<PAGE>
[LOGO]
THE INDONESIA FUND, INC.
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February 26, 1996
Dear Shareholders:
We are pleased to report on the activities of The Indonesia Fund, Inc. (the
"Fund") for the year ended December 31, 1995.
The Fund began the year with a net asset value (NAV) of $9.18 per share. As of
December 31, 1995, the Fund was fully invested in Indonesian securities. Net
asset value at December 31, 1995 was $9.34 per share, representing a total
return of 1.7% for the year, compared with a return of 5.0% for the Jakarta
Composite Index during the same period.
MARKET COMMENTARY
The year ended 1995 was a difficult and dramatic one for the emerging markets,
with the first several months of the year dominated by the fallout from Mexico's
economic crisis. However, as 1996 begins, we have been cheered by the markedly
improving tone in Mexico and other Latin American equity markets. January 1996
was the third consecutive positive month for that region, something that has not
occurred since mid-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 and improving equity market conditions coming out of
Latin America 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 several months ago looking now to buy
in Indonesia and her neighboring markets. It now appears clearly to us that the
"Tequila Effect" -- the simultaneous decline of virtually all emerging equity
markets in sympathy with Mexico's crisis -- is effectively a thing of the past.
In addition, short-term equity market performance in Indonesia, as in many of
the Southeast Asian markets, 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, of course, has been generally positive, in that the interest rate
environment in the U.S. became increasingly benign during the course of 1995.
The U.S. Federal Reserve's (the "Fed") 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-term rates for the first time in
approximately three years. This was followed by additional easing moves in
December 1995 and in January 1996. The improving global interest rate scenario
was perhaps the most important factor in the Indonesian market's strong
performance during the last nine months of the year.
The Indonesian economy, meanwhile, continues to show vibrant growth. Final GDP
growth figures for 1995 should come in at approximately 7.5%, and we believe
that economic growth will continue in this range in
1
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THE INDONESIA FUND, INC.
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1996 and throughout the remainder of the decade. Domestic demand has been the
predominant driver of growth, although we expect momentum to move into the
export sector later in the decade, as the global trade environment is
increasingly liberalized and world trade consequently expands. Some minor
sluggishness may manifest itself later in 1996, prompted primarily by local
government moves toward a tighter monetary policy.
While inflation has so far remained largely stable at approximately 9% per year,
a gradually widening current account deficit and the sharply expanding money
supply are both signs that inflationary pressures are beginning to build. In
fact, the current account deficit, created by sluggish non-oil exports and
rapidly expanding imports, is the major area of concern about the Indonesian
economy, particularly in light of Mexico's problems in 1994 and 1995. A recent
19% increase in public sector salaries, while giving a welcome boost to domestic
consumption, is a meaningful sign of an incipient trend toward wage inflation
and may well in fact spark more aggressive wage demands in the private sector.
Clearly, the Indonesian government has shown little stomach for tighter fiscal
discipline, so some monetary tightening is the most likely alternative. Of
course, Indonesians have a good deal of experience of functioning (and
continuing to grow) in relatively high interest rate environments, so somewhat
higher interest rates are unlikely to have a dramatically deleterious effect on
earnings or GDP growth.
During the past two years, for the first time in memory, the primary topic of
political discourse has been the succession of President Suharto, who is in his
mid-70s and remains in robust good health. The president will soon complete his
sixth term of office, and besides vague comments that he does not intend to be
"a president for the rest of [his] life", he has not yet stated clearly whether
or not he intends to stand again. He has not, however, named or groomed any
obvious successor and many observers have begun to assume that Suharto will
remain to serve another term. As Indonesia has never in its history enjoyed a
peaceful transfer of power, investors have generally taken a positive view of
Suharto's likely seventh term.
