<PAGE>
(ART)
The Indonesia
Fund, Inc.
- -----------------
ANNUAL REPORT
DECEMBER 31, 1997
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders.................................................... 1
Portfolio Summary......................................................... 5
Schedule of Investments................................................... 6
Statement of Assets and Liabilities....................................... 7
Statement of Operations................................................... 8
Statement of Changes in Net Assets........................................ 9
Financial Highlights...................................................... 10
Notes to Financial Statements............................................. 11
Report of Independent Accountants......................................... 14
Results of Annual Meeting of Shareholders................................. 15
Description of InvestLink-SM- Program..................................... 16
</TABLE>
PICTURED ON THE COVER IS THE COURT HALL-KERTHA GOSA LOCATED IN KLUNGKUNG, BALI.
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS
February 6, 1998
DEAR SHAREHOLDER:
We are pleased to report on the activities of The Indonesia Fund, Inc. (the
"Fund") for the year ended December 31, 1997.
PERFORMANCE
At December 31, 1997, the Fund's net assets were $16.5 million. The Fund's net
asset value ("NAV") was $3.58 per share, as compared to $10.68 at December 31,
1996.
For the year ended December 31, 1997, the Fund's total return, based on NAV,
declined 66.5%. By comparison, the total return of the Morgan Stanley Capital
International Indonesia Index (the "Index") declined 74.4%. From the
commencement of investment operations on March 9, 1990 through December 31,
1997, the Fund's total return, based on NAV and assuming reinvestment of
dividends and distributions, declined 72.0%. The Index lost 78.0% during this
same period.
We attribute the Fund's outperformance of the Index in 1997 to a series of
favorable decisions. First, we started off the year aggressively overweighted
relative to the Index in interest rate-sensitive sectors such as banking and
property. This proved quite successful and was a major contributor to
outperformance in the year's first half. Toward midyear, we became somewhat more
cautious and gradually realized our profits in rate-sensitive issues. We then
allocated the proceeds to a more defensive combination of cash (which we allowed
to reach unprecedentedly high levels) and additional positions in the stocks of
dollar-earning companies.
INVESTMENT PERSPECTIVE
The period since our last report was particularly harsh for investors in
Indonesian equities. After gaining 6.2% (in dollar terms) during the first half
of 1997, the Morgan Stanley Capital International Indonesia Index plunged 75.9%
in the second half.
The immediate cause of the market's downturn was investors' battering of the
rupiah, initially as part of the more general "Asian Flu" of currency
depreciation that struck first in Thailand, Malaysia and the Philippines. A
deeper analysis, however, reveals that the flu epidemic only served to
exacerbate pre-existing problems that were specific to Indonesia. The problems
were rooted in the government's policy of managing the devaluation of the rupiah
against the dollar by an orderly 5% or so each year. Initially, investors viewed
this policy quite favorably, for several good reasons. It helped to maintain
Indonesia's economic competitiveness relative to that of its Asian neighbors;
generated higher predictability of earnings; and removed much of the uncertainty
from corporate investment planning.
Ironically, it was corporate assumptions based on managed devaluation that
ultimately undid the rupiah. By taking advantage of the policy to execute a
simple interest-rate arbitrage that profited from the dollar's strength versus
the rupiah, many Indonesian corporations engaged in substantial
dollar-denominated overborrowing. The result was a level of overborrowing
currently estimated at a minimum of $65 billion.
- --------------------------------------------------------------------------------
1
<PAGE>
LETTER TO SHAREHOLDERS
To stabilize the rupiah and undo the damage to the economy of overborrowing, the
government was forced both to allow the rupiah to freely float and reach
agreement with the International Monetary Fund on two separate financial bailout
packages. Some observers believe that the worst is probably over and recovery
will begin soon. We are less optimistic because, clearly, any recovery will be
long and difficult.
The corporate sector now faces significant challenges. The depreciation of the
rupiah, for example, means that debt-servicing costs have skyrocketed. Although
many creditors have rolled over short-term obligations or extended maturities on
outstanding debt to help stem the number of defaults, the fact that corporations
need dollars to service their debt will maintain downward pressure on the
rupiah's value. Corporations long accustomed to planning their expenditures with
relative certainty about the rupiah's value can no longer do so. Inefficiencies
in the key industries of banking and property has been exposed and must be
reduced through painful consolidation.
Short-term interest rates, which the government had to raise in order to defend
the rupiah, are now hovering around 30%, versus 10%-13% before the crisis. We
consider a reduction in rates unlikely in the near term. Overall, we expect a
sharp deterioration in Indonesian gross domestic product and corporate earnings
in the coming months.
