SUPPLEMENT DATED MAY 15, 2000
TO
WEBS INDEX FUND, INC.
PROSPECTUS
AND
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 30, 1999
The information in this Supplement updates the
information in, and should be read in conjunction with, the
Prospectus and the Statement of Additional Information of
WEBS Index Fund, Inc., each dated December 30, 1999.
The Fund is renamed "iShares, Inc."; WEBS become "iShares"
Effective May 15, 2000, the Fund has been renamed
"iShares, Inc." In addition, WEBS have been renamed
"iShares", and each of the Fund's WEBS Index Series has been
renamed an "iShares MSCI Index Fund". The new names are as
follows:
iShares MSCI Australia Index Fund
iShares MSCI Austria Index Fund
iShares MSCI Belgium Index Fund
iShares MSCI Brazil (Free) Index Fund
iShares MSCI Canada Index Fund
iShares MSCI EMU Index Fund
iShares MSCI France Index Fund
iShares MSCI Germany Index Fund
iShares MSCI Hong Kong Index Fund
iShares MSCI Italy Index Fund
iShares MSCI Japan Index Fund
iShares MSCI Malaysia (Free) Index Fund
iShares MSCI Mexico (Free) Index Fund
iShares MSCI Netherlands Index Fund
iShares MSCI Singapore (Free) Index Fund
iShares MSCI South Africa Index Fund
iShares MSCI South Korea Index Fund
iShares MSCI Spain Index Fund
iShares MSCI Sweden Index Fund
iShares MSCI Switzerland Index Fund
iShares MSCI Taiwan Index Fund
iShares MSCI United Kingdom Index Fund
iShares MSCI USA Index Fund
AMEX Listing of iShares of iShares MSCI South Korea Index
Fund and Commencement of Sales to the Public
The American Stock Exchange LLC has approved the
listing of the iShares of the iShares MSCI South Korea Index
Fund.
Beginning May 12, 2000, iShares of the iShares MSCI
South Korea Index Fund are offered for sale to the public,
and will trade on the American Stock Exchange under the
ticker symbol "EWY".
Under the investment advisory agreement between the
Fund and its investment adviser, Barclays Global Fund
Advisors ("BGFA"), for the services to be provided by BGFA
with respect to the iShares MSCI South Korea Index Fund (and
after commencement of their operations, the iShares MSCI
Brazil (Free), South Africa and Taiwan Index Funds), the
Fund pays BGFA an annual gross investment advisory fee equal
to each of those Index Funds' allocable portion of: 0.74%
per annum of the aggregate net assets of those Index Funds
less than or equal to $2 billion, plus 0.69% per annum of
the aggregate net assets of those Index Funds between
$2 billion and $4 billion, plus 0.64% per annum of the
aggregate net assets of those Index Funds greater than
$4 billion; provided, however, that the fee paid to BGFA with
respect to each of those Index Funds shall be reduced by the
aggregate of such Index Funds' fees and expenses, other than
(i) expenses of the Index Funds incurred in connection with
the execution of portfolio securities transactions on behalf
of such Index Funds, (ii) expenses incurred in connection
with any distribution plan adopted by the Fund in compliance
with Rule 12b-1 under the 1940 Act, (iii) litigation
expenses, (iv) taxes (including, but not limited to, income,
excise, transfer and withholding taxes), (v) any cost or
expense that a majority of the Directors of the Fund who are
not "interested persons" (as defined in the 1940 Act) deems
to be an extraordinary expense and (vi) the advisory fee
payable to BGFA under the investment advisory agreement; and
provided, further, that BGFA shall reimburse the Fund to the
extent that the expenses of any of those Index Funds (other
than the expenses set forth in the foregoing proviso) exceed
the amount set forth above with respect to such Index Funds.
The effect of this fee arrangement, based on assumed
average daily net assets of $50 million for the iShares MSCI
South Korea Index Fund, and assuming payments under the
Fund's Rule 12b-1 plan in respect of the iShares MSCI South
Korea Index Fund at the maximum rate of 0.25% and no unusual
expenses, is an expense ratio for the iShares MSCI South
Korea Index Fund of 0.99% (i.e., 0.74% + 0.25%) of average
daily net assets.
