<PAGE>
[LOGO] THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
August 18, 1995
Dear Shareholders:
We are pleased to report on the activities of The Indonesia Fund, Inc. (the
"Fund") for the six months ended June 30, 1995.
The Fund began the year with a net asset value (NAV) of $9.18 per share. As of
June 30, 1995, the Fund has invested approximately $41 million, or 96% of its
portfolio, in Indonesian securities. Net asset value at June 30, 1995 was $9.27,
representing a return of 1.0% for the first half of the year, compared with a
return of 3.5% for the Jakarta Stock Exchange Index.
MARKET COMMENTARY
In Indonesia, as in many of the Southeast Asian markets, short-term equity
market performance is to a great extent driven by global economic factors, and
particularly by the interest rate picture in the U.S. This should not be a
surprise, given that currencies in virtually all of the major regional markets
are linked in one way or another to the U.S. dollar. The news on this front has
been generally positive in that the interest rate environment in the U.S. has
become increasingly benign during the first half of 1995. The Federal Reserve's
year-long cycle of monetary tightening clearly came to an end early in the
spring; the picture became even brighter in early July, when the Fed reduced
U.S. short rates for the first time in approximately three years. The improving
global interest rate scenario was perhaps the most important factor in the
Indonesian market's strong performance during the second quarter.
An additional factor in the market's favor has been the gradually rising tide of
good news coming out of Mexico and the Latin American region in general,
throughout the spring and summer. While Indonesia is a world away from Mexico,
not only geographically but culturally and economically as well, this and
virtually every other emerging market suffered greatly during late 1994 and the
early days of 1995 from the repercussions of Mexico's economic crisis. Mexico's
problems caused a significant drain of liquidity from emerging markets in
general, and led all "risky" assets to be re-rated downward. The tide of better
news coming out of Mexico in recent months, therefore, has led to a slow but
steady return of cautious foreign capital to the emerging markets in all regions
-- we are seeing investors who were on the sidelines two or three months ago
looking now to buy in Indonesia and her neighboring markets. Throughout the
region, these positive factors are battling against a growing wave of negative
speculation about a slowdown in earning momentum, perhaps beginning in 1996, as
the economic growth cycle moves into its next phase. The direction of the
Indonesian markets over the next 12 months will largely be a product of the
interplay of these forces -- will the buoyancy of a positive interest rate
environment delay the natural tendency for earnings growth to slow as the cycle
moves forward?
1
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
We believe that earnings growth in Indonesia will continue to be quite strong at
least well into 1996, although the growth rate is likely to subside somewhat
from this year's pace (projected to reach nearly 35%). The economy, meanwhile,
has remained strong, with GDP growth accelerating to approximately 8% in 1995.
We anticipate that the economy should continue to grow at approximately the same
pace in 1996. Inflation is running higher than the government's initial 6%
projection for 1995 -- the final number for the year is likely to approach 9% --
driven largely by significant recent wage increases. We do not, however, believe
that this level of inflation is problematic for the health of the economy, or
that the rate is likely to rise beyond the government's revised projection of
10%.
While some worries have been expressed, in the wake of the Mexican debacle,
about Indonesia's high level of foreign debt and foreign investment, it is clear
to us (and increasingly, to most observers) that Indonesia is not Mexico. The
strong run of yen strength we have seen over the past few years has certainly
put a degree of pressure on the Indonesian economy -- the country is a huge yen
debtor, and the rising yen vastly increased debt service costs. In this context,
the U.S. dollar's rally against the yen in recent weeks comes as a welcome
respite for Indonesia, and the positive effects of this should be felt in the
equity market. In any event, it is quite clear that barring total financial
disaster in Japan, the economic relationship between Japan and Indonesia is an
exceedingly solid one. Indonesia has been a favored destination not only for
Japanese credit, but also (and more importantly) for an enormous amount of
direct (rather than portfolio) investment, and even under Japan's recently
straitened circumstances we see no sign of this slowing down. If anything, the
gradual liberalization of Indonesia's investment environment has made it an ever
more attractive location, and 1994 and 1995 have seen record capital inflows.
On the political front, there continue to be questions as to President Suharto's
intentions for the end of his current term in 1998. Suharto has, during the past
year, hinted that he does not intend to be "a president for the rest of his
life" and there has been speculation that he could retire, after nearly three
decades in power, rather than run again. The succession, whenever it comes, will
be the first transition of government since Suharto's ascension in the
mid-1960s, which was accompanied by dramatic political and social upheaval. It
will therefore test the political stability and social cohesiveness of the
country in a way that it has not been tested before. It is widely believed,
however, that the change of leadership will be accomplished peacefully, since a
smooth transition is in the interest of all major power groups in the country,
and particularly the military and the bureaucracy. In any case, the political
environment has become consistently more relaxed during recent years, and is not
currently a significant factor for the market.
