-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J7fIIHG143KifqhZQpYi+EUUByVAk3T9QttqtyhUzG5c31Wqg7liWAlxH5hGr4xy 6gmN7zdsO4PQL08EpBPgZA== 0000935069-97-000170.txt : 19971029 0000935069-97-000170.hdr.sgml : 19971029 ACCESSION NUMBER: 0000935069-97-000170 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971028 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEBS INDEX FUND INC CENTRAL INDEX KEY: 0000930667 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-09102 FILM NUMBER: 97702222 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027912919 FORMER COMPANY: FORMER CONFORMED NAME: WFBS INDEX FUND INC DATE OF NAME CHANGE: 19961226 FORMER COMPANY: FORMER CONFORMED NAME: FOREIGN FUND INC DATE OF NAME CHANGE: 19950524 N-30D 1 WEBS 1997 ANNUAL REPORT WORLD EQUITY BENCHMARK SHARES WEBS [WEBS logo graphic omitted] 1 9 9 7 ANNUAL REPORT WEBS INDEX FUND, INC. WEBS INDEX FUND, INC. ================================================================================ October 24, 1997 Dear Shareholder, We are pleased to present the Annual Report for WEBS Index Fund, Inc. covering the period September 1, 1996 through August 31, 1997. It contains important information about the performance of your investment, a management discussion and analysis for each WEBS Index Series from the Fund's investment adviser, Barclays Global Fund Advisors, and important financial information. As you are aware, each of the 17 WEBS Index Series seeks to track the investment performance of a specific country's stock market, as measured by a Morgan Stanley Capital International (MSCI) country index. This report contains information about the tracking of each WEBS Index Series vis-a-vis its benchmark MSCI country index for the one-year period ended August 31, 1997. Further details about each WEBS Index Series' performance are contained in the Investment Adviser's discussion. GROWTH We are very pleased to advise that aggregate net assets of the seventeen WEBS Index Series have grown to $471.6 million as of August 31, 1997 -- a significant achievement. WEBS are increasingly recognized by investors and their advisers as an attractive way to invest in selected equity markets around the world. We look forward to this momentum continuing in the months ahead. INTERNATIONAL OUTLOOK The unprecedented performance of the U.S. equity markets in recent times has over-shadowed the impressive returns that have been realized in certain of the international equity markets. As you will note throughout the Investment Adviser's commentary, a number of the WEBS Index Series have produced total returns, based on net asset value, in excess of 25% for the year ended August 31, 1997. Some examples: WEBS Canada +28.5%, WEBS Mexico +35.2%, WEBS Netherlands +28.0%, WEBS Spain +39.2% and WEBS Sweden +30.1%. This is excellent performance by any standard. Many investors are becoming concerned about the extremely high valuation levels that now exist in the U.S. equity markets. At times such as this, it is particularly important for investors to keep in mind the fact that while international investing involves certain risks, international diversification of an investment portfolio can reduce overall portfolio risk. The benefits of international diversification are recognized by professional managers of pension and other institutional accounts, many of whom have significantly increased portfolio exposures to international equities in recent years. Diversifying your investments internationally may reduce the possibility of all of your investments being negatively impacted by a decline in the U.S. markets. A number of professional money managers are now recommending that their customers consider allocating 20% to 30% of their equity portfolios to international equities. WEBS represent a convenient and relatively low cost way for investors to achieve these allocation targets. CONCLUSION The uniqueness and success of WEBS Index Fund, Inc. continues to attract attention from the media and institutional and retail investors. Word is rapidly getting out that indexing works in international markets, just as it does at home, and that WEBS represent an easy, relatively inexpensive way to access 17 of those markets. We hope you will continue to use the various WEBS Index Series in your portfolio and wish to thank you for your continued support and confidence in WEBS Index Fund, Inc. Sincerely, /S/Nathan Most Nathan Most Chairman and President WEBS Index Fund, Inc. 1 ================================================================================ INTRODUCTION The Investment Adviser for each WEBS Index Series is Barclays Global Fund Advisors. Each WEBS Index Series holds a representative sample of the securities in a corresponding MSCI Index (using an analytic technique known as "portfolio sampling"), as opposed to a full replication of the corresponding MSCI Index. Portfolio sampling is a highly disciplined approach to capturing index returns which involves maximizing float and liquidity, reflecting accurately the market's size and industry profiles and minimizing cross-ownership. No attempt is made to manage the WEBS Index Series using economic or market analysis. There are several important factors that should be kept in mind when reviewing the performance of each WEBS Index Series. First, the MSCI Indices are unmanaged and, therefore, do not bear management, administration, distribution, transaction or other expenses, while the WEBS Index Series do incur such expenses, thereby impacting their performance. Second, because of the portfolio sampling approach discussed above, and the regulatory and other constraints imposed on its use (such as limits on investing in particular stocks imposed by the Internal Revenue Code and the need to comply with the Fund's concentration policy), the resulting performance of each WEBS Index Series may vary positively or negatively from that of its corresponding MSCI Index during any period. A third factor that causes performance of the WEBS Index Series to differ from that of their respective benchmarks is "revenue differential." The dividend revenues received by the WEBS Index Series differ from those of the benchmark MSCI Indices both in amount (principally as a result of the portfolio sampling techniques described above) and timing (the WEBS Index Series record dividend revenues on the "ex" dates of the underlying stocks while the MSCI Indices allocate annual dividend revenues evenly over a 12-month period). Also, the Australia, Austria and Germany WEBS Index Series are subject to withholding taxes at rates that are more favorable than the rates assumed by the benchmark MSCI Indices, and this factor may affect the performance of such WEBS Index Series. In addition, while the sole source of revenues for the MSCI Indices is dividends, the WEBS Index Series receive interest on uninvested cash and, in the case of most WEBS Index Series, revenues from the lending of portfolio securities. Another factor that affects relative performance of the WEBS Index Series and their benchmark indices is known as "cash drag." This results from the fact that a portion of the WEBS Index Series is not invested in stocks. Cash and deferred organizational expenses are the principal "unequitized" assets of the Funds. In contrast, the MSCI Indices are always invested in underlying stocks and thus do not reflect any "unequitized" assets. 2 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ AUSTRALIA PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Australia WEBS Index Series was 6.23%. The corresponding MSCI Index total return for the year ended August 31, 1997 was 5.85%. The Australia WEBS Index Series outperformed the MSCI Australia Index total return by 0.38%. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE AUSTRALIA WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Australia WEBS Index Series outperformed the benchmark for several reasons, principally the impact of portfolio sampling and revenue differentials, which more than offset the impact of expenses. The primary reason the Index Series outperformed the benchmark was due to portfolio sampling, which had a positive effect on performance. The Australia WEBS Index Series had a significant position invested in the banking industry and the positive performance of the underlying securities contributed to the Series' positive performance. WHAT MARKET CONDITIONS AFFECTED THE AUSTRALIA WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? Economic growth has been strong in 1997 with Australia experiencing its sixth year of expansion. Reforms, which have been implemented on an ongoing basis since the 1980s, appear to have removed a number of structural rigidities in the economy. These reforms include unilateral tariff reductions, financial market deregulation and tax incentives to promote work, savings and investment. Business activities have been largely deregulated and foreign investment policies have been relaxed. Unemployment has remained a problem and is expected to be about 8% in 1997. The Reserve Bank of Australia has decided to keep interest rates stable after easing monetary policy on three occasions in the second half of last year. This stability is due to the fact that headline inflation has remained subdued and has even declined from 2.6% in 1996. Inflation is expected to be approximately 1.7% for 1997. The growth of specialist mining contractors has reduced mining costs and allowed small firms to develop deposits using these specialists. Two thirds of current mining exploration spending and 45% of mining contract spending is on gold. However, gold represents only 22% of capital spending, 20% of material spending and 15% of the operational workforce in the mining sector. The great bulk of new planned investment is not gold related but in nickel, gas and oil. Contractors have been increasing market penetration into other mining sectors as gold provided only 18% of the increase in revenue in the three years ended 1995. Growth prospects continue to look good for the remainder of 1997 as the Australian dollar depreciated recently and inflationary pressure has eased.Business investment remains strong and, as world economic growth picks up, the Australian economy will continue to benefit. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE AUSTRALIA WEBS INDEX SERIES VS. THE MSCI AUSTRALIA INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Australia WEBS Index Series MSCI Australia Index 03/12/96 $10,000 $10,000 05/31/96 10,523 10,588 08/31/96 10,388 10,383 11/30/96 11,238 11,232 02/28/97 11,048 11,054 05/31/97 11,545 11,519 08/31/97 11,035 10,990 Past performance is not predictive of future performance Value August 31, 1997 --------------- Australia WEBS Index Series $11,035* MSCI Australia Index $10,990 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- ---------- Australia WEBS Index Series 6.23% 6.91% MSCI Australia Index 5.85% 6.61% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Australia WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 3 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ AUSTRIA PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Austria WEBS Index Series was 1.06%. The corresponding MSCI Index total return for the year was - -1.44%. The Austria WEBS Index Series outperformed the MSCI Austria Index total return by 2.50% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE AUSTRIA WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Austria WEBS Index Series outperformed the benchmark as a result of the impact of portfolio sampling. This technique resulted in holding a large position in the Bank of Austria, which impacted performance positively, more than offsetting the effect of the Fund's expenses and cash drag on the Austria WEBS Index Series' performance. WHAT MARKET CONDITIONS AFFECTED THE AUSTRIA WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The primary objective of the Austrian government is to be included in the first round of the European Monetary Union. As a result, strides have been taken to reduce the budget deficit to 60% of GDP as required by the Maastricht Treaty criteria.The government has set a fairly restrictive monetary policy in the hopes of meeting this goal. It has been successful so far and the federal debt level was cut to 4.9% in 1996, from 9.9% in 1995. GDP growth, which was 1.8% in 1995 and 1.2% in 1996, is expected to be 1.5% in 1997. The small growth that has been experienced is due to a pickup in the export sector, resulting from the strength of Austria's European trading partners as seen in favorable exchange rates. This export growth has directly benefited the industrial sector, which is planning business investment 4% higher than last year. Austria has had to come to terms with a shift in sector growth as tourism has historically been the strongest contributor to economic growth. This sector has undergone a growth crisis and has fallen from a high of 75 billion shillings a year in the early 1990s to 17 billion shillings in the first 8 months of 1997. Inflation remains very low at 1.7% in 1996 and is forecast to be about 1.8% in 1997. Unemployment has also remained fairly stable and should be about 4% in 1997, the same level as 1996 and the maximum level set by the Maastricht Treaty. Sweeping reforms of the civil service, which are currently a drain on the economy and the subject of intense political debate, must be amended. A major technology and export drive, rather than a reliance on the tourism industry, is considered by many to be crucial to economic growth in the long-term. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE AUSTRIA WEBS INDEX SERIES VS. THE MSCI AUSTRIA INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Austria WEBS Index Series MSCI Austria Index 03/12/96 $10,000 $10,000 05/31/96 10,577 10,866 08/31/96 9,661 10,073 11/30/96 9,569 10,080 02/28/97 9,401 9,848 05/31/97 9,782 10,062 08/31/97 9,764 9,928 Past performance is not predictive of future performance Value August 31, 1997 --------------- Austria WEBS Index Series $9,764* MSCI Austria Index $9,928 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- ---------- Austria WEBS Index Series 1.06% (1.61)% MSCI Austria Index (1.44)% (0.49)% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Austria WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 4 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ BELGIUM PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Belgium WEBS Index Series was 9.26%. The corresponding MSCI Index total return for the year was 11.11%. The Belgium WEBS Index Series underperformed the MSCI Belgium Index total return by 1.85% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE BELGIUM WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Belgium WEBS Index Series underperformed the benchmark during this period due to the impact of expenses and, to a lesser degree, portfolio sampling. WHAT MARKET CONDITIONS AFFECTED THE BELGIUM WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The Belgian economy is growing steadily, although at a slower rate than most of Europe. The growth of core European economies has benefited Belgium and resulted in its outperforming the European average of key manufacturing indicators. The acceleration of European manufacturing activity has positively affected Belgium since exports represent 86% of real GDP. GDP, which increased 1.5% in 1996, is forecast to grow 2.2%-2.4% in 1997. The economy has been able to react quickly to shifts in the European business cycle, thereby capturing more trade business. As a result of a national agreement signed last year, real wages have been stable even though productivity is on the rise. Consumer spending has remained subdued, and the drivers of economic growth are exports, inventories and business investment. The weakness in consumer spending has made it hard for retailers to raise prices. The factors affecting growth have been foreign demand, which is booming, and strong capital goods production. Inflation has remained under control despite capital capacity constraints and is expected to be around 2% for 1997. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BELGIUM WEBS INDEX SERIES VS. THE MSCI BELGIUM INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Belgium WEBS Index Series MSCI Belgium Index 03/12/96 $10,000 $10,000 05/31/96 10,288 10,237 08/31/96 10,501 10,496 11/30/96 10,915 11,107 02/28/97 11,204 11,595 05/31/97 11,877 12,172 08/31/97 11,474 11,662 Past performance is not predictive of future performance Value August 31, 1997 --------------- Belgium WEBS Index Series $11,474* MSCI Belgium Index $11,662 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Belgium WEBS Index Series 9.26% 9.77% MSCI Belgium Index 11.11% 11.00% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Belgium WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 5 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ CANADA PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Canada WEBS Index Series was 28.50%. The corresponding MSCI Index total return for the year was 30.65%. The Canada WEBS Index Series underperformed the MSCI Canada Index total return by 2.15% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE CANADA WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Canada WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses and portfolio sampling. WHAT MARKET CONDITIONS AFFECTED THE CANADA WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? Canada's economy is posting its strongest sustained growth of the 1990's and is likely to continue to outperform in an environment of low interest rates and inflation. This growth has been led by increased domestic consumer confidence -- the highest level in eight years. Business confidence is also at its highest level since 1977. The 4% drop in interest rates over the last three years has been a major factor behind the economy's continued strength. In reaction to undesired stimulus from the weaker Canadian dollar, the Bank of Canada raised interest rates by 0.25% on June 26. Further interest rate hikes are likely in order to tighten the money supply and keep inflation under control. Although the unemployment rate remains relatively high (about 9%), job creation has been very strong and consumer confidence keeps improving. Economic growth, which had been led by exports, is now being fueled by strong domestic demand. Inflation has remained fairly stable since the economy has not experienced cost pressures due to prices and wages remaining fairly stable. Retail sales were slightly lower during the second quarter due to a drop in sales of motor vehicles, although retail sales (excluding autos) were up 1.6% for the quarter. Despite the softening of export growth during the summer months, the economy has strong momentum and is expected to grow by 4% for the year. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CANADA WEBS INDEX SERIES VS. THE MSCI CANADA INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Canada WEBS Index Series MSCI Canada Index 03/12/96 $10,000 $10,000 05/31/96 10,639 10,682 08/31/96 10,463 10,521 11/30/96 12,546 12,652 02/28/97 12,569 12,713 05/31/97 13,183 13,389 08/31/97 13,445 13,745 Past performance is not predictive of future performance Value August 31, 1997 --------------- Canada WEBS Index Series $13,445* MSCI Canada Index $13,745 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Canada WEBS Index Series 28.50% 22.24% MSCI Canada Index 30.65% 24.09% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Canada WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 6 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ FRANCE PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the France WEBS Index Series was 16.60%. The corresponding MSCI Index total return for the year was 17.58%. The France WEBS Index Series underperformed the MSCI France Index total return by 0.98% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE FRANCE WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The France WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses. Revenue differentials and portfolio sampling also contributed to the underperformance. WHAT MARKET CONDITIONS AFFECTED THE FRANCE WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The problems that plagued France in 1996 (meeting the criteria of the Maastricht Treaty and high unemployment) continued to slow the growth of the economy through the first quarter of 1997. It now seems as if the economy has overcome this sluggishness and experienced growth throughout the second quarter, led by increased manufacturing exports. Export services account for 6% of the GDP in France, and these have benefited recently from the strength of the dollar and the pound. Inflation has also remained fairly subdued, averaging 2% in 1996, and expected to be slightly lower in 1997. French interest rates have been at historically low levels and are very close to German rates. French monetary policy, which is the main tool used by the government to boost growth, has been very flexible over the last year and the economy is now experiencing positive effects. Consumer demand has been low due to the high level of unemployment. Unemployment averaged 12.4% for 1996 and has been between 12%-13% during 1997. In order to address this problem, socialist leaders have promised to cut weekly working time without pay cuts. This means that work time would be cut by 10% and the resulting increase in labor costs would be 8%. The government has also promised to hire 350,000 workers, which won't cure the youth unemployment problem and will also create new hurdles to reducing the budget deficit. A new cabinet was appointed by Socialist Prime Minister Alain Juppe in June. The new cabinet is expected to have a strong, positive effect on the economy due to its pro-European policy stance and their willingness to work to ensure inclusion in the European Monetary Union. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FRANCE WEBS INDEX SERIES VS. THE MSCI FRANCE INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] France WEBS Index Series MSCI France Index 03/12/96 $10,000 $10,000 05/31/96 10,668 10,701 08/31/96 10,495 10,371 11/30/96 11,855 11,766 02/28/97 12,177 12,210 05/31/97 11,921 11,975 08/31/97 12,237 12,194 Past performance is not predictive of future performance Value August 31, 1997 --------------- France WEBS Index Series $12,237* MSCI France Index $12,194 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- France WEBS Index Series 16.60% 14.68% MSCI France Index 17.58% 14.40% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the France WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 7 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ GERMANY PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Germany WEBS Index Series was 20.51%. The corresponding MSCI Index total return for the year was 22.28%. The Germany WEBS Index Series underperformed the MSCI Germany Index total return by 1.77% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE GERMANY WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Germany WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses. Other factors that adversely affected performance compared to the benchmark were cash drag and revenue differentials, while portfolio sampling had a slight positive impact on performance. WHAT MARKET CONDITIONS AFFECTED THE GERMANY WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The stage was set in 1996 for increased growth in 1997, which the Germany economy has experienced. GDP growth, which was 1.4% for 1996, is expected to be much stronger in 1997. This growth has been led, in part, by a rebound in the construction sector. Industrial production and manufacturing orders have also been on the rise as a result of unusually low interest rates. Business confidence is up due to higher export and manufacturing output growth. The Bundesbank is expected to leave monetary policy at its current stance, a 3% repo rate, until domestic demand accelerates.The low level of interest rates has had a positive effect on business investment, although the deutschmark has depreciated. German import prices jumped to an eight year high of 4.2% in June and there is a concern that these costs will be passed along to consumers. This has led to higher inflation, which is slightly above 2% (in August) for the first time in two years. There is still a continuing problem with unemployment which has been on the rise since 1996. Consumer demand is only expected to pick up once the labor market has strengthened. Although production and exports have fueled the growth of the economy, low interest rates and budget deficit concerns (meeting Maastricht Treaty criteria) may keep the deutschmark weak until unemployment is on a sustained downtrend. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GERMANY WEBS INDEX SERIES VS. THE MSCI GERMANY INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Germany WEBS Index Series MSCI Germany Index 03/12/96 $10,000 $10,000 05/31/96 9,955 9,984 08/31/96 10,399 10,451 11/30/96 10,918 11,034 02/28/97 11,291 11,476 05/31/97 12,176 12,376 08/31/97 12,532 12,778 Past performance is not predictive of future performance Value August 31, 1997 --------------- Germany WEBS Index Series $12,532* MSCI Germany Index $12,778 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Germany WEBS Index Series 20.51% 16.55% MSCI Germany Index 22.28% 18.10% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Germany WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 8 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ HONG KONG PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Hong Kong WEBS Index Series was 17.80%. The corresponding MSCI Index total return for the year was 21.41%. The Hong Kong WEBS Index Series underperformed the MSCI Hong Kong Index total return by 3.61% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE HONG KONG WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Hong Kong WEBS Index Series underperformed the benchmark during this period due to several factors, principally portfolio sampling and the impact of expenses. Revenue differentials and cash drag also adversely affected performance. Portfolio sampling resulted in an overweight position in the real estate sector, which performed poorly during the period.In addition, the constraints of portfolio sampling imposed by the diversification requirements of the Internal Revenue Code adversely affected performance. WHAT MARKET CONDITIONS AFFECTED THE HONG KONG WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? China assumed sovereignty of Hong Kong on July 1, 1997. The territory had been governed by the United Kingdom. Under the Chinese Basic Law, Hong Kong is now a Special Administrative Region (SAR) and retains a high degree of autonomy from China. About 60% of foreign direct investment in China comes from or throughHong Kong and, as a result, the Chinese government is not expected to do anything to threaten the vibrancy of the territory. Beijing has undertaken to leave Hong Kong's capitalist system intact for at least fifty years. The transition has been fairly smooth and has not had a negative effect on the economy of Hong Kong. The transition has been helped by the fact that the United States reinstated China's trade status as a Most Favored Nation (MFN). The growth rate, as measured by GDP, is anticipated to be a healthy 5.5% for the year. Growth has been driven by intense domestic demand and a rise in export trade. Although export trade is relatively strong, it has been moderate when compared to 1996. The Hong Kong dollar has been pegged to the US dollar since October 1983 and the link has been steadfastly maintained by the monetary authority. As a result, the relative strength of the US dollar has continued to weaken the competitiveness of Hong Kong's exports in the world market. Also, the North American Free Trade Agreement (NAFTA) has diverted some US imports from Asia to Mexico and Canada. Inflation has remained relatively stable, about 6% for 1997. Consumer spending has been on the rise due to increased personal income and improved conditions in the labor market. The unemployment rate has been declining and is currently about 2.5%. Overall, the economy is in a position to experience continued, steady growth. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE HONG KONG WEBS INDEX SERIES VS. THE MSCI HONG KONG INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Hong Kong WEBS Index Series MSCI Hong Kong Index 03/12/96 $10,000 $10,000 05/31/96 10,826 10,817 08/31/96 10,322 10,415 11/30/96 12,418 12,543 02/28/97 11,868 12,190 05/31/97 12,609 13,030 08/31/97 12,160 12,645 Past performance is not predictive of future performance Value August 31, 1997 --------------- Hong Kong WEBS Index Series $12,160* MSCI Hong Kong Index $12,645 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Hong Kong WEBS Index Series 17.80% 14.19% MSCI Hong Kong Index 21.41% 17.26% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Hong Kong WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 9 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ ITALY PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Italy WEBS Index Series was 23.37%. The corresponding MSCI Index total return for the year was 24.47%. The Italy WEBS Index Series underperformed the MSCI Italy Index total return by 1.10% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE ITALY WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Italy WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses, but also including cash drag. These factors more than offset the positive impact of revenue differentials and portfolio sampling for the Italy WEBS Index Series. WHAT MARKET CONDITIONS AFFECTED THE ITALY WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The Italian economy's lackluster performance in 1996 (with GDP increasing by only 0.7%), continued with slow growth into the first quarter of 1997. Fiscal policy was tightened in 1996 in order to ensure the criteria of the Maastricht Treaty was met and this had a negative effect on economic growth.Weak levels of activity in the country's core markets also depressed activity. This has been fueled by high unemployment (about 12%) and slow growth of disposable income. A recovery began in the second quarter due to a rise in industrial production. This upturn was caused by increased foreign orders. There has been an increased demand for bank loans in light of improving business conditions, as well as a modest decline in average bank lending rates (some 40 basis points between March and June). The Bank of Italy has been more open to easing monetary policy since the beginning of 1997 as inflation has remained relatively flat and the lira has remained strong. The government has been trying to impose fiscal measures aimed at meeting the budget deficit criteria of the Maastricht Treaty in order to be included in the European Monetary Union. The "mini-budget" which was announced in April, outlined a plan to raise 15.5 trillion lira, but failed to receive approval by parliament. The proposed measures were the delay of expenditures and the early payment of taxes, and were in addition to an already harsh 1997 budget. As a result, government debt as a percentage of GDP remains very high with little improvement expected. The Italian economy is expected to continue its growth trend, although the surge experienced in the second quarter will moderate and third quarter growth may be more modest. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ITALY WEBS INDEX SERIES VS. THE MSCI ITALY INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Italy WEBS Index Series MSCI Italy Index 03/12/96 $10,000 $10,000 05/31/96 11,226 11,207 08/31/96 10,411 10,333 11/30/96 11,272 11,205 02/28/97 11,151 11,102 05/31/97 11,438 11,408 08/31/97 12,845 12,862 Past performance is not predictive of future performance Value August 31, 1997 --------------- Italy WEBS Index Series $12,845* MSCI Italy Index $12,862 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Italy WEBS Index Series 23.37% 18.51% MSCI Italy Index 24.47% 18.62% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Italy WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 10 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ JAPAN PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Japan WEBS Index Series was -11.97%. The corresponding MSCI Index total return for the year was - -11.57%. The Japan WEBS Index Series underperformed the MSCI Japan Index total return by 0.40% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE JAPAN WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Japan WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses and cash drag. The Index Series was positively impacted by the effects of security sampling, although this positive performance was not enough to offset the negative impact of expenses and cash drag. WHAT MARKET CONDITIONS AFFECTED THE JAPAN WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? An economic recovery in Japan has not materialized this year and growth has been poor. Economic growth, which was 3.3% in 1996, has been driven mainly by export demand due to strong overseas sales, particularly in the US with the strength of the dollar. A consumption tax increase in April (from 3% to 5%) has had a continuing negative effect on consumer demand. Retail sales were down 5.7% in July when compared to last year -- the eighth decline in nine months. Lower wages and higher unemployment (3.55% in July -- a postwar record high) have negatively contributed to consumer demand. Japanese monetary policy has been accommodative with the official discount rate at a historically low level of 0.5%, which has stimulated business investment. The currency crisis in Southeast Asia, which started out as an isolated incident in Thailand, has affected other Asian currencies. It is estimated that about 40% of the 100 basis point tightening in Japanese monetary conditions since April has been due to the weakness of Asian currencies. Inflation remains almost non-existent in Japan and is currently about 0.03%. Consumer price inflation has been almost flat since 1995, with 0.01% recorded for 1996. The weakness of the yen for most of 1997 may be a key factor in a sustainable economic recovery as strong yen performance in the past has led to recession. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE JAPAN WEBS INDEX SERIES VS. THE MSCI JAPAN INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Japan WEBS Index Series MSCI Japan Index 03/12/96 $10,000 $10,000 05/31/96 10,548 10,596 08/31/96 9,689 9,720 11/30/96 9,527 9,561 02/28/97 8,060 8,117 05/31/97 8,959 9,033 08/31/97 8,529 8,596 Past performance is not predictive of future performance Value August 31, 1997 --------------- Japan WEBS Index Series $8,529* MSCI Japan Index $8,596 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Japan WEBS Index Series (11.97)% (10.23)% MSCI Japan Index (11.57)% (9.76)% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Japan WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 11 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ MALAYSIA (FREE) PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Malaysia (Free) WEBS Index Series was -40.20%. The corresponding MSCI Index total return for the year was -39.26%. The Malaysia (Free) WEBS Index Series underperformed the MSCI Malaysia (Free) Index total return by 0.94% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE MALAYSIA (FREE) WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Malaysia (Free) WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses and portfolio sampling. These factors more than offset the positive impact on performance of cash drag and revenue differentials. WHAT MARKET CONDITIONS AFFECTED THE MALAYSIA (FREE) WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The Malaysian government has been following a high growth strategy and this is expected to be a priority until the end of the decade. The strong economic growth experienced in 1996 (8.6% GDP) has slowed significantly in 1997. There was a slowdown in export growth in the last half of 1996 which has continued this year. The sharp depreciation of the ringgit against the dollar has undermined the export competitiveness of Malaysia. This has been felt especially hard in the global electronics sector, as Malaysia is a major producer of electronic chips. As a result, manufacturing growth has been lagging and loan growth to the manufacturing sector has been low for the last eight months. Another factor affecting growth has been the large current account deficit (about 5.8% of GDP) and the loss of comparative advantage based on cheap labor as wage increases have overtaken productivity growth. The currency crisis in Southeast Asia has adversely affected Malaysia. Bank Negara, Malaysia's central bank, recently abandoned its rigid link with the US dollar by allowing more flexibility in the exchange rate. After the Thailand currency crisis, the Malaysian ringgit came under selling pressure and Bank Negara implemented a high interest rate defense. The overnight interbank interest rate rose to 50% from 8%. Inflation has remained relatively stable at about 3.4% as has the unemployment rate, currently at about 3%. The tight monetary policy has helped to keep inflation subdued. Strong investment, fueled by the government's large infrastructure and utilities projects, had been the main driver of the economy, but has been weakened by the sharp increase in interest rates. Also, the currency crisis has caused some development projects to be delayed. The financial situation in Malaysia has adversely affected growth and the rate of GDP growth is expected to slow to about 6% to 7% for 1997. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MALAYSIA (FREE) WEBS INDEX SERIES VS. THE MSCI MALAYSIA (FREE) INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Malaysia (Free) WEBS Index Series MSCI Malaysia (Free) Index 03/12/96 $10,000 $10,000 05/31/96 10,498 10,562 08/31/96 10,428 10,512 11/30/96 11,237 11,365 02/28/97 11,834 12,172 05/31/97 10,141 10,411 08/31/97 6,236 6,385 Past performance is not predictive of future performance Value August 31, 1997 --------------- Malaysia WEBS Index Series $6,236* MSCI Malaysia Index $6,385 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Malaysia (Free) WEBS Index Series (40.20)% (27.41)% MSCI Malaysia (Free) Index (39.26)% (26.24)% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Malaysia (Free) WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 12 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ MEXICO (FREE) PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Mexico (Free) WEBS Index Series was 35.21%. The corresponding MSCI Index total return for the year was 39.07%. The Mexico (Free) WEBS Index Series underperformed the MSCI Mexico (Free) Index total return by 3.86% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE MEXICO (FREE) WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Mexico (Free) WEBS Index Series underperformed the benchmark during this period principally due to portfolio sampling and the impact of expenses. Cash drag and revenue differentials also contributed to the underperformance. Portfolio sampling, which was constrained by the requirements to satisfy the diversification requirements of Subchapter M of the Internal Revenue Code, caused the Mexico (Free) WEBS Index Series to underperform the underlying MSCI Index principally due to a large position in the telecommunications industry, which performed poorly during the period. WHAT MARKET CONDITIONS AFFECTED THE MEXICO (FREE) WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? After a year of healthy economic recovery in 1996 (5.1% GDP), growth to date in 1997 has surpassed expectations. During the first half of the year private investment was at a minimum due to nervousness surrounding the July elections. The main objective of the government has been to restore credibility and regain investor confidence. The major outcome of the elections was the loss of political ground in the lower house of the Mexican Congress for the Partido Revolucion Institucional (PRI), which was the main political party. The PRI lost it's absolute majority in Congress, but captured the largest number of seats in the lower house of the Mexican Senate. The left wing Partido Revolucion Democratica (PRD) emerged as the big winner capturing more seats than the traditional opposition party, the right wing Partido Accion Nacional (PAN). The reaction of financial markets after the election has been positive, with the peso strengthening (from 7.95 pesos/USD to 7.85 pesos/USD) and consumer confidence soaring. GDP growth in the second quarter was 8.8%, far outpacing analysts expectations. This growth has taken place despite relatively tight monetary conditions and an increase in real wages. The Central Bank has focused on bringing stability to the exchange rate (a target of 7.7 pesos/USD has been established) in order to lower inflation. Inflation was 27.7% in 1996 and approximately 20.4%, on an annual basis, in the first eight months of 1997. Real interest rates are expected to decline as consumer confidence improves and the US economy continues to grow. There was a strong recovery by the consumer and capital goods sectors in the second quarter. They grew at annualized rates of 51% and 47%, respectively. Trade reports have also shown higher export growth, at 16.1% compared to 14.5% in the first quarter. The outlook for the remainder of the year is positive given the expected decline in interest rates, continued recovery of employment and real wages, all sustained by economic growth. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MEXICO (FREE) WEBS INDEX SERIES VS. THE MSCI MEXICO (FREE) INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Mexico (Free) WEBS Index Series MSCI Mexico (Free) Index 03/12/96 $10,000 $10,000 05/31/96 11,618 11,617 08/31/96 11,592 11,736 11/30/96 11,311 11,489 02/28/97 12,820 13,254 05/31/97 13,283 13,818 08/31/97 15,675 16,321 Past performance is not predictive of future performance Value August 31, 1997 --------------- Mexico WEBS Index Series $15,675* MSCI Mexico Index $16,321 AVERAGE ANNUAL TOTAL RETURN ONE YEAR SINCE INCEPTION -------- --------------- Mexico (Free) WEBS Index Series 35.21% 35.65% MSCI Mexico (Free) Index 39.07% 39.42% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Mexico (Free) WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 13 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ NETHERLANDS PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Netherlands WEBS Index Series was 28.04%. The corresponding MSCI Index total return for the year was 33.77%. The Netherlands WEBS Index Series underperformed the MSCI Netherlands Index total return by 5.73% for the year. This underperformance was principally due to an underweighted position in Royal Dutch/Shell, described below. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE NETHERLANDS WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Netherlands WEBS Index Series underperformed the benchmark principally due to portfolio sampling and the need for compliance with its concentration policy and the diversification requirements of the Internal Revenue Code which state that no more than 25% of the portfolio can be made up of one individual security at the close of each quarter in its taxable year. In keeping with these provisions, holdings of Royal Dutch/Shell have been restricted to 25%, even though it has a much higher weighting in the benchmark MSCI Index. This resulted in a re-weighting of the remaining securities in the portfolio which had a negative effect on performance since Royal Dutch/Shell had very strong performance in the period and outperformed the balance of the portfolio. The impact of expenses, cash drag and revenue differentials also contributed to the underperformance. WHAT MARKET CONDITIONS AFFECTED THE NETHERLANDS WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? Although growth was relatively slow in 1996, GDP was up 2.7% for the year. In the first quarter of 1997, GDP growth was at a respectable 2.1% annual rate. Private consumption has been a major contributor to economic growth this year. This has been due to rising employment, high consumer confidence and borrowing which stimulated household expenditures. Unemployment has been on the decline and was at 5.7% in May compared to 6.5% for 1996. The Central Bank has taken a pro-active position on monetary policy in order to keep the inflation rate within targets set by the Maastricht Treaty. Inflation has been at about a 2% annual rate for the year through August 1997. The Netherlands seems certain to be a founding member of the European Monetary Union (EMU) as it has been able to meet budget deficit and inflation criterion. Business investment has been positive and will continue to grow due to a sound financial situation, low interest rates and healthy corporate earnings. The economy should receive added momentum from a competitive exchange rate and increased exports with Germany and France. Another added boost will come from the fact that the Dutch cabinet recently decided to increase expenditures and cut taxes in both 1997 and 1998 in order to fulfill the EMU budget deficit criteria. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NETHERLANDS WEBS INDEX SERIES VS. THE MSCI NETHERLANDS INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Netherlands WEBS Index Series MSCI Netherlands Index 03/12/96 $10,000 $10,000 05/31/96 11,113 10,941 08/31/96 11,118 10,974 11/30/96 12,259 12,255 02/28/97 12,934 12,949 05/31/97 13,825 13,960 08/31/97 14,236 14,680 Past performance is not predictive of future performance Value August 31, 1997 --------------- Netherlands WEBS Index Series $14,236* MSCI Netherlands Index $14,680 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Netherlands WEBS Index Series 28.04% 27.08% MSCI Netherlands Index 33.77% 29.75% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Netherlands WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 14 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ SINGAPORE (FREE) PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Singapore (Free) WEBS Index Series was -23.48%. The corresponding MSCI Index total return for the year was -24.30%. The Singapore (Free) WEBS Index Series outperformed the MSCI Singapore (Free) Index total return by 0.82% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE SINGAPORE (FREE) WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Singapore (Free) WEBS Index Series outperformed the benchmark for several reasons, principally the impact of portfolio sampling but also including cash drag and revenue differentials. These factors more than offset the effect of the Fund' expenses. WHAT MARKET CONDITIONS AFFECTED THE SINGAPORE (FREE) WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? After enjoying strong economic growth for the past three years, GDP growth has begun to slow and was 6.5% for 1996, compared to 8.5% in 1995. The main reason for this slowdown has been the drop in export demand. Singapore is highly dependent on foreign trade. The country has a highly industrialized economy with a large and vibrant manufacturing sector, which accounts for approximately 24% of GDP. Financial and business services have steadily become more important in recent years and now contribute almost 30% of economic growth. Singapore has faced increasingly tough competition in the electronics industry, its major sector. Both developing and developed countries understand the importance of this sector to their manufacturing base and are aggressively seeking to attract multi-national companies to locate projects there. Many of Singapore's competitors have the advantage of lower land and labor costs. The government has set up an Economic Committee comprised of representatives from the private sector, academia and the public sector to study the issue of Singapore's long-term competitiveness and recommend changes. The Thai currency crisis has also negatively effected Singapore. The selling pressure on the Thailand baht led to selling pressure on the Singapore dollar, and short-term interest rates recently hit a 31-month low. The exchange rate is the primary instrument of monetary policy and aims to promote sustainable, non-inflationary growth. The Singapore dollar depreciated 3.2% in the first quarter of 1997, reversing a six-year trend of appreciation. The country is benefiting from a recent upswing in global electronics demand. The impact of the pick-up in US orders of electronics over the past six months will be felt for the remainder of the year. The electronics sub-sector grew by about 11.1% in the second quarter. If this demand continues and the currency crisis comes to a close, Singapore can expect growth to pick up and GDP is forecast to grow about 7% to 8% in 1997. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SINGAPORE (FREE) WEBS INDEX SERIES VS. THE MSCI SINGAPORE (FREE) INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Singapore (Free) WEBS Index Series MSCI Singapore (Free) Index 03/12/96 $10,000 $10,000 05/31/96 9,714 9,692 08/31/96 9,327 9,196 11/30/96 9,548 9,358 02/28/97 9,720 9,670 05/31/97 9,073 8,986 08/31/97 7,137 6,961 Past performance is not predictive of future performance Value August 31, 1997 --------------- Singapore (Free) WEBS Index Series $7,137* MSCI Singapore (Free) Index $6,961 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Singapore (Free) WEBS Index Series (23.48)% (20.45)% MSCI Singapore (Free) Index (24.30)% (21.79)% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Singapore (Free) WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 15 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ SPAIN PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Spain WEBS Index Series was 39.15%. The corresponding MSCI Index total return for the year was 40.88%. The Spain WEBS Index Series underperformed the MSCI Spain Index total return by 1.73% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE SPAIN WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Spain WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses and cash drag, which more than offset the positive impact of portfolio sampling and revenue differentials. WHAT MARKET CONDITIONS AFFECTED THE SPAIN WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The economy of Spain is growing steadily, despite constraints imposed with meeting the criteria of the Maastricht Treaty. GDP growth was about 2.1% for 1996 and GDP is expected to increase slightly in 1997. This growth has been helped by strong services output, increased private consumption and industrial output which has risen strongly, outperforming the European average. Spain has also seen rising business and consumer confidence, supported by positive employment prospects. Monetary conditions may remain stimulative as in recent months due to a rise in the U.S. dollar and the British pound. Fiscal policy should be moderately restrictive next year with the bulk of deficit reduction coming from cuts in spending as opposed to tax increases. Looking to the future, it seems as if Spain will make the first round of the European Monetary Union, despite the fact that national debt is estimated to be about 70% of GDP. The markets have become increasingly optimistic of Spain's inclusion and investment in information technology and capital equipment should be stimulated to take advantage of greater export opportunities and foreign competition. Inflation has been kept under control, 3.2% as of 1996 and estimated to decline to about 2.5% in 1997. The increased credibility of the Bank of Spain (since its independence in 1994) has helped the inflation outlook. The Bank of Spain has been cautious and interest rates have gradually been lowered by 75 basis points to 5.50% in January and by another 50 basis points to 5.00% in May. For now, ongoing growth in employment (up 3% for the year) should support private consumption spending and reinforce the current cycle already at work. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SPAIN WEBS INDEX SERIES VS. THE MSCI SPAIN INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Spain WEBS Index Series MSCI Spain Index 03/12/96 $10,000 $10,000 05/31/96 10,640 10,747 08/31/96 10,845 10,917 11/30/96 12,361 12,508 02/28/97 12,893 13,066 05/31/97 15,229 15,497 08/31/97 15,091 15,379 Past performance is not predictive of future performance Value August 31, 1997 --------------- Spain WEBS Index Series $15,091* MSCI Spain Index $15,379 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Spain WEBS Index Series 39.15% 32.21% MSCI Spain Index 40.88% 33.91% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Spain WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 16 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ SWEDEN PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Sweden WEBS Index Series was 30.10%. The corresponding MSCI Index total return for the year was 32.64%. The Sweden WEBS Index Series underperformed the MSCI Sweden Index total return by 2.54% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE SWEDEN WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The Sweden WEBS Index Series underperformed the benchmark during this period due to several factors, principally the impact of expenses and cash drag. Portfolio sampling also had a slight negative effect on performance of the Sweden WEBS Index Series. WHAT MARKET CONDITIONS AFFECTED THE SWEDEN WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? Economic growth in the first quarter of 1997 continued the disappointing performance of 1996 when GDP was only 1.1% for the year. Continued high levels of unemployment (about 8% in 1996) currently restrain consumer and business confidence levels. Sweden has a history of very low unemployment (prior to recent times the historic peak was 3.5% in the 1980's) and is finding it very hard to come to terms with unemployment in excess of 8%. Budgetary policy, which is used to control inflation, has had the undesirable consequence of holding unemployment at high levels. Inflation has remained under control due to the strength of the currency and is estimated to be 0.5% for 1997. This is well below the Central Bank's inflation target of 2%. A turnaround of economic growth was experienced during the second quarter. GDP growth is estimated to be about 1.9% for the first half of the year. This growth has been supported by both domestic demand and exports. Domestic demand has been increased by consumption and investment, which is up 3% for the year. Export growth has been a strong factor, rising 11% for the year and foreign orders rising 37%. The Central Bank cut the repo rate aggressively from 8.91% to 4.10% by the end of 1996 due to the appreciation of the currency, tight budgetary policy and low inflation. Sweden will not be a founding member of a single currency under the European Monetary Union as the government has not been able to meet criteria set by the Maastricht Treaty. The country's fiscal condition continues to improve with the deficit declining from a high of 12.3% of GDP in 1993 to about 2.5% last year. The deficit is expected to be about 1.8% of GDP in 1997. The rate of growth is expected to rise due to the strength of the export sector increasing the demand for capital goods which, in turn, increases domestic investment in machinery and equipment. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SWEDEN WEBS INDEX SERIES VS. THE MSCI SWEDEN INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Sweden WEBS Index Series MSCI Sweden Index 03/12/96 $10,000 $10,000 05/31/96 10,976 10,805 08/31/96 11,413 11,200 11/30/96 13,163 12,989 02/28/97 13,357 13,344 05/31/97 13,840 13,806 08/31/97 14,848 14,856 Past performance is not predictive of future performance Value August 31, 1997 --------------- Sweden WEBS Index Series $14,848* MSCI Sweden Index $14,856 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Sweden WEBS Index Series 30.10% 30.76% MSCI Sweden Index 32.64% 30.80% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Sweden WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 17 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ SWITZERLAND PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the Switzerland WEBS Index Series was 16.69%. The corresponding MSCI Index total return for the year was 16.27%. The Switzerland WEBS Index Series outperformed the MSCI Switzerland Index total return by 0.42% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE SWITZERLAND WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The primary reason the Switzerland WEBS Index Series outperformed the benchmark was due to portfolio sampling which had a positive effect on performance. This technique resulted in the Index Series holding a large position in the health industry, as well as substantial holdings in two securities, Novartis and Roche, both of which had good performance during the period. This fact, along with the re-weighting of the remaining securities in the portfolio, more than offset the negative impact of expenses and cash drag. WHAT MARKET CONDITIONS AFFECTED THE SWITZERLAND WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? The minimal economic growth Switzerland has experienced during the last two years is continuing in 1997. GDP grew by 0.2% in 1996 and is expected to make a small recovery in 1997 to about 1% growth. First quarter GDP data show that there has been a stabilization of the economy after seven consecutive quarters of contraction. Private consumption has been stagnant and capital growth has slowed. Wage cuts in the public sector and job losses as a result of company mergers and general cutbacks have added to the decrease in private consumption. Export growth has been rising given that the business cycle is accelerating all over Europe. Unemployment is high by historical standards and is estimated to have increased to 4% in 1996. The Swiss economy is dominated by small- and medium-sized companies, which have not been able to keep up with the multi-national companies in restructuring their activities to take advantage of the weakened Swiss franc. The effects of the weakness of the Swiss franc has been a factor in the performance of the economy. The franc has depreciated significantly and reached a 32 month low against the U.S. dollar in January. In an effort to stimulate domestic growth, the Swiss National Bank has been easing monetary policy. The discount rate was cut to 1% in September of 1996, which represents a historic low. The Swiss National Bank has stated that it does not want to raise interest rates until the economy shows clear signs of recovery. A rebound is expected despite subdued domestic demand, and will be based on improved export demand, although the economy is currently operating below potential. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SWITZERLAND WEBS INDEX SERIES VS. THE MSCI SWITZERLAND INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] Switzerland WEBS Index Series MSCI Switzerland Index 03/12/96 $10,000 $10,000 05/31/96 9,751 9,617 08/31/96 10,260 10,319 11/30/96 10,093 10,125 02/28/97 10,210 10,347 05/31/97 11,879 12,050 08/31/97 11,972 11,998 Past performance is not predictive of future performance Value August 31, 1997 --------------- Switzerland WEBS Index Series $11,972* MSCI Switzerland Index $11,998 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- Switzerland WEBS Index Series 16.69% 12.99% MSCI Switzerland Index 16.27% 13.15% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the Switzerland WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 18 PERFORMANCE REVIEW WEBS INDEX FUND, INC. ================================================================================ UNITED KINGDOM PERFORMANCE REVIEW For the year ended August 31, 1997 the total return of the United Kingdom WEBS Index Series was 30.48%. The corresponding MSCI Index total return for the year was 31.81%. The United Kingdom WEBS Index Series underperformed the MSCI United Kingdom Index total return by 1.33% for the year. WHAT WERE THE MOST SIGNIFICANT FACTORS CONTRIBUTING TO THE UNITED KINGDOM WEBS INDEX SERIES' PERFORMANCE OVER THE YEAR ENDED AUGUST 31, 1997? The United Kingdom WEBS Index Series underperformed the benchmark during this period primarily due to the impact of expenses. Revenue differentials and cash drag had a small negative impact on performance compared to the benchmark. Portfolio sampling resulted in a modest positive contribution to performance. WHAT MARKET CONDITIONS AFFECTED THE UNITED KINGDOM WEBS INDEX SERIES' PERFORMANCE DURING THE PERIOD? Consumer spending has been the engine of the United Kingdom's economic upturn. In addition to strong employment, consumption has been boosted from larger than expected cash payouts due to the conversion of mutually owned building societies into private companies. These "windfall" gains, estimated to total around $56 billion dollars so far, are contributing to near record consumer confidence levels. Retail spending has risen by 8.7% through the second quarter, which is the strongest increase seen since 1987. The housing market has benefited from the boom with property transactions expected to post their best outcome since the late 1980s. The unemployment rate fell to a seven year low of 5.7% during the second quarter, although the tightness in the labor market may begin to exert upward pressure on wages. The Bank of England reacted to this positive growth by increasing the base rate 25 basis points on August 7 to 7%. The equity market should remain fairly priced with earnings-per-share (EPS) accurately reflecting the continued growth experienced in the domestic economy. Export orders have been declining in response to the pound's 20% plus appreciation against the US dollar (on a trade weighted basis) since last year. Inflation has remained in check, coming in at 2.4% for 1996 and expected to be only 3% for 1997. The Bank of England is expected to keep a close watch on consumer price inflation before making any further rate moves. For now, the economy is growing strongly (GDP growth is expected to be 3.5% for the year), with unemployment and inflation under control. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE UNITED KINGDOM WEBS INDEX SERIES VS. THE MSCI UNITED KINGDOM INDEX [LINE GRAPH OMITTED-PLOT POINTS AS FOLLOWS] United Kingdom WEBS Index Series MSCI United Kingdom Index 03/12/96 $10,000 $10,000 05/31/96 10,470 10,521 08/31/96 11,040 11,078 11/30/96 12,417 12,548 02/28/97 12,767 12,996 05/31/97 13,805 13,986 08/31/97 14,405 14,601 Past performance is not predictive of future performance Value August 31, 1997 --------------- United Kingdom WEBS Index Series $14,405* MSCI United Kingdom Index $14,601 AVERAGE ANNUAL TOTAL RETURN ONE SINCE YEAR INCEPTION ---------- --------- United Kingdom WEBS Index Series 30.48% 28.10% MSCI United Kingdom Index 31.81% 29.28% - ------------------ * The chart assumes a hypothetical $10,000 initial investment in the United Kingdom WEBS Index Series and reflects all expenses of the Index Series. Investors should note that the Index Series is professionally managed while the relevant MSCI Index is unmanaged, does not incur expenses and is not available for investment. 19 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ AUSTRALIA WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 0.85% 114,000 Email Limited $ 350,841 ----------- BANKING 19.50% 380,000 National Australia Bank Limited 5,275,179 480,000 Westpac Banking Corporation Limited 2,781,698 ----------- 8,056,877 ----------- BEVERAGES & TOBACCO 7.83% 206,000 Coca-Cola Amatil Limited 2,100,141 602,000 Foster's Brewing Group Limited 1,136,374 ----------- 3,236,515 ----------- BROADCASTING & PUBLISHING 7.90% 522,000 News Corporation Limited 2,351,064 240,000 News Corporation Limited - Preferred 914,893 ----------- 3,265,957 ----------- BUILDING MATERIALS & COMPONENTS 8.17% 334,000 Boral Limited 973,932 276,000 CSR Limited 977,120 130,000 James Hardie Industries Limited 442,096 292,000 Pioneer International Limited 982,291 ----------- 3,375,439 ----------- BUSINESS & PUBLIC SERVICES 2.95% 62,000 Brambles Industries Limited 1,220,445 ----------- CHEMICALS 1.85% 82,000 ICI Australia Limited 764,908 ----------- CONSTRUCTION & HOUSING 0.43% 36,000 Leighton Holdings Limited 176,712 ----------- ENERGY SOURCES 16.82% 495,000 Broken Hill Proprietary Company 6,209,904 156,000 Santos Limited 741,346 ----------- 6,951,250 ----------- FOOD & HOUSEHOLD PRODUCTS 1.80% 144,000 Burns Philp & Company Limited 252,786 342,000 Goodman Fielder Limited 489,838 ----------- 742,624 ----------- FOREST PRODUCTS & PAPER 2.43% 166,000 Amcor Limited 1,004,678 ----------- GOLD MINES 1.86% 80,000 Newcrest Mining Limited 155,126 360,000 Normandy Mining Limited 436,293 62,000 Plutonic Resources Limited 176,691 ----------- 768,110 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- LEISURE & TOURISM 0.56% 190,000 Crown Limited* $ 233,057 ----------- MERCHANDISING 3.43% 304,000 Coles Myer Limited 1,415,423 ----------- METALS - NON FERROUS 9.87% 428,000 Mount Isa Mines Holdings Limited 512,417 214,000 North Limited 720,370 56,000 RGC Limited 158,358 86,000 Rio Tinto Limited 1,270,288 280,000 WMC Limited 1,419,054 ----------- 4,080,487 ----------- METALS - STEEL 0.99% 358,000 Australian National Industries Limited 410,204 ----------- MULTI-INDUSTRY 5.15% 76,000 Howard Smith Limited 695,040 276,000 Pacific Dunlop Limited 709,527 210,000 Southcorp Holdings Limited 724,952 ----------- 2,129,519 ----------- REAL ESTATE 7.61% 258,000 General Property Trust 464,277 66,000 Lend Lease Corporation Limited 1,422,897 194,000 Stockland Trust Group 484,476 412,000 Westfield Trust 771,666 ----------- 3,143,316 ----------- TOTAL COMMON STOCK - BASKET (Cost $42,887,880) 41,326,362 ----------- TOTAL INVESTMENTS (COST $42,887,880)+ 100.00% $41,326,362 ======= =========== - -------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $43,069,312. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 937,013 Excess of tax cost over value (2,679,963) ----------- $(1,742,950) =========== See accompanying notes to financial statements. 20 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ AUSTRIA WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 24.90% 10,240 Bank Austria AG $ 509,232 6,092 Creditanstalt Bankverein AG 374,123 2,792 Creditanstalt Bankverein AG Vorzug 136,619 ----------- 1,019,974 ----------- BEVERAGES & TOBACCO 4.03% 3,124 Oesterreichische Brau Beteiligungs AG 165,219 ----------- BUILDING MATERIALS & COMPONENTS 4.36% 920 Wienerberger Baustoffindustrie AG 178,648 ----------- BUSINESS & PUBLIC SERVICES 3.09% 3,276 Flughafen Wien AG 126,711 ----------- CHEMICALS 2.19% 1,428 Lenzing AG* 89,500 ----------- CONSTRUCTION & HOUSING 5.68% 1,200 Bau Holding AG 73,884 1,400 Bau Holding AG Vorzug 68,074 2,800 Universale-Bau AG 90,618 ----------- 232,576 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 1.40% 736 Austria Mikro Systeme International AG 57,516 ----------- ENERGY SOURCES 13.26% 4,112 OMV AG 543,355 ----------- INSURANCE 4.37% 760 EA-Generali AG 179,074 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MACHINERY & ENGINEERING 14.39% 628 BWT AG $ 106,431 3,324 Steyr Daimler Puch AG 98,656 2,096 VA Technologie AG 384,588 ----------- 589,675 ----------- METALS - STEEL 4.44% 2,320 Boehler-Uddeholm AG 182,033 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 8.61% 3,300 Mayr Melnhof Karton AG 190,417 4,200 Radex-Heraklith Industries AG 162,119 ----------- 352,536 ----------- TRANSPORTATION - AIRLINES 4.84% 8,400 Austrian Airlines AG* 198,255 ----------- UTILITIES - ELECTRICAL & GAS 4.44% 2,676 Oesterreichische Elektrizitaetswirtschafts AG - Class A 182,040 ----------- TOTAL COMMON STOCK - BASKET (Cost $4,118,228) 4,097,112 ----------- TOTAL INVESTMENTS (COST $4,118,228)+ 100.00% $ 4,097,112 ======= =========== - ------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $4,138,149. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $351,828 Excess of tax cost over value (392,865) -------- $(41,037) ======== See accompanying notes to financial statements. 21 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ BELGIUM WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 12.80% 7,176 Generale de Banque SA $ 2,689,069 3,900 Kredietbank NV 1,450,955 ----------- 4,140,024 ----------- BUILDING MATERIALS & COMPONENTS 4.61% 18,408 Cimenteries CBR 1,488,591 ----------- CHEMICALS 5.04% 29,120 Solvay SA 1,629,968 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 4.73% 7,800 Barco NV 1,530,194 ----------- ENERGY SOURCES 11.89% 10,764 Petrofina SA 3,845,320 ----------- INDUSTRIAL COMPONENTS 2.34% 1,196 Bekaert NV 756,351 ----------- INSURANCE 17.57% 20,748 Fortis AG 4,075,899 5,824 Royale Belge 1,606,459 ----------- 5,682,358 ----------- MERCHANDISING 4.52% 31,772 Delhaize-Le Lion SA 1,462,059 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- METALS - NON FERROUS 4.50% 17,524 Union Miniere SA* $ 1,454,831 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 2.15% 4,940 Glaverbel SA 695,269 ----------- MULTI-INDUSTRY 9.77% 17,784 Gevaert 1,598,454 10,452 Groupe Bruxelles Lambert SA 1,561,049 ----------- 3,159,503 ----------- UTILITIES - ELECTRICAL & GAS 20.08% 24,908 Electrabel SA 4,899,825 4,004 Tractebel 1,594,704 ----------- 6,494,529 ----------- TOTAL COMMON STOCK - BASKET (Cost $32,926,072) 32,338,997 ----------- TOTAL INVESTMENTS (COST $32,926,072)+ 100.00% $32,338,997 ======= =========== - ------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $33,386,037. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 605,928 Excess of tax cost over value (1,652,968) ----------- $(1,047,040) =========== See accompanying notes to financial statements. 22 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ CANADA WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.97% AEROSPACE & MILITARY TECHNOLOGY 2.44% 30,600 Bombardier Incorporated - Class B $ 593,929 ----------- BANKING 15.28% 19,800 Bank of Montreal 755,780 18,000 Bank of Nova Scotia 777,170 32,400 Canadian Imperial Bank of Commerce 838,877 12,600 National Bank of Canada 162,434 25,200 Royal Bank of Canada 1,182,413 ----------- 3,716,674 ----------- BEVERAGES & TOBACCO 5.20% 7,200 Molson Company Limited - Class A 132,229 32,400 Seagram Company Limited 1,131,725 ----------- 1,263,954 ----------- BROADCASTING & PUBLISHING 6.26% 5,400 Quebecor Incorporated - Class B 100,727 14,400 Rogers Communications Incorporated - Class B* 100,079 7,200 Southam Incorporated 132,229 52,200 Thomson Corporation 1,189,867 ----------- 1,522,902 ----------- BUSINESS & PUBLIC SERVICES 3.33% 7,200 Extendicare Incorporated - Class A* 115,376 23,400 Laidlaw Incorporated 342,110 5,400 Loewen Group Incorporated 171,120 9,000 Moore Corporation Limited 180,843 ----------- 809,449 ----------- CHEMICALS 2.19% 10,800 Agrium Incorporated 130,673 16,200 Methanex Corporation* 135,924 3,600 Potash Corporation of Saskatchewan Incorporated 266,662 ----------- 533,259 ----------- ELECTRICAL & ELECTRONICS 11.51% 14,400 Newbridge Networks Corporation 655,960 21,600 Northern Telecom Limited 2,142,888 ----------- 2,798,848 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- ENERGY SOURCES 13.86% 9,000 Alberta Energy Company Limited $ 199,316 9,000 Anderson Exploration Limited* 112,135 7,200 Canadian Natural Resources Limited* 185,380 10,800 Canadian Occidental Petroleum Limited 266,792 18,000 Gulf Canada Resources Limited* 147,137 12,600 Imperial Oil Limited 694,202 3,600 IPL Energy Incorporated 128,599 7,200 Norcen Energy Resources Limited 173,453 23,400 Petro-Canada 404,465 10,800 Poco Petroleum Limited* 106,561 9,000 Ranger Oil Limited 86,532 9,000 Renaissance Energy Limited* 231,725 10,800 Suncor Energy Incorporated 338,740 9,000 Talisman Energy Incorporated* 294,599 ----------- 3,369,636 ----------- FINANCIAL SERVICES 0.81% 7,200 Power Corporation of Canada 197,825 ----------- FOREST PRODUCTS & PAPER 2.51% 16,200 Abitibi Consolidated Incorporated 283,515 5,400 Avenor Incorporated 101,116 10,800 Domtar Incorporated 89,449 10,800 MacMillan Bloedel Limited 135,340 ----------- 609,420 ----------- GOLD MINES 5.24% 37,800 Barrick Gold Corporation 854,822 5,400 Cambior Incorporated 57,753 21,600 Placer Dome Incorporated 360,908 ----------- 1,273,483 ----------- HEALTH & PERSONAL CARE 0.46% 5,400 MDS Incorporated - Class B 112,784 ----------- INDUSTRIAL COMPONENTS 1.47% 5,400 Magna International Incorporated - Class A 357,796 ----------- MACHINERY & ENGINEERING 0.40% 3,600 United Dominion Industries Limited 97,875 ----------- MERCHANDISING 2.12% 7,200 Canadian Tire Corporation - Class A 135,081 3,600 George Weston Limited 243,327 5,400 Hudson's Bay Company 136,118 ----------- 514,526 ----------- See accompanying notes to financial statements. 23 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ CANADA WEBS INDEX SERIES (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- METALS - NON FERROUS 8.67% 18,000 Alcan Aluminium Limited $ 628,736 5,400 Cameco Corporation 187,260 7,200 Cominco Limited 186,676 14,400 Inco Limited 389,427 21,600 Noranda Incorporated 422,355 5,400 Rio Algom Limited 125,423 9,000 Teck Corporation - Class B 168,527 ----------- 2,108,404 ----------- METALS - STEEL 0.60% 7,200 Dofasco Incorporated 146,748 ----------- MULTI-INDUSTRY 6.29% 27,000 Canadian Pacific Limited 787,541 13,500 Edperbrascan Corporation - Class A 229,456 18,000 Imasco Limited 511,415 ----------- 1,528,412 ----------- TELECOMMUNICATIONS 6.90% 50,400 BCE Incorporated 1,428,333 12,600 Telus Corporation 250,457 ----------- 1,678,790 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- UTILITIES - ELECTRICAL & GAS 4.43% 43,200 Nova Corporation $ 365,574 16,200 Transalta Corporation 201,844 18,000 Transcanada Pipelines Limited 337,054 9,000 Westcoast Energy Incorporated 172,092 ----------- 1,076,564 ----------- TOTAL COMMON STOCK - BASKET (Cost $20,346,865) 24,311,278 ----------- COMMON STOCK - NON-BASKET 0.03% CHEMICALS 0.02% 450 Agrium Incorporated 5,445 ----------- FOREST PRODUCTS & PAPER 0.01% 56 Abitibi Consolidated Incorporated 980 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $5,964) 6,425 ----------- TOTAL INVESTMENTS (COST $20,352,829)+ 100.00% $24,317,703 ======= =========== - ------------------ * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $20,367,885. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $4,856,837 Excess of tax cost over value (907,019) ---------- $3,949,818 ==========- See accompanying notes to financial statements. 24 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ FRANCE WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 0.84% 4,415 Thomson CSF $ 118,718 ----------- APPLIANCES & HOUSEHOLD DURABLES 0.26% 1,500 Moulinex* 36,353 ----------- AUTOMOBILES 1.41% 1,780 PSA Peugeot Citroen 199,848 ----------- BANKING 7.58% 7,455 Banque Nationale de Paris 318,332 4,575 Compagnie Financiere de Paribas - Class A 315,585 550 Credit National/Natexis 32,644 3,300 Societe Generale 410,222 ----------- 1,076,783 ----------- BEVERAGES & TOBACCO 1.21% 2,295 Pernod Ricard 107,268 2,085 Societe Nationale D'Exploitation 64,281 ----------- 171,549 ----------- BROADCASTING & PUBLISHING 1.30% 1,140 Canal Plus SA 184,001 ----------- BUILDING MATERIALS & COMPONENTS 4.86% 3,350 Compagnie de Saint Gobain 460,622 3,545 Lafarge SA 229,106 ----------- 689,728 ----------- BUSINESS & PUBLIC SERVICES 9.23% 4,570 Compagnie Generale des Eaux 510,833 2,855 Havas SA 174,581 265 Sodexho Alliance SA 119,928 5,015 Suez Lyonnaise des Eaux SA 505,179 ----------- 1,310,521 ----------- CHEMICALS 3.07% 2,845 L'Air Liquide 435,744 ----------- CONSTRUCTION & HOUSING 0.77% 925 Bouygues 74,116 625 GTM Entrepose SA 34,725 ----------- 108,841 ----------- ELECTRICAL & ELECTRONICS 7.93% 4,875 Alcatel Alsthom 597,972 995 Legrand SA 176,182 175 Sagem SA 85,603 4,990 Schneider SA 265,974 ----------- 1,125,731 ----------- ENERGY EQUIPMENT & SERVICES 0.17% 200 Compagnie Generale de Geophysique SA* 24,664 ----------- ENERGY SOURCES 12.39% 9,270 Elf Acquitaine SA 1,031,613 7,750 Total SA-Class B 727,022 ----------- 1,758,635 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- FINANCIAL SERVICES 1.48% 1,025 Compagnie Bancaire SA $ 113,053 555 CPR 41,633 145 Societe Eurafrance SA 54,983 ----------- 209,669 ----------- FOOD & HOUSEHOLD PRODUCTS 3.74% 950 Eridania Beghin-Say SA 123,733 2,730 Groupe Danone 406,878 ----------- 530,611 ----------- HEALTH & PERSONAL CARE 11.99% 385 Essilor International 95,338 2,240 L'Oreal 800,277 11,840 Rhone-Poulenc - Class A 434,911 3,875 Sanofi SA 372,455 ----------- 1,702,981 ----------- INDUSTRIAL COMPONENTS 3.28% 5,125 Michelin - Class B 288,125 2,955 Valeo SA 177,821 ----------- 465,946 ----------- INSURANCE 4.44% 9,875 Axa - UAP SA 630,059 ----------- LEISURE & TOURISM 2.14% 1,375 Accor SA 206,290 515 Club Mediterranee SA* 41,307 300 Pathe SA 56,088 ----------- 303,685 ----------- MACHINERY & ENGINEERING 1.15% 665 Compagnie Francaise d'Etudes de Construction Technip 80,473 1,150 Sidel SA 83,423 ----------- 163,896 ----------- MERCHANDISING 11.57% 1,325 Carrefour SA 799,740 2,505 Casino Guichard Perrachon SA 124,723 240 Comptoirs Modernes 107,981 825 Pinault-Printemps Redoute SA 352,551 715 Promodes 258,039 ----------- 1,643,034 ----------- METALS - STEEL 1.15% 9,375 Usinor Sacilor 162,755 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 0.59% 605 Imetal SA 84,583 ----------- MULTI-INDUSTRY 0.72% 3,845 Lagardere S.C.A. 103,011 ----------- REAL ESTATE 0.82% 325 Sefimeg 21,540 675 Simco SA 50,635 465 Union du Credit-Bail Immobilier 44,618 ----------- 116,793 ----------- See accompanying notes to financial statements. 