The equity market also has political and environmental concerns. On the
political front, President Suharto's re-election in March is virtually
guaranteed, but he is 76 and in questionable health. In January, he announced
his choice for a running mate, which was the closest he has ever come to
publicly designating a successor. Investors, however, are skeptical that the
running mate has the popular and military support needed to maintain power in
the event of Suharto's demise.
As for the environment, Indonesia experienced its worst drought in 50 years. The
drought, in turn, caused a large-scale shortage of rice, a staple of the
Indonesian diet. Food prices and hence, inflation rose accordingly.
HIGHLIGHTED COMPANIES
To illustrate our stock selection process, we would like to discuss two of the
Fund's holdings, Gulf Indonesia Resources Ltd. and PT Indosat. [Note: the prefix
"PT" is the Indonesian equivalent of "Inc." or "Ltd."]
GULF INDONESIA RESOURCES LTD.
Gulf Indonesia Resources Ltd. ("GRL") has been engaged in the exploration,
development and production of crude oil and natural gas in Indonesia for over 35
years. Previously known as Asamera Oil, it was acquired in 1988 by Gulf Canada
Resources. The latter sold 28% of its equity in GRL in a late-September 1997
global public offering and continues to hold majority ownership.
Given the state of the Indonesian economy, one aspect of GRL's business profile
is most compelling for investors: because GRL exports its products to foreign
markets, virtually all of its revenues are in dollars. As a result, the
company's success does not depend on domestic economic conditions or stability
in the rupiah.
- --------------------------------------------------------------------------------
2
<PAGE>
LETTER TO SHAREHOLDERS
Numerous other factors make GRL shares an attractive long-term investment:
- - The oil and gas industry is vital to Indonesia's economic health, as it
accounts for about 20% each of domestic revenues and total exports. It is the
nation's largest earner of dollars. As such, the government has a huge
interest in maintaining the industry's viability.
- - We estimate that GRL's cash flow should rise approximately 60% per year
through 2000. It is important to note that this figure is based on previously
announced discoveries; the vast potential of GRL's as-yet unproven reserves
means that the actual figure could be even higher.
- - The size of proven reserves is projected to grow exponentially over the next
few years, while actual output should compound at an annual rate of about 50%.
- - GRL is significantly more investor-friendly than most Asian companies in two
important ways. First, top management is incentivized with stock options and
thus, highly shareholder-oriented. Second, financial statements are fully
compliant with U.S. accounting standards.
- - It is one of a handful of publicly traded Asian companies focused on the oil
and gas business. This enhances its potential diversification benefit both
within Indonesia-specific or broader Asian portfolios.
It is likely that investor perceptions regarding the general Indonesian
environment will play a disproportionate role in the direction of GRL shares for
some time. As long-term investors, though, we believe that the company's bright
fundamentals will ultimately be the driver of significant appreciation.
PT INDOSAT
PT Indosat ("Indosat") is Indonesia's dominant provider of international
long-distance telecommunication services, with a market share exceeding 90%. It
was founded in 1967 by ITT, which sold it to the Indonesian government in 1980.
Including the effect of its 1994 global offering of shares, Indosat is 65% owned
by the government. Contrary to its name, it does not directly participate in the
satellite business.
Indosat's competitive environment is advantageous. It jointly holds the legal
monopoly on international long-distance service with PT Satelit Palapa Indonesia
(commonly known as Satelindo), whose market share remains steady at about 10%.
The monopoly, moreover, does not expire until 2004.
Like those of Gulf Indonesia Resources Ltd.'s, Indosat's shares are unusually
appealing in today's environment because the company is well-insulated from the
woes of the Indonesian economy. Roughly 15% of revenues are dollar-denominated,
while expenses are in rupiah. Indosat actually benefits from the fall of the
rupiah in two important ways:
- - Much of its transactions with other international carriers are settled in the
other carriers' currencies, providing it with a revenue stream that rises in
value as the rupiah falls; and
- --------------------------------------------------------------------------------
3
<PAGE>
LETTER TO SHAREHOLDERS
- - Calling rates to Indonesia are quoted in rupiah, whose declining value serves
to stimulate greater international telephone traffic.
We also note that, unlike the vast majority of Indonesian companies, Indosat's
balance sheet is free of debt and awash in liquidity. As a result of these
factors, it is likely to be one of a scant few Indonesian companies to achieve
positive earnings growth over the next two years.
Indosat's favorable investment profile has hardly gone unnoticed by the market.
As we write, its American Depositary Receipts have risen about 70% since early
January alone. At current prices, investors are according Indosat a premium
valuation relative to most Indonesian stocks. As long as the overall Indonesian
situation remains sensitive, we suspect that investors will be willing to pay
such a premium for the few financially sound, profitable companies best able to
function.