We continue to see good value in the Indonesian market, which is currently
trading at a price/earnings ratio of approximately 18 times 1995 earnings. Given
the continued high level of earnings growth in this market, this is a quite
attractive valuation. The market continues to be dominated, as it was in 1994,
by large and successful new issues. We continue to see good performance in
infrastructure-related industries, as government and private investment in
infrastructure development continues to be strong. In addition, after a
difficult year, interest rate-sensitive sectors -- particularly banks and real
estate -- have finally begun to bounce back, as would be expected in the present
attractive interest rate environment.
2
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
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--------------------------------------------------------------------------------
In light of Indonesia's continued strong economic and earnings growth and
attractive equity valuations, we remain extremely optimistic about the prospects
for the Indonesian market and for the Fund.
We wish to remind shareholders whose shares are registered in their own name
that they automatically participate in the Fund's dividend reinvestment program.
The automatic Dividend Reinvestment plan can be of value to shareholders in
maintaining their proportional ownership interest in the Fund in an easy and
convenient way. A shareholder whose shares are held in the name of a
broker/dealer or nominee should contact that party for details about
participating in the Plan. The Fund also offers shareholders a voluntary Cash
Purchase Plan. The Plan and the Cash Purchase Plan are described on pages 15 and
16 of this report.
Effective August 2, 1995, Stephen M. Swift was elected as Chief Investment
Officer of the Fund by a unanimous vote of the Fund's Board of Directors. Mr.
Swift is a Managing Director of BEA Associates. He joined BEA Associates on May
31, 1995. Mr. Swift was formerly associated with Credit Suisse Asset Management,
London, where he was head of Global Equities and portfolio manager for the CS
Tiger Fund, one of the largest offshore mutual funds specializing in Southeast
Asian equities. Prior to that time, he was with Hong Kong-based Wardley
Investment Services, where he was a Managing Director for its regional funds.
We appreciate your interest in the Fund and would be pleased to respond to your
questions or comments.
Sincerely,
[LOGO]
Emilio Bassini
President*
*Emilio Bassini, who is a member of the Executive Committee of BEA Associates
and holds the offices of Chief Financial Officer and Executive Director of BEA
Associates, is primarily responsible for management of the Fund's assets. He has
served the Fund in such capacity since February 10, 1995. Mr. Bassini joined BEA
Associates (formerly Basic Appraisals, Inc. and BEA Associates Inc.) in 1984.
Mr. Bassini is a President and Secretary of the Fund and is also a Director,
Chairman of the Board, President and Chief Investment Officer of The Chile Fund,
Inc., The Emerging Markets Infrastructure Fund, Inc., The Emerging Markets
Telecommunications Fund, Inc., The First Israel Fund, Inc., The Latin America
Equity Fund, Inc., The Latin America Investment Fund, Inc. and The Portugal
Fund, Inc. He is also a Director, Chairman of the Board, President and
Investment Officer of The Brazilian Equity Fund, Inc.
3
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PORTFOLIO SUMMARY
AS OF JUNE 30, 1995 (unaudited)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Financial Services 17.80%
Food and Kindred Products 15.50%
Manufacturing 10.40%
Beer, Beverages, Liquors and
Tobacco 9.10%
Pharmaceuticals 8.00%
Automotive 4.80%
Telecommunications 4.40%
Real Estate 3.60%
Retailing 3.40%
Cash and cash equivalents 1.90%
Housing 3.30%
Consumer Goods 3.30%
Construction and Heavy Equipment 3.00%
Paper Products 5.10%
Transportation 2.40%
Other 4.00%
100.00%
</TABLE>
THIS CHART REPRESENTS THE SECTOR ALLOCATION OF TOTAL NET ASSETS OF THE FUND.