25 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ FRANCE WEBS INDEX SERIES (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- RECREATION - OTHER CONSUMER GOODS 5.46% 2,750 LVMH (Moet - Hennessy Louis Vuitton) $ 572,624 640 Salomon SA 44,844 2,180 Societe Bic SA 157,781 ----------- 775,249 ----------- UTILITIES - ELECTRICAL & GAS 0.45% 760 Primagaz Cie 64,529 ----------- TOTAL COMMON STOCK - BASKET (Cost $13,015,756) 14,197,917 ----------- TOTAL INVESTMENTS (COST $13,015,756)+ 100.00% $14,197,917 ======= =========== - ------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $13,016,521. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $1,522,200 Excess of tax cost over value (340,804) ---------- $1,181,396 ========== See accompanying notes to financial statements. 26 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ GERMANY WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 11.68% 23,750 Daimler-Benz AG $ 1,781,052 1,250 Volkswagen AG 899,206 250 Volkswagen AG Vorzug 134,707 ----------- 2,814,965 ----------- BANKING 13.48% 12,500 Bayerische Hypotheken-Und Wechsel Bank AG 458,282 12,750 Bayerische Vereinsbank AG 663,635 20,500 Deutsche Bank AG 1,201,394 23,250 Dresdner Bank AG 926,022 ----------- 3,249,333 ----------- BUILDING MATERIALS & COMPONENTS 1.27% 250 Buderus AG 122,209 2,475 Heidelberger Zement AG 184,917 ----------- 307,126 ----------- BUSINESS & PUBLIC SERVICES 4.89% 3,000 SAP AG 663,260 2,250 SAP AG Vorzug 516,193 ----------- 1,179,453 ----------- CHEMICALS 8.97% 28,000 BASF AG 962,782 32,500 Bayer AG 1,198,936 ----------- 2,161,718 ----------- CONSTRUCTION & HOUSING 0.93% 2,000 Bilfinger & Berger Bau AG 83,213 3,000 Hochtief AG 141,651 ----------- 224,864 ----------- ELECTRICAL & ELECTRONICS 6.70% 26,250 Siemens AG 1,614,196 ----------- FOREST PRODUCTS & PAPER 0.19% 250 PWA-Papierwerke Waldhof- Aschaffenburg AG 46,106 ----------- HEALTH & PERSONAL CARE 3.20% 4,000 Beiersdorf AG 161,982 8,250 Merck KGAA 316,215 3,000 Schering AG 292,801 ----------- 770,998 ----------- INDUSTRIAL COMPONENTS 0.48% 4,750 Continental AG 115,570 ----------- INSURANCE 13.60% 10,000 Allianz AG 2,217,531 250 AMB Aachener & Muenchener Beteiligungs AG 204,144 1,250 Axa Colonia Konzern AG 114,571 2,500 Muenchener Rueckversicherung AG 742,973 ----------- 3,279,219 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MACHINERY & ENGINEERING 2.20% 500 Linde AG $ 337,462 500 MAN AG 137,485 250 MAN AG Vorzug 56,452 ----------- 531,399 ----------- MERCHANDISING 2.76% 1,500 Douglas Holding AG 52,411 500 Karstadt AG 173,036 9,600 Metro AG 439,951 ----------- 665,398 ----------- METALS - STEEL 1.43% 1,500 Thyssen AG 345,795 ----------- MISCELLANEOUS MATERIALS & COMMODITIES 1.53% 5,000 Degussa AG 244,417 1,000 SGL Carbon AG 124,431 ----------- 368,848 ----------- MULTI-INDUSTRY 0.88% 750 Preussag AG 211,018 ----------- RECREATION - OTHER CONSUMER GOODS 1.25% 2,500 Adidas AG 302,050 ----------- TELECOMMUNICATIONS 12.04% 98,750 Deutsche Telekom AG 1,974,780 2,000 Mannesmann AG 928,786 ----------- 2,903,566 ----------- TRANSPORTATION - AIRLINES 1.61% 19,250 Deutsche Lufthansa AG 387,096 ----------- UTILITIES - ELECTRICAL & GAS 10.91% 14,250 Rwe AG 645,137 5,500 Rwe AG-Preferred 212,337 23,000 Veba AG 1,252,083 1,250 Viag AG 520,428 ----------- 2,629,985 ----------- TOTAL COMMON STOCK - BASKET (Cost $21,481,231) 24,108,703 ----------- TOTAL INVESTMENTS (COST $21,481,231)+ 100.00% $24,108,703 ======= =========== - -------------------------------------------------------------------------------- + Aggregate cost for Federal income tax purposes is $21,510,593. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $2,799,351 Excess of tax cost over value (201,241) ---------- $2,598,110 ========== See accompanying notes to financial statements. 27 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ HONG KONG WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- -------- ----- COMMON STOCK - BASKET 99.01% AEROSPACE & MILITARY TECHNOLOGY 0.24% 18,400 Hong Kong Aircraft Engineering Company Limited $ 60,550 ----------- BANKING 9.66% 317,400 Bank Of East Asia Limited 1,132,547 96,600 Hang Seng Bank Limited 1,165,583 25,300 Wing Lung Bank 155,084 ----------- 2,453,214 ----------- BROADCASTING & PUBLISHING 1.98% 322,000 South China Morning Post Holdings Limited 259,711 69,000 Television Broadcasts Limited 243,980 ----------- 503,691 ----------- ELECTRICAL & ELECTRONICS 0.41% 46,000 Johnson Electric Holdings Limited 103,291 ----------- FINANCIAL SERVICES 1.01% 138,000 Peregrine Investment Holdings Limited 256,446 ----------- LEISURE & TOURISM 3.23% 276,000 Hong Kong & Shanghai Hotels Limited 338,366 552,000 Regal Hotels International 151,374 322,000 Shangri-La Asia Limited 330,352 ----------- 820,092 ----------- MERCHANDISING 1.67% 69,000 Dickson Concepts International Limited 261,789 230,000 Giordano International Limited 163,247 ----------- 425,036 ----------- MULTI-INDUSTRY 19.34% 690,000 Hopewell Holdings Limited 411,827 414,000 Hutchison Whampoa Limited 3,445,993 138,000 Swire Pacific Limited - Class A 1,055,168 ----------- 4,912,988 ----------- REAL ESTATE 38.09% 253,000 Cheung Kong Holdings Limited 2,677,249 276,000 Chinese Estates Holdings 245,761 322,000 Hang Lung Development Company 581,752 138,000 Hysan Development Company Limited 400,697 184,000 Miramar Hotel & Investment Limited 403,665 184,000 New World Development Company Limited 1,146,883 276,000 Sino Land Company 261,789 253,000 Sun Hung Kai Properties Limited 2,873,145 299,000 Wharf Holdings Limited 1,082,327 ----------- 9,673,268 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- -------- ----- TELECOMMUNICATIONS 10.82% 1,306,400 Hong Kong Telecommunications Limited $ 2,748,009 ----------- TRANSPORTATION - AIRLINES 2.96% 460,000 Cathay Pacific Airways Limited 750,936 ----------- TRANSPORTATION - SHIPPING 0.82% 368,000 Shun Tak Holdings Limited 207,769 ----------- UTILITIES - ELECTRICAL & GAS 8.78% 241,500 China Light & Power Company Limited 1,118,835 598,000 Hong Kong & China Gas Company Limited 1,111,266 ----------- 2,230,101 ----------- TOTAL COMMON STOCK - BASKET (Cost $25,404,625) 25,145,391 ----------- COMMON STOCK - NON-BASKET 0.99% AEROSPACE & MILITARY TECHNOLOGY 0.06% 4,600 Hong Kong Aircraft Engineering Company Limited 15,137 ----------- MULTI-INDUSTRY 0.38% 11,500 Hutchison Whampoa Limited 95,722 ----------- REAL ESTATE 0.51% 11,500 Sun Hung Kai Properties Limited 130,597 ----------- TELECOMMUNICATIONS 0.04% 4,600 Hong Kong Telecommunications Limited 9,676 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $249,627) 251,132 ----------- TOTAL INVESTMENTS (COST $25,654,252)+ 100.00% $25,396,523 ======= =========== - ------------------ + Aggregate cost for Federal income tax purposes is $25,677,191. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 735,208 Excess of tax cost over value (1,015,876) ----------- $ (280,668) =========== See accompanying notes to financial statements. 28 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ ITALY WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AUTOMOBILES 4.60% 486,200 Fiat SPA $ 1,495,847 ----------- BANKING 18.38% 305,500 Banca Commerciale Italiana SPA 762,750 91,000 Banca Popolare di Milano SPA 483,709 100,100 Banco Ambrosiano Veneto SPA 595,868 152,100 Banco Ambrosiano Veneto SPA Rnc 332,931 375,700 Credito Italiano SPA 773,717 201,500 Istituto Bancario San Paolo de Torino SPA 1,399,864 117,000 Istituto Mobiliare Italiano SPA 1,086,402 80,600 Mediobanca SPA 537,240 ----------- 5,972,481 ----------- BROADCASTING & PUBLISHING 3.32% 31,200 Arnoldo Mondadori Editore SPA 184,892 204,100 Mediaset SPA 895,130 ----------- 1,080,022 ----------- CONSTRUCTION & HOUSING 0.83% 50,700 Sirti SPA 271,050 ----------- DATA PROCESSING & REPRODUCTION 0.51% 406,848 Olivetti Group SPA* 164,107 ----------- ENERGY SOURCES 20.69% 1,211,600 ENI SPA 6,721,687 ----------- FOOD & HOUSEHOLD PRODUCTS 1.50% 314,600 Parmalat Finanziaria SPA 487,971 ----------- INDUSTRIAL COMPONENTS 3.71% 474,500 Pirelli SPA 1,203,831 ----------- INSURANCE 10.79% 23,400 Assigurazioni Generali SPA 494,606 977,600 Istituto Nazionale delle Assicurazioni SPA 1,425,836 92,300 Riunione Adriatica di Sicurta SPA 782,296 72,800 Riunione Adriatica di Sicurta SPA Rnc 361,456 50,700 Societa Assicuratrice Industriale SPA 440,222 ----------- 3,504,416 ----------- MERCHANDISING 1.35% 71,500 La Rinascente SPA 438,250 ----------- METALS - STEEL 0.47% 39,000 Falck Acciaierie & Ferriere Lombarde SPA 152,837 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MULTI-INDUSTRY 2.07% 843,700 Montedison SPA $ 510,809 328,900 Montedison SPA Rnc 162,778 ----------- 673,587 ----------- RECREATION - OTHER CONSUMER GOODS 1.33% 72,800 Bulgari SPA 433,483 ----------- TELECOMMUNICATIONS 24.01% 1,069,900 Telecom Italia Mobile SPA 3,621,620 231,400 Telecom Italia Mobile SPA Rnc 390,200 573,443 Telecom Italia SPA 3,360,138 122,434 Telecom Italia SPA Rnc 430,364 ----------- 7,802,322 ----------- TEXTILES & APPAREL 2.67% 37,856 Benetton Group SPA 549,337 32,500 Marzotto & Figli SPA 316,490 ----------- 865,827 ----------- UTILITIES - ELECTRICAL & GAS 3.77% 145,600 Edison SPA 677,430 178,100 Italgas SPA 546,730 ----------- 1,224,160 ----------- TOTAL COMMON STOCK - BASKET (Cost $28,249,728) 32,491,878 ----------- COMMON STOCK - NON-BASKET 0.00% TELECOMMUNICATIONS 0.00% 1 Telecom Italia SPA 6 7 Telecom Italia SPA Rnc 25 ----------- 31 ----------- TOTAL COMMON STOCK - NON-BASKET (Cost $0) 31 ----------- TOTAL INVESTMENTS (COST $28,249,728)+ 100.00% $32,491,909 ======= =========== - -------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $28,760,108. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $4,359,926 Excess of tax cost over value (628,125) ---------- $3,731,801 ========== See accompanying notes to financial statements. 29 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ JAPAN WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 99.98% APPLIANCES & HOUSEHOLD DURABLES 5.88% 189,000 Matsushita Electric Industrial Company Limited $ 3,488,071 21,000 Pioneer Electronic Corporation 418,987 189,000 Sanyo Electric Company Limited 675,617 105,000 Sharp Corporation 1,056,198 42,000 Sony Corporation 3,666,140 ----------- 9,305,013 ----------- AUTOMOBILES 7.80% 84,000 Honda Motor Company Limited 2,597,722 231,000 Nissan Motor Company Limited 1,494,039 315,000 Toyota Motor Corporation 8,248,815 ----------- 12,340,576 ----------- BANKING 17.57% 189,000 Asahi Bank Limited 1,373,231 105,000 Ashikaga Bank Limited 309,003 378,000 Bank of Tokyo-Mitsubishi Limited 6,881,869 105,000 Bank of Yokohama Limited 446,920 84,000 Chiba Bank Limited 439,937 231,000 Fuji Bank Limited 2,822,928 42,000 Gunma Bank Limited 366,614 63,000 Hokuriku Bank 194,829 231,000 Industrial Bank of Japan Limited 3,187,796 84,000 Joyo Bank 474,852 126,000 Mitsubishi Trust & Banking Corporation 1,770,222 105,000 Mitsui Trust & Banking Company Limited 604,913 294,000 Sakura Bank Limited 1,735,306 42,000 Seventy-Seven Bank 439,937 84,000 Shizuoka Bank 872,891 252,000 Sumitomo Bank Limited 3,728,988 168,000 Tokai Bank 1,466,456 21,000 Yamaguchi Bank 295,037 105,000 Yasuda Trust & Banking 392,801 ----------- 27,804,530 ----------- BEVERAGES & TOBACCO 1.12% 42,000 Asahi Breweries Limited 624,990 105,000 Kirin Brewery Company Limited 852,814 42,000 Sapporo Breweries Limited 298,878 ----------- 1,776,682 ----------- BUILDING MATERIALS & COMPONENTS 1.24% 105,000 Chichibu Onoda Cement Corporation 313,368 42,000 Inax Corporation 206,002 42,000 Sekisui Chemical Company Limited 356,139 21,000 Sumitomo Forestry Company Limited 202,511 21,000 Tostem Corporation 438,191 42,000 Toto Limited 443,428 ----------- 1,959,639 ----------- BUSINESS & PUBLIC SERVICES 2.00% 63,000 Dai Nippon Printing Company Limited 1,319,810 42,000 Kamigumi Company Limited 193,782 21,000 Kokuyo Company 501,039 21,000 Mitsubishi Logistics Corporation 244,409 63,000 Toppan Printing Company Limited 906,060 ----------- 3,165,100 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- CHEMICALS 3.25% 126,000 Asahi Chemical Industry Company Limited $ 657,810 84,000 Dainippon Ink & Chemicals Incorporated 310,051 42,000 Kuraray Company Limited 373,597 210,000 Mitsubishi Chemical Corporation 549,921 63,000 Mitsubishi Rayon Company Limited 239,870 84,000 Mitsui Toatsu Chemicals Incorporated 161,310 21,000 Shin-Etsu Chemical Company Limited 537,701 105,000 Showa Denko K.K.* 204,256 147,000 Sumitomo Chemical Company Limited 576,806 84,000 Teijin Limited 341,475 126,000 Toray Industries Incorporated 837,975 63,000 Tosoh Corporation* 160,786 84,000 Ube Industries Limited 188,544 ----------- 5,140,102 ----------- CONSTRUCTION & HOUSING 2.56% 42,000 Daiwa House Industry Company Limited 485,327 147,000 Kajima Corporation 774,778 21,000 Kandenko Company Limited 144,027 21,000 Kinden Corporation 291,545 147,000 Kumagai Gumi Company Limited 162,532 42,000 Nishimatsu Construction Company Limited 247,901 63,000 Obayashi Corporation 381,279 63,000 Sekisui House Limited 597,057 105,000 Shimizu Corporation 552,540 105,000 Taisei Corporation 413,750 ----------- 4,050,736 ----------- DATA PROCESSING & REPRODUCTION 2.58% 84,000 Canon Incorporated 2,325,380 147,000 Fujitsu Limited 1,759,747 ----------- 4,085,127 ----------- ELECTRICAL & ELECTRONICS 3.59% 294,000 Hitachi Limited 2,712,944 21,000 Makita Corportion 288,054 189,000 Mitsubishi Electric Corporation 868,875 126,000 NEC Corporation 1,414,083 21,000 Omron Corporation 391,055 ----------- 5,675,011 ----------- ELECTRONIC COMPONENTS, INSTRUMENTS 3.33% 21,000 Fanuc Limited 806,551 21,000 Kyocera Corporation 1,326,794 21,000 Murata Manufacturing Company Limited 857,179 42,000 Nikon Corporation 694,821 42,000 Olympus Optical Company Limited 299,576 21,000 Tokyo Electron Limited 1,143,487 21,000 Yokogawa Electric Corporation 138,615 ----------- 5,267,023 ----------- See accompanying notes to financial statements. 30 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ JAPAN WEBS INDEX SERIES (CONTINUED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- ENERGY SOURCES 0.74% 63,000 Cosmo Oil Company Limited $ 204,256 105,000 Japan Energy Corporation 185,926 63,000 Mitsubishi Oil Company Limited 219,968 126,000 Nippon Oil Company Limited 564,586 ----------- 1,174,736 ----------- FINANCIAL SERVICES 3.04% 21,000 Acom Company Limited 993,349 21,000 Credit Saison Company Limited 542,938 126,000 Daiwa Securities Company Limited 796,076 168,000 Nomura Securities Company Limited 2,234,600 126,000 Yamaichi Securities Company 247,203 ----------- 4,814,166 ----------- FOOD & HOUSEHOLD PRODUCTS 1.53% 63,000 Ajinomoto Company Incorporated 576,108 42,000 Kao Corporation 621,498 42,000 Meiji Seika 190,988 21,000 Nippon Meat Packers Incorporated 253,138 21,000 Nissin Food Products Company Limited 488,819 21,000 Yamazaki Baking Company Limited 289,800 ----------- 2,420,351 ----------- FOREST PRODUCTS & PAPER 0.64% 84,000 Nippon Paper Industries Company 487,422 105,000 Oji Paper Company Limited 532,463 ----------- 1,019,885 ----------- HEALTH & PERSONAL CARE 4.12% 21,000 Daiichi Pharmaceutical 357,885 21,000 Eisai Company Limited 399,784 42,000 Kyowa Hakko Kogyo Company Limited 246,155 42,000 Sankyo Company Limited 1,277,912 42,000 Shionogi & Company Limited 283,166 42,000 Shiseido Company Limited 687,838 21,000 Taisho Pharmaceutical Company 515,005 84,000 Takeda Chemical Industries 2,241,583 21,000 Yamanouchi Pharmaceutical Company Limited 502,785 ----------- 6,512,113 ----------- INDUSTRIAL COMPONENTS 4.30% 63,000 Bridgestone Corporation 1,398,371 84,000 Denso Corporation 1,815,612 42,000 Fujikura Limited 352,648 63,000 Furukawa Electric Company Limited 356,139 42,000 Minebea Company Limited 418,987 42,000 NGK Insulators Limited 401,530 21,000 NGK Spark Plug Company Limited 179,815 63,000 NSK Limited 326,286 63,000 NTN Corporation 293,291 84,000 Sumitomo Electric Industries 1,270,929 ----------- 6,813,608 ----------- - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- INSURANCE 2.23% 84,000 Mitsui Marine & Fire Insurance Company Limited $ 489,517 42,000 Nichido Marine & Fire Insurance 278,976 63,000 Nippon Fire & Marine Insurance 272,342 84,000 Sumitomo Marine & Fire Insurance 564,236 168,000 Tokio Marine & Fire Insurance Company 1,927,342 ----------- 3,532,413 ----------- LEISURE & TOURISM 0.14% 21,000 Tokyo Dome Corporation 214,731 ----------- MACHINERY & ENGINEERING 3.99% 42,000 Amada Company Limited 284,911 42,000 Daikin Industries Limited 304,464 21,000 Ebara Corporation 270,596 105,000 Hitachi Zosen Corporation 336,936 126,000 Kawasaki Heavy Industries Limited 493,358 105,000 Komatsu Limited 652,049 147,000 Kubota Corporation 593,915 21,000 Kurita Water Industries Limited 555,158 294,000 Mitsubishi Heavy Industries Limited 1,952,831 126,000 Mitsui Engineering & Shipbuilding Company Limited* 207,399 84,000 Sumitomo Heavy Industries Limited 265,359 21,000 Toyoda Automatic Loom Works Limited 399,784 ----------- 6,316,760 ----------- MERCHANDISING 3.49% 63,000 Daiei, Incorporated 431,557 21,000 Hankyu Department Stores 171,959 21,000 Isetan Company Limited 206,002 42,000 Ito Yokado Company Limited 2,269,515 21,000 Jusco Company Limited 562,142 42,000 Marui Company Limited 666,888 42,000 Mitsukoshi Limited 238,823 21,000 Mycal Corporation 239,172 21,000 Seiyu Limited 120,110 21,000 Takashimaya Company Limited 233,935 21,000 Uny Company Limited 385,818 ----------- 5,525,921 ----------- METALS - NON FERROUS 0.51% 105,000 Mitsubishi Materials Corporation 334,317 84,000 Nippon Light Metal Company Limited 224,857 42,000 Sumitomo Metal Mining Company 250,694 ----------- 809,868 ----------- METALS - STEEL 1.98% 189,000 Kawasaki Steel Corporation 469,790 546,000 Nippon Steel Corporation 1,388,943 294,000 NKK Corporation 469,266 273,000 Sumitomo Metal Industries 635,464 21,000 Tokyo Steel Manufacturing Company Limited 171,261 ----------- 3,134,724 ----------- See accompanying notes to financial statements. 31 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ JAPAN WEBS INDEX SERIES (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MISCELLANEOUS MATERIALS & COMMODITIES 0.97% 105,000 Asahi Glass Company Limited $ 800,441 21,000 Nitto Denko Corporation 364,868 21,000 Toyo Seikan Kaisha Limited 363,122 ----------- 1,528,431 ----------- REAL ESTATE 1.58% 126,000 Mitsubishi Estate Company Limited 1,770,222 63,000 Mitsui Fudosan Company Limited 733,228 ----------- 2,503,450 ----------- RECREATION - OTHER CONSUMER GOODS 2.10% 42,000 Casio Computer Company Limited 366,614 42,000 Citizen Watch Company 324,366 42,000 Fuji Photo Film Company 1,620,085 42,000 Konica Corporation 242,314 21,000 Shimano Incorporated 452,157 21,000 Yamaha Corporation 324,715 ----------- 3,330,251 ----------- TELECOMMUNICATIONS 6.36% 1,071 Nippon Telegraph & Telephone Corporation 10,060,936 ----------- TEXTILES & APPAREL 0.27% 21,000 Nisshinbo Industries Incorporated 136,171 147,000 Toyobo Limited 290,847 ----------- 427,018 ----------- TRANSPORTATION - AIRLINES 0.44% 168,000 Japan Airlines* 702,502 ----------- TRANSPORTATION - ROAD & RAIL 3.82% 336 East Japan Railway Company 1,536,287 105,000 Hankyu Corporation 521,989 42,000 Keihin Electric Express Railway 173,880 126,000 Kinki Nippon Railway Company 711,231 84,000 Nagoya Railroad Company Limited 310,749 63,000 Nankai Electric Railway Company 303,766 84,000 Nippon Express Company Limited 554,460 63,000 Odakyu Electric Railway Company 318,954 21,000 Seino Transportation Company 209,494 84,000 Tobu Railway Company Limited 341,475 105,000 Tokyu Corporation 554,286 42,000 Yamato Transport Company Limited 506,277 ----------- 6,042,848 ----------- NO. OF SHARES SECURITY VALUE ------ -------- ----- TRANSPORTATION - SHIPPING 0.43% 126,000 Mitsui O.s.k. Lines Limited* $ 222,063 126,000 Nippon Yusen Kabushiki Kaisha 455,649 ------------ 677,712 ------------ UTILITIES - ELECTRICAL & GAS 3.67% 84,000 Kansai Electric Power Company Incorporated 1,571,203 231,000 Osaka Gas Company Limited 530,019 42,000 Tohoku Electric Power Company 684,346 126,000 Tokyo Electric Power Company 2,409,178 252,000 Tokyo Gas Company Limited 607,532 ------------ 5,802,278 ------------ WHOLESALE & INTERNATIONAL TRADE 2.71% 126,000 Itochu Corporation 520,592 126,000 Marubeni Corporation 457,744 126,000 Mitsubishi Corporation 1,246,488 168,000 Mitsui & Company 1,374,279 84,000 Sumitomo Corporation 698,312 ------------ 4,297,415 ------------ TOTAL COMMON STOCK - BASKET (Cost $172,970,800) 158,231,656 ------------ COMMON STOCK - NON-BASKET 0.02% ELECTRONIC COMPONENTS, INSTRUMENTS 0.01% 352 Tokyo Electron Limited 19,167 ------------ FINANCIAL SERVICES 0.01% 400 Credit Saison Company Limited 10,342 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $19,139) 29,509 ------------ TOTAL INVESTMENTS (COST $172,989,939)+ 100.00% $158,261,165 ======= ============ - --------------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $175,093,436. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 4,776,605 Excess of tax cost over value (21,608,876) ------------ $(16,832,271) ============ See accompanying notes to financial statements. 32 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ MALAYSIA (FREE) WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 99.82% AUTOMOBILES 4.29% 40,000 Edaran Otomobil Nasional BHD $ 144,058 80,000 Perusahaan Otomobil Nasional BHD 233,236 140,000 Tan Chong Motor Holdings BHD 147,899 ------------ 525,193 ------------ BANKING 12.57% 80,000 Commerce Asset Holdings BHD 99,880 160,000 Malayan Banking BHD 1,064,654 180,000 Public Bank BHD (Foreign) 169,165 120,000 RHB Capital BHD 205,797 ------------ 1,539,496 ------------ BEVERAGES & TOBACCO 5.35% 100,000 Guinness Anchor BHD 171,497 60,000 Rothmans of Pall Mall BHD 483,622 ------------ 655,119 ------------ BROADCASTING & PUBLISHING 1.46% 40,000 New Straits Times Press BHD 178,357 ------------ BUILDING MATERIALS & COMPONENTS 3.30% 60,000 Hume Industries - Malaysia BHD 127,594 100,000 Malayan Cement BHD 122,106 180,000 Pan Malaysia Cement Works BHD 154,965 ------------ 404,665 ------------ CONSTRUCTION & HOUSING 1.55% 80,000 Ekran BHD 93,843 60,000 YTL Corporation BHD 95,901 ------------ 189,744 ------------ ELECTRICAL & ELECTRONICS 0.48% 80,000 Time Engineering BHD 58,721 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 1.34% 60,000 Malaysian Pacific Industries BHD 163,608 ------------ ENERGY SOURCES 1.11% 60,000 Shell Refining Company BHD 135,826 ------------ FINANCIAL SERVICES 6.05% 80,000 AMMB Holdings BHD 285,371 140,000 Idris Hydraulic (Malaysia) BHD* 93,637 180,000 MBF Capital BHD 169,165 80,000 Rashid Hussain BHD 193,449 ------------ 741,622 ------------ FOOD & HOUSEHOLD PRODUCTS 2.07% 40,000 Nestle (Malaysia) BHD 253,816 ------------ INDUSTRIAL COMPONENTS 0.63% 80,000 Leader Universal Holdings BHD 77,105 ------------ LEISURE & TOURISM 4.79% 260,000 Magnum Corporation BHD 241,674 180,000 Resorts World BHD 345,738 ------------ 587,412 ------------ MACHINERY & ENGINEERING 1.76% 80,000 UMW Holdings BHD 215,400 ------------ METALS - NON FERROUS 1.12% 160,000 Malaysia Mining Corporation BHD 137,198 ------------ METALS - STEEL 0.95% 260,000 Amsteel Corporation BHD 115,932 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MISCELLANEOUS MATERIALS & COMMODITIES 6.80% 200,000 Golden Hope Plantations BHD $ 263,420 140,000 Highlands & Lowlands BHD 138,775 40,000 Kian Joo Can Factory BHD 119,362 80,000 Kuala Lumpur Kepong BHD 163,265 60,000 Perlis Plantations BHD 148,174 ------------ 832,996 ------------ MULTI-INDUSTRY 12.70% 300,000 Berjaya Group BHD 173,898 80,000 Land And General BHD 60,093 140,000 Multi-Purpose Holdings BHD 109,003 340,000 Sime Darby BHD 804,665 100,000 United Engineers (Malaysia) Limited 408,163 ------------ 1,555,822 ------------ REAL ESTATE 1.73% 180,000 Hong Leong Properties BHD 130,887 100,000 Malaysian Resources Corporation BHD 80,604 ------------ 211,491 ------------ TELECOMMUNICATIONS 13.20% 180,000 Technology Resources Industries BHD 151,878 480,000 Telekom Malaysia BHD 1,465,272 ------------ 1,617,150 ------------ TRANSPORTATION - AIRLINES 1.86% 120,000 Malaysian Airline System BHD 228,434 ------------ TRANSPORTATION - SHIPPING 3.02% 180,000 Malaysia International Shipping BHD (Foreign) 370,434 ------------ UTILITIES - ELECTRICAL & GAS 11.69% 480,000 Tenaga Nasional BHD 1,432,344 ------------ TOTAL COMMON STOCK - BASKET (Cost $21,090,378) 12,227,885 ------------ COMMON STOCK - NON-BASKET 0.18% BANKING 0.02% 2,333 Public Bank BHD (Foreign) 2,193 ------------ METALS - NON FERROUS 0.01% 1,600 Malaysia Mining Corporation BHD 1,372 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.11% 5,250 Perlis Plantations BHD 12,965 ------------ REAL ESTATE 0.04% 6,666 Malaysian Resources Corporation BHD 5,373 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $38,812) 21,903 ------------ TOTAL INVESTMENTS (COST $21,129,190)+ 100.00% $ 12,249,788 ======= ============ - -------------------------------------------------------------------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $21,130,193. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 0 Excess of tax cost over value (8,880,405) ----------- $(8,880,405) =========== See accompanying notes to financial statements. 