OUTLOOK
The environment for Indonesian equities is unlikely to improve much in the near
term. For the time being, we are managing the Fund in a defensive manner
consisting of two main elements. First, we are maintaining a higher-than-usual
cash balance. Second, we are focusing stock selection on well-managed,
higher-quality companies that either are dollar-earners (E.G., Gulf Indonesia
Resources Ltd., Indosat, Indah Kiat Pulp & Paper) or have relatively low dollar-
denominated debt and high cash levels. There is considerable brightness on the
long-term investment horizon due to the significant cuts in asset valuations in
the past several months, but we must weather the current storm in order to reach
that point.
Sincerely,
/s/ Stephen M. Swift
Stephen M. Swift*
Chief Investment Officer
- --------------------------------------------------------------------------------
* Stephen M. Swift is primarily responsible for management of the Fund's assets.
He has served the Fund in such capacity since August 2, 1995. Mr. Swift is a
Managing Director at Credit Suisse Asset Management Limited ("CSAM"). From June
1995 to February 1997, he was a Managing Director of BEA Associates. Prior to
that time, he was head of Global Equities at CSAM.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
<S> <C> <C>
AS A PERCENT OF NET ASSETS 12/31/97 12/31/96
Agriculture 4.26% 0.00%
Automotive 0.66% 8.39%
Beer, Beverages, Liquors and
Tobacco 10.24% 10.65%
Conglomerates 0.61% 4.06%
Construction & Heavy Equipment 2.18% 5.21%
Financial Services 0.58% 22.41%
Food & Kindred Products 0.00% 6.34%
Housing 0.00% 2.83%
Manufacturing 2.96% 9.00%
Oil Exploration & Production 10.76% 0.00%
Paper Products 7.47% 1.23%
Pharmaceuticals 1.82% 4.11%
Real Estate 0.00% 6.74%
Retailing 1.71% 4.06%
Telecommunications 17.65% 6.47%
Textiles 3.31% 0.00%
Transportation 0.00% 2.72%
Other 0.98% 2.38%
Cash & Other Assets 34.81% 3.40%
</TABLE>
TOP 10 HOLDINGS, BY ISSUER
<TABLE>
<CAPTION>
Percent of Net
Holding Sector Assets
<C> <S> <C> <C>
- -------------------------------------------------------------------------------------------------
1. Gulf Indonesia Resources Ltd. Oil Exploration & Production 10.8
- -------------------------------------------------------------------------------------------------
2. PT Indosat Telecommunications 9.5
- -------------------------------------------------------------------------------------------------
3. PT Gudang Garam Beer, Beverages, Liquors & Tobacco 8.4
- -------------------------------------------------------------------------------------------------
4. PT Telekomunikasi Indonesia Telecommunications 8.2
- -------------------------------------------------------------------------------------------------
5. PT Indah Kiat Pulp & Paper Corp. Paper Products 5.1
- -------------------------------------------------------------------------------------------------
6. PT London Sumatra Indonesia Agriculture 4.3
- -------------------------------------------------------------------------------------------------
7. PT Indorama Synthetics Textiles 2.9
- -------------------------------------------------------------------------------------------------
8. PT Pabrik Kertas Tjiwi Kimia Paper Products 2.3
- -------------------------------------------------------------------------------------------------
9. PT Citra Marga Nusaphala Persada Construction & Heavy Equipment 2.2
- -------------------------------------------------------------------------------------------------
10. PT Semen Gresik Manufacturing 2.0
- -------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
No. of Value
Description Shares (Note A)
<S> <C> <C>
- -----------------------------------------------------
EQUITY OR EQUITY-LINKED SECURITIES-65.19%
AGRICULTURE-4.26%
PT London Sumatra
Indonesia............... 1,235,600 $ 702,046
-----------
AUTOMOTIVE-0.66%
PT Astra International... 420,000 108,818
-----------
BEER, BEVERAGES, LIQUORS & TOBACCO-10.24%
PT Gudang Garam.......... 910,000 1,385,682
PT HM Sampoerna.......... 400,000 301,818
-----------
1,687,500
-----------
CHEMICALS-0.98%
PT Unggul Indah Corp..... 667,600 160,831
-----------
CONGLOMERATES-0.61%
PT Bimantara Citra....... 530,000 101,182
-----------
CONSTRUCTION & HEAVY EQUIPMENT-2.18%
PT Citra Marga Nusaphala
Persada................. 3,300,000 360,000
-----------
FINANCIAL SERVICES-0.58%
PT Bank Dagang Nasional
Indonesia, Warrants
(expiring 2/14/00)+..... 931,626 8,639
PT Bank Internasional
Indonesia............... 632 37
PT Bank Negara
Indonesia............... 914,000 87,246
-----------
95,922
-----------
MANUFACTURING-2.96%
PT Semen Gresik.......... 566,000 331,882
PT Trias Sentosa......... 3,426,000 155,727
-----------
487,609
-----------
OIL EXPLORATION & PRODUCTION-10.76%
Gulf Indonesia Resources
Ltd.*................... 80,655 1,774,410
-----------
<CAPTION>
No. of Value
Description Shares (Note A)
- -----------------------------------------------------
<S> <C> <C>
PAPER PRODUCTS-7.47%
PT Indah Kiat Pulp &
Paper Corp.++........... 4,782,500 $ 847,807
PT Pabrik Kertas Tjiwi
Kimia................... 1,566,311 384,458
-----------
1,232,265
-----------
PHARMACEUTICALS-1.82%
PT Kalbe Farma........... 1,687,880 299,215
-----------
RETAILING-1.71%
PT Matahari Putra
Prima................... 3,436,000 281,127
-----------
