricted from sale by the WEBS Index Series. The Adviser monitors
the liquidity of restricted securities in each WEBS Index Series' portfolio
under the supervision of the Fund's Board. In reaching liquidity decisions, the
Adviser considers, inter alia, the following factors:

1. the frequency of trades and quotes for the security;

2. the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers;

3. dealer undertakings to make a market in the security; and

4. the nature of the security and the nature of the marketplace
in which it trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of
transfer).

If a percentage limitation is adhered to at the time of investment or
contract, a later increase or decrease in percentage resulting from any change
in value or total or net assets will not result in a violation of such
restriction, except that the percentage limitations with respect to the
borrowing of money and illiquid securities will be observed continuously.

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<PAGE> 45
SPECIAL CONSIDERATIONS AND RISKS

A discussion of the risks associated with an investment in the Fund is
contained in the Prospectus under the heading "Investment Considerations and
Risks." The discussion below supplements, and should be read in conjunction
with, such section of the Prospectus.

NON-U.S. EQUITY PORTFOLIOS

An investment in WEBS involves risks similar to those of investing in a
broadly-based portfolio of equity securities traded on exchanges in the
respective countries covered by the individual WEBS Index Series. These risks
include market fluctuations caused by such factors as economic and political
developments, changes in interest rates and perceived trends in stock prices.
Investing in securities issued by companies domiciled in countries other than
the domicile of the investor and denominated in currencies other than an
investor's local currency entails certain considerations and risks not typically
encountered by the investor in making investments in its home country and in
that country's currency. These considerations include favorable or unfavorable
changes in interest rates, currency exchange rates, exchange control regulations
and the costs that may be incurred in connection with conversions between
various currencies. Investing in a WEBS Index Series whose portfolio contains
non-U.S. issuers involves certain risks and considerations not typically
associated with investing in the securities of U.S. issuers. These risks include
generally less liquid and less efficient securities markets; generally greater
price volatility; less publicly available information about issuers; the
imposition of withholding or other taxes; restrictions on the expatriation of
funds or other assets of a WEBS Index Series; higher transaction and custody
costs; delays attendant in settlement procedures; difficulties in enforcing
contractual obligations; lesser liquidity and significantly smaller market
capitalization of most non-U.S. securities markets; lesser levels of regulation
of the securities markets; more substantial government involvement in the
economy; higher rates of inflation; greater social, economic, and political
uncertainty; and the risk of nationalization or expropriation of assets and risk
of war.

CURRENCY TRANSACTIONS

Foreign exchange transactions involve a significant degree of risk and
the markets in which foreign exchange transactions are effected are highly
volatile, highly specialized and highly technical. Significant changes,
including changes in liquidity and prices, can occur in such markets within very
short periods of time, often within minutes. Foreign exchange trading risks
include, but are not limited to, exchange rate risk, maturity gaps, interest
rate risk and potential interference by foreign governments through regulation
of local exchange markets, foreign investment, or particular transactions in
foreign currency. If the Adviser utilizes foreign exchange transactions at an
inappropriate time or judges market conditions, trends or correlations
incorrectly, foreign exchange transactions may not serve their intended purpose
of improving the correlation of a WEBS Index Series' return with the performance
of the corresponding MSCI Index and may lower the WEBS Index Series' return. The
WEBS Index Series could experience losses if the values of its currency
forwards, options and futures positions were poorly correlated with its other
investments or if it could not close out its positions because of an illiquid
market. In addition, each WEBS Index Series will incur transaction costs,
including trading commissions, in connection with certain of its foreign
currency transactions.

FUTURES TRANSACTIONS

Positions in futures contracts and options thereon may be closed out
only on an exchange which provides a secondary market for such futures. However,
there can be no assurance that a liquid secondary market will exist for any
particular futures contract or option at any specific time. Thus, it may not be
possible to close a futures or options position. In the event of adverse price
movements, a WEBS Index Series would continue to be required to make daily cash
payments to maintain its required margin. In such situations, if a WEBS Index
Series has insufficient cash, it may have to sell portfolio securities to meet
daily margin requirements at a time when it may be disadvantageous to do so. In
addition, a WEBS Index Series may be required to make delivery of the
instruments underlying futures contracts it holds.

A WEBS Index Series will minimize the risk that it will be unable to
close out a futures or options contract by only entering into futures and
options for which there appears to be a liquid secondary market.

The risk of loss in trading futures contracts in some strategies is
potentially unlimited, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss (or gain) to the investor. For example, if at the time of
purchase, 10% of the value of a futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, entering into long or short futures positions may result in losses
well in excess of the amount initially paid. However, given the limited purposes
for which futures contracts are used, and the fact that steps will be taken to
eliminate the leverage of any futures positions, a WEBS Index Series would
presumably have sustained comparable losses if, instead of the futures
contracts, it had invested in the underlying financial instrument and sold it
after the decline.

12
<PAGE> 46
Utilization of futures transactions by a WEBS Index Series involves the
risk of imperfect or no correlation to the benchmark index where the index
underlying the futures contracts being used differs from the benchmark index.
There is also the risk of loss by the Fund of margin deposits in the event of
bankruptcy of a broker with whom a WEBS Index Series has an open position in the
futures contract or related option.

Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Each WEBS Index Series is required for federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses on
certain futures contracts as of the end of the year as well as those actually
realized during the year. In most cases, any gain or loss recognized with
respect to the futures contract is considered to be 60% long-term capital gain
or loss and 40% short-term capital gain or loss, without regard to the holding
period of the contract. Furthermore, sales of futures contracts which hedge
against a change in the value of securities held by a WEBS Index Series may
affect the holding period of such securities and, consequently, the nature of
the gain or loss on such securities upon disposition. A WEBS Index Series may be
required to defer the recognition of losses on futures contracts to the extent
of any unrecognized gains on related positions held by the WEBS Index Series.

In order for a WEBS Index Series to continue to qualify for federal
income tax treatment as a regulated investment company, at least 90% of its
gross income for a taxable year must be derived from qualifying income; i.e.,
dividends, interest, income derived from loans of securities, gains from the
sale of securities or of foreign currencies or other income derived with respect
to the WEBS Index Series' business of investing in securities. It is anticipated
that any net gain realized from the closing out of futures contracts will be
considered gain from the sale of securities and therefore will be qualifying
income for purposes of the 90% requirement.

Each WEBS Index Series distributes to shareholders annually any net
capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the WEBS Index Series' fiscal year) on
futures transactions. Such distributions are combined with distributions of
capital gains realized on the WEBS Index Series' other investments and
shareholders are advised on the nature of the distributions.

CONTINUOUS OFFERING

The method by which Creation Units of WEBS are created and traded may
raise certain issues under applicable securities laws. Because new Creation
Units of WEBS are issued and sold by the Fund on an ongoing basis, at any point
a "distribution," as such term is used in the Securities Act, may occur.
Broker-dealers and other persons are cautioned that some activities on their
part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus delivery and liability
provisions of the Securities Act. For example, a broker-dealer firm or its
client may be deemed a statutory underwriter if it takes Creation Units after
placing an order with the Distributor, breaks them down into constituent WEBS,
and sells such WEBS directly to customers, or if it chooses to couple the
creation of a supply of new WEBS with an active selling effort involving
solicitation of secondary market demand for WEBS. A determination of whether one
is an underwriter for the purposes of the Securities Act must take into account
all the facts and circumstances pertaining to the activities of the
broker-dealer or its client in the particular case, and the examples mentioned
above should not be considered a complete description of all the activities that
could lead to a categorization as an underwriter. In any event, broker-dealer
firms should also note that dealers who are not "underwriters" but are effecting
transactions in WEBS, whether or not participating in the distribution of WEBS,
are generally required to deliver a prospectus. This is because the prospectus
delivery exemption in Section 4(3) of the Securities Act is not available in
respect of such transactions as a result of Section 24(d) of the 1940 Act. Firms
that incur a prospectus-delivery obligation with respect to WEBS are reminded
that under Securities Act Rule 153 a prospectus-delivery obligation under
Section 5(b)(2) of the Securities Act owed to an exchange member in connection
with a sale on the exchange is satisfied by the fact that the WEBS Index Series'
prospectus is available at the exchange (i.e., the AMEX) upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange and not with respect to "upstairs"
transactions.

13
<PAGE> 47

REGIONAL AND COUNTRY-SPECIFIC ECONOMIC CONSIDERATIONS [TO BE UPDATED]

Europe

In 1986, the member states of the European Community (the "Member
States") signed the "Single European Act," an agreement to establish a free
market. Although developing a unified common European market has promoted the
free flow of goods and services, in 1993 tight monetary policies and high
inflation caused Europe's economies to ebb into recession.

The 1995 General Agreement on Trade and Tariffs (GATT) has attempted to
resist protectionism and Europe's economies improved, fueled by increased
exports. This recovery was aided by the U.S. dollar's recovery in the spring of
1995. While interest rates have continued to decline, some countries' tight
monetary conditions remain an obstacle to stronger growth and a threat to
exchange market stability.

The Maastricht Treaty on economic and monetary union (the "EMU") is
intended to provide its members with a stable monetary framework. The EMU is
likely to take place in 1999 with only a limited number of countries; however,
the community will be challenged in the future to allow more countries in the
monetary union while maintaining its stability.

Austria. Austria's small population and limited domestic market are
insufficient to support single large industrial sectors. Also, raw materials are
limited and the terrain supports only a small agricultural sector. With its
skilled labor force, however, Austria has focused on special niche industries
for export, with high value added through technological applications. In
addition, a vibrant services sector, based initially on tourism, has emerged and
accounts for 64% of Gross Domestic Product ("GDP").

As a result of the second world war, much of the Austrian industrial
sector was converted to public ownership. Austria had established the Austrian
Industrial Administration Company ("OIAG") to function as a holding company for
these nationalized industries. With the global recession and the troublesome
state of public finance in Austria, the government, attempting to reduce the
drain of the OIAG on the country's budget, reduced the OIAG's labor force and
reorganized the OIAG into seven separate holding companies. The reorganization
of the OIAG, along with public asset sales, helped to reduce the budget deficit
from 5.1% of GDP in 1986 to 3.3% of GDP in 1992. Losses in 1993, however, caused
the government to begin selling the group to the private sector. Along with the
steady trend toward privatizations, the importance of foreign capital has
increased.

Belgium. Rising new industries in Belgium include light engineering,
chemicals and food processing and services, with the service industry sector
accounting for approximately 70% of GDP. Although the agricultural sector is
small, accounting for only 2% of GDP, its importance is reflected in Belgium's
thriving food processing business. Some of Belgium's traditional industries have
experienced a steep decline over the past two decades, such as coal, steel,
textiles and heavy engineering, but this decline has, in part, been offset by
the rising new industries. Company ownership is held by a few large private
sector groups through a web of holding and operating companies.

Belgium's open trade policy together with a successful strategy of
competitive disinflation and lower domestic demand growth has led to substantial
current account surpluses. Exports are running at approximately 77% of GDP and
imports at 74%.

High unemployment and a large government deficit continue to occupy the
government's attention. Through a series of expenditure reductions and tax
increases, the government was able to reduce the deficit to 5.9% of GDP in 1990,
but this trend reversed itself in 1991. The rise in the deficit was fueled by
economic slowdown followed by a recession in 1993, while social security and
interest payments continued to rise. By 1993, the recessive economy coupled with
rising social security and interest payments caused the deficit to increase to
7.2% of GDP. With the debt to GDP ratio standing at 134.3% in 1995 and the
Maastricht criteria to be fulfilled, Belgium has implemented a series of tough
fiscal restrictions during the last four years. As a result, the budget deficit
has fallen from 7.2% of GDP in 1993 to around 3% in 1996 and the debt to GDP
ratio has also started to decline.

France. France is a leading industrial and agricultural country. Its
large service sector, accounting for approximately two-thirds of GDP, includes
tourism, transportation and computer consultancy. The once dominant iron and
steel and textiles and clothing industries have given way to the fast growing
aerospace, chemicals and pharmaceuticals, plastics and telecommunications
industries. The automobile industry, however, is still the most important
industry in France, accounting for one-twelfth of the labor force and one-sixth
of exports.

The two economic concerns that have plagued France for the past decade
are a large budget deficit and high unemployment (currently approximately 12%).
In May 1993, the government, in an effort to correct these problems, imposed
excise duties and implemented government expenditure cuts. Soon thereafter, the
government imposed additional measures to foster employment creation and
conducted the largest government bond issue to date. In addition, in 1993, the
government restarted privatizing state-owned enterprises.

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<PAGE> 48
In 1995, the government attempted to strike a balance between reducing
the budget deficit and stimulating growth. In May 1995, the government imposed
tax increases to reduce the budget deficit consisting of a 2% increase in
value-added tax and a 10% surcharge on corporate income tax. These measures,
while termed temporary, will remain in effect until at least 1997.

In 1996, the government started to implement a far reaching reform of
the social security system, despite a strong popular opposition which resulted
in a protracted strike. The reform aims to curb healthcare spending through
tighter control from the Parliament and supervisory bodies.

The economic challenges facing the government for the next few years
include reducing the budget deficit to a level acceptable under the EMU,
downsizing and restructuring the public sector, curbing high unemployment and
going further in controlling social security spending.

Germany. Germany, the third largest economy in the world, has faced
substantial economic challenges from the reunification of East and West Germany.
The former East Germany, which had been insulated from any real competition, was
under-invested in housing and infrastructure and, generally, was not geared to
handle full economic and political union with West Germany. In addition, while
the West German government intended to finance the costs of reunification with
increased taxes, the costs proved to be much greater than anticipated due to the
high cost of social security transfers, extensive environmental damage and a
generally worse economic condition than expected. As a result, in 1993, the
public sector deficit rose from 0% to 7.5% and the Bundesbank (central bank)
sharply raised interest rates, which, in turn, caused the economy to recess.

In 1994, Germany began to recover from recession, but rising interest
rates restricted market advances. Eastern Germany has also experienced an upturn
in its economy with GDP rates running in excess of 7%, which has enhanced cost
competitiveness. Much of Germany's fiscal health and prosperity over the next
few years will depend on the continued growth of capitalism in eastern Germany.
In addition, to comply with the Maastricht Treaty, Germany must cut government
debt from a projected 62% of GDP next year to less than 60%. The failure, either
political or economic, of Germany's ability to cut spending while also funding
the restoration of the East to fiscal health could negatively impact the German
stock market.

Italy. Italy is a net importer of agricultural products and imports
most of its energy products. Aside from tourism and design, Italy is not very
competitive in the service sector. Through networks of small and medium-sized
companies, Italy's strengths lie in its manufacturing sector, particularly
machine tools and consumer goods. In the early 1990s, industry began to struggle
to compete as a result of wage increases and an exchange rate policy designed to
limit the effect of government borrowing on the inflation rate. Since the
collapse of the lira in September 1992, however, exports have recovered.

The Bank of Italy, operating autonomously, has historically followed a
tough monetary policy in an effort to prevent government borrowing from causing
inflation.

Beginning in 1992, the government implemented a fiscal policy that
reduced government borrowings through tax measures and spending cuts. After a
1995 budget that included some temporary revenue raising measures and cuts to
the pension system, health service, local government and defense, the government
delivered to parliament an ambitious draft budget law in 1996. Indeed, this
legislation sought to bring forward the 3%-of-GDP deficit target from 1998 to
1997 through a combination of higher taxes and one-off measures.

In 1992, Italy also began a privatization program by transferring major
state holdings to joint-stock companies as an intermediate step to total or, at
least partial, floatation on the stock exchange. Although the privatization
program was somewhat curbed in 1994, privatization was partly resumed in
1995-1996.

The Netherlands. The Netherlands boasts one of the highest levels of
GDP per capita in the world. Although its most important sector is industrial,
the Netherlands also benefits from agricultural and natural gas resources.

Foreign trade is vital to the Netherlands, accounting for approximately
50% of GDP. The recovery of exports by the end of the 1980s was fueled by
government policies on wage moderation, although such policies resulted in
increased unemployment. In addition, the reunification of Germany resulted in
a surge in demand for exports.

Public spending has exceeded 50% of GDP, including transfer payments.
The public-sector deficit has been a political and economic problem and has
received heightened government attention. While the deficit has been reduced
recently, further reduction remains a key government objective.

Spain. Spain's entry into the European Community in 1986 was followed
by a period of rapid economic growth. Economic growth did not continue, however,
and the government's restrictive monetary policy and the overvalued peseta

15
<PAGE> 49
contributed to a downturn in investment and a rise in unemployment in the early
1990s. Currently, the government faces the challenges of addressing the domestic
concerns of controlling inflation, reducing a large government deficit and
effecting labor reform against the competing interests of maintaining a monetary
policy suitable for Spain's participation in the EMU.

In June 1989, Spain joined the Exchange Rate Mechanism of the European
Monetary System with the aim of maintaining a stable currency. The resulting
huge inflows of foreign capital caused the Spanish economy to lose some of its
competitiveness. Despite the devaluation of the peseta and the easing of
monetary policy in 1993, Spain slipped into its worst recession in 30 years.
Since then, economic growth has begun to recover, reaching 2.1% in 1994 and 3.0%
in 1995. Although the government has in the past displayed an inability to
control spending, it may be making some progress in this area. The budget law
that is currently undergoing parliamentary ratification would freeze
public-sector wages, cut public works spending and reduce government purchases
of goods and services.

In June of 1994, Spain experienced a general strike by the trade
unions. The strike, while unsuccessful, has led to reforms in the labor market
to ease rigid regulations that govern permanent job contracts.

Sweden. Sweden has a highly developed and successful industrial sector.
The chief industries, most of which are under private ownership, include
textiles, furniture, electronics, dairy, metals, ship building, clothing,
engineering, chemicals, food processing, fishing, paper, oil and gas,
automobiles and shipping. Productivity, as measured by GDP per capita, is well
above the European average, although two-thirds of GDP passes through the public
sector.

Sweden recently suffered a severe recession with a total fall in GDP of
5% from 1990 to 1993. However, economic recovery in 1994 resulted in a 2%
increase in GDP. The result of the recession and the slow growth of GDP
thereafter has led to a drop in the standard of living in Sweden.

The government has traditionally afforded its citizens generous
benefits for unemployment, sick leave, child care, elder care and general public
welfare, along with state-provided medical care. This extensive social welfare
system, however, has proved to be extremely costly during recent decades,
resulting in growing government deficits. In addition, Sweden has a history of
supporting an inefficient agricultural sector with subsidies ranging up to 75%
(the recent average for Europe has been approximately 35%-45%). Also,
unemployment has remained fairly high and, because the income scale tends to be
flat, little income advantage results from career advancement. Almost half of
personal disposable income received by Swedes was the result of transfer
payments, a system for redistributing wealth.