33 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ MEXICO (FREE) WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 4.72% 132,000 Grupo Financiero Banamex Accival SA de CV - Series B* $ 352,056 55,000 Grupo Financiero Banamex Accival SA de CV - Series L* 135,433 495,000 Grupo Financiero Bancomer SA de CV - Series B* 300,768 ------------ 788,257 ------------ BEVERAGES & TOBACCO 15.72% 88,000 Empresas La Moderna SA de CV - Series A* 463,780 99,000 Fomento Economico Mexicano SA de CV - Series B 682,584 66,000 Grupo Continental SA 164,631 154,000 Grupo Modelo SA de CV - Series C 1,313,949 ------------ 2,624,944 ------------ BROADCASTING & PUBLISHING 4.43% 44,000 Grupo Televisa SA - Series CPO* 739,571 ------------ BUILDING MATERIALS & COMPONENTS 6.86% 55,000 Apasco SA de CV 408,059 77,000 Cemex SA de CV - Series A 374,288 66,000 Cemex SA de CV - Series B 363,876 ------------ 1,146,223 ------------ CHEMICALS 0.59% 33,000 Cydsa SA - Series A 99,201 ------------ CONSTRUCTION & HOUSING 2.10% 132,000 Empresas ICA Sociedad Controladora SA de CV 350,368 ------------ ENERGY EQUIPMENT & SERVICES 1.19% 11,000 Tubos de Acero de Mexico SA* 198,682 ------------ FINANCIAL SERVICES 0.80% 407,000 Grupo Financiero Probursa SA de CV - Series B* 133,280 ------------ FOOD & HOUSEHOLD PRODUCTS 4.38% 66,000 Grupo Industrial Bimbo SA de CV - Series A 532,728 176,000 Grupo Industrial Maseca SA de CV - Series B 198,120 ------------ 730,848 ------------ HEALTH & PERSONAL CARE 7.33% 275,000 Kimberly-Clark de Mexico SA de CV - Series A 1,224,177 ------------ MACHINERY & ENGINEERING 0.38% 55,000 Consorcio Grupo Dina SA* 63,742 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- MERCHANDISING 7.85% 407,000 Cifra SA de CV - Series B $ 773,651 198,000 Controladora Comercial Mexicana SA de CV - Series UBC 198,063 220,000 El Puerto de Liverpool SA de CV - Series 1 288,174 44,000 El Puerto de Liverpool SA de CV - Series C1 51,894 ------------ 1,311,782 ------------ METALS - NON FERROUS 4.90% 121,000 Grupo Mexico SA - Series B 473,630 77,000 Industrias Penoles SA - Series CP 344,247 ------------ 817,877 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 2.11% 88,000 Empaques Ponderosa SA de CV - Series B* 66,415 66,000 Vitro SA 286,204 ------------ 352,619 ------------ MULTI-INDUSTRY 14.15% 88,000 Alfa SA de CV - Series A 683,287 55,000 Desc SA de CV - Series B 459,418 176,000 Grupo Carso SA de CV - Series A1 1,220,237 ------------ 2,362,942 ------------ TELECOMMUNICATIONS 22.49% 440,000 Telefonos de Mexico SA - Series A 1,093,035 1,166,000 Telefonos de Mexico SA - Series L 2,663,864 ------------ 3,756,899 ------------ TOTAL COMMON STOCK - BASKET (Cost $14,088,579) 16,701,412 ------------ TOTAL INVESTMENTS (COST $14,088,579)+ 100.00% $ 16,701,412 ======= ============ - ---------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $14,088,579. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $2,615,535 Excess of tax cost over value (2,702) ---------- $2,612,833 ========== See accompanying notes to financial statements. 34 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ NETHERLANDS WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 4.45% 6,075 Philips Electronics NV $ 433,779 ------------ BANKING 4.18% 20,700 ABN Amro Holding NV 407,565 ------------ BEVERAGES & TOBACCO 3.65% 2,250 Heineken NV 355,847 ------------ BROADCASTING & PUBLISHING 7.54% 26,028 Elsevier NV 395,590 2,862 Wolters Kluwer NV 339,796 ------------ 735,386 ------------ BUSINESS & PUBLIC SERVICES 1.39% 4,473 Getronics NV 135,746 ------------ CHEMICALS 4.59% 2,880 Akzo Nobel NV 447,953 ------------ CONSTRUCTION & HOUSING 3.02% 5,670 Hollandsche Beton Groep NV 125,907 2,943 IHC Caland NV 169,188 ------------ 295,095 ------------ DATA PROCESSING & REPRODUCTION 1.69% 1,395 Oce NV 164,591 ------------ ENERGY EQUIPMENT & SERVICES 1.23% 3,510 Koninklijke Pakhoed NV 120,377 ------------ ENERGY SOURCES 23.49% 45,000 Royal Dutch/Shell group 2,291,636 ------------ FINANCIAL SERVICES 12.02% 26,856 Ing Groep NV 1,172,838 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- FOOD & HOUSEHOLD PRODUCTS 11.94% 5,742 Unilever NV - CVA $ 1,164,551 ------------ FOREST PRODUCTS & PAPER 1.39% 6,300 Koninklijke KNP BT NV 135,855 ------------ INSURANCE 4.31% 8,757 ASR Verzekeringsgroep NV 420,457 ------------ MACHINERY & ENGINEERING 1.47% 3,501 Stork NV 143,910 ------------ MERCHANDISING 4.34% 17,100 Koninklijke Ahold NV 423,597 ------------ METALS - STEEL 1.56% 2,700 Koninklijke Hoogovens NV 152,554 ------------ TELECOMMUNICATIONS 4.27% 11,700 Royal PTT Nederland NV 416,269 ------------ TRANSPORTATION - AIRLINES 2.65% 8,100 KLM - Konin Luchvaart Mij NV 259,008 ------------ TRANSPORTATION - ROAD & RAIL 0.82% 2,700 Koninklijke Nedlloyd Groep NV 80,207 ------------ TOTAL COMMON STOCK - BASKET (Cost $7,831,581) 9,757,221 ------------ TOTAL INVESTMENTS (COST $7,831,581)+ 100.00% $ 9,757,221 ======= ============ - -------------------------------------------------------------------------------- + Aggregate cost for Federal income tax purposes is $7,834,047. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $2,078,597 Excess of tax cost over value (155,423) ---------- $1,923,174 ========== See accompanying notes to financial statements. 35 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ SINGAPORE (FREE) WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 98.14% AUTOMOBILES 2.03% 51,000 Cycle And Carriage Limited $ 293,355 ------------ BANKING 26.94% 119,000 Developmental Bank of Singapore Limited (Foreign) 1,258,843 170,000 Oversea-Chinese Banking Corporation Limited 1,326,281 170,000 United Overseas Bank Limited (Foreign) 1,315,041 ------------ 3,900,165 ------------ BEVERAGES & TOBACCO 3.11% 85,000 Fraser & Neave Limited 449,587 ------------ BROADCASTING & PUBLISHING 2.96% 34,000 Singapore Press Holdings Limited (Foreign) 429,355 ------------ DATA PROCESSING & REPRODUCTION 0.75% 391,000 IPC Corporation Limited 108,575 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 3.42% 17,000 Creative Technology Limited* 341,686 306,000 Goldtron Limited 153,759 ------------ 495,445 ------------ LEISURE & TOURISM 3.89% 204,000 Hotel Properties Limited 284,588 17,000 Overseas Union Enterprise Limited 70,248 85,000 Shangri-La Hotel Limited 207,934 ------------ 562,770 ------------ MACHINERY & ENGINEERING 0.34% 34,000 Van Der Horst Limited 48,780 ------------ MERCHANDISING 1.00% 51,000 Metro Holdings Limited 144,992 ------------ METALS - NON FERROUS 1.52% 119,000 Straits Trading Company Limited 220,298 ------------ METALS - STEEL 2.24% 119,000 Natsteel Limited 324,152 ------------ MULTI-INDUSTRY 9.82% 136,000 Haw Par Brothers International Limited 260,760 85,000 Inchcape Berhad 283,802 136,000 Keppel Corporation Limited 485,554 255,000 Singapore Technologies Industrial Corporation 391,140 ------------ 1,421,256 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- REAL ESTATE 17.65% 85,000 City Developments Limited $ 536,694 238,000 DBS Land Limited 610,539 119,000 First Capital Corporation Limited 265,931 68,000 Parkway Holdings Limited 256,264 578,000 United Industrial Corporation Limited 393,613 425,000 United Overseas Land Limited 491,736 ------------ 2,554,777 ------------ TELECOMMUNICATIONS 8.23% 816,000 Singapore Telecommunications Limited 1,192,304 ------------ TRANSPORTATION - AIRLINES 11.10% 221,000 Singapore Airlines Limited (Foreign) 1,607,273 ------------ TRANSPORTATION - ROAD & RAIL 1.28% 255,000 Comfort Group Limited* 185,455 ------------ TRANSPORTATION - SHIPPING 1.86% 357,000 Neptune Orient Lines Limited 269,078 ------------ TOTAL COMMON STOCK - BASKET (Cost $19,113,038) 14,207,617 ------------ COMMON STOCK - NON-BASKET 1.86% BANKING 0.56% 10,400 Oversea-Chinese Banking Corporation Limited 81,137 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 0.09% 650 Creative Technology Limited* 13,064 ------------ MACHINERY & ENGINEERING 1.04% 34,000 Jurong Shipyard Limited 150,612 ------------ MULTI-INDUSTRY 0.17% 6,750 Keppel Corporation Limited 24,099 ------------ TOTAL COMMON STOCK - NON-BASKET (Cost $331,427) 268,912 ------------ TOTAL INVESTMENTS (COST $19,444,465)+ 100.00% $ 14,476,529 ======= ============ - -------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $19,536,274. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $ 145,660 Excess of tax cost over value (5,205,405) ----------- $(5,059,745) =========== See accompanying notes to financial statements. 36 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ SPAIN WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% BANKING 27.32% 32,796 Banco Bilbao Vizcaya SA $ 863,961 10,200 Banco Central Hispanoamericano SA 377,728 24,000 Banco Santander SA 669,342 7,500 Corporacion Bancaria de Espana SA 373,446 ------------ 2,284,477 ------------ BEVERAGES & TOBACCO 2.01% 6,684 El Aguila SA* 30,600 2,568 Tabacalera SA - Class A 137,158 ------------ 167,758 ------------ BUSINESS & PUBLIC SERVICES 5.86% 21,000 Autopistas Concesionaria Espanola SA 250,016 5,088 Prosegur Cia de Seguridad SA 56,559 5,040 Sociedade General de Aguas de Barcelona SA 183,327 ------------ 489,902 ------------ CHEMICALS 0.51% 40,098 Ercros SA* 42,728 ------------ CONSTRUCTION & HOUSING 2.91% 5,082 Dragados y Construcciones SA 95,436 1,236 Fomento de Construcciones y Contratas SA 147,722 ------------ 243,158 ------------ ENERGY SOURCES 4.55% 9,600 Repsol SA 380,135 ------------ FOOD & HOUSEHOLD PRODUCTS 1.64% 7,734 Ebro Agricolas SA 137,099 ------------ FOREST PRODUCTS & PAPER 1.16% 2,400 Empresa Nacional de Celulosas SA 42,781 14,544 Sarrio SA 53,955 ------------ 96,736 ------------ INSURANCE 2.20% 3,336 Corporacion Mapfre 184,322 ------------ MACHINERY & ENGINEERING 2.19% 1,488 Zardoya Otis SA 183,321 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- METALS - STEEL 1.66% 840 Acerinox SA $ 138,517 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.56% 2,100 Viscofan Industria Navarra De Envolturas Celulosicas SA 46,964 ------------ MULTI-INDUSTRY 1.72% 1,302 Corporacion Financiera Alba SA 143,877 ------------ REAL ESTATE 4.54% 4,674 Inmobilaria Metropolitana Vasco Central SA 165,710 7,314 Inmobilaria Urbis SA* 61,579 6,552 Vallehermoso SA 152,347 ------------ 379,636 ------------ TELECOMMUNICATIONS 14.35% 46,200 Telefonica de Espana 1,200,355 ------------ UTILITIES - ELECTRICAL & GAS 26.82% 58,224 Empresa Nacional de Electricidad SA 1,175,740 8,088 Gas Natural SDG SA 364,420 31,800 Iberdrola SA 357,679 44,400 Union Electrica Fenosa SA 344,616 ------------ 2,242,455 ------------ TOTAL COMMON STOCK - BASKET (Cost $7,756,417) 8,361,440 ------------ TOTAL INVESTMENTS (COST $7,756,417)+ 100.00% $ 8,361,440 ======= ============ - ----------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $7,776,977. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $656,232 Excess of tax cost over value (71,769) -------- $584,463 ======== See accompanying notes to financial statements. 37 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ SWEDEN WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 100.00% APPLIANCES & HOUSEHOLD DURABLES 3.57% 4,200 Electrolux AB-B $ 299,580 ------------ AUTOMOBILES 4.22% 6,000 Volvo AB-A 153,229 7,800 Volvo AB-B 200,688 ------------ 353,917 ------------ BANKING 8.56% 32,400 Skandinaviska Enskilda Banken-A 348,720 12,000 Svenska Handelsbanken-A 369,889 ------------ 718,609 ------------ BEVERAGES & TOBACCO 1.96% 54,000 Swedish Match AB 164,387 ------------ BUILDING MATERIALS & COMPONENTS 1.50% 3,600 Scancem AB-A 125,640 ------------ BUSINESS & PUBLIC SERVICES 3.53% 4,200 Esselte AB-A 104,318 3,600 Esselte AB-B 93,084 4,200 Securitas AB-B 98,968 ------------ 296,370 ------------ CHEMICALS 2.70% 8,400 AGA AB-A 123,041 7,200 AGA AB-B 103,630 ------------ 226,671 ------------ CONSTRUCTION & HOUSING 4.41% 9,300 Skanska AB-B 370,176 ------------ ELECTRICAL & ELECTRONICS 29.79% 31,800 ABB AB - A 463,775 10,800 ABB AB - B 157,509 45,000 Ericsson LM-B 1,880,015 ------------ 2,501,299 ------------ FOREST PRODUCTS & PAPER 6.24% 13,800 Stora Kopparbergs-A 219,717 2,400 Stora Kopparbergs-B 37,600 12,000 Svenska Cellulosa AB-B 266,718 ------------ 524,035 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- HEALTH & PERSONAL CARE 15.70% 68,796 Astra AB-A $ 1,099,719 14,400 Astra AB-B 218,265 ------------ 1,317,984 ------------ INDUSTRIAL COMPONENTS 3.76% 6,000 SKF AB-A 153,229 6,000 SKF AB-B 162,782 ------------ 316,011 ------------ INSURANCE 3.89% 8,400 Skandia Forsakrings AB 326,328 ------------ MACHINERY & ENGINEERING 4.53% 7,800 Atlas Copco AB-A 235,957 4,800 Atlas Copco AB-B 144,287 ------------ 380,244 ------------ MERCHANDISING 4.32% 9,600 Hennes & Mauritz AB-B 363,164 ------------ MULTI-INDUSTRY 1.32% 7,200 Trelleborg AB-B 110,967 ------------ TOTAL COMMON STOCK - BASKET (Cost $7,193,178) 8,395,382 ------------ TOTAL INVESTMENTS (COST $7,193,178)+ 100.00% $ 8,395,382 ======= ============ - -------------------- + Aggregate cost for Federal income tax purposes is $7,197,118. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $1,305,364 Excess of tax cost over value (107,100) ---------- $1,198,264 ========== See accompanying notes to financial statements. 38 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ SWITZERLAND WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------- ----------- ----- COMMON STOCK - BASKET 100.00% BANKING 12.80% 4,960 Credit Suisse Group $ 597,399 2,400 Schweizerischer Bankverein (Swiss Bank)* 579,745 608 Union Bank of Switzerland 604,272 ------------ 1,781,416 ------------ BUILDING MATERIALS & COMPONENTS 6.72% 640 Forbo Holding AG 266,074 3,760 Holderbank Financiere Glarus AG 668,850 ------------ 934,924 ------------ BUSINESS & PUBLIC SERVICES 4.01% 848 Adecco SA 289,695 1,360 Danzas Holding AG 267,583 ------------ 557,278 ------------ ELECTRICAL & ELECTRONICS 4.59% 432 Abb AG - Bearer 638,350 ------------ FOOD & HOUSEHOLD PRODUCTS 4.36% 520 Nestle SA 606,159 ------------ HEALTH & PERSONAL CARE 46.02% 2,160 Novartis AG 3,068,041 280 Roche Holding AG - Genusschein 2,367,765 64 Roche Holding AG - Inhaber 967,051 ------------ 6,402,857 ------------ INSURANCE 8.39% 440 Schweizerische Rueckversicherungs (Swiss Re) 585,837 1,600 Zuerich Versicherungs 582,171 ------------ 1,168,008 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- LEISURE & TOURISM 2.85% 96 Kuoni Reisen AG $ 396,200 ------------ MACHINERY & ENGINEERING 7.11% 304 Georg Fischer AG 421,556 360 Schindler Holding AG 460,885 152 Sulzer AG 106,823 ------------ 989,264 ------------ MERCHANDISING 0.72% 480 Valora Holding AG 100,263 ------------ RECREATION - OTHER CONSUMER GOODS 0.72% 248 SMH AG - Bearer 32,669 120 SMH AG- Registered 67,192 ------------ 99,861 ------------ TRANSPORTATION - AIRLINES 1.71% 200 Sairgroup* 237,585 ------------ TOTAL COMMON STOCK - BASKET (Cost $12,913,528) 13,912,165 ------------ TOTAL INVESTMENTS (COST $12,913,528)+ 100.00% $ 13,912,165 ======= ============ - ------------------- * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $12,942,723. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $1,085,694 Excess of tax cost over value (116,252) ---------- $ 969,442 ========== See accompanying notes to financial statements. 39 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ UNITED KINGDOM WEBS INDEX SERIES - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- COMMON STOCK - BASKET 100.00% AEROSPACE & MILITARY TECHNOLOGY 1.49% 11,745 British Aerospace Plc $ 275,054 42,390 Rolls-Royce Plc 160,871 ------------ 435,925 ------------ APPLIANCES & HOUSEHOLD DURABLES 0.09% 10,062 Thorn Plc 26,681 ------------ BANKING 14.82% 38,295 Barclays Plc 877,259 43,200 HSBC Holdings Plc ($HK10) 1,285,633 21,600 HSBC Holdings Plc (75p) 672,593 112,500 Lloyds TSB Group Plc 1,319,132 18,225 Royal Bank of Scotland Group Plc 173,206 ------------ 4,327,823 ------------ BEVERAGES & TOBACCO 2.57% 26,280 Cadbury Schweppes Plc 243,792 57,240 Guinness Plc 507,326 ------------ 751,118 ------------ BROADCASTING & PUBLISHING 2.71% 40,590 British Sky Broadcasting Plc 287,014 16,875 Pearson Plc 198,417 34,560 Reed International Plc 306,030 ------------ 791,461 ------------ BUILDING MATERIALS & COMPONENTS 2.33% 24,390 Blue Circle Industries Plc 152,883 13,590 BPB Plc 74,937 13,221 Caradon Plc 43,956 17,631 Hanson Plc 84,638 7,155 Hepworth Plc 23,962 14,580 Redland Plc 68,573 7,605 RMC Group Plc 123,831 14,985 Wolseley Plc 108,268 ------------ 681,048 ------------ BUSINESS & PUBLIC SERVICES 3.92% 8,280 Anglian Water Plc 104,407 5,040 De La Rue Plc 32,164 10,800 Railtrack Group Plc 135,307 43,560 Reuters Holdings Plc 442,241 12,150 Thames Water Plc 156,161 15,435 United Utilities Plc 172,724 17,775 Williams Plc 100,464 ------------ 1,143,468 ------------ CHEMICALS 2.03% 12,330 BOC Group Plc 212,866 16,290 Courtaulds Plc 83,088 18,405 Imperial Chemical Industries Plc 298,045 ------------ 593,999 ------------ CONSTRUCTION & HOUSING 0.15% 13,995 Taylor Woodrow Plc 42,217 ------------ ELECTRICAL & ELECTRONICS 1.50% 70,920 General Electric Company Plc 438,794 ------------ ELECTRONIC COMPONENTS, INSTRUMENTS 0.14% 6,975 Bowthorpe Plc 40,723 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- ENERGY SOURCES 7.54% 141,435 British Petroleum Company Plc $ 1,978,396 5,805 Burmah Castrol Plc 96,923 30,420 LASMO Plc 127,778 ------------ 2,203,097 ------------ FINANCIAL SERVICES 2.51% 33,660 Abbey National Plc 453,095 5,130 Mercury Asset Management Group Plc 111,070 5,490 Schroders Plc 168,502 ------------ 732,667 ------------ FOOD & HOUSEHOLD PRODUCTS 4.93% 29,205 Associated British Foods Plc 245,823 59,445 Grand Metropolitan Plc 546,151 21,960 Unilever Plc 608,478 11,925 United Biscuits Holdings Plc 39,937 ------------ 1,440,389 ------------ FOREST PRODUCTS & PAPER 0.22% 22,050 Arjo Wiggins Appleton Plc 62,760 ------------ HEALTH & PERSONAL CARE 12.73% 88,380 Glaxo Wellcome Plc 1,770,183 136,998 Smithkline Beecham Plc 1,189,792 23,895 Zeneca Group Plc 758,007 ------------ 3,717,982 ------------ INDUSTRIAL COMPONENTS 0.77% 16,245 BBA Group Plc 101,960 15,435 BICC Plc 42,180 25,290 Lucasvarity Plc 80,800 ------------ 224,940 ------------ INSURANCE 4.41% 22,590 Commercial Union Plc 271,843 31,833 Legal & General Group Plc 233,611 45,000 Prudential Corporation Plc 444,454 38,700 Royal & Sun Alliance Insurance Group Plc 313,818 12,465 Sedgwick Group Plc 24,360 ------------ 1,288,086 ------------ LEISURE & TOURISM 2.87% 26,460 Bass Plc 354,889 7,425 Carlton Communications Plc 59,126 18,000 Ladbroke Group Plc 75,608 25,065 Rank Group Plc 143,699 17,505 Scottish & Newcastle Plc 205,541 ------------ 838,863 ------------ MACHINERY & ENGINEERING 0.53% 8,100 GKN Plc 155,537 ------------ MERCHANDISING 8.85% 25,515 Boots Company Plc 330,421 27,495 Great Universal Stores Plc 279,588 19,575 Kingfisher Plc 230,164 78,075 Marks & Spencer Plc 741,372 13,905 Next Plc 167,329 32,040 Safeway Plc 194,859 36,000 Sainsbury Plc 251,930 58,635 Tesco Plc 388,935 ------------ 2,584,598 ------------ See accompanying notes to financial statements. 40 AUGUST 31, 1997 PORTFOLIO OF INVESTMENTS WEBS INDEX FUND, INC. ================================================================================ UNITED KINGDOM WEBS INDEX SERIES (CONCLUDED) - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- METALS - NON FERROUS 1.43% 26,460 Rio Tinto Plc $ 417,542 ------------ METALS - STEEL 0.45% 47,340 British Steel Plc 132,822 ------------ MISCELLANEOUS MATERIALS & COMMODITIES 0.49% 31,860 Pilkington Plc 75,181 14,220 Rexam Plc 68,609 ------------ 143,790 ------------ MULTI-INDUSTRY 5.03% 81,225 B.A.T. Industries Plc 680,389 103,140 BTR Plc 364,654 15,300 Granada Group Plc 201,362 20,475 Lonrho Plc 41,010 18,990 TI Group Plc 181,400 ------------ 1,468,815 ------------ REAL ESTATE 1.69% 16,335 British Land Company Plc 151,932 17,235 Land Securities Plc 251,006 11,835 MEPC Plc 89,924 ------------ 492,862 ------------ RECREATION - OTHER CONSUMER GOODS 0.65% 21,141 Emi Group Plc 190,633 ------------ TELECOMMUNICATIONS 6.79% 157,725 British Telecommunications Plc 1,021,915 60,525 Cable & Wireless Plc 530,552 83,655 Vodafone Group Plc 430,079 ------------ 1,982,546 ------------ - -------------------------------------------------------------------------------- NO. OF SHARES SECURITY VALUE ------ -------- ----- TEXTILES & APPAREL 0.19% 28,755 Coats Viyella Plc $ 55,262 ------------ TRANSPORTATION - AIRLINES 0.97% 27,270 British Airways Plc 284,376 ------------ TRANSPORTATION - SHIPPING 0.61% 17,010 Peninsular & Oriental Steam Plc 179,314 ------------ UTILITIES - ELECTRICAL & GAS 4.59% 107,955 BG Plc 472,720 107,955 Centrica Plc* 155,385 43,965 National Grid Group Plc 189,664 29,835 National Power Plc 274,835 22,230 Scottish Power Plc 156,829 11,961 Southern Electric Plc 90,105 ------------ 1,339,538 ------------ TOTAL COMMON STOCK - BASKET (Cost $25,911,874) 29,209,676 ------------ TOTAL INVESTMENTS (COST $25,911,874)+ 100.00% $ 29,209,676 ======= ============ - ------------------ * Non-Income producing security. + Aggregate cost for Federal income tax purposes is $25,998,189. The aggregate gross unrealized appreciation (depreciation) for all securities is as follows: Excess of value over tax cost $3,690,981 Excess of tax cost over value (479,494) ---------- $3,211,487 ========== See accompanying notes to financial statements. 41 AUGUST 31, 1997 STATEMENTS OF ASSETS AND LIABILITIES WEBS INDEX FUND, INC. ================================================================================
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY HONG KONG WEBS WEBS WEBS WEBS WEBS WEBS WEBS INDEX INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES SERIES ----------- ---------- ----------- ----------- ----------- ----------- ----------- ASSETS Investments, at value ................ $41,326,362 $4,097,112 $32,338,997 $24,317,703 $14,197,917 $24,108,703 $25,396,523 Cash and foreign currency ............ 27,167 37,164 115,750 28,461 22,049 195,870 -- Collateral for securities loaned ..... 8,262,617 811,663 3,247,381 3,429,000 851,068 6,879,172 2,511,783 Dividends receivable ................. 87,191 3,912 89,196 31,574 160,936 26,955 35,251 Interest receivable .................. 1,721 363 538 196 458 1,432 1,607 Receivable for securities sold ....... -- -- -- -- -- 3,616 127,585 Deferred organization costs .......... 93,767 69,730 30,458 66,234 181,791 172,710 48,141 Prepaid expenses ..................... 2,526 480 742 4,395 2,478 3,524 2,779 ----------- ---------- ----------- ----------- ----------- ----------- ----------- Total assets ..................... 49,801,351 5,020,424 35,823,062 27,877,563 15,416,697 31,391,982 28,123,669 ----------- ---------- ----------- ----------- ----------- ----------- ----------- LIABILITIES Payable for securities loaned ........ 8,262,617 811,663 3,247,381 3,429,000 851,068 6,879,172 2,511,783 Advisory fee payable ................. 10,102 986 7,854 5,777 3,520 5,970 5,914 Administration fee payable ........... 6,361 621 4,945 3,637 2,216 3,759 3,724 Distribution fee payable ............. 9,354 913 7,273 5,349 3,259 5,528 5,476 Due to custodian ..................... 3,972 843 6,032 1,478 1,744 2,213 109,694 Accrued expenses ..................... 23,214 609 21,916 14,502 6,166 9,475 15,464 Advances under loan arrangement ...... 80,000 -- -- 250,000 30,000 -- 55,000 ----------- ---------- ----------- ----------- ----------- ----------- ----------- Total liabilities ................ 8,395,620 815,635 3,295,401 3,709,743 897,973 6,906,117 2,707,055 ----------- ---------- ----------- ----------- ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ...... 4,000 400 2,080 1,800 1,001 1,501 1,726 Paid-in capital ...................... 43,134,123 4,245,917 33,565,500 20,205,364 13,329,797 21,878,391 25,688,391 Accumulated net investment income/(loss) (170,227) 10,687 (402,053) 10,812 20,569 16,602 4,293 Accumulated net realized gain/(loss) on investments ........................ -- (30,857) (45,166) (15,057) -- (29,363) (19,913) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ................. (1,562,165) (21,358) (592,700) 3,964,901 1,167,357 2,618,734 (257,883) ----------- ---------- ----------- ----------- ----------- ----------- ----------- Net Assets ........................... $41,405,731 $4,204,789 $32,527,661 $24,167,820 $14,518,724 $24,485,865 $25,416,614 =========== ========== =========== =========== =========== =========== =========== Shares of common stock issued and outstanding ........................ 4,000,030 400,030 2,080,030 1,800,030 1,001,000 1,501,000 1,726,000 =========== ========== =========== =========== =========== =========== =========== Net Asset Value Per Share ............ $ 10.35 $ 10.51 $ 15.64 $ 13.43 $ 14.50 $ 16.31 $ 14.73 =========== ========== =========== =========== =========== =========== ===========
MALAYSIA MEXICO SINGAPORE ITALY JAPAN (FREE) (FREE) NETHERLANDS (FREE) WEBS WEBS WEBS WEBS WEBS WEBS INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES ----------- ------------ ----------- ----------- ---------- ----------- ASSETS Investments, at value ................ $32,491,909 $158,261,165 $12,249,788 $16,701,412 $9,757,221 $14,476,529 Cash and foreign currency ............ 28,852 461,052 20,833 15,535 14,266 186,181 Collateral for securities loaned ..... 4,926,896 31,889,727 3,156,680 2,202,975 2,274,624 2,572,153 Dividends receivable ................. 751 32,332 34,313 -- 8,932 17,667 Interest receivable .................. 1,294 10,668 1,958 1,156 518 1,405 Receivable for securities sold ....... -- -- 1,698 -- -- -- Deferred organization costs .......... 91,545 381,133 51,026 51,550 43,172 61,271 Prepaid expenses ..................... 5,825 16,576 3,786 1,648 1,562 2,601 ----------- ------------ ----------- ----------- ---------- ----------- Total assets ..................... 37,547,072 191,052,653 15,520,082 18,974,276 12,100,295 17,317,807 ----------- ------------ ----------- ----------- ---------- ----------- LIABILITIES Payable for securities loaned ........ 4,926,896 31,889,727 3,156,680 2,202,975 2,274,624 2,572,153 Advisory fee payable ................. 7,625 40,130 3,481 4,206 2,414 3,704 Administration fee payable ........... 4,801 25,267 2,192 2,649 1,520 2,332 Distribution fee payable ............. 7,060 37,157 3,223 3,895 2,236 3,429 Due to custodian ..................... 2,557 17,783 1,681 4,143 1,775 3,452 Accrued expenses ..................... 13,461 85,773 13,845 9,900 6,592 11,175 Advances under loan arrangement ...... 90,000 -- -- 120,000 150,000 -- ----------- ------------ ----------- ----------- ---------- ----------- Total liabilities ................ 5,052,400 32,095,837 3,181,102 2,347,768 2,439,161 2,596,245 ----------- ------------ ----------- ----------- ---------- ----------- NET ASSETS Capital stock, $0.001 par value ...... 1,950 12,601 1,500 1,100 451 1,700 Paid-in capital ...................... 29,068,365 175,715,355 21,231,445 14,002,544 7,746,137 19,776,404 Accumulated net investment income/(loss) (499,690) (160,294) 3,556 10,040 (8,564) 9,586 Accumulated net realized gain/(loss) on investments ........................ (318,066) (1,860,820) (13,921) -- (2,467) (91,423) Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ................. 4,242,113 (14,750,026) (8,883,600) 2,612,824 1,925,577 (4,974,705) ----------- ------------ ----------- ----------- ---------- ----------- Net Assets ........................... $32,494,672 $158,956,816 $12,338,980 $16,626,508 $9,661,134 $14,721,562 =========== ============ =========== =========== ========== =========== Shares of common stock issued and outstanding ........................ 1,950,030 12,601,000 1,500,030 1,100,030 451,000 1,700,030 =========== ============ =========== =========== ========== =========== Net Asset Value Per Share ............ $ 16.66 $ 12.61 $ 8.23 $ 15.11 $ 21.42 $ 8.66 =========== ============ =========== =========== ========== ===========