Nonetheless, succession questions linger, and will continue to do so for as long
as Suharto remains in the presidency. At present, the dominant candidates spoken
of in this regard are Vice President, Try Sutrisno, a member of the military and
long-term protege of the president, and the Minister of Research and Technology,
Habibie. The Suharto and Habibie families have been close friends for many
decades and Habibie has worked hard in recent years to solidify his position in
the Indonesian power structure. Much of Habibie's advancement has been to the
detriment of the military, which has traditionally been at the center of
Indonesia's government and political establishment. In promoting his
industrialization programs, Habibie has alienated many military leaders,
depending instead upon appeals to populism and his leading role in the
Association of Muslim Intellectuals.
We continue to see good value in the Indonesian market, which is currently
trading at a price/earnings ratio of approximately 17.4 times prospective 1996
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
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THE INDONESIA FUND, INC.
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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 (the "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 16 and
17 of this report.
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, and we greatly appreciate your
continued support.
Sincerely,
[LOGO]
Stephen M. Swift
Chief Investment Officer*
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*Stephen M. Swift, who is a Managing Director of BEA Associates, is primarily
responsible for management of the Fund's assets. He has served the Fund in such
capacity since August 2, 1995. Mr. Swift joined BEA Associates (formerly Basic
Appraisals, Inc. and BEA Associates, Inc.) in June of 1995. Mr. Swift is the
Chief Investment Officer of the Fund and is also a Senior Vice President and
Investment Officer of The Emerging Markets Infrastructure Fund, Inc. and The
Emerging Markets Telecommunications Fund, Inc.
3
<PAGE>
THE INDONESIA FUND, INC.
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PORTFOLIO SUMMARY
AS OF DECEMBER 31, 1995 (unaudited)
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SECTOR ALLOCATION
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FOOD AND KINDRED PRODUCTS 14.30%
<S> <C>
Manufacturing 14.10%
Financial Services 13.30%
Beer, Beverages, Liquors and
Tobacco 12.00%
Telecommunications 7.60%
Automotive 7.20%
Pharmaceuticals 4.90%
Construction and Heavy Equipment 4.70%
Retailing 4.30%
Consumer Goods 3.50%
Housing 3.30%
Paper Products 2.80%
Transportation 2.30%
Other 5.70%
</TABLE>
THIS CHART REPRESENTS THE SECTOR ALLOCATION
OF TOTAL NET ASSETS OF THE FUND.
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TOP 10 HOLDINGS, BY ISSUER
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<TABLE>
<CAPTION>
PERCENT
OF
NET
HOLDING SECTOR ASSETS
<C> <S> <C> <C>
- ------------------------------------------------------------------------------------------
1. PT HM Sampoerna
Beer, Beverages, Liquors and Tobacco 7.66
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2. PT Astra International
Automotive 7.24
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3. PT Indo Food Sukses Makmur
Food and Kindred Products 6.94
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4. PT Bank International Indonesia
Financial Services 6.63
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5. PT Sari Husada
Food and Kindred Products 6.44
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6. Trias Sentosa
Manufacturing 5.92
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7. PT Semen Gresik
Manufacturing 5.72
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8. PT Kalbe Farma
Pharmaceuticals 4.91
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9. PT Telekomunikasi Indonesia
Telecommunications 4.38
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10. PT Gudang Garam
Beer, Beverages, Liquors and Tobacco 4.37
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</TABLE>
4
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THE INDONESIA FUND, INC.