Sweden, which joined the European Community on January 1, 1995, has
been under strong pressure to bring its public finance under control. Fiscal
consolidation, which will entail a tightening of policy over a period of four
years, began in 1995. The implementation of these measures is on track and it is
probable that Sweden will achieve a balanced budget in 1998. The resulting
improvement in investor and business confidence has boosted Swedish economic
prospects and, despite the continued fiscal tightening, such economic prospects
are some of the best in Europe for the remainder of the decade.

Switzerland. Switzerland's lack of raw materials has caused it to base
economic growth on its highly skilled labor market and its technological
expertise in manufacturing. Switzerland's strengths lie in chemicals and
pharmaceuticals, watches and precision instruments, engineering, food, financial
services and tourism. In addition, its small domestic market has caused
substantial reliance on exports, which accounted for 36% of GDP in 1994.

With a heavy dependence on foreign labor to supplement its labor force,
Switzerland has historically experienced low unemployment levels. From 1990
through the first half of 1995, however, unemployment rose substantially,
peaking at 5% in 1994. In addition, high labor costs tend to reduce price
competitiveness, although this has been partially offset by low inflation and
moves to higher value-added products and services.

United Kingdom. Following a long recession that ended in 1992, the
United Kingdom saw 2% growth in GDP in 1993 amidst the global recession. The
reduced demand from foreign markets stemming from the global recession of
1993-94 hurt the United Kingdom's economy. In addition, foreign investment is
crucial to the continued economic recovery, but the United Kingdom faces heavy
competition for foreign investment from its European neighbors.

Anti-union sentiment exists in the United Kingdom and the failed
attempt to tie the pound to the European Currency Unit has resulted in higher
inflation. Accordingly, the United Kingdom has not been as active a participant
in formulating European Community policies as it might have been.

REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)

16
<PAGE> 50

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Austria ........................................................... 1.8 3.0 0.4 2.0 2.8
Belgium ........................................................... 3.0 2.6 -1.6 1.8 2.2
France ........................................................... 2.2 2.8 -1.3 1.2 0.8
Germany ........................................................... 1.9 2.9 -1.1 2.2 5.0
Italy ........................................................... 3.0 2.2 -1.2 0.7 1.2
Netherlands......................................................... 2.4 2.7 0.2 2.0 2.3
Spain ........................................................... 3.0 2.1 -1.2 0.7 2.3
Sweden ........................................................... 3.0 2.6 -2.2 -1.4 -1.1
Switzerland......................................................... 0.7 1.2 -0.8 -0.3 ---
United Kingdom...................................................... 2.5 3.9 2.1 -0.5 -2.0
</TABLE>

Source: World Economic Outlook, October 1996 (International Monetary Fund)

Japan, the Pacific Basin, and Southeast Asia

Many Asian countries may be subject to a greater degree of social,
political and economic instability than is the case in the United States and
Western European countries. Such instability may result from (i) authoritarian
governments or military involvement in political and economic decision-making;
(ii) popular unrest associated with demands for improved political, economic,
and social conditions; (iii) internal insurgencies; (iv) hostile relations with
neighboring countries; and (v) ethnic, religious, and racial disaffection.

The economies of most of the Asian countries continue to depend heavily
upon international trade and are accordingly affected by protective trade
barriers and the economic conditions of their trading partners, principally the
United States, Japan, China and the European Community. The enactment by the
United States or other principal trading partners of protectionist trade
legislation, reduction of foreign investment in the local economies and general
declines in the international securities markets could have a significant
adverse effect upon the economies and securities markets of the Asian countries.

The success of market reforms and a surge in infrastructure spending
have fueled rapid growth in many developing countries in Asia. Rapidly rising
household incomes have fostered large middle classes and new waves of consumer
spending. Increases in infrastructure spending and consumer spending have made
domestic demand the growth engine for these countries. Thus, their growth now
depends less upon exports. While exports may no longer be the sole source of
growth for developing economies, improved competitiveness in export markets has
contributed to growth in many of these nations. The increased productivity of
many Asian countries has enabled them to achieve, or continue, their status as
top exporters while improving their national living standards.

Australia. Australia has a prosperous Western-style capitalist economy,
with a per capita GDP comparable to levels in industrialized Western European
countries. Economic growth accelerated markedly in 1994 as robust domestic
spending boosted activity. Australia is rich in natural resources and is the
world's largest exporter of beef and wool, the second-largest exporter of
mutton, and among the top wheat exporters. Australia is also a major exporter of
minerals, metals and fossil fuels. Due to the nature of Australia's exports, a
downturn in world commodity prices may have a big impact on its economy. The
government is in the process of developing policies to promote foreign
investment, expand research and development, increase funding for national
landcare and reform public housing policy. Also, the government is supportive of
continuing privatization of state-owned enterprises.

While economic data suggests an easing from the unsustainable rates of
growth reached during 1994, the outlook is for continued, but moderate economic
growth. While GDP grew by 3.2% in 1995, debt is expected to continue to rise.

Notwithstanding the intensification of the severe drought in eastern
Australia, economic growth was strong in 1994-95 with improvements made in
reducing unemployment. The drought also contributed to inflation by causing food
prices to rise in 1995. In addition, the government's increased taxes on tobacco
and motor vehicles contributed to an inflation rate that reached 5.1% in 1995.

Hong Kong. Hong Kong's return to Chinese dominion in 1997 has not
initially had a positive effect on its economic growth, which was vigorous in
the 1980s. Although China has committed by treaty to preserve Hong Kong's
economic and social freedoms, the continuation of the current form of the
economic system in Hong Kong will depend on the actions of the Chinese
government. Business confidence in Hong Kong, therefore, can be significantly
affected by such developments, which in turn can affect markets and business
performance. In preparation for 1997, Hong Kong continued to develop trade with
China, where it is the largest foreign investor, while also maintaining its
long-standing export relationship with the United States. Spending on
infrastructure improvements is a significant priority of the colonial government
while the private sector continues to diversify abroad based on its position as
an established international trade center in the Far East. It is important to
note that a substantial portion of the companies listed on the Hong Kong Stock
Exchange are involved in real

17
<PAGE> 51
estate related business.

Much speculation centers around what China will do now that it has come
back into possession of Hong Kong. There can be no assurance that the transition
to Chinese rule will not have serious adverse effects on the value of Hong Kong
stocks, and thus on the value of WEBS of the Hong Kong WEBS Index Series. The
Hong Kong market's growth over the past decade has not come without much
volatility, and there is no doubt that volatility will continue to characterize
the market, not only because of political uncertainties but because the market
has traditionally been dominated by the actions of a few large trading blocks.

Japan. Japan's economy, the second-largest in the world, has grown
substantially over the last three decades. However, in 1995, the Japanese
economy expanded by just 0.9% and its budget showed a deficit of 5.9% of GDP.
The boom in Japan's equity and property markets during the expansion of the late
1980's supported high rates of investment and consumer spending on durable
goods, but both of these components of demand have now retreated sharply
following the decline in asset prices. Profits have fallen sharply, unemployment
has reached a historical high and consumer confidence is low. The banking sector
continues to suffer from non-performing loans. Numerous discount-rate cuts since
its 6% peak in 1991, a succession of fiscal stimulus packages, support plans for
the debt-burdened financial system and spending for reconstruction following the
Kobe earthquake may help to contain the recessionary forces, but substantial
uncertainties remain.

In addition to a cyclical downturn, Japan is suffering through
structural adjustments. Like the Europeans, the Japanese have seen a
deterioration of their competitiveness due to high wages, a strong currency and
structural rigidities. Finally, Japan is reforming its political process and
deregulating its economy. This has brought about turmoil, uncertainty and a
crisis of confidence.

While the Japanese governmental system itself seems stable, the
dynamics of the country's politics have been unpredictable in recent years. The
economic crisis of 1990-92 brought the downfall of the conservative Liberal
Democratic Party, which had ruled since 1955. Since then, the country has seen a
series of unstable multi-party coalitions and several prime ministers come and
go, because of politics as well as personal scandals. While there appears to be
no reason for anticipating civic unrest, it is impossible to know when the
political instability will end and what trade and fiscal policies might be
pursued by the government that emerges.

Japan's heavy dependence on international trade has been adversely
affected by trade tariffs and other protectionist measures as well as the
economic condition of its trading partners. While Japan subsidizes its
agricultural industry, only 19% of its land is suitable for cultivation and it
is only 50% self-sufficient in food production. Accordingly, it is highly
dependent on large imports of wheat, sorghum and soybeans. In addition,
industry, its most important economic sector, depends on imported raw materials
and fuels, including iron ore, copper, oil and many forest products. Japan's
high volume of exports, such as automobiles, machine tools and semiconductors,
have caused trade tensions, particularly with the United States. Some trade
agreements, however, have been implemented to reduce these tensions. The
relaxing of official and de facto barriers to imports, or hardships created by
any pressures brought by trading partners, could adversely affect Japan's
economy. A substantial rise in world oil or commodity prices could also have a
negative affect. The strength of the yen itself may prove an impediment to
strong continued exports and economic recovery, because it makes Japanese goods
sold in other countries more expensive and reduces the value of foreign earnings
repatriated to Japan. Because the Japanese economy is so dependent on exports,
any fall-off in exports may be seen as a sign of economic weakness, which may
adversely affect the market.

Geologically, Japan is located in a volatile area of the world, and has
historically been vulnerable to earthquakes, volcanoes and other natural
disasters. As demonstrated by the Kobe earthquake in January of 1995, in which
5,000 people were killed and billions of dollars of damage was sustained, these
natural disasters can be significant enough to affect the country's economy.

Malaysia. Over the last two decades, Malaysia has experienced rapid
industrialization, transforming a once commodity driven economy to one dominated
by the manufacturing sector. Although commodities remain important to the
Malaysian economy, where tin, rubber, palm oil, timber, oil and gas have played
a leading role, the electronics sector is now, by far, the fastest growing and
most important sector. In fact, Malaysia has become the world's third-largest
producer of semiconductor devices (after the U.S. and Japan) and the world's
largest exporter of semiconductor devices.

The high rates of investment that have been required to sustain
Malaysia's rapid growth have been met with high rates of domestic savings and
significant inflows of foreign direct investment. This combination has been
instrumental in maintaining fast growth while simultaneously limiting
inflationary pressures. Although free repatriation of profits is allowed,
Malaysia has experienced a high rate of reinvestment of profits on foreign
direct investment.

The Bank Negara Malaysia (the central bank) manages the exchange value
of the currency against a basket of currencies. The ringgit has been relatively
stable, which has translated into low and stable inflation. In 1993 speculative
capital inflows became difficult to manage and the central bank imposed capital
controls including segregation of

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<PAGE> 52
non-resident funds and strict limits on banks' activities across frontiers. As a
result, share prices on the national exchange fell and the value of the ringgit
dropped. Although these monetary policies were subsequently rescinded, the
threat of such future action may deter capital inflows.

While inflation has been kept in check, in part through government
intervention to control prices, inflationary pressures still exist. Rapid
economic growth has led to shortages, some inefficiencies and rising imports.
The government, however, has been reluctant to take certain deflationary steps
because of the fear of endangering the private investment needed for economic
growth.

The future direction of Malaysian manufacturing, and the economy as a
whole, depends on the performance of manufactured exports. Foreign direct
investment is the source of Malaysia's export dynamism. Malaysia is developing
its human capital base and its infrastructure in order to continue to attract
foreign investment. But this strategy has led to an increased import-intensity
of growth. It also makes Malaysia vulnerable to potentially volatile foreign
capital flows and downturns in demand in its export markets. Malaysia's
continued success depends on reducing the import content of exports through
increased technology transfer to develop linkages between exporters and domestic
input supplies.

Singapore. Singapore has become a high-income, highly industrialized
country though rapid growth in its manufacturing sector due in large part to
significant foreign investment. Of particular importance is the electronics
industry where Singapore is the leading producer of disk drives. The financial
and business services sector has also experienced recent growth, while mining
and agriculture are of minimal importance. The oil refining and chemicals
industry has long been important and a significant pharmaceuticals sector has
emerged. Since 1987, annual growth has been high, ultimately reaching 10% in
1993 and 1994 and 9% in 1995. This sustained annual growth can be attributed to
high investment and exports. Personal consumption growth has been low, making
Singapore the highest saving country in the world.

The government has followed an interventionist economic policy with
respect to its individual industries. To instill faith in its interventionist
policies, the government has sought to maintain economic stability. The taxes
are relatively high, but rates are stable. Monetary policy has aimed at keeping
inflation low by using the exchange rate as the main instrument. Labor market
pressure has been controlled by setting limits on the percentage of foreign
labor employed and applying levies on employers of foreign labor. In addition,
the government, recognizing that land use is a constraint on growth, has sought
to make existing land use more efficient.

The government directly holds stakes in individual companies across the
board from high-tech defense contractors to low-tech service businesses. The
government also holds indirect stakes in firms through a number of agencies.
Such government ownership interests may discourage the development of private
firms due to fears that the government entities may be given certain advantages
not available to private entities. Some privatization of state-owned businesses
is ongoing, however, such as the telephone business and certain other utilities.

Singapore is heavily dependent on foreign trade with the total value of
trade goods and services reaching 278% of GDP in 1994. The country has also seen
a large volume of re-export trade. The industrial base is dominated by foreign
multinationals, with only a few large domestic firms. While foreign investment
is a key to the continued prosperity of Singapore, the main concern about future
prospects is that productivity growth has not been consistent over the years.
But with one of the highest investment rates in the world, sustaining rapid
output growth increasingly will depend on boosting productivity growth.

REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Australia........................................................... 3.2 5.4 3.5 2.3 -1.1
Hong Kong........................................................... n.a 5.4 6.4 6.3 5.1
Japan ........................................................... 0.9 0.5 0.1 1.1 4.0
Malaysia ........................................................... n.a 9.2 8.3 7.8 8.6
Singapore........................................................... 9.0 10.1 10.1 6.0 6.7
</TABLE>

Source: World Economic Outlook, October 1996 (International Monetary Fund)

Canada

Due to its vast geographic area, ranking second in the world only to
Russia, Canada has successfully developed into a modern industrial country
supplemented by significant agricultural activities and natural resource
exploitation, such as oil, gas and timber. With exports amounting to
approximately 25% of Canadian production, Canada is highly dependent on the U.S.
market as a source of demand for manufacturing, agricultural, energy and other
raw material products. Nearly 80% of Canada's external trade is with the U.S.
and close ties exist between U.S. and Canadian manufacturers (indeed, two-thirds
of foreign direct investment into Canada is from the U.S.). Both the Free Trade
Agreement with the U.S. and the North American Free Trade Agreement increased
the ties between the two nations, guaranteeing Canada's access to its largest

19
<PAGE> 53
export market.

In early 1990, due to reduced domestic demand and the beginnings of a
downturn in the U.S., the economy ebbed into recession. The recession hit the
manufacturing sector the hardest, but continued investment in machinery and
equipment indicated that important restructuring steps were underway with a view
toward improving productivity. As a result of the recession, tax receipts
dwindled and government deficits mushroomed, arriving at approximately 5% of GDP
per annum. In addition, Canada's poor export performance during the recession
hinted at reduced competitiveness internationally. Since that time, Canada has
made some progress in restructuring its industries. At the same time, it has
grappled with its fiscal deficits and has crafted a plan to bring its federal
budget into balance by the end of the century. Moreover, the provinces have also
reined in their fiscal excesses: seven of the ten had balanced budgets in 1996.
The fiscal restructuring across all levels of government led to significant
public sector job losses; although these were offset for the most part by
private sector job gains, overall employment growth remained subpar. As a
result, Canada's unemployment rate has remained above 9% since 1990.

With the fiscal drag on the economy having reached its maximum in 1996,
the continued strength in investment in machinery and equipment, along with a
competitively-valued Canadian dollar, suggest that Canada may have brighter
prospects in the short run. Risks remain however. Continued economic
sluggishness may diminish Canada's fiscal resolve and bring about a call for tax
cuts. Given Canada's high level of public sector debt outstanding, this would
make it difficult for Canada to maintain over the long run, advances made in its
competitiveness. Another significant problem faced by the Canadian economy is
the ongoing uncertainty caused by the separatist movement in Quebec, Canada's
second largest and second most populous province. After a very narrow defeat in
the October, 1995 referendum campaign, Quebec's separatist government vowed to
hold another referendum within a year of its reelection. The next provincial
election in Quebec must take place by summer, 1999.

CANADIAN REAL GDP ANNUAL RATE OF GROWTH (ANNUAL % CHANGE)

1996
1995 2.3
1994 4.1
1993 2.2
1992 0.8
1991 -1.8

Source: World Economic Outlook, October 1996 (International Monetary Fund)

Mexico

During the period from 1982 through 1994, Mexico pursued far-reaching
and comprehensive adjustment policies designed to reform its economy and achieve
a return to sustained economic growth. These policies included fiscal
discipline, tax reform, trade liberalization, opening the economy to foreign
investment, reform of certain public sector prices to conform to market
conditions, deregulation, privatization of certain non-strategic public sector
enterprises and an exchange rate and monetary policy aimed at slowing the rate
of inflation in Mexico to levels approximating those of its major trading
partners.

While successful in reducing inflation from 159.2% in 1987 to 7.1% in
1994 and achieving real GDP growth averaging 3.0% over the 1990-1994 period, the
Mexican economy had certain weaknesses by 1994 that made it unable to withstand
the severe internal and external political and economic shocks that occurred in
1994, which resulted in the destabilization of the Mexican economy at the end of
1994, a crisis of confidence on the part of foreign portfolio investors and the
economic and financial crisis facing the Mexican government since the beginning
of 1995. Weaknesses of the economy that became apparent in 1994 included a
reduced level of domestic savings and a government exchange rate policy that
over time resulted in the progressive overvaluation of the peso.

During 1994, internal and external events combined to complicate the
management of the Mexican economy. Progressive increases in interest rates in
the United States, and prospects of further increases, made Mexican investments
relatively less attractive to foreign portfolio investors. In addition, a series
of internal disruptions and political events, including the insurgents' attack
in the southern state of Chiapas, the assassinations of certain political
leaders and the resulting uncertainty regarding the fairness of elections and
the kidnaping of several prominent businessmen, caused some investors to believe
that the Mexican political system was less stable than had been believed.

In December 1994, a sharp and rapid devaluation of the peso ensued. The
devaluation contributed to a rise in inflation, which totaled 55.2% in 1995. The
devaluation also raised concerns about Mexico's ability to repay its short-term
obligations and the stability of the Mexican banking system. These concerns led
to sharply higher interest rates and reduced opportunities for refinancing or
refunding debt issues in 1995. In 1995, the government amortized US$ 29 billion
of

20
<PAGE> 54
short-term dollar-linked debt, of which two thirds was actually paid in dollars.