Shareholder Approval of Advisory Agreement
The shareholders of the Fund's initial 17 iShares MSCI
Index Funds (i.e., the iShares MSCI Australia, Austria,
Belgium, Canada, France, Germany, Hong Kong, Italy, Japan,
Malaysia (Free), Mexico (Free), Netherlands, Singapore
(Free), Spain, Sweden, Switzerland and United Kingdom Index
Funds) have approved amendments to the Fund's advisory
agreement with BGFA, including a change to the Fund's fee
arrangements with BGFA. The new fee arrangements went into
effect as of May 8, 2000.
Under the new contractual fee arrangements, for the
services to be provided by BGFA with respect to each of the
initial 17 Index Funds (and after commencement of their
operations, the iShares EMU and USA Index Funds), the Fund
pays BGFA an annual gross investment advisory fee equal to
each of those Index Funds' allocable portion of: 0.59% per
annum of the aggregate net assets of those Index Funds less
than or equal to $7 billion, plus 0.54% per annum of the
aggregate net assets of those Index Funds between $7 billion
and $11 billion, plus 0.49% per annum of the aggregate net
assets of those Index Funds in excess of $11 billion;
provided, however, that the fee paid to BGFA with respect to
each of those Index Funds shall be reduced by the aggregate
of such Index Funds' fees and expenses, other than
(i) expenses of the Index Funds incurred in connection with
the execution of portfolio securities transactions on behalf
of such Index Funds, (ii) expenses incurred in connection
with any distribution plan adopted by the Fund in compliance
with Rule 12b-1 under the 1940 Act, (iii) litigation
expenses, (iv) taxes (including, but not limited to, income,
excise, transfer and withholding taxes), (v) any cost or
expense that a majority of the Directors of the Fund who are
not "interested persons" (as defined in the 1940 Act) deems
to be an extraordinary expense and (vi) the advisory fee
payable to BGFA under the investment advisory agreement; and
provided, further, that BGFA shall reimburse the Fund to the
extent that the expenses of any of those Index Funds (other
than the expenses set forth in the foregoing proviso) exceed
the amount set forth above with respect to such Index Funds.
The effect of the new fee arrangements, at current
asset levels, and assuming payments under the Fund's Rule
12b-1 plan in respect of the initial 17 Index Funds at the
maximum rate of 0.25% and no unusual expenses, is an expense
ratio of 0.84% (i.e., 0.59% + 0.25%) of average daily net
assets for each of the initial 17 iShares MSCI Index Funds.
New Distributor
SEI Investments Distribution Company, located at One
Freedom Valley Drive, Oaks, PA 19456, became the new
distributor of the Fund, effective March 28, 2000. At that
time, the Board of Directors' previous limitation on annual
distribution fees paid by an iShares MSCI Index Fund under
the Fund's Rule 12b-1 distribution plan (up to 0.20% of the
average daily net assets of the Index Fund) was removed,
with the effect that each Index Fund may pay annual
distribution fees of up to 0.25% of the average daily net
assets of the Index Fund under the 12b-1 plan (the maximum
permitted by the 12b-1 plan).
The distribution fees payable under the 12b-1 plan are
used to pay distribution related expenses, including:
compensation to the distributor at a rate fixed by the
Fund's Board of Directors from time to time (currently 0.02%
of the Fund's average daily net assets, subject to an annual
minimum of $845,000); compensation to a sales and marketing
consultant retained by the Fund at a rate of 0.035% of the
Fund's average daily net assets; reimbursements of expenses
incurred by the distributor and other persons (including
BGFA) in connection with the distribution of the Fund's
shares. In addition, the distributor also has entered into
sales and investor services agreements with broker-dealers
or other persons that are DTC participants 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 Index Fund, at the annual rate of up to 0.25 of 1%
of the average daily net asset value of iShares held through
DTC for the account of such DTC participant. The amounts of
the fees paid to the distributor and the sales and marketing
consultant are not dependent on the amount of distribution
expenses actually incurred by such persons.
iShares MSCI Malaysia (Free) Index Fund
Effective May 12, 2000, Creation Units of the iShares
MSCI Malaysia (Free) Index Fund will be redeemed for cash in
U.S. dollars. (Prior to that date, the Malaysia Index Fund
has had a policy of redeeming Creation Units exclusively for
Malaysian ringgits, in light of capital controls imposed by
Malaysian authorities.)