TELECOMMUNICATIONS-17.65%
PT Indosat............... 841,500 1,560,600
PT Telekomunikasi
Indonesia............... 930,000 494,591
PT Telekomunikasi
Indonesia ADR........... 77,250 854,578
-----------
2,909,769
-----------
TEXTILES-3.31%
PT Great River
International........... 900,000 73,636
PT Indorama Synthetics... 1,060,000 472,182
-----------
545,818
-----------
TOTAL INVESTMENTS-65.19%
(Cost $24,899,539) (Notes A,D)......... 10,746,512
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES-34.81%..................... 5,739,219
-----------
NET ASSETS-100.00%...................... $16,485,731
-----------
-----------
- ---------------------------------------------------------
* Security is traded on the New York Stock Exchange.
+ Security is non-income producing.
++ Includes 5 warrants, expiring 7/11/02, with a market
value of $0.14.
ADR American Depositary Receipts.
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (Cost $24,899,539)
(Note A)............................... $ 10,746,512
Cash (including $7 of foreign currency
with a cost of $7) (Note A)............ 5,833,576
Receivable for investments sold......... 350,955
Prepaid expenses........................ 14,892
------------
Total Assets............................ 16,945,935
------------
LIABILITIES
Payables:
Investments purchased................. 318,200
Investment advisory fee (Note B)...... 59,175
Administration fees (Note B).......... 3,700
Other accrued expenses................ 79,129
------------
Total Liabilities....................... 460,204
------------
NET ASSETS (applicable to 4,608,989
shares of common stock outstanding)
(Note C)............................... $ 16,485,731
------------
------------
NET ASSET VALUE PER SHARE ($16,485,731
DIVIDED BY 4,608,989)................. $3.58
------------
------------
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......................... 63,035,295
Accumulated net realized loss on
investments and foreign currency
related transactions................... (32,407,680)
Net unrealized depreciation in value of
investments and translation of other
assets and liabilities denominated in
foreign currency....................... (14,146,493)
------------
Net assets applicable to shares
outstanding............................ $ 16,485,731
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Income (Note A):
Dividends............................. $ 966,561
Interest.............................. 121,177
Less: Foreign taxes withheld.......... (140,055)
------------
Total Investment Income............... 947,683
------------
Expenses:
Investment advisory fees (Note B)..... 425,631
Custodian fees........................ 109,100
Printing.............................. 51,868
Audit and legal fees.................. 48,345
Administration fees (Note B).......... 48,094
Accounting fees....................... 33,500
Transfer agent fees................... 23,840
Directors' fees....................... 20,940
NYSE listing fees..................... 16,169
Insurance............................. 14,460
Other................................. 14,328
------------
Total Expenses........................ 806,275
------------
Net Investment Income................. 141,408
------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized loss from:
Investments........................... (7,567,506)
Foreign currency related
transactions......................... (339,409)
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities
denominated in foreign currency........ (24,971,829)
------------
Net realized and unrealized loss on
investments and foreign currency
related transactions................... (32,878,744)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................ $(32,737,336)
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1997 1996
<S> <C> <C>
-----------------------------------
INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income................. $ 141,408 $ 45,224
Net realized loss on investments and
foreign currency related
transactions......................... (7,906,915) (4,785,591)
Net change in unrealized
appreciation/(depreciation) in value
of investments and translation of
other assets and liabilities
denominated in foreign currency...... (24,971,829) 10,903,669
-------------- --------------
Net increase/(decrease) in net
assets resulting from operations... (32,737,336) 6,163,302
-------------- --------------
NET ASSETS
Beginning of year....................... 49,223,067 43,059,765
-------------- --------------
End of year............................. $ 16,485,731 $ 49,223,067
-------------- --------------
-------------- --------------
</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
Period
March 9,
1990*
For the Years Ended December 31, through
-------------------------------------------------------------------------------- December 31,
1997 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period....................... $10.68 $9.34 $9.18 $14.03 $7.63 $7.72 $10.38 $13.78**
-------- -------- -------- -------- -------- -------- -------- -------------
Net investment
income/(loss)................ 0.03 0.01 -- (0.03) (0.03) 0.01 0.04 0.22
Net realized and unrealized
gain/(loss) on investments
and foreign currency
transactions................. (7.13) 1.33 0.16 (4.82) 6.43 (0.10) (2.65) (2.90)