In 1995, the government, through various initiatives and programs,
endeavored to restore stability to Mexico's financial and foreign exchange
markets, lower inflation rates, enhance international competitiveness, protect
the solvency of the banking system and stimulate economic recovery and job
creation. The government was successful in reducing inflation and the volatility
of the exchange rate and reducing nominal interest rates. Furthermore, Mexico's
GDP, which declined 6.2% according to official government estimates, is
officially projected to grow by 3.7% in 1996 and inflation is expected to total
26.2%, according to estimates from Mexico's Ministry of Finance. Mexico's
balance of payments deficit, which equaled US$29.4 billion in 1994, fell to
US$654 million in 1995 and is expected to equal US$1,014 million in 1996, all
according to official government estimates. However, it is unclear whether these
initiatives will continue to be successful in dealing with Mexico's severe
economic problems.

MEXICO REAL GDP RATE OF GROWTH (ANNUAL % CHANGE)

1996
1995 n.a.
1994 3.5
1993 0.6
1992 2.8
1991 3.6

Source: World Economic Outlook, October 1996 (International Monetary Fund)

THE MSCI INDICES

IN GENERAL

The Indices were founded in 1969 by Capital International S.A. as the
first international performance benchmarks constructed to facilitate accurate
comparison of world markets. Morgan Stanley acquired rights to the Indices in
1986. The MSCI Indices have covered the world's developed markets since 1969,
and in 1988, MSCI commenced coverage of the emerging markets.

Although local stock exchanges have traditionally calculated their own
indices, these are generally not comparable with one another, due to differences
in the representation of the local market, mathematical formulas, base dates and
methods of adjusting for capital changes. MSCI applies the same criteria and
calculation methodology across all markets for all indices, developed and
emerging.

MSCI Indices are notable for the depth and breadth of their coverage.
MSCI generally seeks to have 60% of the capitalization of a country's stock
market reflected in the MSCI Index for such country. Thus, the MSCI Indices
balance the inclusiveness of an "all share" index against the replicability of a
"blue chip" index.

WEIGHTING

All single-country MSCI Indices are market capitalization weighted,
i.e., companies are included in the indices at their full market value (total
number of shares issued and paid up, multiplied by price). MSCI believes full
market capitalization weighting is preferable to other weighting schemes for
both theoretical and practical reasons.

MSCI calculates two indices in some countries in order to address the
issue of restrictions on foreign ownership in such countries. The additional
indices are called "free" indices, and they exclude companies and share classes
not purchasable by foreigners. Free indices are currently calculated for China,
Indonesia, Malaysia, Mexico, the Philippines, Singapore and Thailand, and for
those regional and international indices which include such markets.

21
<PAGE> 55
Regional Weights. Market capitalization weighting, combined with a
consistent target of 60% of market capitalization, helps ensure that each
country's weight in regional and international indices approximates its weight
in the total universe of developing and emerging markets. Maintaining consistent
policy among MSCI developed and emerging market indices is also critical to the
calculation of certain combined developed and emerging market indices published
by MSCI.

SELECTION CRITERIA

The Universe of Securities. The constituents of a country index are
selected from the full range of securities available in the market, excluding
issues which are either small or highly illiquid. Non-domiciled companies and
investment trusts are also excluded from consideration. After the index
constituents are chosen, they are reclassified using MSCI's schema of 38
industries and 8 economic sectors in order to facilitate cross-country
comparisons.

The Optimization Process. The process of choosing index constituents
from the universe of available securities is consistent among indices.
Determining the constituents of an index is an optimization process which
involves maximizing float and liquidity, reflecting accurately the market's size
and industry profiles and minimizing cross-ownership. The optimization variables
and their targets are:

<TABLE>
<S> <C>
Market Coverage Target 60% of market
Industry Representation Mirror the Local Market
Liquidity Maximize
Float Maximize
Cross-Ownership Avoid/Minimize
Size Sample with Size Characteristics of Universe
</TABLE>

Coverage. To reflect accurately country-wide performance as well as the
performance of industry groups, MSCI aims to capture 60% of total market
capitalization at both the country and industry level. To reflect local market
performance, an index should contain a percentage of the market's overall
capitalization sufficient to achieve a high level of tracking. The greater the
coverage, however, the greater the risk of including securities which are
illiquid or have restricted float. MSCI's 60% coverage target reflects a
balance of these considerations.

Industry Representation. Within the overall target of 60% market
coverage, MSCI aims to capture 60% of the capitalization of each industry group,
as defined by local practice. MSCI believes this target assures that the index
reflects the industry characteristics of the overall market and permits the
construction of accurate industry indices.

MSCI may exceed the 60% of market capitalization target in the index
for a particular country because, e.g., one or two large companies dominate an
industry. Similarly, MSCI may underweight an industry in an index if, e.g., the
companies in such industry lack good liquidity and float, or because of
extensive cross-ownership.

Liquidity. Liquidity is measured by trading value, as reported by the
local exchanges. Trading value is monitored over time in order to determine
"normal" levels exclusive of short-term peaks and troughs. A stock's liquidity
is significant not only in absolute terms (i.e., a determination of the market's
most actively traded stocks), but also relative to its market capitalization and
to average liquidity for the country as a whole.

Float. Float, or the percentage of shares freely tradeable, is one
measure of potential short-term supply. Low float raises the risk of
insufficient liquidity. MSCI monitors float for every security in its coverage,
and low float may exclude a stock from consideration. However, float can be
difficult to determine. In some markets good sources are generally not
available. In other markets, information on smaller and less prominent issues
can be subject to error and time lags. Government ownership and cross-ownership
positions can change over time, and are not always made public. Float also tends
to be defined differently depending on the source. MSCI seeks to maximize float.
As with liquidity, float is an important determinant, but not a hard-and-fast
screen for inclusion of a stock in, or exclusion of a stock from, a particular
index.

Cross-ownership. Cross-ownership occurs when one company has an
ownership position in another. In situations where cross-ownership is
substantial, including both companies in an index may skew industry weights,
distort country-level valuations and over-represent buyable opportunities. An
integral part of MSCI's country research is identifying cross-ownerships in
order to avoid or minimize them. Cross-ownership cannot always be avoided,
especially in markets where it is prevalent. When MSCI makes exceptions, it
strives to select situations where the constituents operate in different
economic sectors, or where the subsidiary company makes only a minor
contribution to the parent company's results.

Size. MSCI attempts to meet its 60% coverage target by including a
representative sample of large, medium and small capitalization stocks, in order
to capture the sometimes disparate performance of these sectors. In the emerging
markets, the liquidity of smaller issues can be a constraint. At the same time,
properly representing the lower capitalization end of the market risks
overwhelming the index with names. Within these constraints, MSCI strives to
include smaller capitalization

22
<PAGE> 56
stocks, provided they exhibit sufficient liquidity.

CALCULATION METHODOLOGY

All MSCI Indices are calculated daily using Laspeyres' concept of a
weighted arithmetic average together with the concept of "chain-linking," a
classical method of calculating stock market indices. The Laspeyres method
weights stocks in an index by their beginning-of-period market capitalization.
Share prices are "swept clean" daily and adjusted for any rights issues, stock
dividends or splits. Most MSCI Indices are currently calculated in local
currency and in U.S. dollars, without dividends, with gross dividends reinvested
and with net dividends reinvested. With the exception of the Mexico (Free) WEBS
Index Series, the Fund's WEBS Index Series utilize MSCI Indices calculated with
net dividends reinvested. "Net dividends" means dividends after reduction for
taxes withheld at source at the rate applicable to holders of the underlying
stock that are resident in Luxembourg. With respect to the Australia, Austria
and Germany WEBS Index Series, such withholding rate currently differs from that
applicable to United States residents. So-called "un-franked" dividends from
Australian companies are withheld at a 30% rate to Luxembourg residents and a
15% rate to the Australia WEBS Index Series (there is no difference in the
treatment of "franked" dividends). Austrian companies impose a 15% dividend
withholding on Luxembourg residents and an 11% rate on the Austria WEBS Index
Series. German companies impose a 15% dividend withholding on Luxembourg
residents and a 10% rate on the German WEBS Index Series. The Mexico (Free) WEBS
Index Series' benchmark Index, the MSCI Mexico (Free) Index, reflects the
reinvestment of gross dividends. "Gross dividends" means dividends before
reduction for taxes withheld at source.

DIVIDEND TREATMENT

In respect of developed markets, MSCI Indices with dividends reinvested
constitute an estimate of total return arrived at by reinvesting one twelfth of
the year end yield at every month end.

In respect of emerging markets, MSCI has constructed its indices with
dividends reinvested as follows:

- In the period between the ex date and the date of
dividend reinvestment, a dividend receivable is a
component of the index return.

- Dividends are deemed received on the payment date.

- To determine the payment date, a fixed time lag is
assumed to exist between the ex date and the payment
date. This time lag varies by country, and is
determined in accordance with general practice within
that market.

- Reinvestment of dividends occurs at the end of the
month in which the payment date falls.

PRICE AND EXCHANGE RATES

Prices. Prices used to calculate the MSCI Indices are the official
exchange closing prices. All prices are taken from the dominant exchange in each
market. In countries where there are foreign ownership limits, MSCI uses the
price quoted on the official exchange, regardless of whether the limit has been
reached.

Exchange Rates. MSCI uses WM/Reuters Closing Spot Rates for all
developed and emerging markets except those in Latin America. The WM/Reuters
Closing Spot Rates were established by a committee of investment managers and
data providers, including MSCI, whose object was to standardize exchange rates
used by the investment community. Exchange rates are taken daily at 4 p.m.
London time by the WM Company and are sourced whenever possible from
multi-contributor quotes on Reuters. Representative rates are selected for each
currency based on a number of "snapshots" of the latest contributed quotations
taken from the Reuters service at short intervals around 4 PM. WM/Reuters
provides closing bid and offer rates. MSCI uses these to calculate the mid-point
to 5 decimal places.

MSCI continues to monitor exchange rates independently and may, under
exceptional circumstances, elect to use an alternative exchange rate if the
WM/Reuters rate is believed not to be representative for a given currency on a
particular day. Because of the high volatility of currencies in some Latin
American countries, MSCI continues to use its own timing and sources for these
markets. The exchange rate for the MSCI Mexico (Free) Index is that prevailing
as of 3:00 p.m. New York City time.

CHANGES TO THE INDICES

In changing the constituents of the indices, MSCI attempts to balance
representativeness versus undue turnover. An index must represent the current
state of an evolving marketplace, yet at the same time minimize turnover, which
is costly as well as inconvenient for managers.

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<PAGE> 57
There are two broad categories of changes to the MSCI Indices. The
first consists of market-driven changes such as mergers, acquisitions,
bankruptcies, etc. These are announced and implemented as they occur. The second
category consists of structural changes to reflect the evolution of a market,
for example due to changes in industry composition or regulations. In the
emerging markets, index restructurings generally take place every one year to
eighteen months. Structural changes may occur only on four dates throughout the
year: the first business day of March, June, September and December. They are
preannounced at least two weeks in advance.

Additions. Restructuring an index involves a balancing of additions and
deletions. To maintain continuity and minimize turnover, MSCI is reluctant to
delete index constituents, and its approach to additions is correspondingly
stringent. As markets grow because of privatizations, investor interest, or the
relaxation of regulations, index additions (with or without corresponding
deletions) may be needed to bring industry representations up to the 60% target.
Companies are considered not only based on their broad industry, but also based
on their sub-sector, in order to achieve, if possible, a broader range of
economic activity. Beyond industry representativeness, new constituents are
selected based on the criteria discussed above, i.e. float, liquidity,
cross-ownership, etc.

New Issues. In general, new issues are not eligible for immediate
inclusion in the MSCI Indices because their liquidity remains unproven. Usually,
new issues undergo a "seasoning" period of one year to eighteen months between
index restructurings until a trading pattern and volume are established. After
that time, they are eligible for inclusion, subject to the criteria discussed
above (industry representation, float, cross-ownership, etc.).

In the emerging markets, however, it is not uncommon that a large new
issue, usually a privatization, comes to market and substantially changes the
country's industry profile. In exceptional circumstances, where the issue's
size, visibility and investor interest assure high liquidity, and where
excluding it would distort the characteristics of the market, MSCI may decide to
include it immediately in the indices.

In other cases, MSCI may decide not to include a large new issue even
in the normal process of restructuring, and in spite of its substantial size and
liquidity.

Deletions. MSCI's primary concern when considering deletions is the
continuity of the indices. Of secondary concern are the turnover costs
associated with deletions. The indices must represent the full investment cycle,
including bear as well as bull markets. Out-of-favor stocks may exhibit
declining price, market capitalization or liquidity, and yet continue to be good
representatives of their industry.

Companies may be deleted because they have diversified away from their
industry classification, because the industry has evolved in a different
direction from the company's thrust, or because a better industry representative
exists (either a new issue or an existing company). In addition, in order not to
exceed the 60% target coverage of industries and countries, adding new index
companies may entail corresponding deletions. Usually such deletions take place
within the same industry, but there are occasional exceptions.

Each of the MSCI Indices utilized as the benchmark for a WEBS Index
Series of the Fund is calculated reflecting dividends reinvested. With the
exception of the Mexico (Free) WEBS Index Series, the Fund's WEBS Index Series
utilize MSCI Indices calculated with net dividends reinvested. MSCI refers to
each of its Indices calculated reflecting net dividends reinvested as the "MSCI
[relevant country] Index (with net dividends reinvested)."

THE MSCI AUSTRALIA INDEX

On August 31, 1997, the MSCI Australia Index (with net dividends
reinvested) (the "MSCI Australia") consisted of __ stocks with an aggregate
market capitalization of approximately AUD____ billion or US$____ billion. In
percentage terms, the MSCI Australia represented approximately ____% of the
total market capitalization of Australia on August 31, 1997.

The ten largest constituents of the MSCI Australia and the respective
approximate percentages of the MSCI Australia represented by such constituents
as of August 31, 1997 were, in order:

1. _________............................................................ __%
2. _________............................................................ __%
3. _________............................................................ __%
4. _________............................................................ __%
5. _________............................................................ __%
6. _________............................................................ __%
7. _________............................................................ __%
8. _________............................................................ __%
9. _________............................................................ __%

24
<PAGE> 58

10. _________............................................................ __%

As of August 31, 1997, the largest five constituents together comprised
approximately ____of the market capitalization of the MSCI Australia; the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Australia; and the largest 20 constituents comprised
approximately ____% of the market capitalization of the MSCI Australia.

The ten most highly represented industry sectors in the MSCI Australia,
and the approximate percentages of the MSCI Australia represented thereby as of
August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI
Australia Index as of August 31, 1997.

THE MSCI AUSTRIA INDEX

On August 31, 1997, the MSCI Austria Index (with net dividends
reinvested) (the "MSCI Austria") consisted of __ stocks with an aggregate market
capitalization of approximately ATS____ billion or US$____ billion. In
percentage terms, the MSCI Austria represented approximately ____% of the total
market capitalization of Austria on August 31, 1997.

The ten largest constituents of the MSCI Austria and the respective
approximate percentages of the MSCI Austria represented by such constituents as
of August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Austria; the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Austria; and the largest 20 constituents comprised
approximately ____% of the market capitalization of the MSCI Austria.

The ten most highly represented industry sectors in the MSCI Austria,
and the approximate percentages of the MSCI Austria represented thereby as of
August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI Austria
Index as of August 31, 1997.

25
<PAGE> 59
THE MSCI BELGIUM INDEX

On August 31, 1997, the MSCI Belgium Index (with net dividends
reinvested) (the "MSCI Belgium") consisted of __ stocks with an aggregate market
capitalization of approximately BEF____ billion or US$____ billion. In
percentage terms, the MSCI Belgium represented approximately ____% of the total
market capitalization of Belgium on August 31, 1997.

On August 31, 1997, the ten largest constituents of the MSCI Belgium
and the respective approximate percentages of the MSCI Belgium represented by
such constituents as of August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Belgium; the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Belgium; and the largest 15 constituents comprised
approximately ____% of the market capitalization of the MSCI Belgium.

The ten most highly represented industry sectors in the MSCI Belgium,
and the approximate percentages of the MSCI Belgium represented thereby as of
August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI Belgium
Index as of August 31, 1997.

THE MSCI CANADA INDEX

On August 31, 1997, the MSCI Canada Index (with net dividends
reinvested) (the "MSCI Canada") consisted of __ stocks with an aggregate market
capitalization of approximately CAD____ billion or US$____ billion. In
percentage terms, the MSCI Canada represented approximately ____% of the total
market capitalization in Canada on August 31, 1997.

The ten largest constituents of the MSCI Canada and the respective
approximate percentages of the MSCI Canada represented by such constituents as
of August 31, 1997 were, in order:

1. _________............................................................ __%
2. _________............................................................ __%
3. _________............................................................ __%
4. _________............................................................ = __%
5. _________............................................................ __%
6. _________............................................................ __%
7. _________............................................................ __%
8. _________............................................................ __%
9. _________............................................................ __%
10. _________............................................................ __%

26
<PAGE> 60

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Canada; the largest
ten constituents comprised approximately ____% of the market capitalization of
the MSCI Canada; and the largest 20 constituents comprised approximately ____%
of the market capitalization of the MSCI Canada.

The ten most highly represented industry sectors in the MSCI Canada,
and the approximate percentages of the MSCI Canada represented thereby as of
August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI Canada
Index as of August 31, 1997.

THE MSCI FRANCE INDEX

On August 31, 1997, the MSCI France Index (with net dividends
reinvested) (the "MSCI France") consisted of __ stocks with an aggregate market
capitalization of approximately FRF____ billion or US$____ billion. In
percentage terms, the MSCI France represented approximately ____% of the total
market capitalization in France on August 31, 1997.

The ten largest constituents of the MSCI France and the respective
approximate percentages of the MSCI France represented by such constituents as
of August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI France; the largest
ten constituents comprised approximately ____% of the market capitalization of
the MSCI France; and the largest 20 constituents comprised approximately ____%
of the market capitalization of MSCI France.

The ten most highly represented industry sectors in the MSCI France,
and the approximate percentages of the MSCI France represented thereby as of
August 31, 1997 were:

27
<PAGE> 61

Appendix A hereto contains a complete list of the securities in the MSCI France
Index as of August 31, 1997.

THE MSCI GERMANY INDEX

On August 31, 1997, the MSCI Germany Index (with net dividends
reinvested) (the "MSCI Germany") consisted of __ stocks with an aggregate market
capitalization of approximately DEM____ billion or US$____ billion. In
percentage terms, the MSCI Germany represented approximately ____% of the total
market capitalization in Germany on August 31, 1997.

The ten largest constituents of the MSCI Germany and the respective
approximate percentages of the MSCI Germany represented by such constituents as
of August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Germany; the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Germany; and the largest 20 constituents comprised
approximately ____% of the market capitalization of MSCI Germany.

The ten most highly represented industry sectors in the MSCI Germany,
and the approximate percentages of the MSCI Germany represented thereby as of
August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI Germany
Index as of August 31, 1997.

