<PAGE>
As filed with the Securities and Exchange Commission
on November 20, 2000
Securities Act File No. 33-47744
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. /1/
Post-Effective Amendment No. / /
THE INDONESIA FUND, INC.
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue, 16th Floor, New York, New York 10017
(Address of Principal Executive Offices: Number,
Street, City, State, Zip Code)
(212) 875-3500
(Registrant's Area Code and Telephone Number)
-------------
Hal Liebes, Esq., Senior Vice President
The Indonesia Fund, Inc.
466 Lexington Avenue, 16th Floor
New York, New York 10017
(Name and Address of Agent for Service)
with copies to:
Daniel Schloendorn, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
======================== ==================== ====================== ======================== ====================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE (2)
======================== ==================== ====================== ======================== ====================
<S> <C> <C> <C> <C>
Common Stock 4,000,000 $2.625 $10,500,000 $2,772
($0.001 par value)
======================== ==================== ====================== ======================== ====================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended,
based on the five-day average of the high and low sales prices reported
on the New York Stock Exchange on October 9, 2000.
(2) Previously paid.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
THE INDONESIA FUND, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
- Cover Sheet
- Contents of Registration Statement
- Letter to Shareholders of The Indonesia Fund, Inc.
- Letter to Shareholders of Jakarta Growth Fund, Inc.
- Notice of Special Meeting of Shareholders of The Indonesia Fund, Inc.
- Notice of Special Meeting of Shareholders of Jakarta Growth Fund, Inc.
- Part A - Proxy Statement/Prospectus
- Part B - Statement of Additional Information
- Part C - Other Information
- Signature Page
- Exhibits
<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
<PAGE>
THE INDONESIA FUND, INC.
466 LEXINGTON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10017
November , 2000
Dear Shareholder:
We are pleased to invite you to a special meeting of shareholders of The
Indonesia Fund, Inc. (the "Fund"), a Maryland corporation.
The special meeting is scheduled to be held at 11:00 a.m., Eastern time, on
December 28, 2000, at the offices of Credit Suisse Asset Management, LLC, 466
Lexington Avenue, 16th Floor, New York, New York 10017. Shareholders who are
unable to attend this meeting are strongly encouraged to vote by proxy, which is
customary in corporate meetings of this kind. A Proxy Statement/Prospectus
regarding the meeting, a proxy card(s) for your vote at the meeting and an
envelope--postage prepaid--in which to return your proxy card are enclosed. At
the special meeting, you will be asked to vote on a Merger Agreement and Plan of
Reorganization, or the Merger Agreement, whereby Jakarta Growth Fund, Inc. (the
"Jakarta Fund"), a Maryland corporation, will merge with and into the Fund in
accordance with the Maryland General Corporation Law. As a result of the merger,
each share of common stock of the Jakarta Fund will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of full shares
(and the right to receive cash in lieu of fractional shares) of common stock of
the Fund, based on the net asset value per share of each fund.
The Fund will not issue any fractional shares to the Jakarta Fund
shareholders. The Fund will purchase all fractional shares at the current net
asset value of the shares and remit the cash proceeds to former shareholders of
the Jakarta Fund. The currently issued and outstanding shares of the Fund will
remain issued and outstanding.
The Board of Directors of the Fund believes that combining the two funds
will benefit Fund shareholders by providing the potential for:
- economies of scale,
- greater investment flexibility,
- a lower operating expense ratio, and
- enhanced market liquidity of the Fund's shares through the Fund's
continued listing on the New York Stock Exchange ("NYSE").
When combined with the Jakarta Fund, the Fund's asset level is expected to
be above the minimum level for continued listing on the NYSE, based on current
market values. The Board of Directors believes that, absent this combination,
the Fund's asset level may well fall significantly below the NYSE's continued
listing standards and, as a result, the Fund would be delisted from the NYSE.
Such an event had occurred with respect to the Jakarta Fund. The proposed merger
and investment policies of the funds are described in more detail in the
combined Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF YOUR FUND BELIEVES THAT THE PROPOSED MERGER IS IN
THE BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS THAT YOU READ THE ENCLOSED
MATERIALS CAREFULLY AND THEN VOTE "FOR" THE MERGER PROPOSAL.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not
<PAGE>
receive your signed proxy card(s) after a reasonable amount of time, you may
receive a telephone call from our proxy solicitor, Shareholder Communications
Corporation, reminding you to vote your shares.
Respectfully,
/s/ William W. Priest, Jr.
William W. Priest, Jr.
Chairman of the Board of Directors and President
YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE>
JAKARTA GROWTH FUND, INC.
180 MAIDEN LANE
NEW YORK, NEW YORK 10038-4936
November , 2000
Dear Shareholder:
We are pleased to invite you to a special meeting of shareholders of Jakarta
Growth Fund, Inc. (the "Jakarta Fund").
The special meeting is scheduled to be held at 11:00 a.m., Eastern time, on
December 28, 2000, at the offices of Nomura Asset Management U.S.A. Inc., 180
Maiden Lane, New York, New York 10038-4936. Shareholders who are unable to
attend this meeting are strongly encouraged to vote by proxy, which is customary
in corporate meetings of this kind. A Proxy Statement/Prospectus regarding the
meeting, a proxy card(s) for your vote at the meeting and an envelope--postage
prepaid--in which to return your proxy card are enclosed. At the special
meeting, you will be asked to vote on a Merger Agreement and Plan of
Reorganization, or the Merger Agreement, whereby the Jakarta Fund will merge
with and into The Indonesia Fund, Inc. (the "Indonesia Fund") in accordance with
the Maryland General Corporation Law. As a result of the merger each share of
common stock of the Jakarta Fund will convert into an equivalent dollar amount
(to the nearest one ten-thousandth of one cent) of full shares (and the right to
receive cash in lieu of fractional shares) of common stock of the Indonesia
Fund, based on the net asset value per share of each fund.
The Indonesia Fund will not issue any fractional shares to the Jakarta Fund
shareholders. The Indonesia Fund will purchase all fractional shares at the
current net asset value of the shares and remit the cash proceeds to the former
Jakarta Fund shareholders.
Like the Jakarta Fund, the Indonesia Fund is a closed-end, non-diversified
management investment company whose investment objective is long-term capital
appreciation by investing primarily in Indonesian equity securities. The
Indonesia Fund also seeks income as a secondary objective. While the Jakarta
Fund's shares are listed on the Boston Stock Exchange and trade on the OTC
Bulletin Board, the shares of the Indonesia Fund currently trade on the New York
Stock Exchange.
The Board of Directors of the Jakarta Fund believes that combining the two
funds will benefit Fund shareholders by providing enhanced market liquidity by
virtue of the Indonesia Fund's listing on the New York Stock Exchange, and the
potential for economies of scale resulting from a Fund with a larger asset base,
which can be expected to be reflected in a lower operating expense ratio for the
Indonesia Fund.
THE BOARD OF DIRECTORS OF YOUR FUND BELIEVES THAT THE PROPOSED MERGER IS IN
THE BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS THAT YOU READ THE ENCLOSED
MATERIALS CAREFULLY AND THEN VOTE "FOR" THE PROPOSAL.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your signed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote your shares.
Respectfully,
/s/ Nobuo Katayama
Nobuo Katayama
President
YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE>
THE INDONESIA FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of The Indonesia Fund, Inc.:
Please take notice that a special meeting of shareholders of The Indonesia
Fund, Inc. (the "Indonesia Fund"), a Maryland corporation, will be held at the
offices of Credit Suisse Asset Management, LLC, 466 Lexington Avenue, 16th
Floor, New York, New York 10017, on December 28, 2000, at 11:00 a.m., Eastern
time, to consider and vote upon the approval of a Merger Agreement and Plan of
Reorganization dated as of October 18, 2000 whereby Jakarta Growth Fund, Inc.