-------- -------- -------- -------- -------- -------- -------- -------------
Net increase/(decrease) in net
assets resulting from
operations................... (7.10) 1.34 0.16 (4.85) 6.40 (0.09) (2.61) (2.68)
-------- -------- -------- -------- -------- -------- -------- -------------
Dividends and distributions to
shareholders:
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....................... $3.58 $10.68 $9.34 $9.18 $14.03 $7.63 $7.72 $10.38
-------- -------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------- -------------
Market value, end of period... $4.625 $9.750 $10.125 $12.000 $20.750 $9.000 $8.375 $9.875
-------- -------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------- -------------
Total investment return(a).... (52.56)% (3.70)% (15.63)% (42.17)% 130.56% 7.46% (14.71)% (24.15)%
-------- -------- -------- -------- -------- -------- -------- -------------
-------- -------- -------- -------- -------- -------- -------- -------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)..................... $16,486 $49,223 $43,060 $42,297 $64,661 $35,186 $35,590 $47,817
Ratio of expenses to average
net assets................... 1.89% 1.91% 1.96% 1.83% 1.98% 2.04% 2.00% 2.15%(b)
Ratio of net investment
income/(loss) to average net
assets....................... 0.33% 0.10% 0.05% (0.25)% (0.30)% 0.09% 0.49% 2.05%(b)
Portfolio turnover rate....... 48.19% 34.67% 24.10% 31.56% 63.77% 22.39% 32.27% 17.68%
Average commission rate per
share(c)..................... $0.0052 $0.0096 -- -- -- -- -- --
</TABLE>
- ---------------------------------------------------------------------------
* 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 program. Total investment return does not
reflect brokerage commissions or initial underwriting discounts and
has not been annualized.
(b) Annualized.
(c) Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during
the respective periods for which commissions were charged, as required
by the SEC for fiscal years beginning on or after September 1, 1995.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
The Indonesia Fund, Inc. (the "Fund") was 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:
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make certain
estimates and assumptions that may affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
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 467 (1997) states that
foreign investors are now allowed to purchase up to 100% of the shares of
Indonesian companies offered to the public in the primary market, except for
shares in the banking sector. In the banking sector, foreign investors are
allowed to purchase up to 49% of the shares offered to the public in the primary
market. When 49% of such shares are owned by foreign investors and a foreign
market quotation available, the foreign quotation is used. If less than 49% of
these 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 banking shares generally trade at a discount to foreign banking
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. At December 31, 1997, the
Fund held no such securities. 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 currently 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., the Fund's custodian, in a
variable rate account are classified as cash. At December 31, 1997, the interest
rate was 5.00% which resets on a daily basis. Amounts on deposit 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, 1997, the Fund had a capital loss carryover for U.S. federal
income tax purposes of $27,780,961 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; $6,619,896 expires in 2003 ; $4,688,411 expires in 2004 and $3,265,956
expires in 2005.
For U.S. federal income tax purposes, realized capital losses and foreign
exchange losses incurred after October 31, 1997, 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 $4,555,905 and $70,814, respectively.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 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.
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 in value of investments and translation of
other assets and liabilities denominated in foreign currency.
Net realized foreign exchange losses represent foreign exchange gains and losses
from 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. 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, 1997, the Fund reclassified $141,408 of net foreign currency
losses against net investment income.
In addition, the Fund reclassified net realized losses of $129,540 from foreign
currency related transactions 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 certain
investments by foreigners and other factors, may 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
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
THE INDONESIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 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, in
the banking sector only, by the fact that non-Indonesians are permitted to
purchase only 49% of the listed shares of Indonesian finance companies. A high
proportion of the shares of many listed Indonesian finance companies may be held
by a limited number of persons, thus reducing the number of listed shares
available for purchase by foreigners.