THE MSCI HONG KONG INDEX

On August 31, 1997, the MSCI Hong Kong Index (with net dividends
reinvested) (the "MSCI Hong Kong") consisted of __ stocks with an aggregate
market capitalization of approximately HKD____ billion or US$____ billion. In
percentage terms, the MSCI Hong Kong represented approximately ____% of the
total market capitalization in Hong Kong on August 31, 1997.

The ten largest constituents of the MSCI Hong Kong and the respective
approximate percentages of the MSCI Hong Kong represented by such constituents
as of August 31, 1997 were, in order:

28
<PAGE> 62

10. _________............................................................ __%

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Hong Kong; the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Hong Kong; and the largest 20 constituents comprised
approximately ____% of the market capitalization of MSCI Hong Kong.

The ten most highly represented industry sectors in the MSCI Hong Kong,
and the approximate percentages of the MSCI Hong Kong represented thereby as of
August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI Hong
Kong Index as of August 31, 1997.

THE MSCI ITALY INDEX

On August 31, 1997, the MSCI Italy Index (with net dividends
reinvested) (the "MSCI Italy") consisted of __ stocks with an aggregate market
capitalization of approximately ITL____ billion or US$____ billion. In
percentage terms, the MSCI Italy represented approximately ____% of the total
market capitalization of Italy on August 31, 1997.

The ten largest constituents of the MSCI Italy and the respective
approximate percentages of the MSCI Italy represented by such constituents as of
August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Italy; the largest
ten constituents comprised approximately ____% of the market capitalization of
the MSCI Italy; and the largest 20 constituents comprised approximately ____% of
the market capitalization of MSCI Italy.

The ten most highly represented industry sectors in the MSCI Italy, and
the approximate percentages of the MSCI Italy represented thereby as of August
31, 1997 were:

29
<PAGE> 63

Appendix A hereto contains a complete list of the securities constituting the
MSCI Italy Index as of August 31, 1997.

THE MSCI JAPAN INDEX

On August 31, 1997 the MSCI Japan Index (with net dividends reinvested)
(the "MSCI Japan") consisted of ___ stocks with an aggregate market
capitalization of approximately JPY____ billion or US$____ billion. In
percentage terms, the MSCI Japan represented approximately ____% of the total
market capitalization in Japan on August 31, 1997.

The ten largest constituents of the MSCI Japan and the respective
approximate percentages of the MSCI Japan represented by such constituents as of
August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Japan; the largest
ten constituents comprised approximately ____% of the market capitalization of
the MSCI Japan; and the largest 20 constituents comprised approximately ____% of
the market capitalization of the MSCI Japan.

The ten most highly represented industry sectors in the MSCI Japan, and
the approximate percentages of the MSCI Japan represented thereby as of August
31, 1997 were:

Appendix A hereto contains a complete list of the securities constituting the
MSCI Japan Index as of August 31, 1997.

THE MSCI MALAYSIA (FREE) INDEX

On August 31, 1997, the MSCI Malaysia (Free) Index (with net dividends
reinvested) (the "MSCI Malaysia (Free)") consisted of __ stocks with an
aggregate market capitalization of approximately MYR____ billion or US$____
billion. In percentage terms, the MSCI Malaysia (Free) represented approximately
____% of the total market capitalization of Malaysia on August 31, 1997.

The ten largest constituents of the MSCI Malaysia (Free) and the
respective approximate percentages of the MSCI Malaysia (Free) represented by
such constituents as of August 31, 1997 were, in order:

30
<PAGE> 64

9. _________............................................................ __%
10. _________............................................................ __%

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Malaysia (Free);
the largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Malaysia (Free) and the largest 20 constituents
comprised approximately ____% of the market capitalization of the MSCI Malaysia
(Free).

The ten most highly represented industry sectors in the MSCI Malaysia
(Free), and the approximate percentages of the MSCI Malaysia (Free) represented
thereby as of August 31, 1997 were:

Appendix A hereto contains a complete list of the securities
constituting the MSCI Malaysia (Free) Index as of August 31, 1997.

THE MSCI MEXICO (FREE) INDEX

On August 31, 1997, the MSCI Mexico (Free) Index (with gross dividends
reinvested) (the "MSCI Mexico (Free)") consisted of __ stocks with an aggregate
market capitalization of approximately MXN____ billion or US$____ billion. In
percentage terms, the MSCI Mexico (Free) represented approximately ____% of the
total market capitalization of Mexico on August 31, 1997.

On August 31,1997, the ten largest constituents of the MSCI Mexico
(Free) and the respective approximate percentages of the MSCI Mexico (Free)
represented by such constituents as of August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Mexico (Free); the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Mexico (Free); and the largest 20 constituents
comprised approximately ____% of the market capitalization of the MSCI Mexico
(Free).

The ten most highly represented industry sectors in the MSCI Mexico
(Free), and the approximate percentages of the MSCI Mexico (Free) represented
thereby as of August 31, 1997 were:

31
<PAGE> 65

7. _________............................................................ __%
8. _________............................................................ __%
9. _________............................................................ __%
10. _________............................................................ __%

Appendix A hereto contains a complete list of the securities
constituting the MSCI Mexico (Free) Index as of August 31, 1997.

THE MSCI NETHERLANDS INDEX

On August 31, 1997, the MSCI Netherlands Index (with net dividends
reinvested) (the "MSCI Netherlands") consisted of __ stocks with an aggregate
market capitalization of approximately NLG ____ billion or US$____ billion. In
percentage terms, the MSCI Netherlands represented approximately ____% of the
total market capitalization of the Netherlands on August 31, 1997.

The ten largest constituents of the MSCI Netherlands and the respective
approximate percentages of the MSCI Netherlands represented by such constituents
as of August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Netherlands; the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Netherlands; and the largest 20 constituents
comprised approximately ____% of the market capitalization of MSCI Netherlands.

The ten most highly represented industry sectors in the MSCI
Netherlands, and the approximate percentages of the MSCI Netherlands represented
thereby as of August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI
Netherlands as of August 31, 1997.

THE MSCI SINGAPORE (FREE) INDEX

The MSCI Singapore (Free) Index (with net dividends reinvested) (the
"MSCI Singapore (Free)") is a "free" index in that it excludes companies and
share classes that are not purchasable by foreigners. On August 31, 1997, the
MSCI Singapore (Free) consisted of __ stocks with an aggregate market
capitalization of approximately SGD____ billion or US$____ billion. In
percentage terms, the MSCI Singapore (Free) represented approximately ____% of
the total market capitalization of Singapore on August 31, 1997

The ten largest constituents of the MSCI Singapore (Free) and the
respective approximate percentages of the MSCI Singapore (Free) represented by
such constituents as of August 31, 1997 were in order:

32
<PAGE> 66

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Singapore (Free);
the largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Singapore (Free); and the largest 20 constituents
comprised approximately ____% of the market capitalization of the MSCI Singapore
(Free).

The ten most highly represented industry sectors in the MSCI Singapore
(Free), and the approximate percentages of the MSCI Singapore (Free) represented
thereby as of August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI
Singapore (Free) as of August 31, 1997.

THE MSCI SPAIN INDEX

On August 31, 1997, the MSCI Spain Index (with net dividends
reinvested) (the "MSCI Spain") consisted of __ stocks with an aggregate market
capitalization of approximately ESP____ billion or US$____ billion. In
percentage terms, the MSCI Spain represented approximately ____% of the total
market capitalization of Spain on August 31, 1997.

The ten largest constituents of the MSCI Spain and the respective
approximate percentages of the MSCI Spain represented by such constituents as of
August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Spain; the largest
ten constituents comprised approximately ____% of the market capitalization of
the MSCI Spain; and the largest 20 constituents comprised approximately ____% of
the market capitalization of MSCI Spain.

The ten most highly represented industry sectors in the MSCI Spain and
the approximate percentages of the MSCI Spain represented thereby as of August
31, 1997 were:

33
<PAGE> 67

4. _________............................................................ __%
5. _________............................................................ __%
6. _________............................................................ __%
7. _________............................................................ __%
8. _________............................................................ __%
9. _________............................................................ __%
10. _________............................................................ __%

Appendix A hereto contains a complete list of the securities in the MSCI Spain
as of August 31, 1997.

THE MSCI SWEDEN INDEX

On August 31, 1997, the MSCI Sweden Index (with net dividends
reinvested) (the "MSCI Sweden") consisted of __ stocks with an aggregate market
capitalization of approximately SEK____ billion or US$___ billion. In percentage
terms, the MSCI Sweden represented approximately ____% of the total market
capitalization of Sweden on August 31, 1997.

The ten largest constituents of the MSCI Sweden and the respective
approximate percentages of the MSCI Sweden represented by such constituents as
of August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Sweden; the largest
ten constituents comprised approximately ____% of the market capitalization of
the MSCI Sweden; and the largest 20 constituents comprised approximately ____%
of the market capitalization of the MSCI Sweden.

The ten most highly represented industry sectors in the MSCI Sweden,
and the approximate percentages of the MSCI Sweden represented thereby as of
August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI Sweden
as of August 31, 1997.

THE MSCI SWITZERLAND INDEX

On August 31, 1997, the MSCI Switzerland Index (with net dividends
reinvested) (the "MSCI Switzerland") consisted of __ stocks with an aggregate
market capitalization of approximately CHF____ billion or US$____ billion. In
percentage terms, the MSCI Switzerland represented approximately ____% of the
total market capitalization in Switzerland on August 31, 1997.

The ten largest constituents of the MSCI Switzerland and the respective
approximate percentages of the MSCI Switzerland represented by such constituents
as of August 31, 1997 were, in order:

34
<PAGE> 68

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI Switzerland; the
largest ten constituents comprised approximately ____% of the market
capitalization of the MSCI Switzerland; and the largest 20 constituents
comprised approximately ____% of the market capitalization of the MSCI
Switzerland.

The ten most highly represented industry sectors in the MSCI
Switzerland, and the approximate percentages of the MSCI Switzerland represented
thereby as of August 31, 1997 were:

Appendix A hereto contains a complete list of the securities in the MSCI
Switzerland as of August 31, 1997.

THE MSCI UNITED KINGDOM INDEX

On August 31, 1997 , the MSCI United Kingdom Index (with net dividends
reinvested) (the "MSCI UK") consisted of __ stocks with an aggregate market
capitalization of approximately GPB____ billion or US$____ billion. In
percentage terms, the MSCI UK represented approximately ____% of the aggregate
capitalization of the United Kingdom markets on August 31, 1997.

The ten largest constituents of the MSCI UK and the respective
approximate percentages of the MSCI UK represented by such constituents as of
August 31, 1997 were, in order:

As of August 31, 1997, the largest five constituents together comprised
approximately ____% of the market capitalization of the MSCI UK; the largest ten
constituents comprised approximately ____% of the market capitalization of the
MSCI UK; and the largest 20 constituents comprised approximately ____% of the
market capitalization of MSCI UK.

The ten most highly represented industry sectors in the MSCI UK, and
the approximate percentages of the MSCI UK represented thereby as of August 31,
1997 were:

35
<PAGE> 69

Appendix A hereto contains a complete list of the securities in the MSCI UK as
of August 31, 1997.

REGIONAL INDEX REPLICATIONS

The MSCI single-country indices effectively serve as components of
various MSCI regional and international (i.e., multi-country) indices. For
example the MSCI EAFE Index -- covering European, Australasian and the Far
Eastern markets - - is comprised of a weighted allocation of the MSCI Indices
for Japan (____%), the United Kingdom (____%), Germany (____%), France (____%),
Switzerland (____%), Netherlands (____%), Hong Kong (____%), Singapore (____%),
Belgium (____%), Malaysia (____%), Australia (____%), Spain (____%), Italy
(____%), Sweden (____%), Denmark (____%), Finland (____%), Norway (____%), New
Zealand (____%), Austria (____%) and Ireland (____%). The weightings shown
parenthetically are based on the EAFE Index as of August 31, 1997.

Investors may purchase WEBS of different WEBS Index Series of the Fund
in various proportions for the purpose of achieving regional or international
market exposure approximating that of certain of the MSCI regional and
international indices. For example, assuming the estimated values per Creation
Unit listed in the Fund's prospectus under the heading "Creation Units," an
investor might approximate the representation and weighting of the MSCI EAFE
Index by investing in the numbers of WEBS specified for the following 15 WEBS
Index Series, in order to achieve the basket weightings listed below:

Number of % of Value
WEBS Index Series WEBS of Basket
----------------- ---- ---------

Japan _____ __%
United Kingdom _____ __%
Germany _____ __%
France _____ __%
Switzerland _____ __%
Netherlands _____ __%
Hong Kong _____ __%
Australia _____ __%
Malaysia (Free) _____ __%
Italy _____ __%
Sweden _____ __%
Spain _____ __%
Singapore (Free) _____ __%
Belgium _____ __%
Austria _____ __%

The total cost of the above basket of WEBS, again using the values per
Creation Unit in the Prospectus, would be $______. It should be noted that the
WEBS basket set forth above does not include representation of five countries
included in the MSCI EAFE Index, representing ___% of the value of such index on
August 31, 1997.

EXCHANGE LISTING AND TRADING

The WEBS of each WEBS Index Series have been listed for trading on the
AMEX. The AMEX has approved modifications to its Rules to permit the listing of
WEBS. The non-redeemable WEBS trade on the AMEX at prices that may differ to
some degree from their net asset value. See "Special Considerations and Risks"
and "Determining Net Asset Value". There can be no assurance that the
requirements of the AMEX necessary to maintain the listing of WEBS of any Index
Series will continue to be met. The AMEX may remove the WEBS of a WEBS Index
Series from listing if (1) following the initial twelve-month period beginning
upon the commencement of trading of a WEBS Index Series, there are fewer than 50
beneficial holders of the WEBS for 30 or more consecutive trading days, (2) the
value of the underlying index or portfolio of securities on which such WEBS
Index Series is based is no longer calculated or available or (3) such other
event shall occur or condition exist that, in the opinion of the AMEX, makes
further dealings on the AMEX inadvisable. In addition, the AMEX will remove the
shares from listing and trading upon termination of the Fund.

36
<PAGE> 70
As in the case of other stocks traded on the AMEX, the brokers'
commission on transactions will be based on negotiated commission rates at
customary levels for retail customers and rates which range between $.015 to
$.12 per share for institutions and high net worth individuals.

In order to provide current WEBS pricing information, the AMEX disseminates
through the facilities of the Consolidated Tape Association an updated
"indicative optimized portfolio value" ("IOPV") for each WEBS Index Series as
calculated by Bloomberg, L.P ("Bloomberg"). The Fund is not involved in or
responsible for any aspect of the calculation or dissemination of the IOPVs, and
makes no warranty as to the accuracy of the IOPVs. IOPVs are disseminated on a
per WEBS Index Series basis every 15 seconds during regular AMEX trading hours
of 9:30 a.m. to 4:00 p.m. New York time.

The IOPV has an equity securities value component and a cash component. The
equity securities values included in the IOPV are the values of the Deposit
Securities for each WEBS Index Series. While the IOPV reflects the current
market value of the Deposit Securities required to be deposited in connection
with the purchase of a Creation Unit of WEBS, it does not necessarily reflect
the precise composition of the current portfolio of securities held by the Fund
for each WEBS Index Series at a particular point in time, because the current
portfolio of a WEBS Index Series may include securities that are not a part of
the current Deposit Securities. Therefore, the IOPV on a per WEBS Index Series
basis disseminated during AMEX trading hours should not be viewed as a real time
update of the net asset value per WEBS share of the Fund, which is calculated
only once a day. It is possible that the value of the portfolio of securities
held by the Fund for a particular WEBS Index Series may diverge from the
applicable IOPV during any trading day. In such case, the IOPV would not
precisely reflect the value of a WEBS Index Series' portfolio.

The equity securities included in the IOPV reflect the same market
capitalization weighting as the Deposit Securities of the particular WEBS Index
Series. In addition to the equity component described in the preceding
paragraph, the IOPV for each WEBS Index Series includes a cash component
consisting of estimated accrued dividend and other income, less expenses. Each
IOPV also reflects changes in currency exchange rates between the U.S. dollar
and the applicable home foreign currency. For the WEBS Index Series of
Australia, Japan, Malaysia (Free), Hong Kong and Singapore (Free), there is no
overlap in trading hours between the foreign market and the AMEX. Therefore, for
each of these WEBS Index Series, Bloomberg utilizes closing prices (in
applicable foreign currency prices) in the foreign market for securities in the
WEBS Index Series portfolio, and converts the price to U.S. dollars. This value
is updated every 15 seconds during AMEX trading hours to reflect changes in
currency exchange rates between the U.S. dollar and the applicable foreign
currency. For WEBS Index Series which have trading hours overlapping regular
AMEX trading hours, Bloomberg updates the applicable IOPV every 15 seconds to
reflect price changes in the principal foreign market, and converts such prices
into U.S. dollars based on the current currency exchange rate. When the foreign
market is closed but the AMEX is open, the IOPV is updated every 15 seconds to
reflect changes in currency exchange rates after the foreign market closes.

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS OF THE FUND

The Board has responsibility for the overall management and
operations of the Fund, including general supervision of the duties performed by
the Adviser and other service providers. The Board currently consists of five
Directors.

<TABLE>
<S> <C> <C>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
---------------- ---------------------- ----------------------
</TABLE>

37
<PAGE> 71

<TABLE>
<S> <C> <C>
Nathan Most* Director, President and Senior Vice President (retired) (from 1992
P.O. BOX 193 Chairman of the Board to 1996) and Vice President (from 1980 to
BURLINGAME, CA 94011-0193 1992) of the American Stock Exchange, Inc.;
AGE 83 President and CEO (retired) (from 1982 to
1996) of AMEX Commodities Corporation.

JOHN B. CARROLL Director Vice President of Investment Management
PRESIDENT (since 1984) of GTE Corporation; Trustee and
GTE INVESTMENT MANAGEMENT CORP. Member of the Executive Committee (since
ONE STAMFORD FORUM 1991) of The Common Fund, a non-profit
STAMFORD, CT 06904 organization; Member of the Investment
AGE 61 Committee (since 1988) of the TWA Pilots
Annuity Trust Fund; Vice Chairman and
Executive Committee Member (since 1992) of
the Committee on Investment of Employee
Benefit Assets of the Financial Executive
Institute; and Member (since 1986) of the
Pension Advisory Committee of the New York
Stock Exchange.

<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
---------------- ---------------------- ----------------------
<S> <C> <C>
Timothy A. Hultquist Director Advisory Director (since 1995) and Managing
Advisory Director Director (from 1985 to 1995) of Morgan Stanley &
Mrogan Stanley & Co., Incorporated Co., Incorporated; Chairman (since 1994) and
1251 Avenue of the Americas Trustee (since 1985) of the Board of Trustees of
23rd Floor Macalester College; Trustee (since 1995) of the
New York, NY 10020 Russell Sage Foundation; Member (since 1994) of
Age 47 Wilmer Eye Institute Advisory Counsel at Johns
Hopkins University Hospital; President (since
1992) of the Hultquist Foundation.