(the "Jakarta Fund"), a Maryland corporation, will merge with and into the
Indonesia Fund in accordance with the Maryland General Corporation Law.
The appointed proxies will vote in their discretion on any other business
that may properly come before the special meeting or any adjournments thereof.
Holders of record of shares of common stock of the Indonesia Fund at the
close of business on October 16, 2000 are entitled to vote at the special
meeting and at any postponements or adjournments thereof. Jakarta Fund
shareholders must approve the merger as well.
The persons named as proxies may propose one or more adjournments of the
special meeting if the necessary quorum to transact business or the vote
required to approve or reject the proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of the Indonesia Fund's shares present in person or by proxy at the special
meeting. The persons named as proxies will vote those proxies which they are
entitled to vote on the proposal in accordance with their best judgment in the
interest of the Indonesia Fund.
The enclosed proxy is being solicited on behalf of the Board of Directors of
the Indonesia Fund.
By Order of the Board of Directors,
/s/ Michael A. Pignataro
Michael A. Pignataro, Chief Financial Officer and Secretary
November , 2000
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE>
JAKARTA GROWTH FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Jakarta Growth Fund, Inc.:
Please take notice that a special meeting of shareholders of Jakarta Growth
Fund, Inc. (the "Jakarta Fund"), a Maryland corporation, will be held at the
offices of Nomura Asset Management U.S.A. Inc., 180 Maiden Lane, New York, New
York 10038-4936, on December 28, 2000, at 11:00 a.m., Eastern time, to consider
and vote upon the approval of a Merger Agreement and Plan of Reorganization
dated as of October 18, 2000 whereby the Jakarta Fund will merge with and into
The Indonesia Fund, Inc. (the "Indonesia Fund"), a Maryland corporation, in
accordance with the Maryland General Corporation Law.
The appointed proxies will vote in their discretion on any other business
that may properly come before the special meeting or any adjournments thereof.
Holders of record of shares of common stock of the Jakarta Fund at the close
of business on November 3, 2000 are entitled to vote at the special meeting and
at any postponements or adjournments thereof. The Indonesia Fund's shareholders
must approve the merger as well.
The persons named as proxies may propose one or more adjournments of the
special meeting if the necessary quorum to transact business or the vote
required to approve or reject the proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of the Jakarta Fund's shares present in person or by proxy at the special
meeting. The persons named as proxies will vote those proxies which they are
entitled to vote on the proposal in accordance with their best judgment in the
interest of the Jakarta Fund.
The enclosed proxy is being solicited on behalf of the Board of Directors of
the Jakarta Fund.
By Order of the Board of Directors,
/s/ John J. Boretti
John J. Boretti
Secretary
November , 2000
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE>
SUBJECT TO COMPLETION--DATED NOVEMBER 20, 2000
JAKARTA GROWTH FUND, INC.
180 MAIDEN LANE
NEW YORK, NEW YORK 10038-4936
(800) 833-0018
TO BE MERGED WITH AND INTO
THE INDONESIA FUND, INC.
466 LEXINGTON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10017
(212) 875-3500
PROXY STATEMENT
SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD DECEMBER 28, 2000
THE INDONESIA FUND, INC. PROSPECTUS
This Proxy Statement/Prospectus is being furnished to shareholders of
Jakarta Growth Fund, Inc. (the "Jakarta Fund") and The Indonesia Fund, Inc. (the
"Indonesia Fund") for use at special meetings of shareholders of each Fund to be
held on December 28, 2000 at 11:00 a.m., Eastern time, and at any and all
postponements or adjournments thereof. The special meeting of shareholders of
the Indonesia Fund will be held at the offices of Credit Suisse Asset
Management, LLC ("CSAM"), 466 Lexington Avenue, 16th Floor, New York, New York
10017. The special meeting of shareholders of the Jakarta Fund will be held at
the offices of Nomura Asset Management U.S.A. Inc. ("NAM-U.S.A."), 180 Maiden
Lane, New York, New York 10038-4936. The Indonesia Fund and the Jakarta Fund are
sometimes collectively referred to as the "Funds" and individually, as the
context may require, as the "Fund." The approximate mailing date of this Proxy
Statement/Prospectus is November , 2000.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS.
PURPOSE OF THE SPECIAL MEETINGS. At the special meetings, shareholders of
the Funds will be asked to approve a Merger Agreement and Plan of Reorganization
dated as of October 18, 2000 whereby the Jakarta Fund will merge with and into
the Indonesia Fund, in accordance with the Maryland General Corporation Law. The
Merger Agreement and Plan of Reorganization is referred to in this Proxy
Statement/Prospectus as the "Plan."
SPECIFICS OF THE PROPOSED MERGER. As a result of the merger, each share of
common stock of the Jakarta Fund will convert into an equivalent dollar amount
(to the nearest one ten-thousandth of one cent) of full shares (and the right to
receive cash in lieu of fractional shares) of common stock of the Indonesia
Fund, based on the net asset value per share of each Fund. Since the shares of
the Jakarta Fund do not currently trade on a national securities exchange within
the meaning of the Maryland General Corporation Law, its shareholders will be
entitled to exercise "appraisal rights." See "Information About the
Merger--Information on Appraisal Rights."
The Indonesia Fund will not issue any fractional shares to Jakarta Fund
shareholders. In lieu thereof, the Indonesia Fund will purchase all fractional
shares at their current net asset value and remit the cash proceeds to Jakarta
Fund shareholders in proportion to their fractional shares. The currently
<PAGE>
issued and outstanding shares of the Indonesia Fund will remain issued and
outstanding. It is expected that Jakarta Fund shareholders will recognize no
gain or loss for federal income tax purposes as a result of the merger, except
with respect to any cash proceeds received from the purchase of fractional
shares of the Indonesia Fund. These shareholders will be treated for federal
income tax purposes as if they received fractional share interests and then sold
such interests for cash.
INFORMATION ABOUT THE FUNDS. The Funds are closed-end, non-diversified
management investment companies with substantially similar investment
objectives. Both Funds seek to achieve long-term capital appreciation by
investing primarily in Indonesian equity securities. The Indonesia Fund also
seeks income as a secondary investment objective.
The terms and conditions of the merger are more fully described in this
Proxy Statement/ Prospectus and in the Plan, a copy of which is attached as
Exhibit A.
This Proxy Statement/Prospectus serves as a prospectus for shares of the
Indonesia Fund under the Securities Act of 1933, as amended, which is referred
to in this Proxy Statement/Prospectus as the "Securities Act," in connection
with the issuance of the Indonesia Fund common shares in the merger.
Assuming the shareholders of the Funds approve the merger and all other
conditions to the consummation of the merger have been satisfied or waived, the
Funds will jointly file articles of merger, or the Articles of Merger, with the
State Department of Assessments and Taxation of Maryland, or the Department. The
merger will become effective when the Department accepts for record the Articles
of Merger or at such later time, which may not exceed 30 days after the Articles
of Merger are accepted for record, as specified in the Articles of Merger. The
date when the Articles of Merger are accepted for record, or the later date, is
referred to in this Proxy Statement/Prospectus as the "Effective Date." The
Jakarta Fund, as soon as practicable after the Effective Date, will terminate
its registration under the Investment Company Act of 1940, as amended, which is
referred to in this Proxy Statement/Prospectus as the "Investment Company Act."
You should retain this Proxy Statement/Prospectus for future reference as it
sets forth concisely information about the Indonesia Fund and the Jakarta Fund
that you should know before voting on the proposals described below.