UNITED SPAIN SWEDEN SWITZERLAND KINGDOM WEBS WEBS WEBS WEBS INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES ---------- ---------- ----------- ----------- ASSETS Investments, at value ................ $8,361,440 $8,395,382 $13,912,165 $29,209,676 Cash and foreign currency ............ 11,419 12,670 67,061 66,022 Collateral for securities loaned ..... 1,725,044 368,954 805,603 -- Dividends receivable ................. 8,798 -- 17,858 344,488 Interest receivable .................. 565 234 782 221 Receivable for securities sold ....... -- -- -- 23,810 Deferred organization costs .......... 75,694 49,278 116,346 109,837 Prepaid expenses ..................... 836 1,059 1,612 4,700 ---------- ---------- ----------- ----------- Total assets ..................... 10,183,796 8,827,577 14,921,427 29,758,754 ---------- ---------- ----------- ----------- LIABILITIES Payable for securities loaned ........ 1,725,044 368,954 805,603 -- Advisory fee payable ................. 2,005 1,987 3,427 7,074 Administration fee payable ........... 1,262 1,251 2,157 4,454 Distribution fee payable ............. 1,856 1,839 3,173 6,550 Due to custodian ..................... 1,697 4,629 2,405 2,467 Accrued expenses ..................... 5,564 5,505 9,598 16,855 Advances under loan arrangement ...... 125,000 200,000 290,000 -- ---------- ---------- ----------- ----------- Total liabilities ................ 1,862,428 584,165 1,116,363 37,400 ---------- ---------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ...... 450 450 1,001 1,801 Paid-in capital ...................... 7,709,950 7,053,407 12,815,527 26,481,956 Accumulated net investment income/(loss) 12,805 (8,712) 20,353 (65,142) Accumulated net realized gain/(loss) on investments ........................ (6,503) (3,941) (29,194) -- Net unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ................. 604,666 1,202,208 997,377 3,302,739 ---------- ---------- ----------- ----------- Net Assets ........................... $8,321,368 $8,243,412 $13,805,064 $29,721,354 ========== ========== =========== =========== Shares of common stock issued and outstanding ........................ 450,030 450,030 1,001,000 1,801,000 ========== ========== =========== =========== Net Asset Value Per Share ............ $ 18.49 $ 18.32 $ 13.79 $ 16.50 ========== ========== =========== ===========
See accompanying notes to financial statements. 42 & 43 FOR THE YEAR ENDED AUGUST 31, 1997 STATEMENTS OF OPERATIONS WEBS INDEX FUND, INC. ================================================================================
AUSTRALIA AUSTRIA BELGIUM CANADA FRANCE GERMANY WEBS WEBS WEBS WEBS WEBS WEBS INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES ----------- ------------ --------- ---------- ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) .......... $ 512,869 $ 43,519 $ 835,120 $ 379,113 $ 346,742 $ 268,984 Interest .............................................. 17,984 2,398 12,573 3,810 7,445 23,132 ----------- ----------- --------- ---------- ---------- ---------- Total investment income ............................... 530,853 45,917 847,693 382,923 354,187 292,116 ----------- ----------- --------- ---------- ---------- ---------- EXPENSES: Advisory fees ......................................... 49,326 8,459 38,995 59,093 35,574 49,546 Administration fees ................................... 31,057 5,326 24,552 37,207 22,398 31,196 Distribution fees ..................................... 45,672 7,833 36,106 54,716 32,938 45,876 Custodian fees and expenses ........................... 22,006 8,583 22,653 18,800 22,465 22,590 Transfer agent fees ................................... 6,440 5,890 5,890 6,140 6,490 6,890 Directors' fees ....................................... 8,816 432 5,711 15,489 6,280 9,986 Legal fees ............................................ 22,740 2,127 11,826 33,832 18,198 23,204 Audit fees ............................................ 12,386 1,424 6,016 25,321 9,370 13,355 Federal and state registration fees ................... 9,781 (2,964) 10,303 1,903 (3,522) (2,732) Amortization of deferred organization costs ........... 10,645 7,918 3,458 7,519 20,645 19,614 Insurance ............................................. 5,849 2,850 1,682 6,678 9,471 10,123 Printing .............................................. 6,604 824 3,102 11,702 5,559 8,236 Licensing fees ........................................ 5,481 940 4,333 6,566 3,953 5,505 Amex listing fee ...................................... 671 153 151 1,247 711 883 Miscellaneous expenses ................................ 6,203 3,050 4,085 10,763 9,433 6,831 ----------- ----------- --------- ---------- ---------- ---------- Total expenses before waiver ........................ 243,677 52,845 178,863 296,976 199,963 251,103 Less: Fees waived ................................... (247) (73) (50) (433) (261) (371) ----------- ----------- --------- ---------- ---------- ---------- Total expenses after waiver ......................... 243,430 52,772 178,813 296,543 199,702 250,732 ----------- ----------- --------- ---------- ---------- ---------- Net investment income/(loss) .......................... 287,423 (6,855) 668,880 86,380 154,485 41,384 ----------- ----------- --------- ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ............... 187,118 (24,670) 360,599 236,904 217,815 69,915 Net realized gain/(loss) on investments on in-kind redemptions ................................. (11,300) (1,170,090) -- 394,403 369,184 674,889 Net realized gain/(loss) on foreign currency related transactions ................................ (7,026) (2,841) (3,077) (1,685) (15,464) (17,123) ----------- ----------- --------- ---------- ---------- ---------- 168,792 (1,197,601) 357,522 629,622 571,535 727,681 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (1,840,776) 1,155,714 (623,667) 3,938,920 1,283,516 2,325,587 ----------- ----------- --------- ---------- ---------- ---------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (1,671,984) (41,887) (266,145) 4,568,542 1,855,051 3,053,268 ----------- ----------- --------- ---------- ---------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(1,384,561) $ (48,742) $ 402,735 $4,654,922 $2,009,536 $3,094,652 =========== =========== ========= ========== ========== ==========
MALAYSIA MEXICO HONG KONG ITALY JAPAN (FREE) (FREE) NETHERLANDS WEBS WEBS WEBS WEBS WEBS WEBS INDEX INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES SERIES -------- ---------- ------------ ---------- ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) .......... $462,953 $ 563,519 $ 756,630 $ 226,065 $ 165,009 $ 159,063 Interest .............................................. 10,950 45,491 78,721 23,543 8,090 7,763 -------- ---------- ------------ ---------- ---------- ---------- Total investment income ............................... 473,903 609,010 835,351 249,608 173,099 166,826 -------- ---------- ------------ ---------- ---------- ---------- EXPENSES: Advisory fees ......................................... 40,743 78,513 318,796 44,814 26,482 22,577 Administration fees ................................... 25,653 49,434 200,723 28,216 16,674 14,215 Distribution fees ..................................... 37,724 72,698 295,181 41,495 24,521 20,904 Custodian fees and expenses ........................... 26,218 28,251 76,899 21,017 29,581 11,762 Transfer agent fees ................................... 6,690 7,040 9,340 7,490 6,540 6,140 Directors' fees ....................................... 9,210 20,063 71,829 12,124 5,752 5,430 Legal fees ............................................ 20,484 44,154 133,389 28,056 14,132 12,414 Audit fees ............................................ 16,264 37,569 89,292 20,936 9,979 9,120 Federal and state registration fees ................... 5,807 (3,250) 15,777 4,092 3,223 741 Amortization of deferred organization costs ........... 5,465 10,394 43,286 5,792 5,851 4,899 Insurance ............................................. 4,459 9,090 31,798 5,519 3,637 2,919 Printing .............................................. 6,808 16,398 48,553 9,646 4,736 4,495 Licensing fees ........................................ 4,527 8,724 35,422 4,979 2,942 2,508 Amex listing fee ...................................... 623 1,793 5,239 990 482 471 Miscellaneous expenses ................................ 4,750 7,022 28,873 8,190 5,491 3,544 -------- ---------- ------------ ---------- ---------- ---------- Total expenses before waiver ........................ 215,425 387,893 1,404,397 243,356 160,023 122,139 Less: Fees waived ................................... (205) (651) (2,204) (288) (168) (168) -------- ---------- ------------ ---------- ---------- ---------- Total expenses after waiver ......................... 215,220 387,242 1,402,193 243,068 159,855 121,971 -------- ---------- ------------ ---------- ---------- ---------- Net investment income/(loss) .......................... 258,683 221,768 (566,842) 6,540 13,244 44,855 -------- ---------- ------------ ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ............... 571,172 (309,005) (1,796,229) (12,023) 480,040 320,639 Net realized gain/(loss) on investments on in-kind redemptions ................................. 250,388 (229,391) (1,922,263) -- 235,858 -- Net realized gain/(loss) on foreign currency related transactions ................................ (168) (32,162) 22,963 (5,429) 1,324 (17,039) -------- ---------- ------------ ---------- ---------- ---------- 821,392 (570,558) (3,695,529) (17,452) 717,222 303,600 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (209,522) 5,911,350 (6,001,060) (8,968,575) 2,056,611 1,559,687 -------- ---------- ------------ ---------- ---------- ---------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... 611,870 5,340,792 (9,696,589) (8,986,027) 2,773,833 1,863,287 -------- ---------- ------------ ---------- ---------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $870,553 $5,562,560 $(10,263,431) $(8,979,487) $2,787,077 $1,908,142 ======== ========== ============ =========== ========== ==========
SINGAPORE UNITED (FREE) SPAIN SWEDEN SWITZERLAND KINGDOM WEBS WEBS WEBS WEBS WEBS INDEX INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES SERIES ----------- ---------- --------- ---------- ---------- INVESTMENT INCOME: Dividends (net of foreign withholding taxes) .......... $ 175,903 $ 135,210 $ 76,085 $ 104,816 $ 811,670 Interest .............................................. 8,546 5,719 5,004 5,618 6,384 ----------- ---------- --------- ---------- ---------- Total investment income ............................... 184,449 140,929 81,089 110,434 818,054 ----------- ---------- --------- ---------- ---------- EXPENSES: Advisory fees ......................................... 34,141 14,044 15,088 24,197 57,283 Administration fees ................................... 21,496 8,842 9,500 15,235 36,067 Distribution fees ..................................... 31,612 13,003 13,971 22,405 53,040 Custodian fees and expenses ........................... 15,625 11,191 11,348 15,972 17,561 Transfer agent fees ................................... 7,290 5,990 5,890 6,240 6,140 Directors' fees ....................................... 7,593 2,514 3,159 4,012 12,452 Legal fees ............................................ 18,826 6,328 7,867 10,946 29,290 Audit fees ............................................ 13,890 3,020 4,889 6,118 24,578 Federal and state registration fees ................... 3,341 1,494 1,332 2,459 3,141 Amortization of deferred organization costs ........... 6,979 8,594 5,595 13,349 12,523 Insurance ............................................. 4,670 3,603 3,330 5,816 10,025 Printing .............................................. 6,235 1,624 2,632 2,741 9,365 Licensing fees ........................................ 3,794 1,560 1,676 2,688 6,365 Amex listing fee ...................................... 634 250 308 314 978 Miscellaneous expenses ................................ 4,854 4,667 5,094 4,189 14,661 ----------- ---------- --------- ---------- ---------- Total expenses before waiver ........................ 180,980 86,724 91,679 136,681 293,469 Less: Fees waived ................................... (212) (95) (109) (130) (353) ----------- ---------- --------- ---------- ---------- Total expenses after waiver ......................... 180,768 86,629 91,570 136,551 293,116 ----------- ---------- --------- ---------- ---------- Net investment income/(loss) .......................... 3,681 54,300 (10,481) (26,117) 524,938 ----------- ---------- --------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED TRANSACTIONS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: Net realized gain/(loss) on investments ............... 29,184 379,743 343,190 577,114 304,957 Net realized gain/(loss) on investments on in-kind redemptions ................................. (117,574) 205,282 -- (13,406) 1,632,777 Net realized gain/(loss) on foreign currency related transactions ................................ (1,787) (1,872) (2,632) (1,824) 11,954 ----------- ---------- --------- ---------- ---------- (90,177) 583,153 340,558 561,884 1,949,688 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... (4,451,395) 460,457 912,384 910,641 2,438,474 ----------- ---------- --------- ---------- ---------- Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ................... (4,541,572) 1,043,610 1,252,942 1,472,525 4,388,162 ----------- ---------- --------- ---------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $(4,537,891) $1,097,910 $1,242,461 $1,446,408 $4,913,100 =========== ========== ========== ========== ==========
See accompanying notes to financial statements. 44 & 45 STATEMENTS OF CHANGES IN NET ASSETS WEBS INDEX FUND, INC. ================================================================================
AUSTRALIA AUSTRIA WEBS WEBS INDEX INDEX SERIES SERIES ------------------------ ------------------------ For the For the For the For the year period year period ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 ----------- ----------- ----------- ----------- OPERATIONS: Net investment income/(loss) ......................... $ 287,423 $ 83,647 $ (6,855) $ 31,488 Net realized gain/(loss) on investments and foreign currency related transactions .............. 168,792 23,767 (1,197,601) 85,287 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (1,840,776) 278,611 1,155,714 (1,177,072) ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations .................................... (1,384,561) 386,025 (48,742) (1,060,297) ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income. ............................... (287,423) (83,647) -- (26,054) In excess of net investment income ................... (160,198) (47,153) -- (7,923) Net realized gains ................................... (187,118) (21,359) -- (33,980) In excess of net realized gains ...................... -- -- -- -- Return of capital .................................... (796,674) (34,847) -- (100,047) ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ........ (1,431,413) (187,006) -- (168,004) ----------- ----------- ----------- ----------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares ................. 34,012,042 11,977,456 2,076,237 19,180,869 Cost of shares redeemed .............................. (1,967,117) -- (11,342,765) (4,432,844) ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions ......................... 32,044,925 11,977,456 (9,266,528) 14,748,025 ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets .............. 29,228,951 12,176,475 (9,315,270) 13,519,724 NET ASSETS: Beginning of period .................................. 12,176,780 305 13,520,059 335 ----------- ----------- ----------- ----------- End of period ........................................ $41,405,731 $12,176,780 $ 4,204,789 $13,520,059 =========== =========== =========== =========== - -------- *Commencement of operations. Capital Share Transactions: Shares sold .......................................... 3,000,000 1,200,000 200,000 1,700,000 Shares redeemed ...................................... (200,000) -- (1,100,000) (400,000) ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ................ 2,800,000 1,200,000 (900,000) 1,300,000 =========== =========== =========== ===========
BELGIUM CANADA WEBS WEBS INDEX INDEX SERIES SERIES ------------------------ ------------------------ For the For the For the For the year period year period ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 ----------- ----------- ----------- ---------- OPERATIONS: Net investment income/(loss) ......................... $ 668,880 $ 42,944 $ 86,380 $ 40,304 Net realized gain/(loss) on investments and foreign currency related transactions .............. 357,522 18,047 629,622 71,510 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (623,667) 30,967 3,938,920 25,981 ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations .................................... 402,735 91,958 4,654,922 137,795 ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income. ............................... (668,880) (42,944) (86,380) (35,145) In excess of net investment income ................... (587,754) (7,116) (4,605) (7,532) Net realized gains ................................... (230,479) (5,241) (251,961) (3,392) In excess of net realized gains ...................... -- -- -- -- Return of capital .................................... (24,077) -- -- (3,132) ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ........ (1,511,190) (55,301) (342,946) (49,201) ----------- ----------- ----------- ----------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares ................. 31,836,329 2,982,750 9,629,687 15,788,335 Cost of shares redeemed .............................. -- (1,220,075) (3,550,242) (2,100,833) ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions ......................... 31,836,329 1,762,675 6,079,445 13,687,502 ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets .............. 30,727,874 1,799,332 10,391,421 13,776,096 NET ASSETS: Beginning of period .................................. 1,799,787 455 13,776,399 303 ----------- ----------- ----------- ----------- End of period ........................................ $32,527,661 $ 1,799,787 $24,167,820 $13,776,399 =========== =========== =========== =========== - -------- *Commencement of operations. Capital Share Transactions: Shares sold .......................................... 1,960,000 200,000 800,000 1,500,000 Shares redeemed ...................................... -- (80,000) (300,000) (200,000) ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ................ 1,960,000 120,000 500,000 1,300,000 =========== =========== =========== ===========
FRANCE GERMANY WEBS WEBS INDEX INDEX SERIES SERIES ------------------------ ----------------------- For the For the For the For the year period year period ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 ----------- ----------- ----------- ---------- OPERATIONS: Net investment income/(loss) ......................... $ 154,485 $ 146,220 $ 41,384 $ 60,634 Net realized gain/(loss) on investments and foreign currency related transactions .............. 571,535 583,565 727,681 (40,272) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... 1,283,516 (116,159) 2,325,587 293,147 ------------ ----------- ------------ ----------- Net increase/(decrease) in net assets resulting from operations .................................... 2,009,536 613,626 3,094,652 313,509 ------------ ----------- ------------ ----------- DISTRIBUTIONS: Net investment income. ............................... (154,485) (140,840) (41,384) (48,171) In excess of net investment income ................... -- (20,645) (19,425) (19,615) Net realized gains ................................... (198,868) (8,421) (99,278) -- In excess of net realized gains ...................... -- -- -- (14,044) Return of capital .................................... -- (329,606) (37,144) (132,489) ------------ ----------- ------------ ----------- Net decrease in net assets from distributions ........ (353,353) (499,512) (197,231) (214,319) ------------ ----------- ------------ ----------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares ................. 5,656,482 30,831,940 13,746,949 32,463,206 Cost of shares redeemed .............................. (15,723,875) (8,028,940) (20,822,544) (3,911,977) ------------ ----------- ------------ ----------- Net increase/(decrease) in net assets derived from capital share transactions ......................... (10,067,393) 22,803,000 (7,075,595) 28,551,229 ------------ ----------- ------------ ----------- Total increase/(decrease) in net assets .............. (8,411,210) 22,917,114 (4,178,174) 28,650,419 NET ASSETS: Beginning of period .................................. 22,929,934 12,820 28,664,039 13,620 ------------ ----------- ------------ ----------- End of period ........................................ $ 14,518,724 $22,929,934 $ 24,485,865 $28,664,039 ============ =========== ============ =========== - -------- *Commencement of operations. Capital Share Transactions: Shares sold .......................................... 400,000 2,400,000 900,000 2,400,000 Shares redeemed ...................................... (1,200,000) (600,000) (1,500,000) (300,000) ------------ ----------- ------------ ----------- Net increase/(decrease) in shares ................ (800,000) 1,800,000 (600,000) 2,100,000 ============ =========== ============ ===========
HONG KONG ITALY WEBS WEBS INDEX INDEX SERIES SERIES ------------------------- ----------------------- For the For the For the For the year period year period ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 ----------- ----------- ----------- ---------- OPERATIONS: Net investment income/(loss) ......................... $ 258,683 $ 66,748 $ 221,768 $ 346,291 Net realized gain/(loss) on investments and foreign currency related transactions .............. 821,392 43,430 (570,558) 411,113 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (209,522) (48,361) 5,911,350 (1,669,237) ----------- ----------- ------------ ----------- Net increase/(decrease) in net assets resulting from operations .................................... 870,553 61,817 5,562,560 (911,833) ----------- ----------- ------------ ----------- DISTRIBUTIONS: Net investment income. ............................... (258,683) (66,748) (221,768) (346,291) In excess of net investment income ................... (12,817) (9,901) (469,323) (78,413) Net realized gains ................................... (581,360) (3,153) -- (325,362) In excess of net realized gains ...................... (3,851) -- -- -- Return of capital .................................... (236,349) (24,346) -- (195,546) ----------- ----------- ------------ ----------- Net decrease in net assets from distributions ........ (1,093,060) (104,148) (691,091) (945,612) ----------- ----------- ------------ ----------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares ................. 19,035,945 8,886,964 11,652,066 39,202,785 Cost of shares redeemed .............................. (1,242,282) (1,012,585) (19,198,572) (2,176,057) ----------- ----------- ------------ ----------- Net increase/(decrease) in net assets derived from capital share transactions ......................... 17,793,663 7,874,379 (7,546,506) 37,026,728 ----------- ----------- ------------ ----------- Total increase/(decrease) in net assets .............. 17,571,156 7,832,048 (2,675,037) 35,169,283 NET ASSETS: Beginning of period .................................. 7,845,458 13,410 35,169,709 426 ----------- ----------- ------------ ----------- End of period ........................................ $25,416,614 $ 7,845,458 $ 32,494,672 $35,169,709 =========== =========== ============ =========== - -------- *Commencement of operations. Capital Share Transactions: Shares sold .......................................... 1,200,000 675,000 750,000 2,700,000 Shares redeemed ...................................... (75,000) (75,000) (1,350,000) (150,000) ----------- ----------- ------------ ----------- Net increase/(decrease) in shares ................ 1,125,000 600,000 (600,000) 2,550,000 =========== =========== ============ ===========
See accompanying notes to financial statements. 46 & 47 STATEMENTS OF CHANGES IN NET ASSETS WEBS INDEX FUND, INC. ================================================================================