Lloyd N. Morrisett Director President (since 1969) of The John and Mary
President R. Markle Foundation; Member (since 1968) of
The Markle Foundation the Council on Foreign Relations; Member
75 Rockefeller Plaza (since 1970) of the American Association for
Suite 1800 the Advancement of Science; Chairman (since
New York, NY 10099 1970) of the Children's Television Workshop;
Age 67 Director (since 1976) of Haskins
Laboratories, Inc.; Director (since 1990) of
The Multimedia Corporation; Director (since
1992) of Classroom, Inc.; Director (since
1994) of Infonautics Corporation; Member of
Board of Overseers (since 1995) of Dartmouth
School of Medicine; Director (since 1995) of
Smith College-Center for the Study of Social
and Political Change. Trustee (from 1973 to
1983, from 1985 to 1995, and since 1996) of
RAND.
</TABLE>

- ----------
** "Interested" director, as defined in the 1940 Act, by reason of his position
as President of the Fund.

38
<PAGE> 72

<TABLE>
<S> <C> <C>
W. Allen Reed Director President and CEO and Director (since 1994)
President of General Motors Investment Management
General Motors Investment Management Corporation; Vice President and Treasurer
Corp. (from 1991 to 1994) of Hughes Electronics;
767 Fifth Avenue President (from 1984 to 1991) of Hughes
New York, NY 10153 Investment Management Company; Director
Age 50 (since 1995) of Taubman Centers, Inc. (a
real estate investment trust); Director
(since 1992) of FLIR Systems (an imaging
technology company); Director (since 1994)
of General Motors Acceptance Corporation;
Director (since 1994) of General Motors
Insurance Corporation; Director (since 1995)
of Equity Fund of Latin America; Director
(since 1995) of the Commonwealth Equity
Fund; Member (since 1994) of the Pension
Managers Advisory Committee of the New York
Stock Exchange; Member (since 1995) of the
New York State Retirement System Advisory
Board; Chairman (since 1995) of the
Investment Advisory Committee of Howard
Hughes Medical Institute.
</TABLE>

39
<PAGE> 73

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C>
Stephen M. Wynne Treasurer Executive Vice President and Chief Accounting
Executive Vice President Officer (since 1993) and Senior Vice President
PFPC Inc. and Chief Accounting Officer (from 1991 to
400 Bellevue Parkway 1993) of PFPC Inc.; Executive Vice President
Wilmington, DE 19809 (since 1995) of PFPC International; Vice
Age 42 President and Chief Accounting Officer (since
1987) of PNC Institutional Management Corp.

R. Sheldon Johnson Secretary Managing Director, Global Equity Derivatives,
Managing Director Morgan Stanley & Co. Incorporated (since 1988).
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Age 50

Stephen C. Beach Assistant Treasurer Senior Vice President - Product and Client
Senior Vice President Development (since 1995) and Managing Counsel
PFPC Inc. (from 1990 to 1994) of PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
Age 43

JoAnne M. Bennick Assistant Treasurer Vice President and Director of Quality Assurance
Vice President (since 1993) of PFPC Inc.; Audit Manager (from
PFPC Inc. 1990 to 1993) and Audit Associate (from 1985 to
103 Bellevue Parkway 1990) of Coopers & Lybrand.
Wilmington, DE 19809
Age 38

Gary M. Gardner Assistant Secretary Chief Counsel (since 1994) of PFPC Inc.;
Chief Counsel Associate General Counsel (from 1992 to 1994)
PFPC Inc. of The Boston Company, Inc.; General Counsel
400 Bellevue Parkway (from 1986 to 1992) of SunAmerica Asset
Wilmington, DE 19809 Management Inc.
Age 46

Kathleen L. Thren Assistant Secretary Counsel of PNC Bank, N.A. (since 1996);
Counsel Attorney (from 1993 to 1996) of Drinker Biddle
PFPC Inc. & Reath; Attorney (from 1991 to 1993) of
400 Bellevue Parkway L'Abbate & Balkan.
Wilmington, DE 19809
Age 32
</TABLE>

- ---------

40
<PAGE> 74
REMUNERATION OF DIRECTORS AND OFFICERS

The following table sets forth the remuneration of Directors and officers of
the Fund for the fiscal year ended August 31, 1997.

<TABLE>
<CAPTION>
Pension or Retirement Estimated Annual Total Compensation from
Aggregate Compensation Benefits Accrued as Part of Benefits Upon Registrant and Fund
NAME OF PERSON, POSITION from Registrant Fund Expenses Retirement Complex Paid to Director
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nathan Most, Director, $________ $________ $________ $________
President and Chairman
of the Board

John B. Carroll, Director $________ $________ $________ $________

Timothy A. Hultquist, $________ $________ $________ $________
Director

Lloyd N. Morrisett, Director $________ $________ $________ $________

W. Allen Reed, Director $________ $________ $________ $________
</TABLE>

No officer of the Fund is entitled to any compensation, and no officer or
Director is entitled to any pension or retirement benefits, from the Fund.

INVESTMENT ADVISORY, MANAGEMENT,
ADMINISTRATIVE AND DISTRIBUTION SERVICES

The following information supplements and should be read in conjunction
with the sections in the Prospectus entitled "Management of the Fund."

THE INVESTMENT ADVISER

Barclays Global Fund Advisors (the "Adviser") acts as investment adviser
to the Fund and, subject to the supervision of the Board, is responsible for the
investment management of each WEBS Index Series. The Adviser is a California
corporation indirectly owned by Barclays Bank PLC, and is registered as an
investment adviser under the Investment Advisers Act of 1940. The Adviser and
its parent, Barclays Global Investors, N.A., are responsible for managing or
providing investment advice for assets aggregating in excess of $___ billion as
of August 31, 1997.

The Adviser serves as investment adviser to each WEBS Index Series
pursuant to an Investment Management Agreement (the "Management Agreement")
between the Fund and the Adviser. Under the Management Agreement, the Adviser,
subject to the supervision of the Fund's Board and in conformity with the stated
investment policies of each WEBS Index Series, manages the investment of each
WEBS Index Series' assets. The Adviser may enter into subadvisory agreements
with additional investment advisers to act as subadvisers with respect to
particular WEBS Index Series. The Adviser will pay subadvisers, if any, out of
the fees received by the Adviser. The Adviser is responsible for placing
purchase and sale orders and providing continuous supervision of the investment
portfolio of each WEBS Index Series. For its investment management services to
each WEBS Index Series the Adviser is paid management fees equal to each WEBS
Index Series' allocable portion of: .27% per annum of the aggregate net assets
of the Fund less than or equal to $1.7 billion, plus .15% per annum of the
aggregate net assets of the Fund between $1.7 billion and $7 billion, plus .12%
per annum of the aggregate net assets of the Fund between $7 billion and $10
billion, plus .08% per annum of the aggregate net assets of the Fund in excess
of $10 billion. The management fees are accrued daily and paid by the Fund as
soon as practical after the last day of each calendar quarter. The Fund's
management fees, like those paid by most index funds, are lower than those paid
by many actively managed funds. One reason for the difference in fee levels is
that passive management requires fewer investment, research and trading
decisions, thereby justifying lower fees. Pursuant to the Management Agreement,
the Adviser is not liable for any error of judgment or mistake of law or for any
loss suffered by the Fund, and the Fund has agreed to indemnify the Adviser for
certain liabilities, including certain liabilities arising under the federal
securities laws, unless such loss or liability results from willful misfeasance,
bad faith or gross negligence in the performance of its duties or the reckless
disregard of its obligations and duties. The Management Agreement continues in
effect for two years from its effective date, and thereafter is subject to
annual approval by (1) the Fund's Board or (2) vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund, provided
that in either event the continuance also is approved by a majority of the
Fund's Board who are not interested persons (as defined in the 1940 Act) of the
Fund by vote cast in person at a meeting called for the purpose of voting on
such approval. The Management Agreement is terminable without penalty, on 60
days' notice, by the Fund's Board or by vote of the holders of a majority (as
defined in the 1940 Act) of the Fund's outstanding voting securities. The
Management Agreement is also terminable upon 60 days' notice by the Adviser and
will terminate automatically in the event of its assignment (as defined in the
1940 Act).

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<PAGE> 75

For the period from commencement of operations (March 11, 1996) to August
31, 1996 and the fiscal year ended August 31, 1997, respectively, the Fund paid
fees to the Adviser for its advisory service as follows: Australia WEBS Index
Series $10,350 and $________; Austria WEBS Index Series $9,748 and $________;
Belgium WEBS Index Series $2,045 and $________; Canada WEBS Index Series $13,800
and $________; France WEBS Index Series $14,503 and $________; Germany WEBS
Index Series $16,309 and $________; Hong Kong WEBS Index Series $7,597 and
$________; Italy WEBS Index Series $25,345 and $________; Japan WEBS Index
Series $105,230 and $________; Malaysia (Free) WEBS Index Series $7,550 and
$________; Mexico (Free) WEBS Index Series $5,552 and $________; Netherlands
WEBS Index Series $5,510 and $________; Singapore (Free) WEBS Index Series
$8,578 and $________; Spain WEBS Index Series $6,162 and $________; Sweden WEBS
Index Series $4,522 and $________; Switzerland WEBS Index Series $8,392 and
$________; and United Kingdom WEBS Index Series $14,599 and $________.

THE ADMINISTRATOR

PFPC Inc. (the "Administrator"), an indirect wholly owned subsidiary of
PNC Bank Corp., acts as administration and accounting agent of the Fund pursuant
to an Administration and Accounting Services Agreement with the Fund and is
responsible for certain clerical, recordkeeping and bookkeeping services, except
those to be performed by the Adviser, by Morgan Stanley Trust Company ("MSTC")
in its capacity as Custodian, or by PNC Bank, N.A. ("PNC") in its capacity as
Transfer Agent. The Administrator has no role in determining the investment
policies of the Fund or which securities are to be purchased or sold by the
Fund. The principal business address of the Administrator is 400 Bellevue
Parkway, Wilmington, DE 19809.

For the administrative and fund accounting services the Administrator
provides to the Fund, PFPC is paid aggregate fees equal to each WEBS Index
Series' allocable portion of: .22% per annum of the aggregate average daily net
assets of the Fund up to $1.5 billion; plus .15% per annum of the aggregate
average daily net assets of the Fund between $1.5 billion and $3 billion, plus
.14% per annum of the aggregate average daily net assets of the Fund between $3
billion and $5 billion, plus .13% per annum of the aggregate average daily net
assets of the Fund between $5 billion and $7.5 billion, plus .115% per annum of
the aggregate average daily net assets of the Fund between $7.5 billion and $10
billion, plus .10% per annum of the aggregate average daily net assets of the
Fund in excess of $10 billion. The Administrator pays Morgan Stanley Trust
Company a fee of .05% of the average daily net assets of the Fund for
sub-administration services as described under "Custodian, Lending Agent and
Sub-Administrator" below. The Administrator may from time to time waive all or a
portion of its fees.

If the Administrator is terminated within the first three years of the
Fund's operations, except if removed (i) for failing to substantially perform to
the satisfaction of the Board its material obligations under the Agreement or
(ii) in order to comply with federal or state law, the Fund shall pay any
reasonable costs of time and material associated with the deconversion. Pursuant
to the Administration and Accounting Services Agreement, the Administrator is
liable for damages arising of its failure to perform its duties due to willful
misfeasance, bad faith, gross negligence or reckless disregard of such duties.
The Fund will indemnify the Administrator for certain liabilities, including
certain liabilities arising under federal securities laws, except for
liabilities arising out of the Administrator's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.

For the period from commencement of operations to August 31, 1996 and for
the fiscal year ended August 31, 1997, respectively, the Fund paid fees to the
Administrator for its administrative services as follows: Australia WEBS Index
Series $6,524 and $________; Austria WEBS Index Series $6,123 and $________;
Belgium WEBS Index Series $1,289 and $________; Canada WEBS Index Series $8,682
and $________; France WEBS Index Series $9,081 and $________; Germany WEBS Index
Series $10,284 and $________; Hong Kong WEBS Index Series $4,793 and $________;
Italy WEBS Index Series $15,927 and $________; Japan WEBS Index Series $66,484
and $________; Malaysia (Free) WEBS Index Series $4,761 and $________; Mexico
(Free) WEBS Index Series $3,503 and $________; Netherlands WEBS Index Series
$3,475 and $________; Singapore (Free) WEBS Index Series $5,412; and $________
Spain WEBS Index Series $3,858 and $________; Sweden WEBS Index Series $2,878
and $________; Switzerland WEBS Index Series $5,251 and $________; and United
Kingdom WEBS Index Series $9,200 and $________.

THE DISTRIBUTOR

Funds Distributor, Inc. (the "Distributor") is the principal underwriter
and distributor of WEBS. Its address is 60 State Street, Suite 1300, Boston, MA
02109, and investor information can be obtained by calling 1-800-810-WEBS(9327).
The Distributor has entered into an agreement with the Fund which will continue
for two years from its effective date, and which is renewable annually
thereafter (the "Distribution Agreement"), pursuant to which it distributes Fund
shares. WEBS will be continuously offered for sale by the Fund through the
Distributor only in Creation Units, as described below under "Purchase and
Issuance of WEBS in Creation Units." WEBS in less than Creation Units are not
distributed by the Distributor. The Distributor also acts as agent for the Fund.
The Distributor will deliver a prospectus to persons purchasing WEBS in Creation
Units and will maintain records of both orders placed with it and confirmations
of acceptance furnished by it. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of
the National Association of Securities Dealers, Inc. Funds Distributor, Inc., as
Distributor, has no role in determining the

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<PAGE> 76
investment policies of the Fund or which securities are to be purchased or sold
by the Fund.

To compensate the Distributor for the distribution-related services it
provides, and broker-dealers authorized by the Distributor for distribution
services they provide, the Fund has adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Fund's Plan, for each WEBS
Index Series the Distributor is entitled to receive a distribution fee, accrued
daily and paid monthly, calculated with respect to each WEBS Index Series at a
rate set from time to time by the Board of Directors, provided that the annual
rate may not exceed .25% of the average daily net assets of such WEBS Index
Series. The Board of Directors has determined to limit the annual fee payable
under the Rule 12b-1 Plan with respect to each WEBS Index Series so as not to
exceed .20% of the average daily net assets of each WEBS Index Series until
further notice. From time to time the Distributor may waive all or a portion of
these fees.

The Plan is designed to enable the Distributor to be compensated by the
Fund for distribution services provided by it with respect to each WEBS Index
Series. Payments under the Plan are not tied exclusively to the distribution
expenses actually incurred by the Distributor. The Board, including a majority
of the Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan ("Independent
Directors"), evaluate the appropriateness of the Plan and its payment terms on a
continuing basis and in doing so consider all relevant factors, including
expenses borne by the Distributor in the current year and in prior years and
amounts received under the Plan.

Under its terms, the Plan remains in effect from year to year, provided
such continuance is approved annually by vote of the Board, including a majority
of the Independent Directors. The Plan may not be amended to increase materially
the amount to be spent for the services provided by the Distributor without
approval by the shareholders of the WEBS Index Series of the Fund to which the
Plan applies, and all material amendments of the Plan also require Board
approval. The Plan may be terminated at any time, without penalty, by vote of a
majority of the Independent Directors, or, with respect to any WEBS Index Series
of the Fund, by a vote of a majority of the outstanding voting securities of
such WEBS Index Series of the Fund (as such vote is defined in the 1940 Act). If
a Plan is terminated (or not renewed) with respect to any one or more WEBS Index
Series of the Fund, it may continue in effect with respect to any WEBS Index
Series of the Fund as to which it has not been terminated (or has been renewed).
Pursuant to the Distribution Agreement, the Distributor will provide the Board
periodic reports of any amounts expended under the Plan and the purpose for
which such expenditures were made.

The Distributor may also enter into sales and investor services agreements
with broker-dealers or other persons that are DTC Participants (as defined
below) to provide distribution assistance, including broker-dealer and
shareholder support and educational and promotional services. Under the terms of
each sales and investor services agreement, the Distributor will pay such
broker-dealers or other persons, out of Rule 12b-1 fees received from the WEBS
Index Series, at the annual rate of .08 of 1% of the average daily net asset
value of WEBS held through DTC for the account of such DTC Participant.

For the period from commencement of operations to August 31, 1996 and for
the fiscal year ended August 31, 1997, respectively, the Distributor received
the following amounts pursuant to the Plan with respect to each WEBS Index
Series: Australia WEBS Index Series, $9,583.13 and $________; Austria WEBS Index
Series, $9,026.04 and $________; Belgium WEBS Index Series, $1,893.69 and
$________; Canada WEBS Index Series, $12,780.00 and $________; France WEBS Index
Series, $13,429.09 and $________; Germany WEBS Index Series, $15,100.34 and
$________; Hong Kong WEBS Index Series, $7,034.13 and $________; Italy WEBS
Index Series, $23,467.69 and $________; Japan WEBS Index Series, $97,435.42 and
$________; Malaysia (Free)WEBS Index Series, $6,990.22 and $________; Mexico
(Free) WEBS Index Series, $5,140.57 and $________; Netherlands WEBS Index
Series, $5,102.06 and $________; Singapore Index (Free) WEBS Index Series,
$7,942.98 and $________; Spain WEBS Index Series, $5,706.09 and $________;
Sweden WEBS Index Series, $4,187.36 and $________; Switzerland WEBS Index
Series, $7,770.29 and $________; and United Kingdom WEBS Index Series,
$13,517.57 and $________.

In the aggregate, the Distributor received $246,106.67 and $________ for
the period from commencement of operations to March 31, 1996 and for the fiscal
year ended March 31, 1997, respectively, from the WEBS Index Series pursuant to
the Plan, retaining $19,688.53 and $________, respectively, and paying out the
remainder to unaffiliated third parties. The retained amounts represent .02% and
____% , respectively, of the average daily net assets of the WEBS Index Series,
which the Distributor receives for monitoring the purchase and redemption of
Creation Units, as described below under the "Purchase and Issuance of WEBS in
Creation Units" and "Redemption of WEBS in Creation Units." During the period
from commencement of operations to August 31, 1996 and during the fiscal year
ended August 31, 1997, the Distributor paid $184,745.53 and $________;
$26,779.36 and $________; and $14,893.25 and $________, respectively, for (1)
postage and other expenses of distributing prospectuses, statements of
additional information and other marketing materials, (2) advertising-related
expenses and (3) compensation to broker-dealers for distribution assistance,
respectively, which amounts were allocated to each WEBS Index Series based on
its average daily net assets for the period.