A Statement of Additional Information, which is referred to in this Proxy
Statement/Prospectus as the "SAI," dated November , 2000, which contains
additional information about the merger and the Funds has been filed with the
Securities and Exchange Commission, or SEC. The SAI is incorporated by reference
into this Proxy Statement/Prospectus. Copies of the SAI are available upon
request, without charge, by calling Shareholder Communications Corporation, the
Funds' proxy agent, at 1 (800) 403-7916. You may also submit your request in
writing to Shareholder Communications Corporation, Attn: MF proxy, 17 State
Street, New York, New York 10004. If you should have any questions regarding the
proxy material or how to execute your vote, you can call Shareholder
Communications Corporation at 1 (800) 403-7916. The Jakarta Fund has provided
the information included in this Proxy Statement/Prospectus regarding that Fund.
The Indonesia Fund has provided the information included in this Proxy
Statement/Prospectus regarding that Fund.
The Jakarta Fund's shares of common stock currently are listed on the Boston
Stock Exchange ("BSE") under the symbol "JGF". The Jakarta Fund also trades on
the OTC Bulletin Board under the symbol "JGFI". The Indonesia Fund's shares of
common stock currently are listed on the New York Stock Exchange ("NYSE") under
the symbol "IF". Reports, proxy materials and other information concerning each
Fund may be inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005 and the offices of the BSE, 100 Franklin Street, Boston,
Massachusetts 02110, as applicable.
The SEC has not approved or disapproved these securities or determined if
this Proxy Statement/ Prospectus is truthful or complete. To state otherwise is
a crime.
The date of this Proxy Statement/Prospectus is November , 2000
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
GENERAL..................................................... 4
PROPOSAL (BOTH FUNDS): APPROVAL OF THE MERGER AGREEMENT
AND PLAN OF REORGANIZATION PURSUANT TO WHICH THE JAKARTA
FUND WILL MERGE WITH AND INTO THE INDONESIA FUND............ 6
SYNOPSIS.................................................... 7
EXPENSE TABLE............................................... 12
FINANCIAL HIGHLIGHTS........................................ 14
RISK FACTORS AND SPECIAL CONSIDERATIONS..................... 16
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES............ 20
UNITED STATES FEDERAL INCOME TAXES.......................... 27
INFORMATION ABOUT THE MERGER................................ 28
ADDITIONAL INFORMATION ABOUT THE FUNDS...................... 34
MANAGEMENT OF THE FUNDS..................................... 44
EXPERTS..................................................... 53
REQUIRED VOTE............................................... 53
LEGAL PROCEEDINGS........................................... 53
LEGAL OPINIONS.............................................. 53
ADDITIONAL INFORMATION...................................... 53
</TABLE>
3
<PAGE>
GENERAL
This Proxy Statement/Prospectus is furnished to the shareholders of the
Funds in connection with the solicitation of proxies on behalf of the Boards of
Directors of the Indonesia Fund and the Jakarta Fund. The Board of Directors of
each Fund is soliciting proxies for use at the special meetings. The mailing
address for the Indonesia Fund is 466 Lexington Avenue, 16th Floor, New York,
New York 10017. The mailing address for the Jakarta Fund is 180 Maiden Lane, New
York, New York 10038-4936.
This Proxy Statement/Prospectus, the Notice of Meeting of Shareholders and
the proxy card(s) are first being mailed to shareholders on or about
November , 2000 or as soon as practicable thereafter. Any shareholder who
gives a proxy has the power to revoke the proxy either:
- by mail, addressed to the Secretary of the respective Fund, at the Fund's
mailing address, or
- in person at the special meeting
by executing a superseding proxy or by submitting a notice of revocation to the
respective Fund. All properly executed proxies received in time for the special
meetings will be voted as specified in the proxy or, if no specification is
made, in favor of each proposal for that Fund referred to in the Proxy
Statement/Prospectus.
The presence, either in person or by proxy, of the holders of a majority of
the outstanding shares of common stock entitled to vote at a meeting of a Fund
will constitute a quorum for the transaction of business by such Fund. For
purposes of determining the presence of a quorum for transacting business at a
meeting, abstentions and broker "non-votes" will be treated as shares that are
present. Broker non-votes are proxies received by the Funds from brokers or
nominees, indicating that the broker or nominee has neither received
instructions from the beneficial owner or other persons entitled to vote nor has
the discretionary power to vote on a particular matter. Shareholders are urged
to forward their voting instructions promptly.
The proposal requires the affirmative vote of at least 66 2/3% of the
outstanding shares of common stock of the Indonesia Fund and the affirmative
vote of at least a majority of the outstanding shares of common stock of the
Jakarta Fund. If the Merger is not approved, each Fund will continue as a
separate investment company, and the Board of Directors of each Fund will
consider such other alternatives as it determines to be in the best interests of
its shareholders.
Abstentions and broker non-votes will have the effect of a "no" vote for the
proposal.
Proxy solicitations will be made primarily by mail, but solicitations may
also be made by telephone, telegraph or personal interviews conducted by
officers or employees of the Funds, CSAM, the investment adviser to the
Indonesia Fund, NAM-U.S.A., the manager of the Jakarta Fund, Bear Stearns Funds
Management Inc., the administrator to the Indonesia Fund, or Shareholder
Communications Corporation, a proxy solicitation firm retained by each Fund and
entitled to receive a fee of approximately $5,000 and reimbursements for its
reasonable expenses. The Funds will bear the costs of solicitation, including:
- printing and mailing of this Proxy Statement/Prospectus and accompanying
material,
- the reimbursement of brokerage firms and others for their expenses in
forwarding solicitation material to the beneficial owners of each Fund's
shares,
- payment to Shareholder Communications Corporation, for its services in
soliciting proxies, and
- supplementary solicitations to submit proxies. See "Synopsis--Expenses of
the Merger."
Only shareholders of record of each Fund at the close of business on
October 16, 2000 (with respect to the Indonesia Fund) and November 3, 2000 (with
respect to the Jakarta Fund), each a
4
<PAGE>
Record Date, are entitled to vote. Each outstanding share of a Fund is entitled
to one vote on all matters voted upon at a special meeting for that Fund. As of
November 3, 2000 and as of October 16, 2000, there were 5,017,564 shares of the
Jakarta Fund outstanding and 4,608,989 shares of the Indonesia Fund outstanding,
respectively.
Each Fund provides periodic reports to its shareholders. These reports
highlight relevant information, including investment results and a review of
portfolio changes for each Fund. You may receive a copy of the most recent
annual report for a Fund and a copy of any more recent interim report, without
charge, by calling 1 (800) 403-7916 or writing to Shareholder Communications
Corporation, 17 State Street, New York, New York 10004.
The Boards of Directors of the Funds know of no business other than the
proposal described above which will be presented for consideration at the
special meetings. If any other matter is properly presented, it is the intention
of the persons named in the enclosed proxy to vote on that matter in their
discretion.
5
<PAGE>
PROPOSAL (BOTH FUNDS): APPROVAL OF THE MERGER AGREEMENT AND PLAN OF
REORGANIZATION PURSUANT TO WHICH THE JAKARTA FUND WILL MERGE WITH AND INTO THE
INDONESIA FUND
The Boards of Directors of the Indonesia Fund and the Jakarta Fund,
including a majority of the Directors of each Fund who are not "interested
persons" of the respective Fund, or the "Non-interested Directors," on
September 28, 2000 and on October 11, 2000, respectively, unanimously:
- declared the merger of the Jakarta Fund with and into the Indonesia Fund
advisable and in the best interests of each Fund and their existing
shareholders,
- approved entering into the Plan, and
- recommended that the Plan be approved by the shareholders of that Fund.
For more information about the merger, see "Information About the Merger."
The Plan is subject to the approval of the shareholders of both Funds and
certain other conditions, including the continued listing of the Indonesia Fund
on the NYSE through the date of the merger.