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SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------------------------------------------------------------------------------------- ------------
<C> <S> <C>
EQUITY SECURITIES-99.98%
AUTOMOTIVE-7.24%
1,500,000 PT Astra International........................................................ $ 3,116,116
------------
BEER, BEVERAGES, LIQUORS AND TOBACCO-12.03%
180,000 PT Gudang Garam............................................................... 1,881,478
317,000 PT HM Sampoerna............................................................... 3,299,628
------------
5,181,106
------------
CHEMICALS-1.78%
833,800 PT Unggul Indah Corp.......................................................... 765,791
------------
CONSTRUCTION AND HEAVY EQUIPMENT-4.74%
320,000 PT Mulia Industrindo.......................................................... 902,690
606,000 PT United Tractors............................................................ 1,139,646
------------
2,042,336
------------
CONGLOMERATES-1.35%
698,000 PT Bimantara Citra+........................................................... 580,013
------------
CONSUMER GOODS-3.50%
260,000 PT Modern Photo Film.......................................................... 1,506,670
------------
FINANCIAL SERVICES-13.33%
831,250 PT Bank Dagang Nasional Indonesia............................................. 681,650
500,000 PT Bank Danamon Indonesia..................................................... 656,024
861,200 PT Bank International Indonesia............................................... 2,853,090
900,000 PT BBL Dharmala Finance....................................................... 944,675
575,000 PT Dharmala Intiland.......................................................... 314,345
600,000 PT Dharmala Sakti Sejahtera................................................... 291,931
------------
5,741,715
------------
FOOD AND KINDRED PRODUCTS-14.28%
620,830 PT Indo Food Sukses Makmur.................................................... 2,986,718
786,500 PT Japfa Comfeed Indonesia.................................................... 386,972
478,652 PT Sari Husada................................................................ 2,773,732
------------
6,147,422
------------
HOTELS-0.58%
766,500 PT Hotel Sahid Jaya International............................................. 251,421
------------
HOUSING-3.29%
260,500 PT Jaya Real Property......................................................... 723,453
323,520 PT Surya Toto Indonesia....................................................... 693,308
------------
1,416,761
------------
<CAPTION>
NO. OF VALUE
SHARES DESCRIPTION (NOTE A)
- ----------------------------------------------------------------------------------------- ------------
<C> <S> <C>
MANUFACTURING-14.10%
642,000 PT Asahimas Flat Glass+....................................................... $ 624,732
130,000 PT Indocement Tunggal Prakarsa................................................ 436,366
880,000 PT Semen Gresik............................................................... 2,463,153
1,142,000 Trias Sentosa................................................................. 2,547,212
------------
6,071,463
------------
PACKAGING-0.42%
446,000 PT Berlina.................................................................... 180,429
------------
PAPER PRODUCTS-2.76%
604,692 PT Indah Kiat Pulp & Paper.................................................... 442,974
504,497 PT Pabrik Kertas Tjiwi Kimia.................................................. 463,347
645,750 PT Surabaya Agung Industri Pulp & Kertas...................................... 282,419
------------
1,188,740
------------
PHARMACEUTICALS-4.91%
623,940 PT Kalbe Farma................................................................ 2,114,820
------------
REAL ESTATE-1.40%
374,000 PT Kawasan Industries......................................................... 605,204
------------
RETAILING-4.33%
1,059,000 PT Matahari Putra Prima....................................................... 1,864,192
------------
TELECOMMUNICATIONS-7.62%
22,000 PT Indo Satellite Corp. ADR................................................... 803,000
732,000 PT Kabel Indo Murni........................................................... 260,114
223,700 PT Supreme Cable Manufacturing Corp. (a)...................................... 332,639
75,000 PT Telekomunikasi Indonesia ADR+.............................................. 1,884,375
------------
3,280,128
------------
TRANSPORTATION-2.32%
1,404,000 PT Andayani Megah............................................................. 997,813
------------
TOTAL EQUITY SECURITIES (Cost $43,130,149)
(Notes A, D)............................................................ 99.98% 43,052,140
------------
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES............................................................0.02% 7,625
------------
NET ASSETS...............................................................100.00% $ 43,059,765
------------
------------
</TABLE>
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+ Security is non-income producing.
(a) With an additional 111,850 rights attached, expiring 1/3/96, with no
market value.
ADR American Depositary Receipts.
See accompanying notes to financial statements.
5
<PAGE>
THE INDONESIA FUND, INC.
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STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $43,130,149) (Note A) $43,052,140
Cash (Note A) 184,183
Dividends receivable 34,686
Prepaid insurance 3,225
-----------
Total Assets 43,274,234
-----------
LIABILITIES:
Payables:
Advisory fee (Note B) 116,576
Administration fees (Note B) 5,622
Other accrued expenses 92,271
-----------
Total Liabilities 214,469
-----------
NET ASSETS (applicable to 4,608,989 shares of common stock outstanding) (Note
C) $43,059,765
-----------
-----------
NET ASSET VALUE PER SHARE ($43,059,765 DIVIDED BY 4,608,989) $9.34
-----------
-----------
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 63,164,835
Accumulated net realized loss on investments and foreign currency related
transactions (20,031,346)
Net unrealized depreciation in value of investments and translation of other
assets and liabilities denominated in foreign currency (78,333)
-----------
Net assets applicable to shares outstanding $43,059,765
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
THE INDONESIA FUND, INC.
