SUPPLEMENT DATED MAY 11, 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.
AMEX LISTING OF SOUTH KOREA SERIES WEBS AND COMMENCEMENT OF SALES TO THE PUBLIC
The American Stock Exchange LLC has approved the listing of the WEBS of
the South Korea WEBS Index Series.
Beginning May 12, 2000, WEBS of the South Korea Series 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 South Korea WEBS Index Series (and after
commencement of their operations, the Brazil (Free), South Africa and Taiwan
WEBS Index Series), the Fund pays BGFA an annual gross investment advisory fee
equal to each of those Index Series' allocable portion of: 0.74% per annum of
the aggregate net assets of those Index Series less than or equal to $2 billion,
plus 0.69% per annum of the aggregate net assets of those Index Series between
$2 billion and $4 billion, plus 0.64% per annum of the aggregate net assets of
those Index Series greater than $4 billion; PROVIDED, HOWEVER, that the fee paid
to BGFA with respect to each of those Index Series shall be reduced by the
aggregate of such Index Series' fees and expenses, other than (i) expenses of
the Index Series incurred in connection with the execution of portfolio
securities transactions on behalf of such Index Series, (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 Series (other than the
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expenses set forth in the foregoing proviso) exceed the amount set forth above
with respect to such Index Series.
The effect of this fee arrangement, based on assumed average daily net
assets of $50 million for the South Korea Series, and assuming payments under
the Fund's Rule 12b-1 plan in respect of the South Korea Series at the maximum
rate of 0.25% and no unusual expenses, is an expense ratio for the South Korea
Series 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 WEBS Index Series (I.E., the
Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan,
Malaysia (Free), Mexico (Free), Netherlands, Singapore (Free), Spain, Sweden,
Switzerland and United Kingdom WEBS Index Series) 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 Series (and after
commencement of their operations, the EMU and USA WEBS Index Series), the Fund
pays BGFA an annual gross investment advisory fee equal to each of those Index
Series' allocable portion of: 0.59% per annum of the aggregate net assets of
those Index Series less than or equal to $7 billion, plus 0.54% per annum of the
aggregate net assets of those Index Series between $7 billion and $11 billion,
plus 0.49% per annum of the aggregate net assets of those Index Series in excess
of $11 billion; PROVIDED, HOWEVER, that the fee paid to BGFA with respect to
each of those Index Series shall be reduced by the aggregate of such Index
Series' fees and expenses, other than (i) expenses of the Index Series incurred
in connection with the execution of portfolio securities transactions on behalf
of such Index Series, (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
Series (other than the expenses set forth in the foregoing proviso) exceed the
amount set forth above with respect to such Index Series.
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 Series 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 WEBS Index Series.
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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 a WEBS Index Series under the Fund's Rule 12b-1
distribution plan (up to 0.20% of the average daily net assets of the Series)
was removed, with the effect that each Index Series may pay annual distribution
fees of up to 0.25% of the average daily net assets of the Index Series 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 Series, at the annual
rate of up to 0.25 of 1% of the average daily net asset value of WEBS 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.
MALAYSIA (FREE) WEBS INDEX SERIES
Effective May 12, 2000, Creation Units of the Malaysia (Free) WEBS
Index Series will be redeemed for cash in U.S. dollars. (Prior to that date, the
Malaysia Series 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 Series for U.S. dollars, the Fund is combining its accounts in Malaysia
effective May 12, 2000, and Malaysian securities acquired by the Malaysia Series
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
Series 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 Series for possible use as a foreign
tax credit.
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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 Series and its shareholders.
Since the capital controls were imposed, the WEBS of the Malaysia Series 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 Series WEBS for U.S. dollars will result in Malaysia Series WEBS
trading close to their net asset values.
DETERMINATION OF NET ASSET VALUE
Except for the Index Series named below, the net asset value of each
Index Series 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 South Korea,
Malaysia (Free) and Taiwan WEBS Index Series are determined as of 8:30 a.m.
(Eastern time), and the net asset value of the Brazil (Free) WEBS Index Series
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 WEBS is made is
based on the next calculation of net asset value. In the case of Index Series
that effect creations and/or redemptions only for cash (I.E., the Brazil (Free),
South Korea, Malaysia (Free) and Taiwan WEBS Index Series), it is possible that
portfolio securities transactions by the Fund in the relevant local markets of
those Index Series could affect the prices of those portfolio securities at the
time those Index Series' net asset values are calculated.
CREATION UNIT TRANSACTION FEES FOR INSTITUTIONAL INVESTORS
The Fund issues and redeems shares of WEBS only in Creation Units,
comprised of at least 50,000 to 600,000 shares, depending on the Index Series.
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 Series, 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 Series. The basic transaction fees (per
Creation Unit purchase or redemption transaction) range from maximums of $1,500
to $8,000, depending on the Index Series. 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 Series.
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