A copy of the Plan is attached to this Proxy Statement/Prospectus as Exhibit
A, and the description of the Plan included in this Prospectus/Proxy Statement
is qualified in its entirety by reference to Exhibit A.
The following provides a more detailed discussion about the merger, each
Fund and additional information that you may find helpful in deciding how to
vote on the Plan.
6
<PAGE>
SYNOPSIS
This summary highlights important information included in this Proxy
Statement/Prospectus. This summary is qualified by reference to the more
complete information included elsewhere in this Proxy Statement/Prospectus and
the Plan. Shareholders of the Funds should read this entire Proxy Statement/
Prospectus carefully.
THE PROPOSED MERGER. The Boards of Directors of the Indonesia Fund and the
Jakarta Fund, including the Non-interested Directors of each Fund, have
unanimously approved the Plan. The Plan provides for the merger of the Jakarta
Fund with and into the Indonesia Fund, referred to in this Proxy
Statement/Prospectus as the "Merger." As a result of the Merger:
- each share of common stock of the Jakarta Fund will convert into an
equivalent dollar amount (to the nearest one ten-thousandth of one cent)
of full shares (and the right to receive cash in lieu of fractional
shares) of common stock of the Indonesia Fund, based on the net asset
value per share of each Fund calculated at 4:00 pm on the Business Day
(defined as any day on which the NYSE is open for trading) preceding the
Effective Date,
- each shareholder of the Jakarta Fund will become a shareholder of the
Indonesia Fund and will receive, on the Effective Date, that number of
full shares of common stock of the Indonesia Fund having an aggregate net
asset value (disregarding fractional shares) equal to the aggregate net
asset value of such shareholder's shares held in the Jakarta Fund as of
the close of business on the Business Day preceding the Effective Date,
and
- the Indonesia Fund will not issue any fractional shares to the Jakarta
Fund shareholders. The Indonesia Fund will purchase all fractional shares
at the current net asset value of the shares and remit the cash proceeds
to former shareholders of the Jakarta Fund in proportion to their
fractional shares.
The Board of Directors of each Fund recommends approval of the Merger. If
the Merger is not approved, each Fund will continue as a separate investment
company, and the Board of Directors of each Fund will consider such other
alternatives as it determines to be in the best interests of its shareholders.
FORM OF ORGANIZATION. Both Funds are closed-end, non-diversified management
investment companies registered under the Investment Company Act. The Indonesia
Fund was organized as a Maryland corporation on January 8, 1990, and the Jakarta
Fund was organized as a Maryland corporation on January 29, 1990. Each Fund's
Board of Directors is responsible for the management of the business and affairs
of that Fund, including the supervision of the duties performed by that Fund's
investment manager.
INVESTMENT OBJECTIVES AND POLICIES. The following table highlights the
principal differences between the Funds' investment objectives and policies.
7
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT OBJECTIVES AND POLICIES JAKARTA FUND INDONESIA FUND
---------------------------------- ------------ --------------
<S> <C> <C>
Fundamental Investment Objective(1) To seek long-term capital To seek long-term capital
appreciation by investing appreciation (and income as a
primarily in equity securities secondary objective) by
of Indonesian companies and investing primarily in
non-Indonesian companies that Indonesian equity and debt
derive a significant proportion securities
of their revenue from Indonesia
or that hold a significant
proportion of their assets in
Indonesia
Fundamental Investment Policy(1) Investment of at least 65% of Investment of substantially
its total assets in Indonesian all, and at least 65%, of its
equity securities total assets in Indonesian
equity and debt securities
Investment in unlisted equity Up to 25% of its assets Up to 20% of its assets
securities(2) (including investments in new
and early stage companies)
Investment in debt securities(2) Up to 35% of its assets; may No limitation generally, except
not invest in lower-rated only up to 5% of its assets may
securities be invested in lower-rated debt
securities
</TABLE>
------------------
(1) The fundamental investment objectives and policies listed above can only
be changed with the approval of the holders of a majority of each Fund's
outstanding voting securities, as defined under the Investment Company Act.
(2) These investment policies are not fundamental and may be modified by the
Board of Directors of each Fund if, in the reasonable exercise of its
business judgment, the Board determines that modification is necessary or
appropriate to carry out the Fund's investment objective.
The preceding summary of the Funds' investment objectives and certain
policies should be considered in conjunction with the discussion below under
"Comparison of Investment Objectives and Policies." The Indonesia Fund, due to
its ability to invest in lower-rated debt securities and by investing a larger
portion of its assets in debt securities in general, is subject to certain risks
unique to the Indonesia Fund, in addition to the risks to which both Funds are
subject as a consequence of investing in Indonesian equity securities. For more
information, see "Risk Factors and Special Considerations." As of June 30, 2000,
equity securities represented approximately 100% of the Indonesia Fund's
portfolio and 95.2% of the Jakarta Fund's portfolio. The following table
reflects the top 10 holdings at June 30, 2000 of the Indonesia Fund and the
Jakarta Fund along with the percentage of each Fund's total net assets
represented by each holding.
<TABLE>
<CAPTION>
JAKARTA FUND INDONESIA FUND
AT JUNE 30, 2000 AT JUNE 30, 2000
% OF % OF
NAME OF SECURITY TOTAL NET ASSETS NAME OF SECURITY TOTAL NET ASSETS
-------------------------------- ---------------- -------------------------------- ----------------
<S> <C> <C> <C>
Telekomunikasi Indonesia 16.6 Telekomunikasi Indonesia 19.0
Gudang Garam 12.7 Gudang Garam 10.2
Indofood Sukses Makmur 6.4 H.M. Sampoerna 9.1
Indonesian Satellite Corporation 5.3 Ramayana Lestari Sentosa 6.8
H.M. Sampoerna 5.0 Astra International 6.0
Indah Kiat Pulp & Paper 4.8 Indofood Sukses Makmur 5.0
Ramayana Lestari Sentosa 4.1 Indah Kiat Pulp & Paper 4.4
Multipolar Corporation 4.0 Matahari Putra Prima 4.4
Tempo Scan Pacific 3.9 Dankos Laboratories 4.4
Astra International Inc. 3.8 Tempo Scan Pacific 4.3
</TABLE>
8
<PAGE>
FEES AND EXPENSES--THE JAKARTA FUND.
ADVISERS. NAM-U.S.A. acts as the Jakarta Fund's investment manager pursuant
to a management agreement approved on August 15, 2000. NAM-U.S.A. has retained
Nomura Asset Management Co., Ltd. ("NAM") to act as the Jakarta Fund's
investment adviser. NAM, in turn, has retained Nomura Asset Management Singapore
Limited ("NAM-Singapore") to act as the Jakarta Fund's sub-adviser. As
compensation for its services, NAM-U.S.A. is entitled to receive from the
Jakarta Fund an annual fee, calculated weekly and paid monthly, equal to 1.10%
of the value of the Fund's average weekly net assets. On June 30, 2000,
NAM-U.S.A. voluntarily agreed to reduce the management fee to 1.00% of the
Jakarta Fund's average weekly net assets. This reduction will remain in effect
until May 31, 2001 unless NAM-U.S.A. and the Board of Directors of the Jakarta
Fund mutually agree to reinstate the full management fee.
For its investment advisory services to the Jakarta Fund, NAM-U.S.A. pays
NAM a monthly fee at the annual rate of 0.50% of the Fund's average weekly net
assets. For its sub-advisory services to the Jakarta Fund, NAM pays
NAM-Singapore a monthly fee at the annual rate of 0.25% of the Fund's average
weekly net assets.
For the year ended March 31, 2000, NAM-U.S.A. earned $161,712 in management
fees. Of that amount, NAM earned advisory fees of $68,222 and NAM-Singapore
earned sub-advisory fees of $34,111.