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income (Note A):
Dividends $ 913,420
Interest 73,219
Less: Foreign taxes withheld (162,397)
----------
Total Investment Income 824,242
----------
Expenses:
Investment advisory fees (Note B) 409,379
Custodian fees (Note B) 101,617
Administration fees (Note B) 67,834
Audit and legal fees 62,151
Printing 33,989
Insurance 30,924
Transfer agent fees 26,598
Directors' fees 21,056
Accounting fees 17,868
Other 30,382
----------
Total Expenses 801,798
----------
Net Investment Income 22,444
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS:
Net realized loss from:
Investments (5,194,656)
Foreign currency related transactions (12,731)
Net change in unrealized depreciation in value of investments and
translation of other assets and liabilities denominated in foreign currency 5,947,467
----------
Net realized and unrealized gain on investments and foreign currency related
transactions 740,080
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 762,524
----------
----------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE INDONESIA FUND, INC.
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994
----------------- ------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS FROM:
Operations:
Net investment income/(loss) $ 22,444 $ (124,967)
Net realized loss on investments and foreign currency related
transactions (5,207,387) (10,271,046)
Net change in unrealized appreciation/(depreciation) in value of
investments and translation of other assets and liabilities
denominated in foreign currency 5,947,467 (11,967,582)
----------------- ------------------
Net increase/(decrease) in net assets resulting from operations 762,524 (22,363,595)
----------------- ------------------
NET ASSETS:
Beginning of year 42,297,241 64,660,836
----------------- ------------------
End of year $ 43,059,765 $ 42,297,241
----------------- ------------------
----------------- ------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE INDONESIA FUND, INC.
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FINANCIAL HIGHLIGHTS
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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 PERIOD
FOR THE YEAR ENDED DECEMBER 31, MARCH 9, 1990*
----------------------------------------------- THROUGH
1995 1994 1993 1992 1991 DECEMBER 31, 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) -- (0.03) (0.03) 0.01 0.04 0.22
Net realized and unrealized gain/(loss) on
investments and foreign currency related
transactions 0.16 (4.82) 6.43 (0.10) (2.65) (2.90)
------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets resulting
from operations 0.16 (4.85) 6.40 (0.09) (2.61) (2.68)
------- ------- ------- ------- ------- -------
Dividends and distributions to shareholders
from:
Net investment income -- -- -- -- (0.05) (0.19)
Net realized gains on investments and foreign
currency related transactions -- -- -- -- -- (0.53)
------- ------- ------- ------- ------- -------
Total dividends and distributions to
shareholders -- -- -- -- (0.05) (0.72)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.34 $ 9.18 $14.03 $ 7.63 $ 7.72 $ 10.38
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Market value, end of period $10.125 $12.000 $20.750 $9.000 $8.375 $ 9.875
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Total investment return (a) (15.63)% (42.17)% 130.56% 7.46% (14.71)% (24.15)%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $43,060 $42,297 $64,661 $35,186 $35,590 $ 47,817
Ratio of expenses to average net assets 1.96% 1.83% 1.98% 2.04% 2.00% 2.15%(b)
Ratio of net investment income/(loss) to average
net assets 0.05% (0.25)% (0.30)% 0.09% 0.49% 2.05%(b)
Portfolio turnover 24.10% 31.56% 63.77% 22.39% 32.27% 17.68%(c)
</TABLE>
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* Commencement of investment operations.
** Initial public offering price of $15.00 per share less underwriting discount
of $1.05 per share and offering expenses of $0.17 per share.
(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 dividends and
distributions, if any, 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.