TOP 10 INDONESIAN EQUITY HOLDINGS, BY ISSUER, AS OF JUNE 30, 1995 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
OF
HOLDING SECTOR NET ASSETS
<C> <S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
1. Kalbe Farma Pharmaceuticals 8.02 %
-----------------------------------------------------------------------------------------------------------------------------------
2. Indo Food Sukses Makmur Food and Kindred Products 6.26 %
-----------------------------------------------------------------------------------------------------------------------------------
3. Bank International Indonesia Financial Services 6.22 %
-----------------------------------------------------------------------------------------------------------------------------------
4. PT HM Sampoerna Beer, Beverages, Liquors and Tobacco 5.83 %
-----------------------------------------------------------------------------------------------------------------------------------
5. Trias Sentosa Manufacturing 5.70 %
-----------------------------------------------------------------------------------------------------------------------------------
6. PT Sari Husada Food and Kindred Products 5.20 %
-----------------------------------------------------------------------------------------------------------------------------------
7. Astra International Automotive 4.78 %
-----------------------------------------------------------------------------------------------------------------------------------
8. Lippo Bank Financial Services 3.70 %
-----------------------------------------------------------------------------------------------------------------------------------
9. Semen Gresik Manufacturing 3.46 %
-----------------------------------------------------------------------------------------------------------------------------------
10. PT Matahari Putra Prima Retailing 3.43 %
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
JUNE 30, 1995 (unaudited)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
--------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
EQUITY SECURITIES-98.06%
INDONESIA-95.73%
AUTOMOTIVE-4.78%
1,152,000 Astra International........................................................... $ 2,043,287
------------
BEER, BEVERAGES, LIQUORS AND TOBACCO-9.06%
180,000 Gudang Garam*................................................................. 1,382,128
317,000 PT HM Sampoerna*.............................................................. 2,491,019
------------
3,873,147
------------
CHEMICALS-1.75%
833,800 Unggul Indah Corp............................................................. 748,882
------------
CONSTRUCTION AND HEAVY EQUIPMENT-3.02%
606,000 PT United Tractors............................................................ 1,292,546
------------
CONGLOMERATES-0.07%
55,000 PT Bimantara Citra*........................................................... 30,871
------------
CONSUMER GOODS-3.30%
260,000 Modern Photo Film............................................................. 1,412,663
------------
ELECTRONICS-0.19%
122,000 Astra Graphia................................................................. 79,434
------------
FINANCIAL SERVICES-17.78%
500,000 Bank Danamon PT*.............................................................. 729,681
475,000 Bank Dugang Nasional Indonesia................................................ 831,837
861,200 Bank International Indonesia.................................................. 2,658,622
900,000 Dharmala Finance*............................................................. 1,070,947
575,000 Dharmala Intiland............................................................. 387,292
600,000 Dharmala Sakti Sejahtera...................................................... 336,776
898,500 Lippo Bank*................................................................... 1,583,571
------------
7,598,726
------------
FOOD AND KINDRED PRODUCTS-15.50%
4,800 Aqua Golden Mississippi....................................................... 6,035
86,000 Hero Supermarket.............................................................. 155,433
620,830 Indo Food Sukses Makmur*...................................................... 2,676,232
165,000 Mayorah Indah*................................................................ 755,725
451,000 Metro Supermarket & Realty.................................................... 258,206
786,500 PT Japfa Comfeed Indonesia.................................................... 547,407
478,652 PT Sari Husada................................................................ 2,224,539
------------
6,623,577
------------
HOTELS-1.12%
354,000 Bumi Modern Hyatt*............................................................ 151,010
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
--------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
HOTELS (CONTINUED)
766,500 Hotel Sahid Jaya International................................................ $ 326,976
------------
477,986
------------
HOUSING-3.31%
260,500 Jaya Real Property............................................................ 783,723
323,520 Surya Toto Indonesia.......................................................... 631,932
------------
1,415,655
------------
MANUFACTURING-10.35%
130,000 Indocement Tunggal............................................................ 510,777
220,000 Semen Gresik*................................................................. 1,476,875
1,142,000 Trias Sentosa................................................................. 2,435,788
------------
4,423,440
------------
PACKAGING-1.01%
446,000 Berlina....................................................................... 430,579
------------
PAPER PRODUCTS-2.76%
532,000 Indah Kiat Pulp & Paper*...................................................... 788,325
24 Pabik Kertas Tjiwi Kimia...................................................... 48
645,750 Surabaya Agung Industries..................................................... 391,452
------------
1,179,825
------------
PHARMACEUTICALS-8.02%
748,440 Kalbe Farma................................................................... 3,427,970
------------
REAL ESTATE-3.56%
791,200 Lippo Land Development........................................................ 781,608
374,000 PT Kawasan Industries*........................................................ 738,931
------------
1,520,539
------------
RETAILING-3.43%
706,000 PT Matahari Putra Prima....................................................... 1,125,415
353,000 PT Matahari Putra Prima Rights (Expiring 08/04/95)............................ 340,795
------------
1,466,210
------------
TELECOMMUNICATIONS-4.36%
22,000 Indo Satellite ADR*........................................................... 841,500
366,000 Kabel Indo Murni.............................................................. 236,248
366,000 Kabel Indo Murni Rights
(Expiring 08/14/95).......................................................... 49,300
223,700 Supreme Cable Manufacturing Co................................................ 737,199
------------
1,864,247
------------
TRANSPORTATION-2.36%
702,000 Andayani Megah................................................................ 1,008,711
------------
TOTAL INDONESIA (Cost $42,473,085).............................................. 40,918,295
------------
</TABLE>
5
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (unaudited) (continued)
<TABLE>
<CAPTION>
VALUE
NO. OF SHARES DESCRIPTION (NOTE A)
--------------------------------------------------------------------------------------------- ------------
PHILIPPINES-0.02%
<C> <S> <C>
CORRUGATED BOX CONTAINERS
63,250 Steniel Manufacturing Corp.