For the fiscal year ended March 31, 2000, the Jakarta Fund's total expense
ratio was 3.89%. The Jakarta Fund's total expense ratio is the ratio of total
annual operating expenses to average net assets, net of fee waivers (if any) and
including taxes.
FEES AND EXPENSES--THE INDONESIA FUND.
ADVISER. CSAM serves as the Indonesia Fund's investment adviser with
respect to all investments. As compensation for its advisory services to the
Indonesia Fund, CSAM receives 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, 1999, CSAM earned $169,382 for advisory services. CSAM also
provides certain administrative services to the Indonesia Fund and is reimbursed
by the Fund for costs incurred on its behalf (up to $20,000 per year). For the
year ended December 31, 1999, CSAM was reimbursed $2,871 for administrative
services rendered to the Indonesia Fund.
ADMINISTRATOR. Bear Stearns Funds Management Inc. ("BSFM") serves as the
Indonesia Fund's administrator. The Indonesia 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, 1999, BSFM earned $16,944 for administrative
services.
For the fiscal year ended December 31, 1999, the Indonesia Fund's total
expense ratio was 3.18%, and is currently 3.71% based on an estimate of
operating expenses for the first six months of fiscal 2000. The Fund's total
expense ratio is the ratio of total annual operating expenses to the average net
assets, net of fee waivers (if any) and including taxes.
The expense ratio of the Indonesia Fund, assuming the Merger was consummated
on June 30, 2000, is projected to be approximately 2.48% after giving effect to
the Merger. The actual expense ratios for the Indonesia Fund for the current and
future fiscal years, if the Merger occurs, may be higher or lower than this
projection and depend upon the Indonesia Fund's performance, general stock
market and economic conditions, net asset levels, stock price and other factors.
See "Expense Table" below for the current expenses of each Fund and pro
forma expenses following the Merger.
9
<PAGE>
REALIZED AND UNREALIZED CAPITAL LOSSES. As of June 30, 2000, the Jakarta
Fund had approximately $6,000,000 of unrealized depreciation on investments,
representing approximately $1.20 per share. As of that same date, the Indonesia
Fund had approximately $5,800,000 of depreciation on investments, representing
approximately $(1.27) per share. As of June 30, 2000, the Jakarta Fund had
approximately $38,700,000 of capital loss carryforwards, while the Indonesia
Fund had approximately $42,100,000 of capital loss carryforwards. The ultimate
realization of the capital loss carryforwards is not assured.
Both Funds will pay their shareholders a cash distribution of substantially
all undistributed 2000 net investment income prior to the Effective Date unless
such amounts are immaterial. It is expected that any current year realized net
capital gains will be offset through the utilization of capital loss
carryforwards prior to the Effective Date.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. As a condition to the
closing of the Merger, the Jakarta Fund will receive an opinion of Brown & Wood
LLP, counsel to the Jakarta Fund, and the Indonesia Fund will receive an opinion
of Willkie Farr & Gallagher, counsel to the Indonesia Fund, stating that the
Merger will constitute a tax-free reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, or the Code.
Accordingly, it is expected that neither the Jakarta Fund, the Indonesia Fund
nor the shareholders of either Fund will recognize any gain or loss for federal
income tax purposes as a result of the Merger, except with respect to the
shareholders of the Jakarta Fund who receive cash proceeds from the purchase of
fractional share interests by the Indonesia Fund. These shareholders will be
treated for federal income tax purposes as if they received such fractional
share interests and then sold such interests for cash. The holding period and
the aggregate tax basis of the Indonesia Fund shares (including fractional share
interests) received by a Jakarta Fund shareholder will be the same as the
holding period and aggregate tax basis of the shares of the Jakarta Fund
previously held by the shareholder. The holding period and the aggregate tax
basis of the assets received by the Indonesia Fund in the Merger will be the
same as the holding period and the tax basis of such assets in the hands of the
Jakarta Fund immediately before the Merger. For more information about the tax
consequences of the Merger, see "Information About the Merger--Tax
Considerations."
DISCOUNT FROM NET ASSET VALUE. Shares of closed-end funds frequently trade
at a market price that is less than the value of the share's net assets. The
possibility that shares of the Indonesia Fund will trade at a discount from its
net asset value is a risk separate and distinct from the risk that the Fund's
net asset value will decrease. Although the shares of the Jakarta Fund
frequently have traded at a premium, they have also traded at a discount from
net asset value, and, as of June 30, 2000, traded at a market price discount of
10.18%. The Indonesia Fund's shares have historically traded in the market at a
premium, and as of the same date traded at a market price premium of 36.09%.
There can be no assurance that the Indonesia Fund's shares will continue to
trade at a premium before or after the Merger.
DISPARITY IN JAKARTA FUND AND INDONESIA FUND MARKET LEVELS. As described
above, the Jakarta Fund's shares have been recently trading at a substantial
discount to net asset value, while the Indonesia Fund's shares have been trading
at a premium. If this pattern continues, the total market value of the Indonesia
Fund shares issued to Jakarta Fund shareholders on the Effective Date will be
more than the total market value of Jakarta Fund shares outstanding immediately
prior to the Effective Date, although their total net asset values will be the
same (disregarding fractional shares). If this disparity in market levels
persists at the time of the Merger, Jakarta Fund shareholders will receive
assets (Indonesia Fund shares) that are more valuable, from a market value
perspective, than the assets (Jakarta Fund shares) owned immediately prior to
the transaction. This may cause Indonesia Fund shareholders to experience a
reduction in the market value of their shares. The market levels of the
10
<PAGE>
Funds may be different at the time the Merger occurs. For more information, see
"Additional Information About the Funds--Net Asset Value."
EXPENSES OF THE MERGER. In evaluating the proposed Merger, CSAM and
NAM-U.S.A. have estimated the amount of expenses the Funds would incur,
including NYSE listing fees, SEC registration fees, legal and accounting fees
and proxy solicitation and distribution costs. The estimated total expenses
pertaining to the Merger are $357,000. Each Fund will bear its own legal,
accounting and mailing expenses relating to the Merger and one-half of all other
Merger-related expenses, except that if the Merger is completed, the Indonesia
Fund will bear the first $200,000 of the Jakarta Fund's expenses under this
formula. If the Merger is not completed for any reason (other than a breach by
the Jakarta Fund of its obligations under the Plan), the Indonesia Fund will
bear all of the Jakarta Fund's ordinary Merger-related expenses, including its
legal, accounting and mailing expenses as described above, but excluding any
extraordinary expenses such as litigation expenses. Counsel to the Indonesia
Fund has taken the lead role in drafting this Proxy Statement/Prospectus, and
the Indonesia Fund will bear the fees and expenses of such counsel.
The expenses of the Merger, assuming its consummation, are expected to
result in a reduction in the Indonesia Fund's net asset value per share of
approximately $0.07, and no reduction in the Jakarta Fund's net asset value.
11
<PAGE>
EXPENSE TABLE
<TABLE>
<CAPTION>
JAKARTA INDONESIA PRO FORMA
FUND FUND POST-MERGER
-------- --------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price).............. NONE NONE NONE
Dividend Reinvestment and Cash Purchase Plan Fees........... $ 2.50(1) $ 5.00(2) $ 5.00(2)
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)(3)
Investment Management Fees.................................. 1.10%(4) 1.00% 1.00%
Interest Payments on Borrowed Funds......................... 0 0 0
Other Expenses(5)........................................... 2.79% 2.32% 1.48%
Total Annual Expenses....................................... 3.89% 3.32% 2.48%
</TABLE>
--------------
(1) For cash withdrawals or termination.
(2) For optional cash purchases. First-time investors are subject to an initial
service charge of $10.