In addition, such returns have been restated to reflect the reinvestment of
dividends and distributions, if any, on the ex-dividend date.
(b) Annualized.
(c) Not annualized.
See accompanying notes to financial statements.
9
<PAGE>
THE INDONESIA FUND, INC.
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NOTES TO FINANCIAL STATEMENTS
The Indonesia Fund, Inc.
NOTE A. SIGNIFICANT
(the "Fund") was ACCOUNTING
POLICIES
incorporated in Maryland on January 8, 1990 and
commenced investment 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 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 of Indonesian
companies 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 generally trade at a discount to foreign shares when 49% of the shares
offered to the public are owned by foreign investors. All other securities and
assets are valued at the 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 Board of Directors has established
general guidelines for calculating fair value of non-publicly traded securities.
At December 31, 1995, the Fund held no securities valued in good faith by the
Board of Directors. The net asset value per share of the Fund is calculated
weekly, at the end of each month and at any other times determined by the Board
of Directors.
CASH: Deposits held at Brown Brothers Harriman & Co. (Grand Cayman), the
Fund's custodian, in a variable rate account are classified as cash. At December
31, 1995, the interest rate was 4.94% which resets on a daily basis. Amounts are
generally available on the same business day.
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 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 U.S. federal income and
excise taxes.
At December 31, 1995, the Fund had a capital loss carryover of $19,826,594 of
which $2,239,330 expires in 1999; $1,666,081 expires in 2000; $683,625 expires
in 2001; $8,617,662 expires in 2002, and $6,619,896 expires in 2003.
For U.S. federal income tax purposes, realized capital losses and foreign
exchange losses incurred after October 31, 1995, 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 $204,032 and $720, respectively.
Income received by the Fund from sources within Indonesia and other countries
may be subject to withholding and other taxes imposed by such countries.
FOREIGN CURRENCY TRANSLATIONS: 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; and
(II) purchases and sales of investment securities, income and expenses at the
relevant rates of
10
<PAGE>
THE INDONESIA FUND, INC.
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NOTES TO FINANCIAL STATEMENTS (continued)
exchange prevailing on the respective dates of such transactions.
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. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances.
The Fund reports certain foreign currency related transactions and foreign
taxes withheld on security transactions as components of realized gains for
financial reporting purposes, whereas such components are treated as ordinary
income for U.S. federal income tax purposes.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/depreciation on investments, foreign currency holdings,
and other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange losses represent foreign exchange gains and
losses from sales and maturities of debt securities, transactions in foreign
currencies and forward foreign currency contracts, exchange gains or losses
realized between the trade date and settlement date on security transactions,
and the difference between the amounts of interest and dividends recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received.
DISTRIBUTIONS 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.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
At December 31, 1995, the Fund reclassified $22,749 of realized foreign
currency losses to undistributed net investment income. In addition, the Fund
reclassified $305 of accumulated net investment loss to paid-in capital.
OTHER: Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations 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 is 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.
11
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THE INDONESIA FUND, INC.
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NOTES TO FINANCIAL STATEMENTS (continued)
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.
BEA Associates ("BEA")
NOTE B. AGREEMENTS
serves as the Fund's investment adviser with respect
to all investments. As compensation for its advisory services, BEA receives from
the Fund an annual fee, calculated weekly 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 year ended December 31, 1995, advisory and administration fees amounted
to $409,379 and $3,201, respectively.
Through June 22, 1995, PFPC Inc. ("PFPC") served as the Fund's administrator.
The Fund paid PFPC a fee that was computed weekly and paid quarterly at an
annual rate of 0.10% of the value of the Fund's average weekly net assets, which
was subject to a minimum annual fee. For the period January 1, 1995 through June
22, 1995, PFPC earned $41,796 for administrative services.
Effective June 23, 1995, Bear Stearns Funds Management Inc. ("BSFM") serves as
the Fund's administrator. The Fund pays 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 December 31, 1995, BSFM earned $22,837 for
administrative services.
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 for the
Fund's U.S. assets. Effective June 1, 1995, Brown Brothers Harriman & Co. serves
as the custodian for all of the Fund's U.S. and foreign assets.