NOTE B. AGREEMENTS
BEA Associates ("BEA") 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. For the year ended December 31, 1997, BEA
earned $425,631 for advisory services. BEA also provides certain administrative
services to the Fund and is reimbursed by the Fund for costs incurred on behalf
of the Fund (up to $20,000 per annum). For the year ended December 31, 1997, BEA
was reimbursed $5,544 for administrative services rendered to the Fund.
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 year ended December 31,
1997, BSFM earned $42,550 for administrative services.
Effective April 22, 1997, Credit Suisse Asset Management Limited ("CSAM") was
approved by the Fund's shareholders to serve as the Fund's investment
sub-adviser. In return for its services, CSAM is paid by BEA a quarterly fee of
$18,750. Both BEA and CSAM are part of the Credit Suisse Asset Management
Business Unit, which is controlled by Credit Suisse First Boston (a Swiss Bank).
NOTE C. CAPITAL STOCK
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 December 31, 1997, BEA
owned 7,169 shares.
NOTE D. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1997 was $24,899,539. Accordingly, the net unrealized depreciation of
investments (including investments denominated in foreign currency) of
$14,153,027, was composed of gross appreciation of $13,762 for those investments
having an excess of value over cost and gross depreciation of $14,166,789 for
those investments having an excess of cost over value.
For the year ended December 31, 1997, purchases and sales of securities, other
than short-term obligations, were $18,861,464 and $23,115,376, respectively.
NOTE E. CREDIT AGREEMENT
The Fund, along with 18 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 19 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
maximum amount outstanding under the credit agreement was $600,000 and averaged
$1,644 with an average interest rate of 8.50% during the year ended December 31,
1997. The Fund had no amounts outstanding under the credit agreement at December
31, 1997.
- --------------------------------------------------------------------------------
13
<PAGE>
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,
1997 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 included confirmation of investments owned as of
December 31, 1997 by correspondence with the custodians, brokers and issuers. 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, 1997, 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 the 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 18, 1998
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14
<PAGE>
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 22, 1997, 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 FOR WITHHELD NON-VOTES
- ------------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
C. Oscar Morong, Jr. 2,651,577 118,839 1,838,573
William W. Priest, Jr. 2,651,077 119,339 1,838,573
</TABLE>
In addition to the directors re-elected at the meeting, Richard H. Francis and
Peter Kaplan 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, 1997.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
2,685,525 80,710 4,181 1,838,573
</TABLE>
(3) To approve a sub-advisory agreement with Credit Suisse Asset Management
Limited.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
2,624,493 114,010 11,798 1,858,688
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM
The InvestLink Program is sponsored and administered by The First National Bank
of Boston, not by The Indonesia Fund, Inc. (the "Fund"). The First National Bank
of Boston will act as program administrator (the "Program Administrator") of the
InvestLink Program (the "Program"). The purpose of the Program is to provide
interested investors with a simple and convenient way to invest funds and
reinvest dividends in Shares of the Fund's common stock ("Shares") at prevailing
prices, with reduced brokerage commissions and fees.
An interested investor may join the Program at any time. Purchases of Shares
with funds from a participant's cash payment or automatic account deduction will
begin on the next day on which funds are invested. If a participant selects the
dividend reinvestment option, automatic investment of dividends generally will
begin with the next dividend payable after the Program Administrator receives
his enrollment form. Once in the Program, a person will remain a participant
until he terminates his participation or sells all Shares held in his Program
account, or his account is terminated by the Program Administrator. A
participant may change his investment options at any time by requesting a new
enrollment form and returning it to the Program Administrator.
A participant will be assessed certain charges in connection with his
participation in the Program. First-time investors will be subject to an initial
service charge which will be deducted from their initial cash deposit. All
optional cash deposit investments will be subject to a service charge. Sales
processed through the Program will have a service fee deducted from the net
proceeds, after brokerage commissions. In addition to the transaction charges
outlined above, participants will be assessed per share processing fees (which
include brokerage commissions.) Participants will not be charged any fee for
reinvesting dividends.
The number of Shares to be purchased for a participant depends on the amount of
his dividends, cash payments or bank account or payroll deductions, less
applicable fees and commissions, and the purchase price of the Shares. The
Program Administrator uses dividends and funds of participants to purchase
Shares of Company Common Stock in the open market. Such purchases will be made
by participating brokers as agent for the participants using normal cash
settlement practices. All Shares purchased through the Program will be allocated
to participants as of the settlement date, which is usually three business days
from the the purchase date. In all cases, transaction processing will occur
within 30 days of the receipt of funds, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of the
Federal Securities laws or when unusual market conditions make prudent
investment impracticable. In the event the Program Administrator is unable to
purchase Shares within 30 days of the receipt of funds, such funds will be
returned to the participants.
