SUPPLEMENT DATED SEPTEMBER 15, 1998
TO
WEBS INDEX FUND, INC.
PROSPECTUS
DATED OCTOBER 29, 1997
NOTE: This Supplement relates solely to the Malaysia (Free) WEBS Index
Series and is not relevant to any other WEBS Index Series.
This Supplement relates to the Prospectus of WEBS Index Fund, Inc.
(the "Fund") dated October 29, 1997 and is in addition to the Supplement
dated April 22, 1998.
Impact of Malaysian Controls on the Malaysia (Free) WEBS Index Series
On September 1, 1998, the government of Malaysia imposed capital
restrictions that impact the operations of non-Malaysian investors such
as the Malaysia (Free) WEBS Index Series (the "Malaysia Series") in
certain respects. Important details regarding the capital controls and
their administration are not yet available. However, based upon current
information, the Fund believes that it is unable to exchange Creation
Units of WEBS principally on an in-kind basis as contemplated in the
Fund's Prospectus and Statement of Additional Information. In the
circumstances, the Fund temporarily suspended new creations of Creation
Units of WEBS of its Malaysia Series on September 4, 1998.
In light of the Malaysian capital restrictions, the Fund is
concerned about its ability to honor redemptions of Creation Units of
WEBS of the Malaysia Series. To the extent the Fund is presented with
requests for the redemption of Creation Units of Malaysia Series WEBS,
the Fund will seek to honor such requests consistent with the Malaysian
capital restrictions. Based on the information available to date, the
Fund believes that (i) it cannot currently make in-kind redemptions of
Malaysia Series WEBS and (ii) it may only be able to honor redemption
requests through the delivery of Malaysian ringgits in Malaysia, subject
to receipt of Malaysian Central Bank approval on a case by case basis.
The Fund understands that a non-Malaysian investor cannot freely
exchange holdings of Malaysian ringgits for other currencies at this
time and cannot freely transfer ringgits outside or inside Malaysia.
There can be no assurance that the Malaysian Central Bank would issue
such approval and, if an approval is not received, the Fund would not be
able to effect the redemption. In the circumstances, the Fund suggests
that requests for the redemption of Creation Units of Malaysia Series
WEBS should not be made and urges investors contemplating such
redemptions to consult with Malaysian counsel.
Any updates relating to the specific mechanics of redeeming
Malaysia Series WEBS are expected to be announced in future Supplements
to the Fund's Statement of Additional Information.
As a result of the suspension of creations of Malaysia Series WEBS
and the Fund's belief that redemptions of Malaysia Series WEBS may be
impracticable or impossible to effect, the Fund believes that WEBS of
the Malaysia Series are likely to trade at larger discounts or premiums
to their net asset value than in the past and that such discounts or
premiums may be material. Although WEBS of the Malaysia Series are
expected to continue trading on the American Stock Exchange, there can
be no assurance that an active trading market will be maintained for
Malaysia Series WEBS.
Because of the Malaysian capital restrictions, the Malaysia Series
is subject to severe restrictions on exchanging Malaysian ringgits for
U.S. dollars for at least the next year, and accordingly may seek to
borrow dollars to pay its U.S. dollar expenses and to make required
distributions to shareholders. There can be no assurances that the
Malaysia Series will be able to make such borrowings. The interest
expense associated with any borrowings would reduce the income of the
Malaysia Series and introduce leverage into its capital structure.
Leverage would magnify the impact on net asset value of decreases and
increases in the value of the Malaysia Series' investment portfolio.
Effective September 15, 1998, the net asset value of the Malaysia
Series
is determined as of 8:30 a.m., New York City time, on each day that the New
York Stock Exchange, Inc. is open for trading. In computing the net asset
value of the Malaysia Series, values denominated in Malaysian ringgits may be
converted into U.S. dollars at an exchange rate other than the "official"
exchange rate of fixed by Malaysian regulatory authorities from time to time
if, in the Fund's judgment, another exchange rate represents a better measure
of the ringgit's value. As a result of this policy, the exchange rate used by
the Fund in converting ringgits to U.S. dollars may differ from both the
"official" exchange rate and the rate used in computing the Morgan Stanley
Capital International ("MSCI") Malaysia (Free) Index, which serves as the
benchmark index of the Malaysia Series.