JAPAN MALAYSIA (FREE) MEXICO (FREE) WEBS WEBS WEBS INDEX INDEX INDEX SERIES SERIES SERIES ------------------------- --------------------- -------------------- For the For the For the For the For the For the year period year period year period ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 ----------- ----------- --------- ---------- --------- ---------- OPERATIONS: Net investment income/(loss) ......................... $ (566,842) $ (395,549) $ 6,540 $ (9,877) $ 13,244 $ 162 Net realized gain/(loss) on investments and foreign currency related transactions .............. (3,695,529) 167,831 (17,452) 3,867 717,222 (165) Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ...... (6,001,060) (8,748,966) (8,968,575) 84,975 2,056,611 556,213 ------------ ------------ ----------- ---------- ----------- ---------- Net increase/(decrease) in net assets resulting from operations .................................... (10,263,431) (8,976,684) (8,979,487) 78,965 2,787,077 556,210 ------------ ------------ ----------- ---------- ----------- ---------- DISTRIBUTIONS: Net investment income. ............................... -- -- (6,540) -- (13,244) -- In excess of net investment income ................... -- -- (7,611) -- (6,992) (2,004) Net realized gains ................................... -- -- -- -- (480,039) -- In excess of net realized gains ...................... (59,225) -- -- -- -- -- Return of capital .................................... -- -- (25,600) (4,200) (50,400) (5,496) ------------ ------------ ----------- ---------- ----------- ---------- Net decrease in net assets from distributions ........ (59,225) -- (39,751) (4,200) (550,675) (7,500) ------------ ------------ ----------- ---------- ----------- ---------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares ................. 91,183,410 112,125,708 12,040,298 9,242,755 9,898,729 5,209,737 Cost of shares redeemed .............................. (25,067,882) -- -- -- (1,267,357) -- ------------ ------------ ----------- ---------- ----------- ---------- Net increase/(decrease) in net assets derived from capital share transactions ......................... 66,115,528 112,125,708 12,040,298 9,242,755 8,631,372 5,209,737 ------------ ------------ ----------- ---------- ----------- ---------- Total increase/(decrease) in net assets .............. 55,792,872 103,149,024 3,021,060 9,317,520 10,867,774 5,758,447 NET ASSETS: Beginning of period .................................. 103,163,944 14,920 9,317,920 400 5,758,734 287 ------------ ------------ ----------- ---------- ----------- ---------- End of period ........................................$158,956,816 $103,163,944 $12,338,980 $9,317,920 $16,626,508 $5,758,734 ============ ============ =========== ========== =========== ========== - -------- *Commencement of operations. Capital Share Transactions: Shares sold .......................................... 7,200,000 7,200,000 825,000 675,000 700,000 500,000 Shares redeemed ...................................... (1,800,000) -- -- -- (100,000) -- ------------ ------------ ----------- ---------- ----------- ---------- Net increase/(decrease) in shares .................... 5,400,000 7,200,000 825,000 675,000 600,000 500,000 ============ ============ =========== ========== =========== ==========
NETHERLANDS SINGAPORE (FREE) SPAIN WEBS WEBS WEBS INDEX INDEX INDEX SERIES SERIES SERIES --------------------- ------------------- ---------------------- For the For the For the For the For the For the year period year period year period ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 --------- ---------- --------- --------- --------- ---------- OPERATIONS: Net investment income/(loss) .......................... $ 44,855 $ 59,698 $ 3,681 $ 21,999 $ 54,300 $ 46,585 Net realized gain/(loss) on investments and foreign currency related transactions ............... 303,600 31,842 (90,177) (120,662) 583,153 238,394 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 1,559,687 365,890 (4,451,395) (523,310) 460,457 144,209 ---------- ---------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ..................................... 1,908,142 457,430 (4,537,891) (621,973) 1,097,910 429,188 ---------- ---------- ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income. ................................ (44,855) (56,328) (3,681) (19,081) (54,300) (41,405) In excess of net investment income .................... (4,630) (4,914) (13,239) (6,120) (24,069) -- Net realized gains .................................... (320,639) (31,842) (37,220) -- (379,744) (29,254) In excess of net realized gains ....................... -- (2,655) -- -- -- -- Return of capital ..................................... (8,873) (37,393) (37,832) -- (39,171) -- ---------- ---------- ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ......... (378,997) (133,132) (91,972) (25,201) (497,284) (70,659) ---------- ---------- ----------- ----------- ----------- ----------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares .................. 1,170,170 6,621,571 11,351,615 10,940,175 4,683,798 7,091,661 Cost of shares redeemed ............................... -- -- (1,107,208) (1,186,369) (1,190,432) (3,223,243) ---------- ---------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions .......................... 1,170,170 6,621,571 10,244,407 9,753,806 3,493,366 3,868,418 ---------- ---------- ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets ............... 2,699,315 6,945,869 5,614,544 9,106,632 4,093,992 4,226,947 NET ASSETS: Beginning of period ................................... 6,961,819 15,950 9,107,018 386 4,227,376 429 ---------- ---------- ----------- ----------- ----------- ----------- End of period ......................................... $9,661,134 $6,961,819 $14,721,562 $ 9,107,018 $ 8,321,368 $ 4,227,376 ========== ========== =========== =========== =========== =========== - -------- *Commencement of operations. Capital Share Transactions: Shares sold ........................................... 50,000 400,000 1,000,000 900,000 225,000 525,000 Shares redeemed ....................................... -- -- (100,000) (100,000) (75,000) (225,000) ---------- ---------- ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ..................... 50,000 400,000 900,000 800,000 150,000 300,000 ========== ========== =========== =========== =========== ===========
SWEDEN SWITZERLAND UNITED KINGDOM WEBS WEBS WEBS INDEX INDEX INDEX SERIES SERIES SERIES ---------------------- ---------------------- ----------------------- For the For the For the For the For the For the year period year period year period ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 --------- ----------- --------- ---------- -------- ---------- OPERATIONS: Net investment income/(loss) .......................... $ (10,481)$ 51,107 $ (26,117)$ 43,339 $ 524,938 $ 195,730 Net realized gain/(loss) on investments and foreign currency related transactions ............... 340,558 94,837 561,884 (107,039) 1,949,688 106,646 Net change in unrealized appreciation/(depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies ....... 912,384 289,824 910,641 86,736 2,438,474 864,265 ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ..................................... 1,242,461 435,768 1,446,408 23,036 4,913,100 1,166,641 ----------- ----------- ----------- ----------- ----------- ----------- DISTRIBUTIONS: Net investment income. ................................ -- (51,107) -- (35,720) (524,938) (195,730) In excess of net investment income .................... -- (16,685) -- -- (102,415) (31,721) Net realized gains .................................... (345,698) (26,271) (568,979) -- (304,957) (987) In excess of net realized gains ....................... -- -- -- -- -- -- Return of capital ..................................... -- -- (1,191) -- (176,359) (26,817) ----------- ----------- ----------- ----------- ----------- ----------- Net decrease in net assets from distributions ......... (345,698) (94,063) (570,170) (35,720) (1,108,669) (255,255) ----------- ----------- ----------- ----------- ----------- ----------- CAPITAL STOCK TRANSACTIONS: Net proceeds from the sale of shares .................. 2,946,675 5,130,382 8,262,901 10,622,671 19,063,646 17,417,928 Cost of shares redeemed ............................... -- (1,072,542) (1,492,280) (4,464,972) (8,936,965) (2,551,512) ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in net assets derived from capital share transactions .......................... 2,946,675 4,057,840 6,770,621 6,157,699 10,126,681 14,866,416 ----------- ----------- ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets ............... 3,843,438 4,399,545 7,646,859 6,145,015 13,931,112 15,777,802 NET ASSETS: Beginning of period ................................... 4,399,974 429 6,158,205 13,190 15,790,242 12,440 ----------- ----------- ----------- ----------- ----------- ----------- End of period ......................................... $ 8,243,412 $ 4,399,974 $13,805,064 $ 6,158,205 $29,721,354 $15,790,242 =========== =========== =========== =========== =========== =========== - -------- *Commencement of operations. Capital Share Transactions: Shares sold ........................................... 150,000 375,000 625,000 875,000 1,200,000 1,400,000 Shares redeemed ....................................... -- (75,000) (125,000) (375,000) (600,000) (200,000) ----------- ----------- ----------- ----------- ----------- ----------- Net increase/(decrease) in shares ..................... 150,000 300,000 500,000 500,000 600,000 1,200,000 =========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements. 48 & 49
FINANCIAL HIGHLIGHTS WEBS INDEX FUND, INC. ==================================================================================================================================== (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) AUSTRALIA AUSTRIA BELGIUM WEBS WEBS WEBS INDEX INDEX INDEX SERIES SERIES SERIES ----------------------- ---------------------- --------------------- For the For the For the For the For the For the year period year period year period ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 --------- --------- --------- --------- --------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .................... $ 10.15 $ 9.95(1) $ 10.40 $10.91(1) $ 14.99 $ 14.92(1) -------- -------- -------- -------- -------- --------- Net investment income/(loss) (+) ........................ 0.17 0.10 (0.02) 0.04 0.77 0.40 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ...................................... 0.47 0.29 0.13 (0.41) 0.62 0.36 -------- -------- -------- -------- -------- --------- Net increase/(decrease) in net assets resulting from operations ........................................ 0.64 0.39 0.11 (0.37) 1.39 0.76 -------- -------- -------- -------- -------- --------- LESS DISTRIBUTIONS Dividends from net investment income .................... (0.16) (0.08) -- (0.02) (0.33) (0.54) Dividends in excess of net investment income ............ (0.04) (0.05) -- (0.01) (0.28) (0.09) Distributions from net realized gains ................... (0.04) (0.02) -- (0.03) (0.12) (0.06) Distributions in excess of net realized gains ........... -- -- -- -- -- -- Return of capital ....................................... (0.20) (0.04) -- (0.08) (0.01) -- -------- -------- -------- -------- -------- --------- Total dividends and distributions ................... (0.44) (0.19) -- (0.14) (0.74) (0.69) -------- -------- -------- -------- -------- --------- Net asset value, end of period .......................... $ 10.35 $ 10.15 $ 10.51 $10.40 $ 15.64 $ 14.99 ======== ======== ======== ======== ======== ========= TOTAL INVESTMENT RETURN (2) ............................... 6.23% 3.88%(4) 1.06% (3.39)%(4) 9.26% 5.01%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .................... $41,406 $12,177 $ 4,205 $13,520 $32,528 $ 1,800 Ratios of expenses to average net assets (5) ............ 1.33% 1.59%(3) 1.68% 1.56%(3) 1.24% 2.29%(3) Ratios of net investment income/(loss) to average net assets (5) ........................................ 1.57% 2.18%(3) (0.22%) 0.87%(3) 4.63% 5.67%(3) Portfolio turnover (6) .................................. 5.30% 8.84%(4) 28.47% 9.60%(4) 16.83% 6.25%(4) Average commission rate paid ............................ $0.0182 $0.0085 $0.1719 $0.2986 $0.3379 $0.4327 * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (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 American Stock Exchange. 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 average net assets before waivers 1.33% 1.60%(3) 1.69% 1.57%(3) 1.24% 2.30%(3) Ratios of net investment income/(loss) to average net assets before waivers 1.57% 2.17%(3) (0.22)% 0.86%(3) 4.63% 5.66%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
CANADA FRANCE WEBS WEBS INDEX INDEX SERIES SERIES ---------------------- ---------------------- For the For the For the For the year period year period ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 -------- --------- --------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ..................... $ 10.60 $10.17(1) $ 12.73 $12.42(1) -------- -------- -------- -------- Net investment income/(loss) (+) ......................... 0.05 0.04 0.17 0.17 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ....................................... 2.97 0.43 1.95 0.45 -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ......................................... 3.02 0.47 2.12 0.62 -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income ..................... (0.05) (0.03) (0.15) (0.09) Dividends in excess of net investment income ............. (0.00)** (0.01) -- (0.01) Distributions from net realized gains .................... (0.14) -- (0.20) 0.00** Distributions in excess of net realized gains ............ -- 0.00** -- -- Return of capital ........................................ -- 0.00** -- (0.21) -------- -------- -------- -------- Total dividends and distributions .................... (0.19) (0.04) (0.35) (0.31) -------- -------- -------- -------- Net asset value, end of period ........................... $13.43 $10.60 $ 14.50 $12.73 ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ................................ 28.50% 4.63%(4) 16.60% 4.95%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ..................... $24,168 $13,776 $14,519 $22,930 Ratios of expenses to average net assets (5) ............. 1.35% 1.44%(3) 1.52% 1.84%(3) Ratios of net investment income/(loss) to average net assets (5) ......................................... 0.39% 0.79%(3) 1.17% 2.72%(3) Portfolio turnover (6) ................................... 11.02% 0.00%(4) 7.13% 0.00%(4) Average commission rate paid ............................. $0.0217 -- $0.0137 $0.3956 * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (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 American Stock Exchange. 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 average net assets before waivers 1.36% 1.45%(3) 1.52% 1.85%(3) Ratios of net investment income/(loss) to average net assets before waivers 0.39% 0.78%(3) 1.17% 2.71%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
GERMANY HONG KONG ITALY WEBS WEBS WEBS INDEX INDEX INDEX SERIES SERIES SERIES ----------------------- ---------------------- ---------------------- For the For the For the For the For the For the year period year period year period ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 -------- --------- -------- --------- --------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................. $ 13.64 $13.23(1) $ 13.05 $12.83(1) $ 13.79 $13.62(1) -------- -------- -------- -------- ------- -------- Net investment income/(loss) (+) ..................... 0.03 0.06 0.26 0.15 0.12 0.25 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .................... 2.77 0.47 2.12 0.27 3.10 0.31 -------- -------- -------- -------- ------- -------- Net increase/(decrease) in net assets resulting from operations ................ 2.80 0.53 2.38 0.42 3.22 0.56 -------- -------- -------- -------- ------- -------- LESS DISTRIBUTIONS Dividends from net investment income ................. (0.03) (0.03) (0.21) (0.13) (0.11) (0.14) Dividends in excess of net investment income ......... (0.01) (0.01) (0.01) (0.02) (0.24) (0.03) Distributions from net realized gains ................ (0.07) -- (0.34) (0.01) -- (0.14) Distributions in excess of net realized gains ........ -- (0.01) 0.00** -- -- -- Return of capital .................................... (0.02) (0.07) (0.14) (0.04) -- (0.08) -------- -------- -------- -------- ------- -------- Total dividends and distributions ................ (0.13) (0.12) (0.70) (0.20) (0.35) (0.39) -------- -------- -------- -------- ------- -------- Net asset value, end of period ....................... $ 16.31 $13.64 $ 14.73 $13.05 $ 16.66 $ 13.79 ======== ======== ======== ======== ======= ======== TOTAL INVESTMENT RETURN (2) ............................ 20.51% 4.00%(4) 17.80% 3.22%(4) 23.37% 4.11%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) ................. $24,486 $28,664 $25,417 $ 7,845 $32,495 $35,170 Ratios of expenses to average net assets (5) ......... 1.37% 1.68%(3) 1.43% 1.52%(3) 1.33% 1.43%(3) Ratios of net investment income/(loss) to average net assets (5) ............................... 0.23% 1.00%(3) 1.71% 2.37%(3) 0.76% 3.69%(3) Portfolio turnover (6) ............................... 9.04% 0.00%(4) 22.90% 0.00%(4) 13.70% 19.80%(4) Average commission rate paid ......................... $0.0236 -- $0.0058 $0.0007 $0.0045 $0.0046 * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (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 American Stock Exchange. 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 average net assets before waivers ................................... 1.37% 1.69%(3) 1.43% 1.53%(3) 1.33% 1.44%(3) Ratios of net investment income/(loss) to average net assets before waivers ................ 0.22% 0.99%(3) 1.71% 2.36%(3) 0.76% 3.68%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s). See accompanying notes to financial statements.
50 & 51
FINANCIAL HIGHLIGHTS WEBS INDEX FUNDS, INC. ==================================================================================================================================== (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) JAPAN MALAYSIA (FREE) MEXICO (FREE) NETHERLANDS WEBS WEBS WEBS WEBS INDEX INDEX INDEX INDEX SERIES SERIES SERIES SERIES ------------------- -------------------- ------------------- -------------------- For the For the For the For the For the For the For the For the year period year period year period year period ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 -------- --------- -------- --------- -------- --------- -------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period . $ 14.33 $ 14.79(1) $ 13.80 $13.24(1) $ 11.52 $ 9.95(1) $ 17.36 $ 15.91(1) -------- ---------- -------- -------- -------- --------- -------- -------- Net investment income/(loss) (+) ..... (0.06) (0.07) 0.01 (0.02) 0.02 0.00** 0.11 0.24 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .............. (1.65) (0.39) (5.55) 0.59 4.07 1.59 4.79 1.54 -------- ---------- -------- -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations (1.71) (0.46) (5.54) 0.57 4.09 1.59 4.90 1.78 -------- ---------- -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income . -- -- 0.00** -- (0.01) -- (0.10) (0.14) Dividends in excess of net investment income .................. -- -- (0.01) -- 0.01 (0.01) (0.01) (0.01) Distributions from net realized gains -- -- -- -- (0.44) -- (0.71) (0.08) Distributions in excess of net realized gains ..................... (0.01) -- -- -- -- -- -- (0.01) Return of capital .................... -- -- (0.02) (0.01) (0.04) (0.01) (0.02) (0.09) -------- ---------- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.01) -- (0.03) (0.01) (0.50) (0.02) (0.84) (0.33) -------- ---------- -------- -------- -------- -------- -------- -------- Net asset value, end of period ....... $ 12.61 $ 14.33 $ 8.23 $13.80 $ 15.11 $ 11.52 $ 21.42 $ 17.36 ======== ========== ======== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ............ (11.97)% (3.11)%(4)(40.20)% 4.28%(4) 35.21% 15.93%(4) 28.04% 11.19%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .$158,957 $103,164 $12,339 $9,318 $16,627 $ 5,759 $ 9,661 $ 6,962 Ratios of expenses to average net assets (5) ..................... 1.19% 1.37%(3) 1.46% 1.58%(3) 1.63% 1.75%(3) 1.46% 1.63%(3) Ratios of net investment income/(loss) to average net assets (5) ..................... (0.48)% (1.01)%(3) 0.04% (0.35)%(3) 0.14% 0.01%(3) 0.54% 2.93%(3) Portfolio turnover (6) ............... 12.90% 21.54%(4) 0.00% 0.00%(4) 22.80% 0.00%(4) 12.68% 4.32%(4) Average commission rate paid .........$ 0.0162 $ 0.0152 $ -- $ -- $0.0066 $ -- $0.0354 $0.0651 * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (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 American Stock Exchange. 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 average net assets before waivers ............ 1.19% 1.38%(3) 1.47% 1.59%(3) 1.63% 1.76%(3) 1.46% 1.64%(3) Ratios of net investment income/(loss) to average net assets before waivers ...... (0.48)% (1.02)%(3) 0.04% (0.36)%(3) 0.13% 0.00%(3) 0.53% 2.92%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
SINGAPORE (FREE) SPAIN SWEDEN WEBS WEBS WEBS INDEX INDEX INDEX SERIES SERIES SERIES ------------------- ------------------- -------------------- For the For the For the For the For the For the year period year period year period ended 03/12/96*- ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 08/31/97 08/31/96 -------- --------- -------- --------- -------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period . $ 11.38 $ 12.24(1) $ 14.09 $ 13.28(1) $ 14.67 $ 13.22(1) -------- -------- -------- -------- -------- --------- Net investment income/(loss) (+) ..... 0.00** 0.04 0.19 0.14 (0.03) 0.20 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies .............. (2.67) (0.86) 5.33 0.98 4.45 1.67 -------- -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations (2.67) (0.82) 5.52 1.12 4.42 1.87 -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income . 0.00** (0.03) (0.12) (0.18) -- (0.23) Dividends in excess of net investment income .................. (0.01) (0.01) (0.05) -- -- (0.07) Distributions from net realized gains (0.02) -- (0.86) (0.13) (0.77) (0.12) Distributions in excess of net realized gains ..................... -- -- -- -- -- -- Return of capital .................... (0.02) -- (0.09) -- -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.05) (0.04) (1.12) (0.31) (0.77) (0.42) -------- -------- -------- -------- -------- -------- Net asset value, end of period ....... $ 8.66 $ 11.38 $ 18.49 $ 14.09 $ 18.32 $ 14.67 ======== ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ............ (23.48)% (6.73)%(4) 39.15% 8.45%(4) 30.10% 14.13%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) . $14,722 $ 9,107 $ 8,321 $ 4,227 $ 8,243 $ 4,400 Ratios of expenses to average net assets (5) ..................... 1.43% 1.56%(3) 1.67% 1.76%(3) 1.64% 1.75%(3) Ratios of net investment income/(loss) to average net assets (5) ..................... 0.03% 0.69%(3) 1.04% 2.04%(3) (0.19)% 3.05%(3) Portfolio turnover (6) ............... 13.40% 26.29%(4) 19.21% 4.73%(4) 13.71% 5.87%(4 Average commission rate paid ......... $0.0076 $0.0118 $0.0344 $0.0723 $0.0229 $0.0561 * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (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 American Stock Exchange. 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 average net assets before waivers ............ 1.43% 1.57%(3) 1.67% 1.77%(3) 1.64% 1.76%(3) Ratios of net investment income/(loss) to average net assets before waivers ...... 0.03% 0.68%(3) 1.04% 2.03%(3) (0.19)% 3.04%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
SWITZERLAND UNITED KINGDOM WEBS WEBS INDEX INDEX SERIES SERIES -------------------- ------------------- For the For the For the For the year period year period ended 03/12/96*- ended 03/12/96*- 08/31/97 08/31/96 08/31/97 08/31/96 -------- --------- -------- --------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .. $ 12.29 $ 12.07(1) $ 13.15 $ 12.14(1) -------- -------- -------- -------- Net investment income/(loss) (+) ...... (0.04) 0.08 0.38 0.21 Net realized and unrealized gain/(loss) on investments and foreign currency related transactions and translation of other assets and liabilities denominated in foreign currencies ............... 2.11 0.24 3.62 1.06 -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations 2.07 0.32 4.00 1.27 -------- -------- -------- -------- LESS DISTRIBUTIONS Dividends from net investment income .. -- (0.10) (0.32) (0.20) Dividends in excess of net investment income ................... -- -- (0.06) (0.03) Distributions from net realized gains . (0.57) -- (0.17) 0.00** Distributions in excess of net realized gains ...................... -- -- -- -- Return of capital ..................... 0.00** -- (0.10) (0.03) -------- -------- -------- -------- Total dividends and distributions . (0.57) (0.10) (0.65) (0.26) -------- -------- -------- -------- Net asset value, end of period ........ $ 13.79 $ 12.29 $ 16.50 $ 13.15 ======== ======== ======== ======== TOTAL INVESTMENT RETURN (2) ............. 16.69% 2.60%(4) 30.48% 10.41%(4) RATIOS/ SUPPLEMENTAL DATA Net assets, end of period (in 000's) .. $13,805 $ 6,158 $29,721 $15,790 Ratios of expenses to average net assets (5) ...................... 1.52% 1.82%(3) 1.38% 1.61%(3) Ratios of net investment income/(loss) to average net assets (5) ...................... (0.29)% 1.39%(3) 2.47% 3.62%(3) Portfolio turnover (6) ................ 48.05% 17.06%(4) 1.84% 0.00%(4) Average commission rate paid .......... $0.8788 $0.7852 $0.0314 $ -- * Commencement of operations. ** Less than one cent per share. + Based on average shares outstanding throughout the period. (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 American Stock Exchange. 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 average net assets before waivers ............. 1.53% 1.83%(3) 1.38% 1.62%(3) Ratios of net investment income/(loss) to average net assets before waivers ....... (0.29)% 1.38%(3) 2.47% 3.61%(3) (6) Excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Unit(s).