The average price of all Shares purchased by the Program Administrator with all
funds received during the time period from two business days preceding any
investment date up to the second business day preceding the next investment date
shall be the price per share allocable to a participant in connection with the
Shares purchased for his account with his funds or dividends received by the
Program Administrator during such time period. The average price of all Shares
sold by the Program Administrator pursuant to sell orders received during such
time period shall be the price per share allocable to a participant in
connection with the Shares sold for his account pursuant to his sell orders
received by the Program Administrator during such time period.
The First National Bank of Boston, as Program Administrator, administers the
Program for participants, keeps records, sends statements of
- --------------------------------------------------------------------------------
16
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
account to participants and performs other duties relating to the Program. Each
participant in the Program will receive a statement of his account following
each purchase of Shares. The statements will also show the amount of dividends
credited to such participant's account (if applicable), as well as the fees paid
by the participant. In addition, each participant will receive copies of the
Fund's Annual Report to shareholders, proxy statements and, if applicable,
dividend income information for tax reporting purposes.
If the Fund is paying dividends on the Shares, a participant will receive
dividends through the Program for all Shares held on the dividend record date on
the basis of full and fractional Shares held in his account, and for all other
Shares of the Fund registered in his name. The Program Administrator will send
checks to the participants for the amounts of their dividends that are not to be
automatically reinvested at no cost to the participants.
Shares of the Fund purchased under the Program will be registered in the name of
the accounts of the respective participants. Unless requested, the Fund will not
issue to participants certificates for Shares of the Fund purchased under the
Program. The Program Administrator will hold the Shares in book-entry form until
a Program participant chooses to withdraw his Shares or terminate his
participation in the Program. The number of Shares purchased for a participant's
account under the Program will be shown on his statement of account. This
feature protects against loss, theft or destruction of stock certificates.
A participant may withdraw all or a portion of the Shares from his Program
account by notifying the Program Administrator. After receipt of a participant's
request, the Program Administrator will issue to such participant certificates
for the whole Shares of the Fund so withdrawn or, if requested by the
participant, sell the Shares for him and send him the proceeds, less applicable
brokerage commissions, fees, and transfer taxes, if any. If a participant
withdraws all full and fractional Shares in his Program account, his
participation in the Program will be terminated by the Program Administrator. In
no case will certificates for fractional Shares be issued. The Program
Administrator will convert any fractional Shares held by a participant at the
time of his withdrawal to cash.
Participation in any rights offering, dividend distribution or stock split will
be based upon both the Shares of the Fund registered in participants' names and
the Shares (including fractional Shares) credited to participants' Program
accounts. Any stock dividend or Shares resulting from stock splits with respect
to Shares of the Fund, both full and fractional, which participants hold in
their Program accounts and with respect to all Shares registered in their names
will be automatically credited to their accounts.
All Shares of the Fund (including any fractional share) credited to his account
under the Program will be voted as the participant directs. The participants
will be sent the proxy materials for the annual meetings of shareholders. When a
participant returns an executed proxy, all of such Shares will be voted as
indicated. A participant may also elect to vote his Shares in person at the
Shareholders' meeting.
A participant will receive tax information annually for his personal records and
to help him prepare his U.S. federal income tax return. The automatic
reinvestment of dividends does not relieve him of any income tax which may be
payable on dividends. For further information as to tax consequences of
participation in the Program, participants should consult with their own tax
advisors.
The Program Administrator in administering the Program will not be liable for
any act done in good faith or for any good faith omission to act. However, the
Program Administrator will be liable for loss or damage due to error caused by
its negligence, bad faith or
- --------------------------------------------------------------------------------
17
<PAGE>
DESCRIPTION OF INVESTLINK* PROGRAM (CONTINUED)
willful misconduct. Shares held in custody by the Program Administrator are not
subject to protection under the Securities Investors Protection Act of 1970.
The participant should recognize that neither the Fund nor the Program
Administrator can provide any assurance of a profit or protection against loss
on any Shares purchased under the Program. A participant's investment in Shares
held in his Program account is no different than his investment in directly held
Shares in this regard. The participant bears the risk of loss and the benefits
of gain from market price changes with respect to all of his Shares. Neither the
Fund nor the Program Administrator can guarantee that Shares purchased under the
Program will, at any particular time, be worth more or less than their purchase
price. Each participant must make an independent investment decision based on
his own judgment and research.
While the Program Administrator hopes to continue the Program indefinitely, the
Program Administrator reserves the right to suspend or terminate the Program at
any time. It also reserves the right to make modifications to the Program.