(Cost $8,469)................................................................ $ 9,906
------------
SINGAPORE-2.31%
PAPER PRODUCTS
78,200 Asia Pulp and Paper Co., Ltd.,
ADR*
(Cost $899,300).............................................................. 987,275
------------
TOTAL EQUITY SECURITIES (Cost $43,380,854)...................................... 41,915,476
------------
<CAPTION>
PAR VALUE
(000) DESCRIPTION (NOTE A)
--------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
SHORT-TERM INVESTMENTS-1.38%
US$ 590 GRAND CAYMAN
Brown Brothers Harriman & Co.
Call Account 5.000% (Cost $590,000)**........................................ $ 590,000
------------
TOTAL INVESTMENTS (Notes A, D) (Cost $43,970,854)-99.44%........................ 42,505,476
------------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES-0.56%............................ 239,414
------------
NET ASSETS-100.00%.............................................................. $ 42,744,890
------------
------------
<FN>
------------------------------
* Security is non-income producing.
** Variable rate account. Rates reset on a monthly basis; amounts available
generally on the same business day requested.
ADR American Depositary Receipts.
US$ United States dollars.
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
(unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $43,970,854) (Note A) $42,505,476
Cash (including foreign currency of $32,220 with a cost of $32,182) 33,055
Receivables:
Dividends 292,011
Investments sold 152,921
Prepaid insurance 9,488
-----------
Total Assets 42,992,951
-----------
LIABILITIES:
Payables:
Due to adviser (Note B) 94,994
Due to administrators (Note B) 16,186
Investments purchased 61,742
Other accrued expenses 75,139
-----------
Total Liabilities 248,061
-----------
NET ASSETS (applicable to 4,608,989 shares of common stock outstanding) (Note
C) $42,744,890
-----------
-----------
NET ASSET VALUE PER SHARE ($42,744,890 DIVIDED BY 4,608,989) $9.27
Net assets consist of:
Capital stock, $0.001 par value; 4,608,989 shares issued and
outstanding (100,000,000 shares authorized) $ 4,609
Paid-in capital 63,165,140
Undistributed net investment income 42,553
Accumulated realized losses on investments and foreign currency related
transactions (19,002,022)
Net unrealized depreciation on investments and other assets and liabilities
denominated in foreign currency (1,465,390)
-----------
Net assets applicable to shares outstanding $42,744,890
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income (Note A):
Dividends $ 424,545
Interest 52,311
Less: Foreign taxes withheld (65,057)
----------
Total Investment Income 411,799
----------
Expenses:
Investment advisory fees (Note B) 190,236
Custodian fees (Note B) 53,504
Administration fees (Note B) 44,233
Audit fees 17,182
Transfer agent fees 16,661
Directors' fees (Note B) 10,413
Legal fees 7,191
Insurance 5,438
Printing 4,470
Amortization of organizational costs (Note A) 2,656
Other 17,262
----------
Total Expenses 369,246
----------
Net Investment Income 42,553
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS:
Net realized loss from:
Investments (4,141,144)
Foreign currency related transactions (14,170)
Net change in unrealized depreciation in value of investments and translation
of other assets and liabilities denominated in foreign currency 4,560,410
----------
Net realized and unrealized gain on investments and foreign currency related
transactions 405,096
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 447,649
----------
----------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED JUNE 30, 1995 ENDED
(UNAUDITED) DECEMBER 31, 1994
------------------- -----------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss) $ 42,553 $ (124,967)
Net realized loss on investments and foreign currency related
transactions (4,155,314) (10,271,046)
Net change in unrealized appreciation/(depreciation) in value of
investments and translation of other assets and liabilities
denominated in foreign currency 4,560,410 (11,967,582)
------------------- -----------------
Net increase/(decrease) in net assets resulting from operations 447,649 (22,363,595)
------------------- -----------------
NET ASSETS:
Beginning of period 42,297,241 64,660,836
------------------- -----------------
End of period (including undistributed net investment income of
$42,553 and net investment loss of $124,967, respectively) $ 42,744,890 $ 42,297,241
------------------- -----------------
------------------- -----------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED MARCH 9, 1990*
JUNE 30, FOR THE YEAR ENDED DECEMBER 31, THROUGH
1995 --------------------------------------------- DECEMBER 31,
(UNAUDITED) 1994 1993 1992 1991 1990
----------- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $9.18 $14.03 $7.63 $7.72 $10.38 $13.78**
----------- --------- --------- --------- --------- -------
Net investment income/(loss) 0.00 (0.03) (0.03) 0.01 0.04 0.22
Net realized and unrealized
gain/(loss) on investments and
foreign currency related
transactions 0.09 (4.82) 6.43 (0.10) (2.65) (2.90)
----------- --------- --------- --------- --------- -------
Net increase/(decrease) in net
assets resulting from operations 0.09 (4.85) 6.40 (0.09) (2.61) (2.68)
----------- --------- --------- --------- --------- -------
Distributions to shareholders from:
Net investment income -- -- -- -- (0.05) (0.19)
Net realized gains and foreign