The Distribution Agreement provides that it may be terminated at any time,
without the payment of any penalty, (i) by vote of a majority of the Directors
who are not interested persons of the Fund (as defined under the 1940 Act) or
(ii) by vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the relevant WEBS Index Series, on at least 60 days'
written notice to the Distributor. The Distribution Agreement is also terminable
upon 60 days' notice by the

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<PAGE> 77
Distributor and will terminate automatically in the event of its assignment (as
defined in the 1940 Act).

THE CUSTODIAN, LENDING AGENT AND SUB-ADMINISTRATOR

MSTC serves as the Custodian for the cash and portfolio securities of each
WEBS Index Series of the Fund pursuant to a Custodian Agreement between MSTC and
the Fund and as Lending Agent for each WEBS Index Series. As Lending Agent, MSTC
causes the delivery of loaned securities from the Fund to borrowers, arranges
for the return of loaned securities to the Fund at the termination of the loans,
requests deposit of collateral, monitors daily the value of the loaned
securities and collateral, requests that borrowers add to the collateral when
required by the loan agreements, and provides recordkeeping and accounting
services necessary for the operation of the program. MSTC also provides certain
sub-administrative services relating to the Fund pursuant to a
Sub-Administration Agreement and receives a fee from the Administrator equal to
.05% of the Fund's average daily net assets for providing such services. MSTC,
as Custodian, Lending Agent and Sub-Administrator has no role in determining the
investment policies of the Fund or which securities are to be purchased or sold
by the Fund. The principal business address of MSTC is One Pierrepont Plaza,
Brooklyn, New York, 11201.

For its custody services to each WEBS Index Series, MSTC will be paid per
annum fees based on the aggregate net assets of the WEBS Index Series as
follows: Australia WEBS Index Series (.10%); Austria WEBS Index Series (.10%);
Belgium WEBS Index Series (.10%); Canada WEBS Index Series (.07%); France WEBS
Index Series (.11%); Germany WEBS Index Series (.10%); Hong Kong WEBS Index
Series (.12%); Italy WEBS Index Series (.09%); Japan WEBS Index Series (.07%);
Malaysia (Free) WEBS Index Series (.13%); Mexico (Free) WEBS Index Series
(.25%); Netherlands WEBS Index Series (.10%); Singapore (Free) WEBS Index Series
(.10%); Spain WEBS Index Series (.10%); Sweden WEBS Index Series (.10%);
Switzerland WEBS Index Series (.10%); and United Kingdom WEBS Index Series
(.08%). As remuneration for its services in connection with lending portfolio
securities of the WEBS Index Series, MSTC is paid by the Fund, in respect of
each WEBS Index Series, 50% of the net investment income earned on the
collateral for securities loaned.

TRANSFER AGENT

PNC (the "Transfer Agent"), an indirect wholly owned subsidiary of PNC
Bank Corp., provides transfer agency services pursuant to an agreement with the
Fund. The Transfer Agent has no role in determining the investment policies of
the Fund or which securities are to be purchased or sold by the Fund. The
principal business address of the Transfer Agent is Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19110.

ADDITIONAL EXPENSES

In addition to the fees described above, the Fund is responsible for the
payment of expenses that include, among other things, organizational expenses,
compensation of the Directors of the Fund, reimbursement of out-of-pocket
expenses incurred by the Administrator, exchange listing fees, license fees,
brokerage costs, legal and audit fees, and litigation and extraordinary
expenses. For the use of the relevant MSCI Index, each WEBS Index Series pays a
license fee to Morgan Stanley equal to .03% per annum of the aggregate net
assets of the WEBS Index Series.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio securities, the Adviser looks for prompt execution of the order at a
favorable price. Generally, the Adviser works with recognized dealers in these
securities, except when a better price and execution of the order can be
obtained elsewhere. The Fund will not deal with affiliates in principal
transactions unless permitted by exemptive order or applicable rule or
regulation. Since the investment objective of each WEBS Index Series is
investment performance that corresponds to that of an index, the Adviser does
not intend to select brokers and dealers for the purpose of receiving research
services in addition to a favorable price and prompt execution either from that
broker or an unaffiliated third party.

Subject to allocating brokerage to receive a favorable price and prompt
execution, the Adviser may select brokers who are willing to provide payments to
third party service suppliers to a WEBS Index Series, to reduce expenses of the
WEBS Index Series.

The Adviser assumes general supervision over placing orders on behalf of
the Fund for the purchase or sale of portfolio securities. If purchases or sales
of portfolio securities of the Fund and one or more other investment companies
or clients supervised by the Adviser are considered at or about the same time,
transactions in such securities are allocated among the several investment
companies and clients in a manner deemed equitable to all by the Adviser, taking
into account the sizes of such other investment companies and clients and the
amount of securities to be purchased or sold. In some cases this procedure could
have a detrimental effect on the price or volume of the security so far as the
Fund is concerned. However, in other cases it is possible that the ability to
participate in volume transactions and to negotiate lower brokerage commissions
will be beneficial to the Fund. The primary consideration is prompt execution of
orders at the most favorable net price. Portfolio turnover may vary from year to
year, as well as within a year. High turnover rates are likely to result in

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<PAGE> 78
comparatively greater brokerage expenses. The portfolio turnover rate for each
WEBS Index Series is expected to be under 50%. See "Implementation of Policies"
in the Prospectus. The overall reasonableness of brokerage commissions is
evaluated by the Adviser based upon its knowledge of available information as to
the general level of commissions paid by other institutional investors for
comparable services.

BOOK ENTRY ONLY SYSTEM

DTC acts as securities depositary for the WEBS. WEBS of each WEBS Index
Series are represented by global securities registered in the name of DTC or its
nominee and deposited with, or on behalf of, DTC. Except as provided below,
certificates will not be issued for WEBS.

DTC has advised the Fund as follows: it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participants (the "DTC Participants") and to facilitate the
clearance and settlement of securities transactions among the DTC Participants
in such securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the New York Stock Exchange, Inc., the
AMEX and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly (the "Indirect Participants"). DTC
agrees with and represents to its Participants that it will administer its
book-entry system in accordance with its rules and by-laws and requirements of
law.

Beneficial Owners of WEBS are not entitled to have WEBS registered in
their names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and are not considered the registered holder
thereof. Accordingly, each Beneficial Owner must rely on the procedures of DTC,
the DTC Participant and any Indirect Participant through which such Beneficial
Owner holds its interests, to exercise any rights of a holder of WEBS. The Fund
understands that under existing industry practice, in the event the Fund
requests any action of holders of WEBS, or a Beneficial Owner desires to take
any action that DTC, as the record owner of all outstanding WEBS, is entitled to
take, DTC would authorize the DTC Participants to take such action and that the
DTC Participants would authorize the Indirect Participants and Beneficial Owners
acting through such DTC Participants to take such action and would otherwise act
upon the instructions of Beneficial Owners owning through them. As described
above, the Fund recognizes DTC or its nominee as the owner of all WEBS for all
purposes. Conveyance of all notices, statements and other communications to
Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement
between the Fund and DTC, DTC is required to make available to the Fund upon
request and for a fee to be charged to the Fund a listing of the WEBS holdings
of each DTC Participant. The Fund shall inquire of each such DTC Participant as
to the number of Beneficial Owners holding WEBS, directly or indirectly, through
such DTC Participant. The Fund shall provide each such DTC Participant with
copies of such notice, statement or other communication, in such form, number
and at such place as such DTC Participant may reasonably request, in order that
such notice, statement or communication may be transmitted by such DTC
Participant, directly or indirectly, to such Beneficial Owners. In addition, the
Fund shall pay to each such DTC Participant a fair and reasonable amount as
reimbursement for the expenses attendant to such transmittal, all subject to
applicable statutory and regulatory requirements.

WEBS distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all WEBS. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in WEBS as
shown on the records of DTC or its nominee. Payments by DTC Participants to
Indirect Participants and Beneficial Owners of WEBS held through such DTC
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in a "street name," and will be the responsibility of such
DTC Participants. The Fund has no responsibility or liability for any aspects of
the records relating to or notices to Beneficial Owners, or payments made on
account of beneficial ownership interests in such WEBS, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between DTC and the DTC
Participants or the relationship between such DTC Participants and the Indirect
Participants and Beneficial Owners owning through such DTC Participants.

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<PAGE> 79
DTC may determine to discontinue providing its service with respect to
WEBS at any time by giving reasonable notice to the Fund and discharging its
responsibilities with respect thereto under applicable law. Under such
circumstances, the Fund shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a replacement is
unavailable, to issue and deliver printed certificates representing ownership of
WEBS, unless the Fund makes other arrangements with respect thereto satisfactory
to the AMEX (or such other exchange on which WEBS may be listed).

PURCHASE AND ISSUANCE OF WEBS IN CREATION UNITS

The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Purchase and Issuance of WEBS in
Creation Units."

GENERAL

The Fund issues and sells WEBS only in Creation Units on a continuous
basis through the Distributor, without an initial sales load, at their net asset
value next determined after receipt, on any Business Day (as defined herein), of
an order in proper form.

A "Business Day" with respect to each WEBS Index Series is any day on
which (i) the New York Stock Exchange ("NYSE") and (ii) the stock exchange(s)
and Fund subcustodian(s) relevant to such WEBS Index Series are open for
business. As of the date of the Prospectus, the NYSE observes the following
holidays: New Year's Day, President's Day (Washington's Birthday), Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The stock exchange and/or subcustodian holidays relevant to each
WEBS Index Series are set forth in Appendix B to this Statement of Additional
Information.

PORTFOLIO DEPOSIT

The consideration for purchase of a Creation Unit of WEBS of a WEBS Index
Series generally consists of the in-kind deposit of a designated portfolio of
equity securities (the "Deposit Securities") constituting an optimized
representation of the WEBS Index Series' benchmark foreign securities index and
an amount of cash computed as described below (the "Cash Component"). Together,
the Deposit Securities and the Cash Component constitute the "Portfolio
Deposit," which represents the minimum initial and subsequent investment amount
for shares of any WEBS Index Series of the Fund. The Cash Component is an amount
equal to the Dividend Equivalent Payment (as defined below), plus or minus, as
the case may be, a Balancing Amount (as defined below). The "Dividend Equivalent
Payment" enables the Fund to make a complete distribution of dividends on the
next dividend payment date, and is an amount equal, on a per Creation Unit
basis, to the dividends on all the Portfolio Securities with ex-dividend dates
within the accumulation period for such distribution (the "Accumulation
Period"), net of expenses and liabilities for such period, as if all of the
Portfolio Securities had been held by the Fund for the entire Accumulation
Period. The "Balancing Amount" is an amount equal to the difference between (x)
the net asset value (per Creation Unit) of the WEBS Index Series and (y) the sum
of (i) the Dividend Equivalent Payment and (ii) the market value (per Creation
Unit) of the securities deposited with the Fund (the sum of (i) and (ii) is
referred to as the "Deposit Amount"). The Balancing Amount serves the function
of compensating for any differences between the net asset value per Creation
Unit and the Deposit Amount.

The Adviser makes available through the Distributor on each Business Day,
immediately prior to the opening of business on the AMEX (currently 9:30 a.m.,
New York time), the list of the names and the required number of shares of each
Deposit Security to be included in the current Portfolio Deposit (based on
information at the end of the previous Business Day) for each WEBS Index Series.
Such Portfolio Deposit is applicable, subject to any adjustments as described
below, in order to effect purchases of Creation Units of WEBS of a given WEBS
Index Series until such time as the next-announced Portfolio Deposit composition
is made available.

The identity and number of shares of the Deposit Securities required for a
Portfolio Deposit for each WEBS Index Series changes as rebalancing adjustments
and corporate action events are reflected from time to time by the Adviser with
a view to the investment objective of the WEBS Index Series. The composition of
the Deposit Securities may also change in response to adjustments to the
weighting or composition of the securities constituting the relevant securities
index. In addition, the Fund reserves the right to permit or require the
substitution of an amount of cash (i.e., a "cash in lieu" amount) to be added to
the Cash Component to replace any Deposit Security which may not be available in
sufficient quantity for delivery or for other similar reasons. The adjustments
described above will reflect changes, known to the Adviser on the date of
announcement to be in effect by the time of delivery of the Portfolio Deposit,
in the composition of the subject index being tracked by the relevant WEBS Index
Series, or resulting from stock splits and other corporate actions.

In addition to the list of names and numbers of securities constituting
the current Deposit Securities of a Portfolio Deposit, the Distributor also
makes available (i) on each Business Day, the Dividend Equivalent Payment
effective through and including the previous Business Day, per outstanding WEBS
of each WEBS Index Series, and (ii) on a continuous basis throughout the day,
the sum of the Dividend Equivalent Payment effective through and including the
close of the previous trading session in the relevant foreign market, plus the
current value of the requisite Deposit Securities as in effect on such

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<PAGE> 80
day.

ROLE OF THE AUTHORIZED PARTICIPANT

Creation Units of WEBS may be purchased only by or through a DTC
Participant that has entered into an Authorized Participant Agreement with the
Fund and the Distributor ("Authorized Participant"). Such Authorized Participant
will agree pursuant to the terms of such Authorized Participant Agreement on
behalf of itself or any investor on whose behalf it will act, as the case may
be, to certain conditions, including that such Authorized Participant will make
available in advance of each purchase of WEBS an amount of cash sufficient to
pay the Cash Component, once the net asset value of a Creation Unit is next
determined after receipt of the purchase order in proper form, together with the
transaction fee described below. The Authorized Participant may require the
investor to enter into an agreement with such Authorized Participant with
respect to certain matters, including payment of the Cash Component. Investors
who are not Authorized Participants must make appropriate arrangements with an
Authorized Participant. Investors should be aware that their particular broker
may not be a DTC Participant or may not have executed an Authorized Participant
Agreement, and that therefore orders to purchase Creation Units of Fund shares
may have to be placed by the investor's broker through an Authorized
Participant. As a result, purchase orders placed through an Authorized
Participant may result in additional charges to such investor. The Fund does not
expect to enter into an Authorized Participant Agreement with more than a small
number of DTC Participants that have international capabilities. A list of the
Authorized Participants may be obtained from the Distributor.

PURCHASE ORDER

To initiate an order for a Creation Unit of WEBS, the Authorized
Participant must give notice to the Distributor of its intent to submit an order
to purchase WEBS not later than 4:00 p.m., New York time on the relevant
Business Day. The Distributor shall cause the Adviser and the Custodian to be
informed of such advice. The Custodian will then provide such information to the
appropriate subcustodian. For each WEBS Index Series, the Custodian shall cause
the subcustodian of the WEBS Index Series to maintain an account into which the
Authorized Participant shall deliver, on behalf of itself or the party on whose
behalf it is acting, the securities included in the designated Portfolio Deposit
(or the cash value of all or a part of such securities, in the case of a
permitted or required cash purchase or "cash in lieu" amount), with any
appropriate adjustments as advised by the Fund.

DEPOSIT SECURITIES MUST BE DELIVERED TO AN ACCOUNT MAINTAINED AT THE APPLICABLE
LOCAL SUBCUSTODIAN.

Following the notice of intention, an irrevocable order to purchase
Creation Units, in the form required by the Fund, must be received by the
Distributor from an Authorized Participant on its own or another investor's
behalf by the closing time of the regular trading session on the AMEX (currently
4:00 p.m., New York time) on the relevant Business Day. (The required form of an
order to purchase is available on request from the Distributor.) Those placing
orders to purchase Creation Units through an Authorized Participant should allow
sufficient time to permit proper submission of the purchase order to the
Distributor by the cut-off time on such Business Day. Orders must be transmitted
by the Authorized Participant to the Distributor by facsimile or electronic
transmission as provided in the Authorized Participant Agreement.

The Authorized Participant must also make available on or before the
contractual settlement date, by means satisfactory to the Fund, immediately
available or same day funds estimated by the Fund to be sufficient to pay the
Cash Component next determined after acceptance of the purchase order, together
with the applicable purchase transaction fee. Any excess funds will be returned
following settlement of the issue of the Creation Unit of WEBS. Those placing
orders should ascertain the applicable deadline for cash transfers by contacting
the operations department of the broker or depositary institution effectuating
the transfer of the Cash Component. This deadline is likely to be significantly
earlier than the closing time of the regular trading session on the AMEX.

Investors should be aware that an Authorized Participant may require
orders for purchases of WEBS placed with it to be in the form required by the
individual Authorized Participant, which form will not be the same as the form
of purchase order specified by the Fund, which the Authorized Participant must
deliver to the Distributor.

ACCEPTANCE OF PURCHASE ORDER

Subject to the conditions that (i) a properly completed irrevocable
purchase order has been submitted by the Authorized Participant (either on its
own or another investor's behalf) not later than the closing time of the regular
trading session on the AMEX, and (ii) arrangements satisfactory to the Fund are
in place for payment of the Cash Component and any other cash amounts which may
be due, the Fund will accept the order, subject to its right (and the right of
the Distributor and the Adviser) to reject any order until acceptance.

Once the Fund has accepted an order, upon next determination of the net
asset value of the shares, the Fund will confirm the issuance, against receipt
of payment, of a Creation Unit of WEBS of the WEBS Index Series at such net
asset value. The

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<PAGE> 81
Distributor will then transmit a confirmation of acceptance to the Authorized
Participant that placed the order.

The Fund reserves the absolute right to reject a purchase order
transmitted to it by the Distributor in respect of any WEBS Index Series if (a)
the purchaser or group of purchasers, upon obtaining the shares ordered, would
own 80% or more of the currently outstanding shares of any WEBS Index Series;
(b) the Deposit Securities delivered are not as specified by the Adviser, as
described above; (c) acceptance of the Deposit Securities would have certain
adverse tax consequences to the WEBS Index Series; (d) the acceptance of the
Portfolio Deposit would, in the opinion of counsel, be unlawful; (e) the
acceptance of the Portfolio Deposit would otherwise, in the discretion of the
Fund or the Adviser, have an adverse effect on the Fund or the rights of
beneficial owners; or (f) in the event that circumstances outside the control of
the Fund, the Distributor and the Adviser make it for all practical purposes
impossible to process purchase orders. The Fund shall notify a prospective
purchaser of its rejection of the order of such person. The Fund and the
Distributor are under no duty, however, to give notification of any defects or
irregularities in the delivery of Portfolio Deposits nor shall either of them
incur any liability for the failure to give any such notification.

ISSUANCE OF A CREATION UNIT

A Creation Unit of WEBS of a WEBS Index Series will not be issued until
the transfer of good title to the Fund of the Deposit Securities and the payment
of the Cash Component have been completed. When the subcustodian has confirmed
to the Custodian that the required securities included in the Portfolio Deposit
(or the cash value thereof) have been delivered to the account of the relevant
subcustodian, the Custodian shall notify the Distributor and the Adviser, and
the Fund will issue and cause the delivery of the Creation Unit of WEBS.