Participants will be notified of any such suspension, termination or
modification in accordance with the terms and conditions of the Program. The
Program Administrator also reserves the right to terminate any participant's
participation in the Program at any time. Any question of interpretation arising
under the Program will be determined in good faith by the Program Administrator
and any such good faith determination will be final.
Any interested investor may participate in the Program. To participate in the
Program, an investor who is not already a registered owner of the Shares must
make an initial investment of at least $250.00. All other cash payments or bank
account deductions must be at least $100.00, up to a maximum of $100,000.00
annually. An interested investor may join the Program by reading the Program
description, completing and signing the enrollment form and returning it to the
Program Administrator. The enrollment form and information relating to the
Program (including the terms and conditions) may be obtained by calling the
Program Administrator at one of the following telephone numbers: First Time
Investors--(800) 969-3294; Current Shareholders--(800) 730-6001. All
correspondence regarding the Program should be directed to: The First National
Bank of Boston, InvestLink Program, P.O. Box 1681, Boston, MA 02105-1681.
- ---------------------------------------------
*InvestLink-SM- is a service mark of Boston EquiServe Limited
Partnership.
- --------------------------------------------------------------------------------
18
<PAGE>
SUMMARY OF GENERAL INFORMATION
The Fund--The Indonesia Fund, Inc.--is a closed-end, non-diversified management
investment company whose shares trade on the New York Stock Exchange. Its
principal investment objective is long-term capital appreciation with income as
a secondary objective through investments primarily in Indonesian equity and
debt securities. The Fund is managed and advised by BEA Associates ("BEA"). BEA
is a diversified asset manager, handling equity, balanced, fixed income,
international and derivative based accounts. Portfolios include international
and emerging market investments, common stocks, taxable and non-taxable bonds,
options, futures and venture capital. BEA manages money for corporate pension
and profit-sharing funds, public pension funds, union funds, endowments and
other charitable institutions and private individuals. As of December 31, 1997,
BEA managed approximately $34.2 billion in assets.
SHAREHOLDER INFORMATION
The market price is published in: THE NEW YORK TIMES (daily) under the
designation "Indones" and THE WALL STREET JOURNAL (daily), and BARRON'S (each
Monday) under the designation "IndonesiaFd". The Fund's New York Stock Exchange
trading symbol is IF. Weekly comparative net asset value (NAV) and market price
information about The Indonesia Fund, Inc.'s shares are published each Sunday in
THE NEW YORK TIMES and each Monday in THE WALL STREET JOURNAL and BARRON'S, as
well as other newspapers, in a table called "Closed End Funds."
THE BEA GROUP OF FUNDS
LITERATURE REQUEST--Call today for free descriptive information on the
closed-end funds or a prospectus on any of the open-end mutual funds listed
below. The prospectus contains more complete information, including fees,
charges and expenses, and should be read carefully before investing or sending
money.
<TABLE>
<S> <C>
CLOSED-END FUNDS BEA ADVISOR FUNDS
SINGLE COUNTRY OPEN-END MUTUAL FUNDS
The Brazilian Equity Fund, Inc. (BZL) BEA Emerging Markets Equity Fund
The Chile Fund, Inc. (CH) BEA Global Telecommunications Fund
The First Israel Fund, Inc. (ISL) BEA High Yield Fund
The Portugal Fund, Inc. (PGF) BEA International Equity Fund
MULTIPLE COUNTRY
The Emerging Markets Infrastructure Fund, Inc. (EMG)
The Emerging Markets Telecommunications Fund, Inc. (ETF)
The Latin America Equity Fund, Inc. (LAQ)
The Latin America Investment Fund, Inc. (LAM)
For shareholder information or a copy
FIXED INCOME of a prospectus for any of the
BEA Income Fund, Inc. (FBF) open-end mutual funds please call,
BEA Strategic Global Income Fund, Inc. (FBI) 1-800-401-2230.
For closed-end fund information Visit our website on the internet:
please call, 1-800-293-1232. http://www.beafunds.com
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
DIRECTORS AND CORPORATE OFFICERS
William W. Priest, Jr. Director and President
Richard H. Francis Director
Peter Kaplan Director
C. Oscar Morong, Jr. Director
Stephen M. Swift Chief Investment Officer
Michael A. Pignataro Chief Financial Officer and
Secretary
Hal Liebes Senior Vice President
Rocco A. Del Guercio Vice President
Wendy S. Setnicka Treasurer
INVESTMENT ADVISER
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022
ADMINISTRATOR
Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
SHAREHOLDER SERVICING AGENT
The First National Bank of Boston
P.O. Box 1865
Mail Stop 45-02-62
Boston, MA 02105-1865
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
LEGAL COUNSEL
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
[LOGO]
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.
- --------------------------------------------------------------------------------
3913-AR-97