currency related transactions -- -- -- -- -- (0.53)
----------- --------- --------- --------- --------- -------
Total distributions to shareholders -- -- -- -- (0.05) (0.72)
----------- --------- --------- --------- --------- -------
Net asset value, end of period $9.27 $9.18 $14.03 $7.63 $7.72 $10.38
----------- --------- --------- --------- --------- -------
----------- --------- --------- --------- --------- -------
Market value, end of period $11.125 $12.00 $20.75 $9.00 $8.375 $9.875
----------- --------- --------- --------- --------- -------
----------- --------- --------- --------- --------- -------
Total investment return (a) (7.29)% (42.17)% 130.56% 7.53% (8.52)% (29.21)%***
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted) $42,745 $ 42,297 $64,661 $35,186 $35,590 $47,817
Ratio of expenses to average net
assets 1.94%(c) 1.83% 1.98% 2.04% 2.00% 2.15%(c)
Ratio of net investment
income/(loss) to average net
assets 0.22%(c) (0.25)% (0.30)% 0.09% 0.49% 2.05%(c)
Portfolio turnover 11.90%(b) 31.56% 63.77% 22.39% 32.27% 21.73%(c)
Average commission rate per share $ 0.01
<FN>
------------------------------
* Commencement of operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share offering expenses of $0.17 per share.
*** Restated to exclude underwriting discount.
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of
distributions at actual prices pursuant to the Fund's dividend reinvestment
plan. Total investment return does not reflect brokerage commissions or
initial underwriting discounts and has not been annualized.
(b) Not annualized.
(c) Annualized.
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
NOTE A. The Indonesia Fund, Inc. (the "Fund") was incorporated in Maryland on
January 8, 1990 and commenced operations on March 9, 1990. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company. Significant
accounting policies are as follows:
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities for which market quotations are
readily available are valued at the last sales price prior to the time of
determination, or, if no sales price is available at that time, at the closing
price quoted for the securities (but if bid and asked quotations are available
at the mean between the last current bid and asked prices). Securities that are
traded over-the-counter are valued at the mean between the current bid and the
asked prices, if available. Ministry of Finance Decree 1055 (1989) states that
foreign investors are allowed to purchase up to 49% of the shares offered to the
public in the primary market. When 49% of the shares offered to the public are
owned by foreign investors and a foreign market quotation is available, the
foreign quotation is used. If less than 49% of shares offered to the public are
owned by foreign investors, there is no foreign market quotation available,
therefore the local market quotation is used. Local shares trade at a discount
to foreign shares. All other securities and assets are valued at fair value as
determined in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The net asset value per share of the Fund is calculated weekly and at the end of
each month and at any other times determined by the Board of Directors.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the 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 an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention 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.
At December 31, 1994 the Fund had a capital loss carryover of $13,206,698 of
which $189,206 expires in 1999; $1,666,081 expires in 2000; $683,625 expires in
2001 and $10,667,786 expires in 2002.
Income received by the Fund from sources within Indonesia and other countries
may be subject to withholding and other taxes.
For U.S. federal income tax purposes, realized capital losses and foreign
exchange losses incurred after October 31, 1994, within the fiscal year, are
deemed to arise on the first day of the following fiscal year. The Fund incurred
and elected to defer such losses of $1,629,272 and $10,738, respectively.
Accumulated net realized losses differ for financial statement and tax purposes
primarily because of deferred post October capital losses and foreign exchange
losses. The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund 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
current rate of exchange.
(II) Purchases and sales of investment securities, income and expenses at
the rate of exchange prevailing on the respective dates of such
transactions.
11
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
The Fund does not isolate that portion of gains and losses in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities.
The Fund reports certain foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for federal income tax purposes.
DISTRIBUTION OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers if any, although it
currently expects to distribute such gains. An additional distribution may be
made to the extent necessary to avoid the payment of a 4% U.S. federal excise
tax. Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date.
OTHER: Costs incurred by the Fund in connection with its organization have been
amortized on a straight-line basis over a five-year period beginning at the
commencement of operations of the Fund.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuation in exchange rates.