In connection with the decision to redeem Creation
Units of the Malaysia Index Fund for U.S. dollars, the Fund
is combining its accounts in Malaysia effective May 12,
2000, and Malaysian securities acquired by the Malaysia
Index Fund before September 1, 1998 will acquire a basis for
purposes of the Malaysian profits levy equal to their fair
market value at the time of the combination. Previously,
the proceeds of such securities could be repatriated without
payment of the profits levy. Under the current Malaysian
capital controls, the Malaysia Index Fund will pay a profits
levy at a rate of 10% (with any profits computed based on
the cost basis for purposes of the Malaysian capital
controls) when it sells Malaysian securities and repatriates
the proceeds (e.g., in connection with redemptions). Since
the levy is not a foreign income tax it will not be "passed
through" to shareholders of the Malaysia Index Fund for
possible use as a foreign tax credit.
The Malaysian capital controls have been changed in
significant ways since they were first adopted without
warning on September 1, 1998. There can be no assurance
that the Malaysian capital controls will not be changed in
the future in ways that adversely affect the Malaysia Index
Fund and its shareholders. Since the capital controls were
imposed, the iShares of the Malaysia Index Fund have often
traded at discounts or premiums to their net asset value.
There can be no assurance that the Fund's decision to permit
redemptions of Creation Units of Malaysia Index Fund iShares
for U.S. dollars will result in Malaysia Index Fund iShares
trading close to their net asset values.
Determination of Net Asset Value
Except for the Index Funds named below, the net asset
value of each Index Fund is determined as of the close of
the regular trading session on the New York Stock Exchange,
Inc. ("NYSE") (ordinarily 4:00 p.m., Eastern time) on each
day that the NYSE is open. The net asset values of the
iShares MSCI South Korea, Malaysia (Free) and Taiwan Index
Funds are determined as of 8:30 a.m. (Eastern time), and the
net asset value of the iShares MSCI Brazil (Free) Index Fund
is determined at 5:00 p.m. (Eastern time), on each day that
the NYSE is open. The price at which a purchase or
redemption of Creation Units of iShares is made is based on
the next calculation of net asset value. In the case of
Index Funds that effect creations and/or redemptions only
for cash (i.e., the iShares MSCI Brazil (Free), South Korea,
Malaysia (Free) and Taiwan Index Funds), it is possible that
portfolio securities transactions by the Fund in the
relevant local markets of those Index Funds could affect the
prices of those portfolio securities at the time those Index
Funds' net asset values are calculated.
Creation Unit Transaction Fees for Institutional Investors
The Fund issues and redeems iShares only in Creation
Units, comprised of at least 50,000 to 600,000 shares,
depending on the Index Fund. As a practical matter, only
institutions are capable of purchasing or redeeming these
Creation Units. In connection with the purchase or the
redemption of a Creation Unit of an Index Fund, an investor
must pay to the Fund a purchase or redemption transaction
fee, which is intended to offset the issuance/redemption
transaction costs incurred by that Index Fund. The basic
transaction fees (per Creation Unit purchase or redemption
transaction) range from maximums of $1,500 to $8,000,
depending on the Index Fund. In addition to the basic
transaction fee, Creation Unit purchase or redemption
transactions for cash (only if available) require an
additional maximum variable charge that ranges from maximums
of 0.25% to 1.60% of the value of the Creation Unit being
purchased or redeemed, depending on the Index Fund.