The Authorized Participant Agreement provides that in the event that a
Portfolio Deposit is incomplete on the settlement date for a Creation Unit of
WEBS because certain Deposit Securities are missing, the Fund may, in its sole
discretion, issue the Creation Unit of WEBS notwithstanding such deficiency in
reliance on the undertaking of the Authorized Participant to deliver the missing
Deposit Securities as soon as possible, which undertaking shall be secured by
such Authorized Participant's delivery and maintenance of collateral consisting
of cash or Short-Term Investments having a value at least equal to 105% of the
value of the missing Deposit Securities. The Authorized Participant Agreement
will permit the Fund to buy the missing Deposit Securities at any time and will
subject the Authorized Participant to liability for any shortfall between the
cost to the Fund of purchasing such securities and the value of the collateral.

All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility and acceptance for deposit of any
securities to be delivered shall be determined by the Fund, and the Fund's
determination shall be final and binding.

CASH PURCHASE METHOD

Although the Fund does not ordinarily permit cash purchases of Creation
Units, when cash purchases of Creation Units of WEBS are available or specified
for a WEBS Index Series, they will be effected in essentially the same manner as
in-kind purchases thereof. In the case of a cash purchase, the investor must pay
the cash equivalent of the Deposit Securities it would otherwise be required to
provide through an in-kind purchase, plus the same Cash Component required to be
paid by an in-kind purchaser. In addition, to offset the Fund's brokerage and
other transaction costs associated with using the cash to purchase the requisite
Deposit Securities, the investor will be required to pay a fixed purchase
transaction fee, plus an additional variable charge for cash purchases, which is
expressed as a percentage of the value of the Deposit Securities. The
transaction fees for in-kind and cash purchases of Creation Units of WEBS are
described below.

PURCHASE TRANSACTION FEE

A purchase transaction fee payable to the Fund is imposed to compensate
the Fund for the transfer and other transaction costs of a WEBS Index Series.
THE PURCHASE TRANSACTION FEE FOR IN-KIND AND CASH PURCHASES AND THE ADDITIONAL
VARIABLE CHARGE FOR CASH PURCHASES (WHEN CASH PURCHASES ARE AVAILABLE OR
SPECIFIED) ARE LISTED FOR THE RELEVANT WEBS INDEX SERIES IN THE SHAREHOLDER
TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND EXPENSES" IN THE PROSPECTUS.
Where the Fund permits an in-kind purchaser to substitute cash in lieu of
depositing a portion of the Deposit Securities, the purchaser will be assessed
the additional variable charge for cash purchases on the "cash in lieu" portion
of its investment. Purchasers of WEBS in Creation Units are responsible for the
costs of transferring the securities constituting the Deposit Securities to the
account of the Fund. See "Summary of Fund Expenses" in the Prospectus.

EXAMPLE

A hypothetical example of the costs of creating a Creation Unit of WEBS of
the Japan WEBS Index Series is set forth below for illustrative purposes only.
The exchange rate reflected in the table is Y____ per US$1.

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<PAGE> 82

<TABLE>
<CAPTION>
Unit Creation Daily NAV
Unit Creation Calculation Calculation
Calculation in United in United
in Japanese Yen States Dollars States Dollars
--------------- -------------- --------------
<S> <C> <C> <C>
Execution......................................... ____ ____ ____
Commissions....................................... ____ ____ ____
Stamp Taxes....................................... ____ ____ ____
Risk Premium...................................... ____ ____ ____
Accrued Income.................................... ____ ____ ____
Creation Charge................................... ____ ____ ____
WEBS Unit Value................................... ____ ____ ____
Per WEBS.......................................... ____ ____ ____
Shares............................................ ____ ____ ____
</TABLE>

See "Management of the Fund," in the Prospectus, and "Investment
Advisory, Management, Administrative and Distribution Services" herein, for
additional information concerning the distribution arrangements for WEBS.

REDEMPTION OF WEBS IN CREATION UNITS

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Redemption of WEBS in
Creation Units."

WEBS may be redeemed only in Creation Units at their net asset value
next determined after receipt of a redemption request in proper form by the
Distributor and only on a day on which the AMEX is open for trading. THE FUND
WILL NOT REDEEM WEBS IN AMOUNTS LESS THAN CREATION UNITS. Beneficial Owners also
may sell WEBS in the secondary market, but must accumulate enough WEBS to
constitute a Creation Unit in order to have such shares redeemed by the Fund.
There can be no assurance, however, that there will be sufficient liquidity in
the public trading market at any time to permit assembly of a Creation Unit of
WEBS. Investors should expect to incur brokerage and other costs in connection
with assembling a sufficient number of WEBS to constitute a redeemable Creation
Unit. See "Investment Considerations and Risks" in the Prospectus.

With respect to each WEBS Index Series, the Adviser makes available
through the Distributor immediately prior to the opening of business on the AMEX
(currently 9:30 am, New York time) on each day that the AMEX is open for
business the Portfolio Securities that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form (as
defined below) on that day. Unless cash redemptions are available or specified
for a WEBS Index Series, the redemption proceeds for a Creation Unit generally
consist of Deposit Securities as announced by the Distributor on the Business
Day of the request for redemption, plus cash in an amount equal to the
difference between the net asset value of the shares being redeemed, as next
determined after a receipt of a request in proper form, and the value of the
Deposit Securities, less the redemption transaction fee described below. The
redemption transaction fee described below is deducted from such redemption
proceeds. In the case of a resident Australian or New Zealand holder,
notwithstanding the foregoing, such holder is only entitled to receive cash upon
its redemption of Creation Units of WEBS.

A redemption transaction fee payable to the Fund is imposed to
offset transfer and other transaction costs that may be incurred by the relevant
WEBS Index Series. THE REDEMPTION TRANSACTION FEE FOR REDEMPTIONS IN KIND AND
FOR CASH AND THE ADDITIONAL VARIABLE CHARGE FOR CASH REDEMPTIONS (WHEN CASH
REDEMPTIONS ARE AVAILABLE OR SPECIFIED) ARE LISTED FOR THE RELEVANT WEBS INDEX
SERIES IN THE SHAREHOLDER TRANSACTION EXPENSES TABLE IN "SUMMARY OF FUND
EXPENSES" IN THE PROSPECTUS. Investors will also bear the costs of transferring
the Portfolio Deposit from the Fund to their account or on their order.
Investors who use the services of a broker or other such intermediary may be
charged a fee for such services.

Redemption requests in respect of Creation Units of any WEBS Index
Series must be submitted to the Distributor by or through an Authorized
Participant on a day that the AMEX is open for business. Investors other than
through Authorized Participants are responsible for making arrangements for a
redemption request to be made through an Authorized Participant. The Distributor
will provide a list of current Authorized Participants upon request.

The Authorized Participant must transmit the request for redemption,
in the form required by the Fund, to the Distributor in accordance with
procedures set forth in the Authorized Participant Agreement. Investors should
be aware that their particular broker may not have executed an Authorized
Participant Agreement, and that, therefore, requests to redeem Creation Units
may have to be placed by the investor's broker through an Authorized Participant
who has executed an Authorized Participant Agreement. At any given time there
will be only a limited number of broker-dealers that have executed an Authorized
Participant Agreement. Investors making a redemption request should be aware
that such request be in the form specified by such Authorized Participant.
Investors making a request to redeem Creation Units should allow sufficient time
to permit proper submission of the request by an Authorized Participant and
transfer of the WEBS to the Fund's Transfer Agent; such investors should allow
for the additional time that may be required to effect redemptions through their
banks, brokers or other financial intermediaries if such intermediaries are not
Authorized Participants.

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<PAGE> 83
A redemption request is considered to be in "proper form" if (i) an
Authorized Participant has transferred or caused to be transferred to the Fund's
Transfer Agent the Creation Unit of WEBS being redeemed through the book-entry
system of DTC so as to be effective by the AMEX closing time on a day on which
the AMEX is open for business and (ii) a duly completed request form is received
by the Distributor from the Authorized Participant on behalf of itself or
another redeeming investor by the AMEX closing time on such day. If the Transfer
Agent does not receive the investor's WEBS through DTC's facilities by the AMEX
closing time on the same day that the redemption request is received, the
redemption request shall be rejected and may be resubmitted the next day that
the AMEX is open for business. Investors should be aware that the deadline for
such transfers of shares through the DTC system may be significantly earlier
than the close of business on the AMEX. Those making redemption requests should
ascertain the deadline applicable to transfers of shares through the DTC system
by contacting the operations department of the broker or depositary institution
effecting the transfer of the WEBS.

Upon receiving a redemption request, the Distributor shall notify
the Fund and the Fund's Transfer Agent of such redemption request. The tender of
an investor's WEBS for redemption and the distribution of the cash redemption
payment in respect of Creation Units redeemed will be effected through DTC and
the relevant Authorized Participant to the beneficial owner thereof as recorded
on the book-entry system of DTC or the DTC Participant through which such
investor holds WEBS, as the case may be, or by such other means specified by the
Authorized Participant submitting the redemption request. See "Book-Entry System
Only."

IN CONNECTION WITH TAKING DELIVERY OF SHARES OF DEPOSIT SECURITIES
UPON REDEMPTION OF WEBS, A REDEEMING BENEFICIAL OWNER OR AUTHORIZED PARTICIPANT
ACTING ON BEHALF OF SUCH BENEFICIAL OWNER MUST MAINTAIN APPROPRIATE SECURITY
ARRANGEMENTS WITH A QUALIFIED BROKER-DEALER, BANK OR OTHER CUSTODY PROVIDERS IN
EACH JURISDICTION IN WHICH ANY OF THE PORTFOLIO SECURITIES ARE CUSTOMARILY
TRADED, TO WHICH ACCOUNT SUCH PORTFOLIO SECURITIES WILL BE DELIVERED.

Deliveries of redemption proceeds by the WEBS Index Series relating
to those countries generally will be made within three business days. Due to the
schedule of holidays in certain countries, however, the delivery of in-kind
redemption proceeds may take longer than three business days after the day on
which the redemption request is received in proper form. For each country
relating to a WEBS Index Series, Appendix B hereto identifies the instances
where more than seven days would be needed to deliver redemption proceeds.
PURSUANT TO AN ORDER OF THE SEC, IN RESPECT OF EACH WEBS INDEX SERIES, THE FUND
WILL MAKE DELIVERY OF IN-KIND REDEMPTION PROCEEDS WITHIN THE NUMBER OF DAYS
STATED IN APPENDIX B TO BE THE MAXIMUM NUMBER OF DAYS NECESSARY TO DELIVER
REDEMPTION PROCEEDS.

If neither the redeeming Beneficial Owner nor the Authorized
Participant acting on behalf of such redeeming Beneficial Owner has appropriate
arrangements to take delivery of the Portfolio Securities in the applicable
foreign jurisdiction and it is not possible to make other such arrangements, or
if it is not possible to effect deliveries of the Portfolio Securities in such
jurisdiction, the Fund may in its discretion exercise its option to redeem such
shares in cash, and the redeeming Beneficial Owner will be required to receive
its redemption proceeds in cash. In such case, the investor will receive a cash
payment equal to the net asset value of its shares based on the net asset value
of WEBS of the relevant WEBS Index Series next determined after the redemption
request is received in proper form (minus a redemption transaction fee and
additional variable charge for cash redemptions specified above, to offset the
Fund's brokerage and other transaction costs associated with the disposition of
Portfolio Securities of the WEBS Index Series). Redemptions of WEBS for Deposit
Securities will be subject to compliance with applicable United States federal
and state securities laws and each WEBS Index Series (whether or not it
otherwise permits cash redemptions) reserves the right to redeem Creation Units
for cash to the extent that the WEBS Index Series could not lawfully deliver
specific Deposit Securities upon redemptions or could not do so without first
registering the Deposit Securities under such laws.

Although the Fund does not ordinarily permit cash redemptions of
Creation Units (except that, as noted above, resident Australian and New Zealand
holders may redeem solely for cash), in the event that cash redemptions are
permitted or required by the Fund, proceeds will be paid to the Authorized
Participant redeeming shares on behalf of the redeeming investor as soon as
practicable after the date of redemption (within seven calendar days thereafter,
except for the instances listed in Appendix B hereto where more than seven
calendar days would be needed).

Because the Portfolio Securities of a WEBS Index Series may trade on
the relevant exchange(s) on days that the AMEX is closed or are otherwise not
Business Days for such WEBS Index Series, stockholders may not be able to redeem
their shares of such WEBS Index Series, or to purchase or sell WEBS on the AMEX,
on days when the net asset value of such WEBS Index Series could be
significantly affected by events in the relevant foreign markets.

The right of redemption may be suspended or the date of payment
postponed with respect to any WEBS Index Series (1) for any period during which
the New York Stock Exchange is closed (other than customary weekend and holiday
closings); (2) for any period during which trading on the New York Stock
Exchange is suspended or restricted; (3) for any period during which an
emergency exists as a result of which disposal of the shares of the WEBS Index
Series' portfolio securities or determination of its net asset value is not
reasonably practicable; or (4) in such other circumstance as is permitted by the
SEC.

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<PAGE> 84
DETERMINING NET ASSET VALUE

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Determination of Net
Asset Value."

Net asset value per share for each WEBS Index Series of the Fund is
computed by dividing the value of the net assets of such WEBS Index Series
(i.e., the value of its total assets less total liabilities) by the total number
of WEBS outstanding, rounded to the nearest cent. Expenses and fees, including
the management, administration and distribution fees, are accrued daily and
taken into account for purposes of determining net asset value. The net asset
value of each WEBS Index Series is determined as of the close of the regular
trading session on the New York Stock Exchange, Inc. (ordinarily 4:00 p.m., New
York City time) on each day that such exchange is open.

In computing a WEBS Index Series' net asset value, the WEBS Index
Series' portfolio securities are valued based on their last quoted current
price. Price information on listed securities is taken from the exchange where
the security is primarily traded. Securities regularly traded in an
over-the-counter market are valued at the latest quoted bid price in such
market. Other portfolio securities and assets for which market quotations are
not readily available are valued based on fair value as determined in good faith
by the Adviser in accordance with procedures adopted by the Board. Foreign
currency values are converted into US dollars using the same exchange rates
utilized by Morgan Stanley Capital International in the calculation of the
relevant MSCI Indices (currently, exchange rates as of 4:00 p.m. London time,
except that the exchange rate for the MSCI Mexico (Free) Index is that as of
3:00 p.m. New York City time). The AMEX also disseminates during its trading day
an indicative optimized portfolio value ("IOPV") for each WEBS Index Series.

DIVIDENDS AND DISTRIBUTIONS

The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Dividends and Capital
Gains Distributions."

Dividends from net investment income are declared and paid at least
annually by each WEBS Index Series. Distributions of net realized securities
gains, if any, generally are declared and paid once a year, but the Fund may
make distributions on a more frequent basis for certain WEBS Index Series to
improve tracking error or to comply with the distribution requirements of the
Internal Revenue Code, in all events in a manner consistent with the provisions
of the 1940 Act. In addition, the Fund intends to distribute at least annually
amounts representing the full dividend yield on the underlying portfolio
securities of each WEBS Index Series, net of expenses of such WEBS Index Series,
as if such WEBS Index Series owned such underlying portfolio securities for the
entire dividend period. As a result, some portion of each distribution may
result in a return of capital. See "Tax Matters."

Dividends and other distributions on WEBS are distributed, as
described below, on a pro rata basis to Beneficial Owners of such WEBS. Dividend
payments are made through DTC and the Authorized Participants to Beneficial
Owners then of record with proceeds received from the Fund.

The Fund makes additional distributions to the minimum extent
necessary (i) to distribute the entire annual investment company taxable income
of the Fund, plus any net capital gains and (ii) to avoid imposition of the
excise tax imposed by Section 4982 of the Internal Revenue Code. Management of
the Fund reserves the right to declare special dividends if, in its reasonable
discretion, such action is necessary or advisable to preserve the status of each
WEBS Index Series as a regulated investment company ("RIC") or to avoid
imposition of income or excise taxes on undistributed income.

TAXES

The following information supplements and should be read in
conjunction with the sections in the Prospectus entitled "Dividends and Capital
Gains Distributions" and "Tax Matters."

The Fund on behalf of each WEBS Index Series has the right to reject
an order for a purchase of WEBS if the purchaser (or group of purchasers) would,
upon obtaining the WEBS so ordered, own 80% or more of the outstanding WEBS of a
given WEBS Index Series and if, pursuant to section 351 of the Internal Revenue
Code, the respective WEBS Index Series would have a basis in the securities
different from the market value of such securities on the date of deposit. The
Fund also has the right to require information necessary to determine beneficial
share ownership for purposes of the 80% determination. See "Purchase and
Issuance of WEBS in Creation Units."

Each WEBS Index Series intends to qualify for and to elect treatment
as a separate RIC under Subchapter M of the Internal Revenue Code. To qualify
for treatment as a RIC, a company must annually distribute at least 90 percent
of its net investment company taxable income (which includes dividends, interest
and net short-term capital gains) and meet several other requirements. Among
such other requirements are the following: (1) at least 90 percent of the
company's annual gross income must be derived from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock or securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (2) at the close of each

51
<PAGE> 85

quarter of the company's taxable year, (a) at least 50 percent of the market
value of the company's total assets must be represented by cash and cash items,
U.S. government securities, securities of other regulated investment companies
and other securities, with such other securities limited for purposes of this
calculation in respect of any one issuer to an amount not greater than 5% of the
value of the company's assets and not greater than 10% of the outstanding voting
securities of such issuer, and (b) not more than 25 percent of the value of its
total assets may be invested in the securities of any one issuer or of two or
more issuers that are controlled by the company (within the meaning of Section
851(b)(4)(B) of the Internal Revenue Code) and that are engaged in the same or
similar trades or businesses or related trades or businesses (other than U.S.
government securities or the securities of other regulated investment
companies).

Each WEBS Index Series may be subject to foreign income taxes
withheld at source. Each WEBS Index Series will elect to "pass through" to its
investors the amount of foreign income taxes paid by the WEBS Index Series, with
the result that each investor will (i) include in gross income, even though not
actually received, the investor's pro rata share of the WEBS Index Series'
foreign income taxes, and (ii) either deduct (in calculating U.S. taxable
income) or credit (in calculating U.S. federal income tax) the investor's pro
rata share of the WEBS Index Series' foreign income taxes. A foreign tax credit
may not exceed the investor's U.S. federal income tax otherwise payable with
respect to the investor's foreign source income. For this purpose, each
shareholder must treat as foreign source gross income (i) his proportionate
share of foreign taxes paid by the WEBS Index Series and (ii) the portion of any
dividend paid by the WEBS Index Series which represents income derived from
foreign sources; the WEBS Index Series' gain from the sale of securities will
generally be treated as U.S. source income. This foreign tax credit limitation
is applied separately to separate categories of income; dividends from the WEBS
Index Series will be treated as "passive" or "financial services" income for
this purpose. The effect of this limitation may be to prevent investors from
claiming as a credit the full amount of their pro rata share of the WEBS Index
Series' foreign income taxes.