Through September 4, 1995, PNC Bank, N.A. served as the Fund's transfer agent
and registrar. Effective September 5, 1995, The First National Bank of Boston
serves as the Fund's transfer agent and registrar.
The authorized capital
NOTE C. CAPITAL stock of the Fund is STOCK
100,000,000 shares of common stock, $0.001, par value.
Of the 4,608,989 shares outstanding at December 31, 1995, BEA owned 7,169
shares.
For U.S. federal income
NOTE D. INVESTMENT tax purposes, the cost of TRANSACTIONS
securities owned at December 31, 1995 was $43,130,149.
Accordingly, the net unrealized depreciation of investments (including
investments denominated in foreign currency) of $78,009, was composed of gross
appreciation of $3,309,040 for those investments having an excess of value over
cost and gross depreciation of $3,387,049 for those investments having an excess
of cost over value.
For the year ended December 31, 1995, purchases and sales of securities, other
than short-term obligations, were $13,368,632 and $9,510,977, respectively.
The Fund, along with
NOTE E. CREDIT 15 other U.S. regulated AGREEMENT
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 credit agreement during the year ended
December 31, 1995.
12
<PAGE>
THE INDONESIA FUND, INC.
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NOTES TO FINANCIAL STATEMENTS (continued)
NOTE F. QUARTERLY RESULTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
NET GAIN/(LOSS) NET
ON INVESTMENT INCREASE/ (DECREASE)
AND FOREIGN
NET CURRENCY IN NET
INVESTMENT INVESTMENT RELATED ASSETS RESULTING
INCOME INCOME/(LOSS) TRANSACTIONS FROM 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
September 30, 1995............ 342 0.07 132 0.03 838 0.18 970 0.21 11.000 9.500
December 31, 1995............. 71 0.02 (152) (0.03) (503) (0.11) (655) (0.14) 12.375 10.125
------ ------ ------- ------- --------- ------- --------- --------
Totals.................. $ 824 $ 0.18 $ 23 $ 0.00 $ 740 $ 0.16 $ 763 $ 0.16
------ ------ ------- ------- --------- ------- --------- --------
------ ------ ------- ------- --------- ------- --------- --------
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)
------ ------ ------- ------- --------- ------- --------- --------
------ ------ ------- ------- --------- ------- --------- --------
</TABLE>
13
<PAGE>
THE INDONESIA FUND, INC.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of The Indonesia Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Indonesia Fund, Inc., including the schedule of investments, as of December 31,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the periods presented. 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. Our procedures include confirmation of investments owned as of
December 31, 1995 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 The
Indonesia Fund, Inc. as of December 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 16, 1996
14
<PAGE>
THE INDONESIA FUND, INC.
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RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (unaudited)
On April 25, 1995, the annual meeting of shareholders of The Indonesia Fund,
Inc. (the "Fund") was held and the following matters were voted upon:
(1) To re-elect two directors to the Board of Directors of the Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR VOTES FOR VOTES WITHHELD NON-VOTES
- -------------------------------------------------------------- ---------- --------------- ----------
<S> <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 re-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>
VOTES FOR VOTES AGAINST VOTES WITHHELD NON-VOTES
---------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
2,734,521 11,037 26,790 1,836,641
</TABLE>
15
<PAGE>
THE INDONESIA FUND, INC.
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DESCRIPTION OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN
Pursuant to The Indonesia Fund, Inc.'s (the "Fund") 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,
16
<PAGE>
THE INDONESIA FUND, INC.
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DESCRIPTION OF DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN (continued)
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 to The First National 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.
17
<PAGE>
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INVESTMENT ADVISER
BEA Associates
New York, New York
ADMINISTRATOR
Bear Stearns Funds Management Inc.
New York, New York
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston
Boston, Massachusetts
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, Massachusetts
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
LEGAL COUNSEL
Willkie Farr & Gallagher
New York, New York
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in this report.
THE INDONESIA FUND, INC.
-----------------------------
[LOGO]
THE INDONESIA FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1995