Investment in Indonesian securities requires consideration of certain factors
that are not normally involved in investments in U.S. securities. The Indonesian
securities market is an emerging market characterized by a small number of
company listings, high price volatility and a relatively illiquid secondary
trading environment. These factors, coupled with restrictions on investment by
foreigners and other factors, limit the supply of securities available for
investment by the Fund. This will affect the rate at which the Fund is able to
invest in Indonesian securities, the purchase and sale prices for such
securities and the timing of purchases and sales.
The limited liquidity of the Indonesian securities markets may also affect the
Fund's ability to acquire or dispose of securities at a price and time that it
wishes to do so. Accordingly, in periods of rising market prices, the Fund may
be unable to participate in such price increases fully to the extent that it is
unable to acquire desired portfolio positions quickly; conversely, the Fund's
inability to dispose fully and promptly of positions in declining markets will
cause its net asset value to decline as the value of unsold positions is marked
to lower prices.
The number of shares available for investment by the Fund is also limited by the
fact that non-Indonesians are permitted to purchase only 49% of the listed
shares of Indonesian companies. A high proportion of the shares of many listed
Indonesian companies may be held by a limited number of persons, thus reducing
the number of listed shares available for purchase by foreigners.
NOTE B. BEA Associates serves as the Fund's investment adviser. As compensation
for its advisory services, BEA Associates receives from the Fund an annual fee,
calculated monthly and paid quarterly, equal to 1.00% of the Fund's average
weekly net assets. In addition, BEA receives from the Fund an administration fee
which represents a reimbursement of certain Fund expenses. For the six months
ended June 30, 1995, the advisory and administration fees amounted to $190,236
and $1,587, respectively.
Through June 22, 1995, PFPC Inc. ("PFPC") served as the Fund's administrator.
The Fund paid PFPC a fee that was computed monthly and paid quarterly at an
annual rate of 0.10% of the value of the Fund's average weekly net assets, with
a minimum annual fee. For the period January 1, 1995 through June 22, 1995, PFPC
earned $40,288 for administrative services.
12
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
Effective June 23, 1995, Bear Stearns Funds Management Inc. ("BSFM") serves as
the Fund's administrator. The Fund will pay BSFM a monthly fee that is computed
weekly at an annual rate of 0.10% of the first $100 million of the Fund's
average weekly net assets and 0.08% of amounts in excess of $100 million. For
the period June 23, 1995 through June 30, 1995, BSFM earned $1,710 for
administrative services.
The Fund pays each of its Directors who is not a director, officer or employee
of BEA Associates, the administrator, or any affiliate thereof an annual fee of
$5,000 plus $500 for each Board of Directors' meeting attended. In addition, the
Fund will reimburse these Directors for travel and out-of-pocket expenses
incurred in connection with Board of Directors meetings.
Through May 31, 1995, Brown Brothers Harriman & Co. served as the custodian for
the Fund's foreign assets and PNC Bank, N.A., served as the custodian of the
Fund's U.S. assets.
Effective June 1, 1995, Brown Brothers Harriman & Co. serves as custodian for
all of the Fund's U.S. and foreign assets.
NOTE C. The authorized capital stock of the Fund is 100,000,000 shares of common
stock, $0.001 par value. Of the 4,608,989 shares outstanding at June 30, 1995,
BEA Associates owned 7,169 shares.
NOTE D. For U.S. federal income tax purposes, the cost of securities owned at
June 30, 1995 was $43,970,854. Accordingly, the net unrealized depreciation of
investments (including investments denominated in foreign currrency) of
$1,465,378, was composed of gross appreciation of $8,359,727 for those
investments having an excess of value over cost and gross depreciation of
$9,825,105 for those investments having an excess of cost over value.
Purchases and sales of securities, other than short-term obligations, aggregated
$7,421,300 and $4,366,450, respectively, for the six months ended June 30, 1995.
NOTE E. The Fund, along with 15 other U.S. regulated investment companies for
which BEA serves as investment adviser, has a credit agreement with The First
National Bank of Boston. The agreement provides that each fund is permitted to
borrow an amount equal to the lesser of $50,000,000 or 25% of the net assets of
the fund. However, at no time shall the aggregate outstanding principal amount
of all loans to any of the 16 funds exceed $50,000,000. The line of credit will
bear interest at (i) the greater of the bank's prime rate or the Federal Funds
Effective Rate plus 0.50% or (ii) the Adjusted Eurodollar Rate plus 1.50%. The
Fund had no amounts outstanding under the line of credit agreement at June 30,
1995.