(3) The percentages in the above table expressing annual fund operating expenses
are based on the Jakarta Fund's operating expenses for the fiscal year ended
March 31, 2000 and the Indonesia Fund's operating expenses for the period
ended June 30, 2000. "Other Expenses" include fees for shareholder services,
custody, legal and accounting services, auditing and tax reporting fees,
printing costs, the costs involved in communication with shareholders and
the costs of regulatory compliance, maintaining corporate existence and the
listing of the shares of common stock on the NYSE or BSE, as the case may
be. These figures do not reflect the expenses of the Merger.
(4) On June 30, 2000, NAM-U.S.A. voluntarily agreed to reduce the management fee
to 1.00% of the Jakarta Fund's average weekly net assets. This reduction
will remain in effect until May 31, 2001 unless NAM-U.S.A. and the Board of
Directors of the Jakarta Fund mutually agree to reinstate the full
management fee.
(5) Includes administrative fees.
12
<PAGE>
EXAMPLE. The purpose of the following example is to help you understand the
costs and expenses you may bear as an investor. This example is based on the
level of total annual operating expenses for each Fund listed in the table
above, the total expenses relating to a $1,000 investment, assuming a 5% annual
return and reinvestment of all dividends and distributions. Shareholders do not
pay these expenses directly; they are paid by the Funds before they distribute
net investment income to shareholders. This example should not be considered a
representation of future expenses, and actual expenses may be greater or less
than those shown. Federal regulations require the example to assume a 5% annual
return, but actual annual returns may vary.
<TABLE>
<CAPTION>
PRO FORMA
JAKARTA FUND INDONESIA FUND POST-MERGER
------------ -------------- -----------
<S> <C> <C> <C>
1 Year............................................... $ 39 $ 33 $ 25
3 Years.............................................. $119 $102 $ 77
5 Years.............................................. $200 $173 $132
10 Years............................................. $411 $361 $282
</TABLE>
PERFORMANCE. The table below provides performance data for periods ended
June 30, 2000 based on each Fund's net asset value and market value. Past
performance is not a guarantee of future results, and it is not possible to
predict whether or how investment performance will be affected by the Merger.
<TABLE>
<CAPTION>
JAKARTA FUND INDONESIA FUND
--------------------------- ---------------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value One Year............. (48.14%) (48.14%) (48.31%) (48.31%)
Three Year........... (84.86%) (46.71%) (79.71%) (41.21%)
Five Year............ (80.82%) (28.14%) (72.98%) (23.01%)
Since inception
(1)................ (83.56%) (16.27%) (80.44%) (14.62%)
Market Value One Year............. (61.29%) (61.29%) (50.92%) (50.92%)
Three Year........... (84.92%) (46.78%) (68.69%) (32.10%)
Five Year............ (83.03%) (29.87%) (69.39%) (21.08%)
Since inception
(1)................ (86.39%) (17.73%) (73.70%) (12.15%)
</TABLE>
--------------
(1) The Jakarta Fund commenced operations on April 19, 1990. The Indonesia Fund
commenced operations on March 9, 1990.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the financial
performance of the Jakarta Fund and the Indonesia Fund. This information is
derived from financial and accounting records of each Fund.
This information has been audited by PricewaterhouseCoopers LLP, each Fund's
independent accountants, whose reports, along with the Funds' financial
statements, are incorporated herein by reference and included in the Funds'
Annual Reports to Shareholders. The Annual Reports may be obtained without
charge, by writing to Shareholder Communications Corporation, 17 State Street,
New York, New York 10004, or by calling 1 (800) 403-7916.
JAKARTA GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
The following tables include 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 YEARS ENDED MARCH 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 2.00 $ 2.43 $ 10.12 $ 9.11 $ 7.69 $ 9.30
------- ------- ------- ------- ------- -------
Net investment income/(loss)............ (0.06) (0.04) 0.03 0.01 0.06 0.01
Net realized and unrealized gain/(loss)
on investments and foreign currency... 0.30 (0.39) (7.70) 1.00 1.47 (1.60)
------- ------- ------- ------- ------- -------
Total from investment operations........ 0.24 (0.43) (7.67) 1.01 1.53 (1.59)
------- ------- ------- ------- ------- -------
Distributions to shareholders from:
Net investment income................. -- -- (0.02) -- (0.11) (0.02)
------- ------- ------- ------- ------- -------
Net realized capital gains............ -- -- -- -- -- --
Return of capital..................... -- -- -- -- -- --
Total distributions..................... -- -- (0.02) -- (0.11) (0.02)
------- ------- ------- ------- ------- -------
Net asset value, end of year............ $ 2.24 $ 2.00 $ 2.43 $ 10.12 $ 9.11 $ 7.69
------- ------- ------- ------- ------- -------
Market value, end of year............... $2.3125 $2.1875 $4.0625 $ 8.875 $ 9.250 $ 8.125
Total investment return+................ 5.7% (46.2%) (54.0%) (4.1%) 15.3% (13.1%)
Net asset value total return+........... 12.0% (17.7%) (75.3%) 11.1% 20.0% (17.1%)
RATIOS AND SUPPLEMENTAL DATA
Ratio to average net assets/supplemental
data:
Net assets, end of year (in 000)........ $11,239 $10,035 $12,208 $50,788 $45,693 $38,552
Operating expenses...................... 3.89% 4.66% 2.60% 2.07% 1.94% 1.91%
Net investment income (loss)............ (2.37%) (1.94%) 0.53% 0.12% 0.70% 0.15%
Portfolio turnover...................... 46% 11% 68% 35% 44% 37%
<CAPTION>
FOR THE
PERIOD
APRIL 19,
1990*
FOR THE YEARS ENDED MARCH 31, THROUGH
------------------------------ MARCH 31,
1994 1993 1992 1991
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 7.21 $ 6.49 $ 8.51 $ 10.99**
------- ------- ------- --------
Net investment income/(loss)............ 0.03 0.07 0.05 0.22
Net realized and unrealized gain/(loss)
on investments and foreign currency... 2.12 0.73 (1.89) (2.56)
------- ------- ------- --------
Total from investment operations........ 2.15 0.80 (1.84) (2.34)
------- ------- ------- --------
Distributions to shareholders from:
Net investment income................. (0.02) (0.08) (0.12) (0.14)
------- ------- ------- --------
Net realized capital gains............ -- -- (0.06) --
Return of capital..................... (0.04) -- -- --
Total distributions..................... (0.06) (0.08) (0.18) (0.14)
------- ------- ------- --------
Net asset value, end of year............ $ 9.30 $ 7.21 $ 6.49 $ 8.51
------- ------- ------- --------
Market value, end of year............... $ 9.375 $ 7.500 $ 7.250 $ 7.750
Total investment return+................ 25.6% 4.7% (4.0%) (34.2%)
Net asset value total return+........... 29.7% 12.4% (21.8%) (21.0%)
RATIOS AND SUPPLEMENTAL DATA
Ratio to average net assets/supplemental
data:
Net assets, end of year (in 000)........ $46,647 $36,128 $32,533 $ 42,639
Operating expenses...................... 1.88% 2.06% 2.15% 1.83%+
Net investment income (loss)............ 0.36% 1.06% 0.63% 2.30%+
Portfolio turnover...................... 42% 35% 24% 7%
</TABLE>
------------------------
+ Based on market value per share, adjusted for reinvestment of distribution
and capital share transactions. Total return does not reflect sales
commissions.
++ Based on net asset value per share, adjusted for reinvestment of
distribution and capital share transactions. Total return does not reflect
sales commissions.
* Commencement of operations.
** Net of offering costs ($0.17).
+ Annualized
14
<PAGE>
THE INDONESIA FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes per share operating performance data for a
share of common stock outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from information provided in the financial
statements and market price data for the Fund's shares.