See accompanying notes to financial statements. 52 & 53 NOTES TO FINANCIAL STATEMENTS ================================================================================ GENERAL WEBS Index Fund, Inc. (the "Fund") was incorporated under the laws of the State of Maryland on September 1, 1994, and commenced operations on March 12, 1996. The Fund is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open end management investment company. On January 2, 1997, the name of the Fund was changed from Foreign Fund, Inc. to WEBS Index Fund, Inc. The shares of common stock of each WEBS Index Series are referred to as "World Equity Benchmark Shares" or "WEBS" and are traded on the American Stock Exchange, Inc. (the "AMEX") under the following symbols: WEBS INDEX SERIES SYMBOL ---------------------- -------- Australia WEBS Index Series EWA Austria WEBS Index Series EWO Belgium WEBS Index Series EWK Canada WEBS Index Series EWC France WEBS Index Series EWQ Germany WEBS Index Series EWG Hong Kong WEBS Index Series EWH Italy WEBS Index Series EWI Japan WEBS Index Series EWJ Malaysia (Free) WEBS Index Series EWM Mexico (Free) WEBS Index Series EWW Netherlands WEBS Index Series EWN Singapore (Free) WEBS Index Series EWS Spain WEBS Index Series EWP Sweden WEBS Index Series EWD Switzerland WEBS Index Series EWL United Kingdom WEBS Index Series EWU The investment objective of each of the 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 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). On June 2, 1997 the Malaysia WEBS Index Series commenced using the MSCI Malaysia (Free) Index as its benchmark and changed its name to the Malaysia (Free) WEBS Index Series. Each WEBS Index Series of the Fund utilizes a "passive" or indexing investment approach in an effort to approximate the investment performance of its benchmark index through the use of quantitative analytical procedures. 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 a WEBS Index Series. It is expected that the non-redeemable WEBS will trade on the AMEX during the day at prices that differ to some degree from their net asset value. The Depository Trust Company ("DTC") acts as the securities depository for the WEBS. WEBS are represented by global securities, registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. 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 Act. Each of the other WEBS Index Series is classified as a "non-diversified" investment company under the Act. On September 12, 1997 the shareholders voted to approve a change in the France WEBS Index Series status from a diversified to a non-diversified investment company, which change will be effective on October 29, 1997. The WEBS Index Series had no operations prior to their commencement of operations on March 12, 1996, other than the sale of the following WEBS Index Series shares to Funds Distributor, Inc. (the "Distributor") for the noted amounts: Australia WEBS Index Series - 30 shares for proceeds of $305; Austria WEBS Index Series - 30 shares for proceeds of $335; Belgium WEBS Index Series - 30 shares for proceeds of $455; Canada WEBS Index Series - 30 shares for proceeds of $303; France WEBS Index Series - 1,000 shares for proceeds of $12,820; Germany WEBS Index Series - 1,000 shares for proceeds of $13,620; Hong Kong WEBS Index Series - 1,000 shares for proceeds of $13,410; Italy WEBS Index Series - 30 shares for proceeds of $426; Japan WEBS Index Series - 1,000 shares for proceeds of $14,920; Malaysia (Free) WEBS Index Series - 30 shares for proceeds of $400; Mexico (Free) WEBS Index Series - 30 shares for proceeds of $287; Netherlands WEBS Index Series - 1,000 shares for proceeds of $15,950; Singapore (Free) WEBS Index Series - 30 shares for proceeds of $386; Spain WEBS Index Series - 30 shares for proceeds of $429; Sweden WEBS Index Series - 30 shares for proceeds of $429; Switzerland WEBS Index Series - 1,000 shares for proceeds of $13,190 and United Kingdom WEBS Index Series - 1,000 shares for proceeds of $12,440. 54 WEBS INDEX FUND, INC. ================================================================================ SIGNIFICANT ACCOUNTING POLICIES WEBS Index Series' financial statements are prepared in accordance with generally accepted accounting principles which may require the use of management estimates and assumptions. Actual results could differ from those estimates. PORTFOLIO VALUATION Investments are stated at value. All securities for which market quotations are readily available are valued at (i) the last sales price prior to the time of determination, if there was a sale on the date of determination, (ii) at the mean between the last current bid and asked prices if there was no sales price on such date and bid and asked quotations are available, or (iii) at the bid price if there was no sales price on such date and only bid quotations are available. Securities that are traded over-the-counter are valued at the last quoted bid price. Securities for which market values are not readily available are carried at fair value as determined in good faith by Barclays Global Fund Advisors (the "Adviser") in accordance with procedures adopted by the Fund's Board of Directors. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME Investment transactions are accounted for on trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis; dividend income is recorded on the ex-dividend date. TAX STATUS No provision is made for U.S. Federal income or excise taxes as it is each WEBS Index Series' intention to continue to qualify as a regulated investment company and to make the requisite distributions to its shareholders which will be sufficient to relieve it from all or substantially all Federal income and excise taxes. If so elected, each WEBS Index Series' realized net foreign exchange losses and realized net capital losses incurred since October 31, 1996 will be treated for tax purposes as arising on September 1, 1997. Each WEBS Index Series incurred and will elect to defer such losses as follows: FOREIGN EXCHANGE NET REALIZED CAPITAL WEBS INDEX SERIES LOSSES LOSSES - ------------------- ---------------- -------------------- Australia WEBS Index Series $ 7,013 $ -- Austria WEBS Index Series $ 2,857 $ 10,937 Belgium WEBS Index Series $ 3,025 $ -- Canada WEBS Index Series $ 2,060 $ -- France WEBS Index Series $13,967 $ -- Germany WEBS Index Series $16,934 $ -- Hong Kong WEBS Index Series $ 169 $ -- Italy WEBS Index Series $35,296 $309,363 Japan WEBS Index Series $ -- $ -- Malaysia (Free) WEBS Index Series $ 5,358 $ 13,921 Mexico (Free) WEBS Index Series $ -- $ -- Netherlands WEBS Index Series $16,958 $ -- Singapore (Free) WEBS Index Series $ 1,858 $ -- Spain WEBS Index Series $ 1,901 $ -- Sweden WEBS Index Series $ 2,374 $ -- Switzerland WEBS Index Series $ 1,804 $ -- United Kingdom WEBS Index Series $ -- $ -- In addition, the Italy WEBS Index Series had a $5,714 capital loss carryover which will expire in 2005. If any WEBS Index Series owns shares in certain foreign investment entities, referred to, under U.S. tax law principles, as "passive foreign investment companies", the WEBS Index Series may elect to mark-to-market annually the shares of the passive foreign investment company, and would be required to distribute to shareholders any such mark-to-market gains. FOREIGN CURRENCY TRANSLATION The books and records of each WEBS Index Series are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: (i) Market value of investment securities, assets and liabilities at the prevailing rates of exchange on the valuation date; and (ii) Purchases and sales of investment securities and investment income at the relevant rates of exchange prevailing on the respective dates of such transactions. 55 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ================================================================================ Foreign currency and assets and liabilities denominated in foreign currency 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) WEBS Index is that as of 3:00 p.m. New York City time). The WEBS Index Series generally do not isolate the effect of fluctuations in foreign exchange rates from the effect of fluctuations in the market prices of securities. The WEBS Index Series report certain foreign exchange realized gains and losses on foreign currency related transactions as components of realized gains and losses for financial reporting purposes, whereas such components are treated as ordinary income for Federal income tax purposes. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among other factors, the level of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability, and the fact that foreign securities markets may be smaller, less developed and have less reliable settlement and share registration procedures. DISTRIBUTION OF INCOME AND GAINS Each WEBS Index Series intends to distribute, at least annually, to shareholders, substantially all of its net investment income, including net foreign currency gains, if any, and any realized net capital gains after the utilization of available capital loss carryovers. An additional distribution may be made to the extent necessary to avoid payment of a 4% Federal excise tax. In addition, each WEBS Index Series intends to distribute at least annually amounts representing the dividend yield on the underlying portfolio securities of each WEBS Index Series, net of expenses, 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. Dividends and distributions are paid in U.S. dollars and cannot be automatically reinvested in additional WEBS. Distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized gains are determined in accordance with U.S. tax law principles, which may differ from generally accepted accounting principles. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within each WEBS Index Series' capital accounts based on their Federal tax treatment. Dividends and distributions which exceed net investment income and realized net capital gains for financial reporting purposes but not for tax purposes are reported as distributions in excess of net investment income and realized net capital gains. To the extent they exceed net investment income and net realized gains for tax purposes, they are reported as return of capital distributions. For the year ended August 31, 1997, each Index Series reclassified certain amounts from accumulated net realized gain (loss) on investments and foreign currency transactions and accumulated net investment income (loss), respectively, as a result of permanent book and tax differences primarily attributed to net investment loss, return of capital, realized foreign currency gains and losses and gains and losses on in-kind redemptions. ORGANIZATION COSTS Organization costs were originally allocated to each WEBS Index Series based on the expected future net assets of each WEBS Index Series. Such organization costs have been deferred and are amortized ratably on the reverse sum of the years digits method over a period of sixty months from the commencement of operations. If any of the shares initially issued to the Distributor are redeemed before the end of the amortization period, the proceeds of the redemption will be reduced by their pro rata share of the unamortized organization costs. The pro rata share by which the proceeds are reduced is derived by dividing the number of original shares redeemed by the total number of original shares outstanding at the time of redemption. FEE ARRANGEMENTS The Fund has an Investment Management Agreement (the "Management Agreement") with the Adviser. The Adviser manages the investments of each of the WEBS Index Series. For its services to each WEBS Index Series, the Adviser receives fees based on the Fund's aggregate average daily net assets equal to .27% per annum up to aggregate net assets of $1.7 billion; plus .15% per annum of the aggregate net assets between $1.7 billion and $7 billion; plus .12% per annum of the aggregate net assets between $7 billion and $10 billion; plus .08% per annum of the aggregate net assets in excess of $10 billion. The Fund has an Administration and Accounting Services Agreement with PFPC Inc. ("PFPC" or the "Administrator"). Under the Administration and Accounting Services Agreement, PFPC assists in supervising the operations of each WEBS Index Series. Prior to June 30, 1997 for its administrative services and Fund accounting services, PFPC was paid aggregate fees equal to each WEBS Index Series' allocable portion of: .10% per annum of the aggregate average daily net assets less than $3 billion, plus .09% per annum of the aggregate net assets between $3 billion and $5 billion, plus .08% per annum of the aggregate net assets between $5 billion and $7.5 billion, plus .065% per annum of the aggregate net assets between $7.5 billion and $10 billion, plus .05% per annum of the aggregate net assets in excess of $10 billion. 56 WEBS INDEX FUND, INC. ================================================================================ PFPC charged the Fund an annual minimum fee of $850,000 for year one, $1,275,000 for year two, and $1,700,000 for year three and thereafter (based on an annual minimum of $50,000, $75,000 and $100,000 per WEBS Index Series, respectively). PFPC capped its minimum fees at the annual rate of .17% of average daily net assets. Any resulting shortfall between the above required minimums and the asset based fee of .17% were to be recouped as the WEBS Index Series' asset levels reach the threshold to permit such recovery of fees.For the period March 12, 1996 through June 30, 1997, the deferred administration fee amounted to $648,802. On July 1, 1997, PFPC waived all deferred fees. Effective July 1, 1997 PFPC amended its Administration and Accounting Services Agreement. PFPC is paid aggregate fees equal to each WEBS Index Series' allocable portion of .17% per annum of the aggregate average daily net assets less than $1.5 billion, plus .10% per annum of the aggregate net assets between $1.5 billion and $3 billion, plus .09% per annum of the aggregate net assets between $3 billion and $5 billion, plus .08% per annum of the aggregate net assets between $5 billion and $7.5 billion, plus .065% per annum of the aggregate net assets between $7.5 billion and $10 billion, plus .05% per annum of the aggregate net assets in excess of $10 billion. PNC Bank, N.A., an affiliate of the Administrator, serves as each WEBS Index Series' Transfer Agent and Dividend Disbursement Agent. The Fund has a Licensing Agreement with MSCI for the use of the relevant MSCI Indices. Each WEBS Index Series pays a license fee equal to .03% per annum of the aggregate net assets of each of such WEBS Index Series. The Fund has adopted a Distribution Plan, pursuant to Rule 12b-1 under the Act ("Rule 12b-1 Plan") with respect to each WEBS Index Series. 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 fee paid to the Distributor under the Rule 12b-1 Plan is accrued daily and paid monthly with respect to each WEBS Index Series at an annual rate of up to .25% of the average daily net assets of such WEBS Index Series. From time to time the Distributor may waive all or a portion of the fee. Morgan Stanley Trust Company ("MSTC") serves as custodian as well as the Securities Lending Agent to each of the WEBS Index Series. For its custody services to each WEBS Index Series, MSTC is 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 (.10%); Germany WEBS Index Series (.10%); Hong Kong WEBS Index Series (.12%); Italy WEBS Index Series (.09%); Japan WEBS Index Series (.06%); Malaysia (Free) WEBS Index Series (.12%); 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 (.07%). MSTC also receives certain fees for each transaction of the WEBS Index Series. The AMEX agreed to voluntarily waive its annual listing fee through December 31, 1996. The Fund pays each director who is not a director, officer or employee of the Adviser, Administrator, Distributor or any affiliate thereof, an annual fee of $20,000 plus $5,000 for each Board of Directors meeting attended. In addition, the Fund reimburses the directors for travel and out-of-pocket expenses incurred in connection with the Board of Directors meetings. FOREIGN CURRENCY At August 31, 1997, each WEBS Index Series' cash balance included the following amount of foreign currency: VALUE COST ---------- ---------- Australia WEBS Index Series $ 6,738 $ 6,799 Austria WEBS Index Series $ 419 $ 419 Belgium WEBS Index Series $ 218 $ 219 Canada WEBS Index Series $ 7,459 $ 7,451 France WEBS Index Series $ 8,122 $ 8,086 Germany WEBS Index Series $ 154,070 $161,428 Hong Kong WEBS Index Series $ -- $ -- Italy WEBS Index Series $ 7,596 $ 7,637 Japan WEBS Index Series $ 401,719 $421,834 Malaysia (Free) WEBS Index Series $ 9,722 $ 10,336 Mexico (Free) WEBS Index Series $ 989 $ 997 Netherlands WEBS Index Series $ 1,765 $ 1,757 Singapore (Free) WEBS Index Series $ 134,165 $140,857 Spain WEBS Index Series $ 3,469 $ 3,462 Sweden WEBS Index Series $ 206 $ 203 Switzerland WEBS Index Series $ 5,844 $ 5,681 United Kingdom WEBS Index Series $ 24,289 $ 24,135 57 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ================================================================================ STOCK LOAN Each WEBS Index Series may lend securities from its portfolio to brokers, dealers and other financial institutions. Because the collateral pledged to each WEBS Index Series in connection with these loans generates income, securities lending enables a WEBS Index Series to earn income that may partially offset the expenses of the WEBS Index Series. Each WEBS Index Series receives collateral equal to at least 100% of the current market value of the loaned securities. The WEBS Index Series invests collateral in short-term investments, and bears the risk of loss of the invested collateral. In addition, a WEBS Index Series is exposed to the risk of loss should a borrower default on its obligation to return the borrowed securities. For its services as the securities lending agent, the Fund pays MSTC, in respect of each WEBS Index Series, 50% of the net investment income earned on the collateral for securities loaned. The market values of securities on loan to broker/dealers at August 31, 1997, and the collateral received with respect to such loans were as follows: CASH MARKET VALUE OF COLLATERAL WEBS INDEX SERIES LOANED SECURITIES RECEIVED - ------------------ ----------------- ------------ Australia WEBS Index Series $ 7,770,430 $ 8,262,617 Austria WEBS Index Series $ 777,503 $ 811,663 Belgium WEBS Index Series $ 3,088,402 $ 3,247,381 Canada WEBS Index Series $ 3,224,449 $ 3,429,000 France WEBS Index Series $ 810,144 $ 851,068 Germany WEBS Index Series $ 6,545,738 $ 6,879,172 Hong Kong WEBS Index Series $ 1,993,386 $ 2,511,783 Italy WEBS Index Series $ 4,380,821 $ 4,926,896 Japan WEBS Index Series $30,030,911 $31,889,727 Malaysia (Free) WEBS Index Series $ 2,798,372 $ 3,156,680 Mexico (Free) WEBS Index Series $ 2,014,126 $ 2,202,975 Netherlands WEBS Index Series $ 2,164,384 $ 2,274,624 Singapore (Free) WEBS Index Series $ 2,251,485 $ 2,572,153 Spain WEBS Index Series $ 1,641,686 $ 1,725,044 Sweden WEBS Index Series $ 349,935 $ 368,954 Switzerland WEBS Index Series $ 767,229 $ 805,603 United Kingdom WEBS Index Series $ -- $ -- The following WEBS Index Series had outstanding commitments to deliver securities under security lending transactions as of August 31, 1997: WEBS INDEX SERIES AMOUNTS -------------------- ----------- Hong Kong WEBS Index Series $1,127,423 Italy WEBS Index Series $ 670,867 Japan WEBS Index Series $2,832,239 Spain WEBS Index Series $ 49,793 CAPITAL SHARES The Fund currently is authorized to issue 6 billion shares of common stock, with the following number of shares allocated to each WEBS Index Series: Australia WEBS Index Series (127.8 million shares); Austria WEBS Index Series (19.8 million shares); Belgium WEBS Index Series (136.2 million shares); Canada WEBS Index Series (340.2 million shares); France WEBS Index Series (340.2 million shares); Germany WEBS Index Series (382.2 million shares); Hong Kong WEBS Index Series (191.4 million shares); Italy WEBS Index Series (63.6 million shares); Japan WEBS Index Series (2,124.6 million shares); Malaysia (Free) WEBS Index Series (127.8 million shares); Mexico (Free) WEBS Index Series (255 million shares); Netherlands WEBS Index Series (255 million shares); Singapore (Free) WEBS Index Series (191.4 million shares); Spain WEBS Index Series (127.8 million shares); Sweden WEBS Index Series (63.6 million shares); Switzerland WEBS Index Series (318.625 million shares); and United Kingdom WEBS Index Series (943.2 million shares). The shares will not be issued or redeemed individually, but only in specified aggregations of shares. The consideration for purchase of a Creation Unit 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 "Basket Securities") and an amount of cash (the "Cash Component"). Non-Basket Securities may be held by a WEBS Index Series as a result of corporate actions, odd share lots, or as a result of rebalancing of the Basket Securities. 58 WEBS INDEX FUND, INC. ================================================================================ Shares of each WEBS Index Series are offered in Creation Units at net asset value without an initial sales load, in exchange for an in-kind deposit of a designated portfolio of securities specified by the Distributor each day, plus a specified amount of cash and a purchase transaction fee. Shares of each WEBS Index Series may also be issued in the specified aggregations for cash at the sole discretion of the Fund. Redemptions of the shares of each WEBS Index Series in the specified aggregations are made in portfolio securities, plus or minus a specified amount of cash, and minus a specified redemption transaction fee. Shares of each WEBS Index Series may also be redeemed in the specified aggregations for cash at the sole discretion of the Fund. LOAN AGREEMENT Each of the WEBS Index Series has entered into a Line of Credit Agreement ("Agreement") with PNC Bank, N.A., an affiliate of the Administrator. Under the terms of the Agreement, any of the WEBS Index Series may request an advance of the full amount of the $5,000,000 line of credit; provided, however, that: (i) Total outstanding advances to all WEBS Index Series under the line of credit may not exceed $5,000,000 and (ii) The aggregate amount outstanding under the line of credit to any one WEBS Index Series may not exceed the lowest of (a) $5,000,000 (b) one-quarter of that WEBS Index Series' net assets, (c) any lower leverage limit set forth in the Fund's prospectus or (d) the maximum amount permitted to be borrowed by such WEBS Index Series under the Act. Each WEBS Index Series shall be severally, and not jointly, liable for its particular advances under the line. Advances made under the line of credit are due and payable on demand and bear interest at a rate per annum equal to the sum of the Federal Funds Rate plus 1%. The interest rate at August 31, 1997 is 6.11%. The following WEBS Index Series had advances on the line of credit outstanding at August 31, 1997. WEBS INDEX SERIES ADVANCES -------------------- ----------- Australia WEBS Index Series $ 80,000 Canada WEBS Index Series $250,000 France WEBS Index Series $ 30,000 Hong Kong WEBS Index Series $ 55,000 Italy WEBS Index Series $ 90,000 Mexico (Free) WEBS Index Series $120,000 Netherlands WEBS Index Series $150,000 Spain WEBS Index Series $125,000 Sweden WEBS Index Series $200,000 Switzerland WEBS Index Series $290,000 Average borrowings under the line of credit did not exceed 10% of net assets of any WEBS Index Series during the year ended August 31, 1997. PORTFOLIO ACTIVITY The WEBS Index Series' purchases and sales of securities (excluding in-kind transactions), other than short-term obligations, were as follows, for the year ended August 31, 1997: PURCHASES OF SALES OF WEBS INDEX SERIES SECURITIES SECURITIES - -------------------- ------------- ------------ Australia WEBS Index Series $ 1,026,118 $ 1,323,136 Austria WEBS Index Series $ 1,091,678 $ 1,115,190 Belgium WEBS Index Series $ 2,475,823 $ 3,047,186 Canada WEBS Index Series $ 2,433,980 $ 2,372,526 France WEBS Index Series $ 950,197 $ 1,345,582 Germany WEBS Index Series $ 1,716,629 $ 2,028,936 Hong Kong WEBS Index Series $ 3,438,220 $ 4,007,320 Italy WEBS Index Series $ 3,959,792 $ 4,104,645 Japan WEBS Index Series $15,179,666 $15,498,124 Malaysia (Free) WEBS Index Series $ -- $ 15,609 Mexico (Free) WEBS Index Series $ 2,161,619 $ 2,302,064 Netherlands WEBS Index Series $ 1,033,368 $ 1,039,632 Singapore (Free) WEBS Index Series $ 1,732,752 $ 1,664,228 Spain WEBS Index Series $ 1,002,231 $ 1,246,890 Sweden WEBS Index Series $ 758,069 $ 963,687 Switzerland WEBS Index Series $ 4,209,102 $ 4,439,085 United Kingdom WEBS Index Series $ 381,801 $ 1,238,223 59 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ================================================================================ FOREIGN INCOME TAXES For the year ended August 31, 1997, each WEBS Index Series' net foreign withholding taxes deducted from foreign dividends received were as follows: FOREIGN WITHOLDING WEBS INDEX SERIES TAX --------------------- ----------- Australia WEBS Index Series $ 14,251 Austria WEBS Index Series $ 6,217 Belgium WEBS Index Series $147,374 Canada WEBS Index Series $ 68,249 France WEBS Index Series $ 61,399 Germany WEBS Index Series $ 29,700 Hong Kong WEBS Index Series $ -- Italy WEBS Index Series $ 94,336 Japan WEBS Index Series $133,523 Malaysia (Free) WEBS Index Series $ 86,827 Mexico (Free) WEBS Index Series $ -- Netherlands WEBS Index Series $ 28,252 Singapore (Free) WEBS Index Series $ -- Spain WEBS Index Series $ 23,861 Sweden WEBS Index Series $ 13,427 Switzerland WEBS Index Series $ 18,497 United Kingdom WEBS Index Series $132,386 MARKET AND PORTFOLIO 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 less liquid and less efficient securities markets; 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 in settlement; difficulties in enforcing contractual obligations; less liquidity and smaller market capitalization of most non-U.S. securities markets; lower 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. 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). 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 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. SUBSEQUENT EVENTS On September 15, 1997 the Board of Directors approved the following changes to the fee arrangements of the Fund which will be effective October 29, 1997. 60 WEBS INDEX FUNDS, INC. ================================================================================ The Administrators fee will be amended so that PFPC will be 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. Effective October 29, 1997, MSTC will provide certain sub-administrative services relating to the Fund pursuant to a Sub-Administration Agreement and will receive a fee from the Administrator equal to .05% of the Fund's average daily net assets for providing such services. In addition, the Board of Directors has determined, effective October 29, 1997, 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. Effective September 1, 1997 the annual Director fees paid to the Chairman of the Board have been increased by $20,000. FEDERAL TAXATION NOTICE (UNAUDITED) The WEBS Index Series paid the following foreign taxes during the year ended August 31, 1997 which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code. In addition, each of the WEBS Index Series earned the following foreign source income and is designating the following distributions as long-term capital gain distributions:
FOREIGN SOURCE LONG-TERM WEBS INDEX SERIES INCOME FOREIGN TAXES CAPITAL GAINS DISTRIBUTIONS - -------------------- -------------- ------------- --------------------------- Australia WEBS Index Series $ 672,202 $ 14,251 $187,118 Austria WEBS Index Series $ 49,687 $ 6,217 $ -- Belgium WEBS Index Series $1,561,917 $147,374 $ 86,363 Canada WEBS Index Series $ 447,739 $ 68,249 $ -- France WEBS Index Series $ 416,052 $ 61,399 $ -- Germany WEBS Index Series $ 300,013 $ 29,700 $ -- Hong Kong WEBS Index Series $ 474,611 $ -- $324,715 Italy WEBS Index Series $1,129,789 $ 94,336 $ -- Japan WEBS Index Series $1,110,825 $133,523 $ 67,607 Malaysia (Free) WEBS Index Series $ 313,325 $ 86,827 $ -- Mexico (Free) WEBS Index Series $ 165,009 $ -- $139,389 Netherlands WEBS Index Series $ 187,992 $ 28,252 $303,665 Singapore (Free) WEBS Index Series $ 181,712 $ -- $ -- Spain WEBS Index Series $ 178,245 $ 23,861 $236,221 Sweden WEBS Index Series $ 90,395 $ 13,427 $268,001 Switzerland WEBS Index Series $1,023,322 $ 18,497 $472,674 United Kingdom WEBS Index Series $1,008,337 $132,386 $304,957 Shareholders will receive more detailed information along with Form 1099-DIV in January 1998.
61 REPORT OF INDEPENDENT AUDITORS WEBS INDEX FUND, INC. ================================================================================ Shareholders and Board of Directors WEBS Index Fund, Inc. We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of WEBS Index Fund, Inc. (comprised of 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) (collectively, the "Fund") as of August 31, 1997, and the related statements of operations for the year then ended, and the statements of changes in net assets and financial highlights for the year ended August 31, 1997 and for the period from March 12, 1996 (commencement of operations) to August 31, 1996. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights.Our procedures included confirmation of securities owned as of August 31, 1997 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the WEBS Index Series comprising WEBS Index Fund, Inc. at August 31, 1997, and the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the periods indicated above, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP /S/ SIGNATURE New York, New York October 24, 1997 [THIS PAGE LEFT INTENTIONALLY BLANK] [THIS PAGE LEFT INTENTIONALLY BLANK] WEBS INDEX FUND, INC. INVESTMENT ADVISER BARCLAYS GLOBAL FUND ADVISORS ADMINISTRATOR PFPC INC. DISTRIBUTOR FUNDS DISTRIBUTOR INC. TRANSFER AGENT PNC BANK, N.A. CUSTODIAN AND SECURITIES LENDING AGENT MORGAN STANLEY TRUST COMPANY 400 BELLEVUE PARKWAY WILMINGTON, DE 19809 -----END PRIVACY-ENHANCED MESSAGE-----