13
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
NOTE F. Quarterly Results of Operations:
<TABLE>
<CAPTION>
NET GAIN/(LOSS) NET INCREASE/
ON INVESTMENT AND (DECREASE)
FOREIGN CURRENCY IN NET ASSETS
INVESTMENT NET INVESTMENT DENOMINATED RESULTING FROM
INCOME INCOME TRANSACTIONS OPERATIONS MARKET PRICE
----------- ---------------- ------------------- ------------------- ON NYSE
TOTAL PER TOTAL PER TOTAL PER TOTAL PER -----------------
QUARTER ENDED (000) SHARE (000) SHARE (000) SHARE (000) SHARE HIGH LOW
------------------------- ---- ----- ------ ------- --------- ------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995........... $ 67 $0.01 $ (118) $ (0.03) $ (6,846) $ (1.48) $ (6,964) $ (1.51) $12.000 $ 9.375
June 30, 1995............ 344 0.08 161 0.03 7,251 1.57 7,412 1.60 12.250 9.500
---- ----- ------ ------- --------- ------- --------- -------
Totals................... $411 $0.09 $ 43 $ (0.00) $ 405 $ 0.09 $ 448 $ 0.09
---- ----- ------ ------- --------- ------- --------- -------
---- ----- ------ ------- --------- ------- --------- -------
March 31, 1994........... $ 34 $0.01 $ (207) $ (0.05) $ (15,635) $ (3.39) $ (15,842) $ (3.44) $20.500 $12.375
June 30, 1994............ 269 0.06 74 0.02 (532) (0.12) (458) (0.10) 15.375 12.000
September 30, 1994....... 360 0.08 132 0.03 342 0.08 474 0.11 15.500 11.750
December 31, 1994........ 110 0.02 (124) (0.03) (6,414) (1.39) (6,538) (1.42) 15.000 11.125
---- ----- ------ ------- --------- ------- --------- -------
Totals................... $773 $0.17 $ (125) $ (0.03) $ (22,239) $ (4.82) $ (22,364) $ (4.85)
---- ----- ------ ------- --------- ------- --------- -------
---- ----- ------ ------- --------- ------- --------- -------
March 31, 1993........... $ 63 $0.01 $ (138) $ (0.03) $ 5,444 $ 1.18 $ 5,306 $ 1.15 $10.375 $ 8.625
June 30, 1993............ 98 0.02 (114) (0.02) 3,484 0.76 3,370 0.74 11.625 9.000
September 30, 1993....... 411 0.09 187 0.04 4,459 0.97 4,646 1.01 14.000 10.250
December 31, 1993........ 178 0.04 (69) (0.02) 16,222 3.52 16,153 3.50 23.625 11.875
---- ----- ------ ------- --------- ------- --------- -------
Totals................... $750 $0.16 $ (134) $ (0.03) $ 29,609 $ 6.43 $ 29,475 $ 6.40
---- ----- ------ ------- --------- ------- --------- -------
---- ----- ------ ------- --------- ------- --------- -------
</TABLE>
--------------------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS
On April 25, 1995, the Fund's Annual Meeting of Shareholders was held and the
following matters were voted upon:
(1) To reelect two directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
BROKER
NAME OF DIRECTOR VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
----------------------------------------------- ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
Richard Francis................................ 2,699,167 -- 73,181 1,836,641
Daniel Sigg.................................... 2,700,367 -- 71,981 1,836,641
</TABLE>
In addition to the directors elected at the meeting, Peter Kaplan, C. Oscar
Morong, Jr., and William Priest continue to serve as directors of the Fund.
(2)To ratify the selection of Coopers & Lybrand L.L.P. as independent public
accountants for the year ending December 31, 1995.
<TABLE>
<CAPTION>
BROKER
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
---------- ------------- --------------- ----------
<S> <C> <C> <C>
2,734,521 11,037 26,790 1,836,641
</TABLE>
14
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DESCRIPTION OF THE FUND'S DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
Pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), each shareholder will be deemed to have elected, unless the Fund's
transfer agent, as the Plan Agent (the "Plan Agent"), is otherwise instructed by
the shareholder in writing, to have all distributions, net of any applicable
U.S. withholding tax, automatically reinvested in additional shares of the Fund.