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED
JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
2000 ----------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period....................... $ 4.48 $ 2.71 $ 3.58 $ 10.68 $ 9.34 $ 9.18
-------- ------- -------- -------- ------- --------
Net investment income/(loss)... (0.04) (0.05) (0.04) 0.03 0.01 --
Net realized and unrealized
gain/ (loss) on investments
and foreign currency related
transactions................. (1.96) 1.87 (0.83) (7.13) 1.33 0.16
-------- ------- -------- -------- ------- --------
Net increase/(decrease) in net
assets resulting from
operations................... (2.00) 1.82 (0.87) (7.10) 1.34 0.16
-------- ------- -------- -------- ------- --------
Dividends and distributions to
shareholders:
Net investment income........ -- -- -- -- -- --
Net realized gain on
investments and foreign
currency related
transactions............... -- (0.05) -- -- -- --
-------- ------- -------- -------- ------- --------
Total dividends and
distributions to
shareholders................. -- (0.05) -- -- -- --
-------- ------- -------- -------- ------- --------
Net asset value, end of
period....................... $ 2.48 $ 4.48 $ 2.71 $ 3.58 $ 10.68 $ 9.34
======== ======= ======== ======== ======= ========
Market value, end of period.... $ 3.375 $ 5.438 $ 3.438 $ 4.625 $ 9.750 $ 10.125
======== ======= ======== ======== ======= ========
Total investment return (a).... (37.93%) 59.58% (25.68%) (52.56%) (3.70%) (15.63%)
======== ======= ======== ======== ======= ========
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)..................... $ 11,449 $20,669 $ 12,491 $ 16,486 $49,223 $ 43,060
Ratio of expenses to average
net assets................... 3.71%(b) 3.18% 4.21% 1.89% 1.91% 1.96%
Ratio of net investment income/
(loss) to average net
assets....................... (2.54%)(b) (1.43%) (1.37%) 0.33% 0.10% 0.05%
Portfolio turnover rate........ 10.05% 47.38% 36.58% 48.19% 34.67% 24.10%
<CAPTION>
FOR THE PERIOD
MARCH 9, 1990*
FOR THE YEARS ENDED DECEMBER 31, THROUGH
----------------------------------------- DECEMBER 31,
1994 1993 1992 1991 1990
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period....................... $ 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................. (4.82) 6.43 (0.10) (2.65) (2.90)
-------- ------- ------- -------- --------
Net increase/(decrease) in net
assets resulting from
operations................... (4.85) 6.40 (0.09) (2.61) (2.68)
-------- ------- ------- -------- --------
Dividends and distributions to
shareholders:
Net investment income........ -- -- -- (0.05) (0.19)
Net realized gain 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....................... $ 9.18 $ 14.03 $ 7.63 $ 7.72 $ 10.38
======== ======= ======= ======== ========
Market value, end of period.... $ 12.000 $20.750 $ 9.000 $ 8.375 $ 9.875
======== ======= ======= ======== ========
Total investment return (a).... (42.17%) 130.56% 7.46% (14.71%) (24.15%)
======== ======= ======= ======== ========
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)..................... $ 42,297 $64,661 $35,186 $ 35,590 $ 47,817
Ratio of expenses to average
net assets................... 1.83% 1.98% 2.04% 2.00% 2.15%(b)
Ratio of net investment income/
(loss) to average net
assets....................... (0.25%) (0.30%) 0.09% 0.49% 2.05%(b)
Portfolio turnover rate........ 31.56% 63.77% 22.39% 32.27% 17.68%
</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.
15
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Both the Jakarta Fund and the Indonesia Fund invest in substantially similar
Indonesian equity securities and, accordingly, are subject to substantially the
same investment risks. The Indonesia Fund, however, is subject to additional
risks due to its potential investments in lower-rated debt securities (although
it may only invest up to 5% of its assets in lower-rated debt securities) and
its ability to invest a larger portion of its portfolio in debt securities, in
general.
The current investment risks of each of the Funds are described below.
RISKS OF FOREIGN INVESTMENTS
Investing in Indonesian securities involves the following risks:
- the small size of the markets and the low volume of trading could result
in potential illiquidity and price volatility;
- the heavy concentration of market capitalization and trading volume in a
small number of companies representing a limited number of industries,
which, combined with U.S. regulatory requirements, could result in
potentially fewer investment opportunities for the Funds;
- political and economic considerations, including the effect on the economy
of changes in the export prices of the primary commodities produced in
Indonesia and other risks associated with Indonesian politics and the
Indonesian economy, could affect the Funds' performance and the ability to
dispose of portfolio holdings; and
- periodic devaluations and fluctuations in the rate of exchange between the
U.S. dollar and the Indonesian rupiah (the "Rupiah") could result in
fluctuations in the Funds' net asset values.
REPORTING STANDARDS
Companies in Indonesia are subject to accounting, auditing and financial
standards and requirements that differ significantly from those applicable to
U.S. companies. For example:
- the assets and profits of an Indonesian company appearing on its financial
statements may not reflect its financial position or results of operations
as those amounts would appear had they been prepared in accordance with
U.S. generally accepted accounting principles;
- there is less regulation and government supervision of Indonesian
securities exchanges, underwriters, brokers, dealers and listed companies
than exists in the U.S.; and
- there is also substantially less publicly available information about
Indonesian companies and the Indonesian Government compared to reports and
ratings published about U.S. companies and the U.S. Government.
These risks are generally magnified in the case of investments in
non-publicly traded securities.
INVESTMENT CONTROLS
Foreign investment in the securities markets of Indonesia is restricted or
controlled to varying degrees. These restrictions or controls at times may limit
or preclude foreign investment in certain Indonesian issuers and increase the
costs and expenses of each Fund.
These restrictions and controls include, among other things:
- government approval prior to investments by foreign persons;
- limitations on the amount of Indonesian securities of a particular company
that can be purchased by foreign persons; and
16
<PAGE>
- the imposition of additional taxes on foreign investors.
MARKET ILLIQUIDITY; VOLATILITY; SMALLER MARKET CAPITALIZATION
The securities of Indonesian issuers are substantially smaller, less liquid
and more volatile than the major securities markets in the United States. At
June 30, 2000, the aggregate market capitalization of listed equity securities
on the Jakarta Stock Exchange was approximately US$34 billion. For the six
months ended June 30, 2000, the average daily equity trading value on the
Jakarta Exchange was US$94 million. By comparison, at July 31, 2000, the market
capitalization of the NYSE was US$11.2 trillion and at August 31, 2000 the
annual aggregate trading value was US$43.6 billion.
A limited number of persons may hold a high proportion of the shares of many
Indonesian companies, which may limit the number of shares available for
investment by a Fund. A limited number of issuers may represent a
disproportionately large percentage of market capitalization and trading value
in the Indonesian securities market. The limited liquidity of the Indonesian
securities market may also affect a Fund's ability to acquire or dispose of
securities at the price and time it wishes to do so. Indonesian securities
settlements may, in some instances, be subject to delays and related
administrative uncertainties.
In addition to its smaller size, lesser liquidity and greater volatility,
the Indonesian securities market is less developed than U.S. securities markets.
Disclosure and regulatory standards are in many respects less stringent than
U.S. standards. Furthermore, there is a low level of monitoring and regulation
of the market and the activities of investors in such market and the enforcement
of existing regulations has been extremely limited. Consequently:
- other market participants' anticipation of the Fund's investing,
- trading by persons with material, non-public information, and
- securities transactions by brokers in anticipation of transactions by the
Funds in particular securities
can affect the prices for investments acquired by the Funds. Commissions and
other transaction costs are also generally higher than in the United States.
CURRENCY HEDGING
The Funds normally invest principally in securities denominated in Rupiah.
CSAM generally does not seek to hedge against a decline in the value of the
Indonesia Fund's non-dollar-denominated portfolio securities resulting from
currency devaluations or fluctuations, but may do so in the future if deemed
appropriate by CSAM.