If any WEBS Index Series owns shares in certain foreign investment
entities, referred to as "passive foreign investment companies," the WEBS Index
Series will be subject to one of the following special tax regimes: (i) the WEBS
Index Series is liable for U.S. federal income tax, and an additional charge in
the nature of interest, on a portion of any "excess distribution" from such
foreign entity or any gain from the disposition of such shares, even if the
entire distribution or gain is paid out by the WEBS Index Series as a dividend
to its shareholders; (ii) if the WEBS Index Series were able and elected to
treat a passive foreign investment company as a "qualified electing fund," the
WEBS Index Series would be required each year to include in income, and
distribute to shareholders in accordance with the distribution requirements set
forth above, the WEBS Index Series' pro rata share of the ordinary earnings and
net capital gains of the passive foreign investment company, whether or not such
earnings or gains are distributed to the WEBS Index Series or (iii) the WEBS
Index Series is entitled to mark-to-market annually the shares of the passive
foreign investment company, and is required to distribute to shareholders any
such mark-to-market gains in accordance with the distribution requirements set
forth above.

A WEBS Index Series will be subject to a 4 percent excise tax on
certain undistributed income if it does not distribute to its shareholders in
each calendar year at least 98 percent of its ordinary income for the calendar
year plus 98 percent of its capital gain net income for the twelve months ended
October 31 of such year. Each WEBS Index Series intends to declare and
distribute dividends and distributions in the amounts and at the times necessary
to avoid the application of this 4 percent excise tax.

An investor in a WEBS Index Series that is a foreign corporation or
an individual who is a nonresident alien for U.S. tax purposes will be subject
to significant adverse U.S. tax consequences. For example, dividends paid out of
a WEBS Index Series' investment company taxable income will generally be subject
to U.S. federal withholding tax at a rate of 30% (or lower treaty rate if the
foreign investor is eligible for the benefits of an income tax treaty). Foreign
investors are urged to consult their own tax advisors regarding the U.S. tax
treatment, in their particular circumstances, of ownership of shares in a WEBS
Index Series.

The foregoing discussion is a summary only and is not intended as a
substitute for careful tax planning. Purchasers of shares of the Fund should
consult their own tax advisors as to the tax consequences of investing in such
shares, including under state, local and other tax laws. Finally, the foregoing
discussion is based on applicable provisions of the Internal Revenue Code,
regulations, judicial authority and administrative interpretations in effect on
the date hereof. Changes in applicable authority could materially affect the
conclusions discussed above, and such changes often occur.

CAPITAL STOCK AND SHAREHOLDER REPORTS

The Fund currently is comprised of seventeen series of shares of
common stock, par value $.001 per share, referred to herein as WEBS: the
Australia WEBS Index Series, the Austria WEBS Index Series, the Belgium WEBS
Index Series, the Canada WEBS Index Series, the France WEBS Index Series, the
Germany WEBS Index Series, the Hong Kong WEBS Index Series, the Italy WEBS Index
Series, the Japan WEBS Index Series, the Malaysia (Free) WEBS Index Series, the
Mexico (Free) WEBS Index Series, the Netherlands WEBS Index Series, the
Singapore (Free) WEBS Index Series, the Spain WEBS Index Series, the Sweden WEBS
Index Series, the Switzerland WEBS Index Series, and the United Kingdom WEBS

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<PAGE> 86
Index Series. Each WEBS Index Series has been issued a separate class of capital
stock. The Board may designate additional series of common stock and classify
shares of a particular series into one or more classes of that series.

Each WEBS issued by the Fund has a pro rata interest in the assets
of the corresponding WEBS Index Series. The Fund is currently authorized to
issue 6 billion shares of common stock. The following number of shares is
currently authorized for each WEBS Index Series: the Australia WEBS Index
Series, 127.8 million shares; the Austria WEBS Index Series, 19.8 million
shares; the Belgium WEBS Index Series, 136.2 million shares; the Canada WEBS
Index Series, 340.2 million shares; the France WEBS Index Series, 340.2 million
shares; the Germany WEBS Index Series, 382.2 million shares; the Hong Kong WEBS
Index Series, 191.4 million shares; the Italy WEBS Index Series, 63.6 million
shares; the Japan WEBS Index Series, 2,124.6 million shares; the Malaysia (Free)
WEBS Index Series, 127.8 million shares; the Mexico (Free) WEBS Index Series,
255 million shares; the Netherlands WEBS Index Series, 255 million shares, the
Singapore (Free) WEBS Index Series, 191.4 million shares; the Spain WEBS Index
Series, 127.8 million shares; the Sweden WEBS Index Series, 63.6 million shares;
the Switzerland WEBS Index Series, 318.625 million shares; and the United
Kingdom WEBS Index Series, 934.2 million shares. Fractional shares will not be
issued. Shares have no preemptive, exchange, subscription or conversion rights
and are freely transferable. Each share is entitled to participate equally in
dividends and distributions declared by the Board with respect to the relevant
WEBS Index Series, and in the net distributable assets of such WEBS Index Series
on liquidation. Shareholders are entitled to require the Fund to redeem Creation
Units of their shares.

Each WEBS has one vote with respect to matters upon which a
stockholder vote is required consistent with the requirements of the 1940 Act
and the rules promulgated thereunder and the Maryland General Corporation Law;
stockholders have no cumulative voting rights with respect to their shares.
Shares of all series vote together as a single class except that if the matter
being voted on affects only a particular WEBS Index Series it will be voted on
only by that WEBS Index Series and if a matter affects a particular WEBS Index
Series differently from other WEBS Index Series, that WEBS Index Series will
vote separately on such matter. Under Maryland law, the Fund is not required to
hold an annual meeting of stockholders unless required to do so under the 1940
Act. The policy of the Fund is not to hold an annual meeting of stockholders
unless required to do so under the 1940 Act. All shares of the Fund (regardless
of WEBS Index Series) have noncumulative voting rights for the election of
Directors. Under Maryland law, Directors of the Fund may be removed by vote of
the stockholders.

As of September 30, 1997, the name, address and percentage of
ownership of each DTC Participant that owned of record 5% or more of the
outstanding shares of each WEBS Index Series were as follows: [TO BE UPDATED]

The Fund does not have information concerning the beneficial
ownership of the WEBS held in the names of such DTC Participants.

The Fund issues through the Authorized Participants to its
stockholders semi-annual reports containing unaudited financial statements and
annual reports containing financial statements audited by independent auditors
approved by the Fund's Directors and by the stockholders when meetings are held
and such other information as may be required by applicable laws, rules and
regulations. Beneficial Owners also receive annually notification as to the tax
status of the Fund's distributions.

Stockholder inquiries may be made by writing to the Fund, c/o PFPC
Inc., 400 Bellevue Parkway, Wilmington, DE 19809.

PERFORMANCE INFORMATION

The performance of the WEBS Index Series may be quoted in
advertisements, sales literature or reports to shareholders in terms of average
annual total return, cumulative total return and yield.

Quotations of average annual total return are expressed in terms of
the average annual rate of return of a hypothetical investment in a WEBS Index
Series over periods of 1, 5 and 10 years (or the life of a WEBS Index Series, if
shorter). Such total return figures will reflect the deduction of a proportional
share of such WEBS Index Series' expenses on an annual basis, and will assume
that all dividends and distributions are reinvested when paid.

Total return is calculated according to the following formula: P(1 +
T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years and ERV = the ending redeemable
value of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10
year period). The average annual return for the period from commencement of
operations to August 31, 1996 and for the fiscal year ended August 31, 1997,
respectively, for each of the WEBS Index Series was: Australia WEBS Index Series
_____ and _____; Austria WEBS Index Series _____ and ______; Belgium WEBS Index
Series _____ and _____; Canada WEBS Index Series _____ and _____; France WEBS
Index Series _____ and _____; Germany WEBS Index Series _____ and _____; Hong
Kong WEBS Index Series _____ and _____; Italy WEBS Index Series _____ and _____;
Japan WEBS Index Series _____ and _____; Malaysia (Free) WEBS Index Series _____
and _____; Mexico (Free) WEBS Index Series _____ and _____; Netherlands WEBS
Index Series _____ and _____;

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<PAGE> 87

Singapore (Free) WEBS Index Series _____ and _____; Spain WEBS Index Series
_____ and _____; Sweden WEBS Index Series _____ and _____; Switzerland WEBS
Index Series _____ and _____; and United Kingdom WEBS Index Series _____ and
_____.

Quotations of a cumulative total return will be calculated for any
specified period by assuming a hypothetical investment in a WEBS Index Series on
the date of the commencement of the period and will assume that all dividends
and distributions are reinvested on ex date. However, currently there is no
dividend reinvestment option available to shareholders of WEBS and such
calculation is provided for informational purposes only. The net increase or
decrease in the value of the investment over the period will be divided by its
beginning value to arrive at cumulative total return. Total return calculated in
this manner will differ from the calculation of average annual total return in
that it is not expressed in terms of an average rate of return. The cumulative
total return for the period from commencement of operations to August 31, 1996
and for the fiscal year ended August 31, 1997, respectively, for each of the
WEBS Index Series was: Australia WEBS Index Series _____ and _____; Austria WEBS
Index Series _____ and ______; Belgium WEBS Index Series _____ and _____; Canada
WEBS Index Series _____ and _____; France WEBS Index Series _____ and _____;
Germany WEBS Index Series _____ and _____; Hong Kong WEBS Index Series _____ and
_____; Italy WEBS Index Series _____ and _____; Japan WEBS Index Series _____
and _____; Malaysia (Free) WEBS Index Series _____ and _____; Mexico (Free) WEBS
Index Series _____ and _____; Netherlands WEBS Index Series _____ and _____;
Singapore (Free) WEBS Index Series _____ and _____; Spain WEBS Index Series
_____ and _____; Sweden WEBS Index Series _____ and _____; Switzerland WEBS
Index Series _____ and _____; and United Kingdom WEBS Index Series _____ and
_____.

The yield of a WEBS Index Series is the net annualized yield based
on a specified 30-day (or one month) period assuming a semiannual compounding of
income. Included in net investment income is the amortization of market premium
or accretion of market and original issue discount. Yield is calculated by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula: YIELD = 2[(a-b/cd + 1)(6)-1] (where a = dividends and
interest earned during the period, b = expenses accrued for the period (net of
reimbursements), c = the average daily number of shares outstanding during the
period that were entitled to receive dividends and d = the maximum offering
price per share on the last day of the period). The yield for the period from
commencement of operations to August 31, 1996 and for the fiscal year ended
August 31, 1997, respectively, for each of the WEBS Index Series was: Australia
WEBS Index Series _____ and _____; Austria WEBS Index Series _____ and ______;
Belgium WEBS Index Series _____ and _____; Canada WEBS Index Series _____ and
_____; France WEBS Index Series _____ and _____; Germany WEBS Index Series
_____ and _____; Hong Kong WEBS Index Series _____ and _____; Italy WEBS Index
Series _____ and _____; Japan WEBS Index Series _____ and _____; Malaysia
(Free) WEBS Index Series _____ and _____; Mexico (Free) WEBS Index Series _____
and _____; Netherlands WEBS Index Series _____ and _____; Singapore (Free) WEBS
Index Series _____ and _____; Spain WEBS Index Series _____ and _____; Sweden
WEBS Index Series _____ and _____; Switzerland WEBS Index Series _____ and
_____; and United Kingdom WEBS Index Series _____ and _____.

Quotations of cumulative total return, average annual total return
or yield reflect only the performance of a hypothetical investment in a WEBS
Index Series during the particular time period on which the calculations are
based. Such quotations for a WEBS Index Series will vary based on changes in
market conditions and the level of such WEBS Index Series' expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.

The cumulative and average total returns and yields do not take into
account federal or state income taxes which may be payable; total returns and
yields would, of course, be lower if such charges were taken into account.

A comparison of the quoted non-standard performance offered for
various investments is valid only if performance is calculated in the same
manner. Since there are different methods for calculating performance, investors
should consider the effects of the methods used to calculate performance when
comparing performance of the Fund with performance quoted with respect to other
investment companies or types of investments.

Because some or all of the Fund's investments are denominated in
foreign currencies, the strength or weakness of the U.S. dollar as against these
currencies may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future fluctuations in the value of the U.S.
dollar against these currencies. In addition, marketing materials may cite
country and economic statistics and historical stock market performance
information for any of the countries in which the Fund invests, including, but
not limited to, the following: population growth, gross domestic product,
inflation rate, average stock market price-earnings ratios and the total value
of stock markets. Sources for such statistics may include official publications
of various foreign governments and exchanges.

From time to time, in advertising and marketing literature, the
Fund's performance may be compared to the performance of broad groups of
open-end and closed-end investment companies with similar investment goals, as
tracked by independent organizations such as Investment Company Data, Inc.,
Lipper Analytical Services, Inc., CDA Investment

54
<PAGE> 88

Technologies, Inc., Morningstar, Inc., Value Line Mutual Fund Survey and other
independent organizations. When these organizations' tracking results are used,
the Fund will be compared to the appropriate fund category, that is, by fund
objective and portfolio holdings, or to the appropriate volatility grouping,
where volatility is a measure of a fund's risk.

In addition, in connection with the communication of its performance
to current or prospective shareholders, the Fund also may compare those figures
to the performance of certain unmanaged indices which may assume the
reinvestment of dividends or interest but generally do not reflect deductions
for administrative and management costs. Examples of such indices include, but
are not limited to the following:

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<PAGE> 89

Dow Jones Industrial Average
Consumer Price Index
Standard & Poor's 500 Composite Stock Price Index (S&P 500)
NASDAQ OTC Composite Index
NASDAQ Industrials Index
International Finance Corporation's (Global) Composite and
(Investable) Composite Indices
Morgan Stanley Capital International Indices
NASDAQ Composite Index
Wilshire 5000 Stock Index

For examples of how these sources of information have been used,
please see Appendix C to this Statement of Additional Information, "Supplemental
Educational Information on WEBS."

In addition, the Fund from time to time may compare the results of
each WEBS Index Series to the following national benchmarks:

<TABLE>
<CAPTION>
COUNTRY NATIONAL INDEX
------- --------------
<S> <C>
Australia All Ordinares
Austria Vienna Stock Exchange
Belgium Brussels Stock Exchange
Canada Toronto 300
France CAC40
Germany DAX
Hong Kong Hang Seng
Italy BCI
Japan Nikkei 225
Malaysia KLSE
Mexico IPC
Netherlands CBS All Share
Singapore SES All
Spain Madrid Stock Exchange
Sweden Aff. General
Switzerland Swiss Bank
U.K. FTSE100
</TABLE>

From time to time, the Fund may use in marketing materials a graph
entitled "The Efficient Frontier," which illustrates the historical risks and
returns of selected unmanaged indices which track the performance of various
combinations of United States and international securities for a certain time
period, such as twenty years. A twenty year graph, for example, shall use twenty
year annualized international returns represented by the MSCI Europe,
Australasia and Far East (EAFE) Index and twenty year annualized United States
returns represented by the S&P 500 Index. Risk is measured by the standard
deviation in overall performance within each index. Data presented in the graph
shall be provided by Ibbotson Associates, Inc. Performance of an index is
historical and does not represent performance of the Fund, and is not a
guarantee of future results. For an example of the use of an "Efficient
Frontier" graph, please see "The Case for International Index Investing" at
Appendix C of this Statement of Additional Information.

Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements and
sales literature concerning the Fund, including reprints of, or selections from,
editorials or articles about the Fund. Sources for Fund performance information
and articles about the Fund include, but are not limited to, the following:

American Association of Individual Investors' Journal, a monthly
publication of the AAII that includes articles on investment
analysis techniques.

Barron's, a Dow Jones and Company, Inc. business and financial
weekly that periodically reviews investment company performance
data.

Business Week, a national business weekly that periodically reports
the performance rankings and ratings of a variety of investment
companies investing abroad.

CDA Investment Technologies, an organization that provides
performance and ranking information through

56
<PAGE> 90

examining the dollar results of hypothetical mutual fund investments
and comparing these results against appropriate indices.

Forbes, a national business publication that from time to time
reports the performance of specific investment companies.

Fortune, a national business publication that periodically rates the
performance of a variety of investment companies.

The Frank Russell Company, a West-Coast investment management firm
that periodically evaluates international stock markets and compares
foreign equity market performance to U.S. stock market performance.

Ibbotson Associates, Inc., a company specializing in investment
research and data.

Investment Company Data, Inc., an independent organization that
provides performance ranking information for broad classes of mutual
funds.

Investor's Business Daily, a daily newspaper that features
financial, economic, and business news.

Kiplinger's Personal Finance Magazine, a monthly investment advisory
publication that periodically features the performance of a variety
of securities.

Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis,
a weekly publication of industry-wide mutual fund averages by type
of fund.

Money, a monthly magazine that from time to time features both
specific funds and the mutual fund industry as a whole.

Morgan Stanley International, an integrated investment banking firm
that compiles statistical information.

The New York Times, a nationally distributed newspaper that
regularly covers financial news.

Smart Money, a national personal finance magazine published monthly
by Dow Jones & Company, Inc. and The Hearst Corporation that focuses
on ideas for investing, spending and saving.

Value Line Mutual Fund Survey, an independent organization that
provides biweekly performance and other information on mutual funds.

The Wall Street Journal, a Dow Jones and Company, Inc. newspaper
that regularly covers financial news.

Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies,
including comparative data on funds' backgrounds, management
policies, salient features, management results, income and dividend
records and price ranges.

Worth, a national publication distributed ten times per year by
Capital Publishing Company, a subsidiary of Fidelity Investments
that focuses on personal financial journalism.

COUNSEL AND INDEPENDENT AUDITORS

Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, are
counsel to the Fund and have passed upon the validity of the Fund's shares.

Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
serve as the independent auditors of the Fund.

FINANCIAL STATEMENTS

The audited financial statements and notes thereto in the Fund's
Annual Report to Shareholders for the fiscal year ended August 31, 1997 (the
"1997 Annual Report") are incorporated in this Statement of Additional
Information by reference. No other parts of the 1997 Annual Report are
incorporated by reference herein. The financial statements included in the 1997
Annual Report have been audited by the Fund's independent auditors, Ernst &
Young LLP, whose report thereon is incorporated herein by reference. Additional
copies of the 1997 Annual Report may be obtained

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<PAGE> 91
at no charge by telephoning the Distributor at 1-800-810-WEBS(9327).

EDUCATIONAL MATERIALS

Attached as Appendix C to this Statement of Additional Information
are certain supplemental educational materials concerning WEBS.

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<PAGE> 92
APPENDIX A-1

MSCI AUSTRALIA INDEX AS OF AUGUST 31, 1997