Shareholders who do not participate in the Plan will receive all dividends and
distributions in cash, net of any applicable U.S. withholding tax, paid in
dollars by check mailed directly to the shareholder by the Plan Agent, as
dividend-paying agent. Shareholders who do not wish to have dividends and
distributions automatically reinvested should notify the Plan Agent for the
Fund, at the address set forth below. Dividends and distributions with respect
to shares registered in the name of a broker-dealer or other nominee (i.e., in
"street name") will be reinvested under the Plan unless such service is not
provided by the broker or nominee or the shareholder elects to receive dividends
and distributions in cash. A shareholder whose shares are held by a broker or
nominee that does not provide a dividend reinvestment program may be required to
have his shares registered in his own name to participate in the Plan. Investors
who own shares of the Fund's common stock registered in street name should
contact the broker or nominee for details concerning participation in the Plan.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Fund and (b) certain capital gains earned by the
Fund that are derived from securities of certain foreign issuers are subject to
taxes payable by the Fund at the time amounts are remitted. Such taxes, if any,
will be borne by the Fund and allocated to all shareholders in proportion to
their interests in the Fund.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the Board of Directors of the Fund declares an income dividend or a capital
gains distribution payable either in the Fund's common stock or in cash, as
shareholders may have elected, nonparticipants in the Plan will receive cash and
participants in the Plan will receive common stock to be issued by the Fund. If
the market price per share on the valuation date equals or exceeds net asset
value per share on that date, the Fund will issue new shares to participants
valued at net asset value or, if the net asset value is less than 95% of the
market price on the valuation date, then valued at 95% of the market price. If
net asset value per share on the valuation date exceeds the market price per
share on that date, participants in the Plan will receive shares of stock from
the Fund valued at the market price.
The valuation date is the dividend or distribution payment date or, if that date
is not a New York Stock Exchange trading day, the next preceding trading day. If
the Fund should declare an income dividend or capital gains distribution payable
only in cash, the Plan Agent will, as agent for the participants, buy Fund
shares in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts on, or shortly after, the payment date.
Participants in the Plan have the option of making additional cash payments to
the Plan Agent, semiannually, in any amount from $100 to $3,000, for investment
in the Fund's common stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about February 15
and August 15 of each year. Any voluntary cash payments received more than 30
days prior to these dates will be returned by the Plan Agent and interest will
not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent,
15
<PAGE>
THE INDONESIA FUND, INC.
------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
it is suggested that participants send in voluntary cash payments to be received
by the Plan Agent approximately 10 days before February 15 or August 15, as the
case may be. A participant may withdraw a voluntary cash payment by written
notice, if the notice is received by the Plan Agent not less than 48 hours
before the payment is to be invested. A participant's tax basis in his shares
acquired through his optional investment right will equal his cash payments to
the Plan, including any cash payments used to pay brokerage commissions
allocable to his acquired shares.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
In the case of a shareholder, such as a bank, broker or nominee, that holds
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions payable in either stock or cash. The Plan Agent's fees for the
handling of reinvestment of such dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage charges with respect to shares
issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, each participant will
be charged by the Plan Agent a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or the reinvestment of dividends
or capital gains distributions payable only in cash. Brokerage charges for
purchasing small amounts of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Plan Agent will be purchasing stock for all participants in blocks
and prorating the lower commission thus obtainable. Brokerage commissions will
vary based on, among other things, the broker selected to effect a particular
purchase and the number of participants on whose behalf such purchase is being
made. The Fund cannot predict, therefore, whether the cost to a participant who
makes a voluntary cash payment will be less than if a participant were to make
an open market purchase of the Fund's common stock on his own behalf.
The receipt of dividends and distributions in stock under the Plan will not
relieve participants of any income tax (including withholding tax) that may be
payable on such dividends or distributions.
The Fund and the Plan Agent reserve the right to terminate the Plan as applied
to any voluntary cash payments made and any dividend or distribution paid
subsequent to notice of the termination sent to the members of the Plan at least
30 days before the semiannual contribution date, in the case of voluntary cash
payments, or the record date for dividends or distributions. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to members of the Plan. All
correspondence concerning the Plan should be directed as follows: Inquiries made
before September 5, 1995 should be directed to PNC Bank, National Association,
c/o PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809 or by telephone
at 1-800-852-4750. Inquiries made on or after September 5, 1995, should be
directed to Bank of Boston, Investor Relations Department, P.O. Box 644, Mail
Stop 45-02-09, Boston, Massachusetts 02102-0644 or by telephone at
1-800-730-6001.
16
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<PAGE>
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<PAGE>
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--------------------------------------------------------------------------------
INVESTMENT ADVISER
THE INDONESIA FUND, INC.
BEA Associates
-----------------------------
New York, New York
ADMINISTRATOR
Bear Stearns Funds Management Inc.
New York, New York
TRANSFER AGENT AND REGISTRAR
PNC Bank, N.A.
Philadelphia, Pennsylvania
[LOGO]
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
This report, including the financial statements herein, is sent to the
shareholders of
THE INDONESIA FUND, INC.
the Fund for their information. The financial information included herein is
taken from the records of the Fund without examination by independent
accountants SEMI-ANNUAL REPORT
who do not express an opinion thereon. It is not a prospectus, circular or
represenJUNE 30, 1995
tation intended for use in the purchase or sale of shares of the Fund or of any
(UNAUDITED)
securities mentioned in this report.