Although the Jakarta Fund is permitted to seek to hedge against a decline in
the value of the Jakarta Fund's non-dollar-dominated portfolio securities
resulting from currency deductions or fluctuations, NAM-U.S.A. generally does
not enter into such hedging transactions.
A change in the value of currencies in which each Fund's investments are
denominated against the U.S. dollar will result in a corresponding change in the
U.S. dollar value of each Fund's assets. This change will also affect each
Fund's income and net asset value. The Funds compute income on the date of its
receipt by the respective Fund at the exchange rate in effect with respect to
the relevant currency on that date. Each Fund pays most expenses and makes
distributions necessary to maintain its status as a regulated investment company
for U.S. federal income tax purposes in U.S. dollars. In order to pay such
expenses and make such distributions, each Fund may have to liquidate securities
denominated in Rupiah. If the value of the Rupiah declines relative to the U.S.
dollar between the time when the income or a dollar-denominated expense item is
accrued and the date when the expense is paid or the distribution is made, a
Fund may have to liquidate more investment securities than would otherwise
17
<PAGE>
have been the case. There can be no assurance that the Funds will be able to
liquidate securities for these purposes, but the Funds are permitted to borrow
money to pay expenses outside of Indonesia and to make distributions required to
maintain their status as regulated investment companies for U.S. tax purposes.
See "Comparison of Investment Objectives--Currency Transactions."
The following table sets forth, for the periods and dates indicated, certain
information concerning the middle exchange rate as determined by Bank Indonesia
for the Rupiah:
RUPIAH EXCHANGE RATES
<TABLE>
<CAPTION>
END OF PERIOD PER US$1.00
------------- -----------
<S> <C>
1999........................................................ 7,050.000
1998........................................................ 7,950.000
1997........................................................ 5,495.000
1996........................................................ 2,362.500
1995........................................................ 2,286.500
1994........................................................ 2,198.000
1993........................................................ 2,103.000
1992........................................................ 2,063.500
1991........................................................ 1,984.000
1990........................................................ 1,889.000
</TABLE>
ECONOMIC AND POLITICAL RISKS
The Indonesian economy may differ favorably or unfavorably from the U.S.
economy in several respects, including:
- general development,
- wealth distribution,
- rate of inflation,
- volatility of the rate of growth of gross domestic product,
- capital reinvestment,
- resource self-sufficiency, and
- balance of payments position.
The Indonesian Government has exercised and continues to exercise
substantial influence over many aspects of the private sector. Government
actions in the future could have a significant effect on economic conditions
which could affect private sector companies and the Funds. These actions could
also affect market conditions, prices and yields of Indonesian securities,
including those held in the Funds' portfolios. Expropriation, confiscatory
taxation, nationalization, political, economic or social instability or
diplomatic developments could adversely affect the assets of the Funds held in
Indonesia. Each Fund may also experience difficulty in its ability to protect
and enforce its rights against governmental and private entities in Indonesia.
In the summer of 1997, Indonesia suffered a major economic setback along
with most other Asian economies. Banks failed and the value of Indonesia's
currency, the Rupiah, plummeted. Anti-government demonstrations took to the
streets and riots broke out, directed mainly at the country's prosperous ethnic
Chinese. As the economic crisis deepened, student demonstrators occupied the
national Parliament, demanding President Suharto's ouster. On May 31, 1998,
Suharto stepped down, ending 32 years of rule and handing over power to Vice
President B.J. Habibie. The Asian
18
<PAGE>
economic crisis hit Indonesia the hardest, and in 1998 one in five jobs were
lost. Three years after the onset of its economic and political crisis,
Indonesia has a new government led by President Abdurrahman Wahid and Vice
President Megawati Sukarnoputri. Indonesia, however, still ranks in the lower
reaches of transparency and corporate governance assessments of Asian countries.
Perpetrators of Suharto-era corruption and the Habibie-era Bank Bali campaign
finance scandal have not yet been brought to account, although a multitude of
investigations into these and other (human rights, for example) cases is
underway.
TAXATION
The Funds are subject to Indonesian withholding taxes on dividends and
interest received from Indonesian residents.
LITIGATION
The Funds and their shareholders may encounter substantial difficulties in
obtaining and enforcing judgments against non-U.S. resident individuals and
companies.
FRAUDULENT SECURITIES
It is possible that the Funds may purchase securities that may subsequently
be found to be fraudulent or counterfeit and as a consequence could result in
losses.
SETTLEMENT RISKS
Settlement systems in Indonesia are generally less well organized than in
developed markets. Supervisory authorities may also be unable to apply standards
which are comparable with those in developed markets. Thus, there may be risks
that settlement may be delayed and that cash or securities belonging to the
Funds may be in jeopardy because of failures of or defects in the systems. In
particular, market practice may require that payment be made before receipt of
the security which is being purchased or that delivery of a security must be
made before payment is received. In such cases, default by a broker or bank
through whom the relevant transaction is effected might result in losses for the
Funds. The Funds will seek, where possible, to use reputable financial
institutions to reduce this risk. However, there can be no certainty that the
Funds will be successful in eliminating this risk, particularly as banks or
brokers operating in Indonesia frequently lack the substance or financial
resources of those in more developed countries. There may also be a danger that,
because of uncertainties in the operation of settlement systems, competing
claims may arise in respect of securities held by or to be transferred to the
Funds.
INVESTMENTS IN NON-PUBLICLY TRADED SECURITIES
Although the Funds invest primarily in Indonesian equity securities of
publicly traded companies, they may, subject to local investment limitations,
invest in unlisted Indonesian equity securities, including investments in new
and early stage companies. Investments in unlisted equity securities may involve
a high degree of business and financial risk and may result in substantial
losses. Currently, the Jakarta Fund may invest up to 25% of its assets, and the
Indonesia Fund may invest up to 20% of its assets, in unlisted equity
securities. No liquid trading market typically exists for these investments,
and, as such, the Funds may take longer to liquidate these positions than
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized on such sales could be less than
those originally paid by the Funds. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies with publicly traded securities.
19
<PAGE>
DEBT SECURITIES
Each Fund may invest in Indonesian debt securities, although the Indonesia
Fund may invest a substantial portion of its assets in these instruments when
CSAM believes that it is appropriate (i.e., when interest rates on Indonesian
debt securities are high in comparison with anticipated returns on Indonesian
equity securities). The Indonesia Fund, however, will not invest more than 5% of
its assets in Indonesian debt securities that are determined by CSAM to be
comparable to securities rated B or below by Moody's or S&P. The Jakarta Fund
may not invest in lower-rated debt securities. The market value of debt
obligations may be expected to vary depending upon, among other factors,
interest rates, the ability of the issuer to repay principal and interest, any
change in investment rating and general economic conditions.
OPERATING EXPENSES
Each Fund's annual operating expenses are higher than those of many other
investment companies of comparable size.
MARKET VALUE AND NET ASSET VALUE
Shares of closed-end investment companies frequently trade at a discount
from net asset value. Trading at a discount is a risk separate and distinct from
the risk that the net asset value of each Fund will decrease. The risk of
purchasing shares of a closed-end fund that might trade at a discount is more
pronounced for shareholders who wish to sell their shares in a relatively short
period of time because for those shareholders, realization of a gain or loss on
their investments is likely to be more dependent upon the existence of a premium
or discount than upon portfolio performance. The Jakarta Fund's shares currently
trade at a discount to net asset value, while the shares of the Indonesia Fund
currently trade at a premium, although there can be no assurance that the
Indonesia Fund's shares will trade at a premium upon consummation of the Merger.
Neither Fund's shares are subject to redemption. Investors desiring liquidity
may, subject to applicable securities laws, trade their shares in the Funds on
any exchange where such shares are then listed at the then current market value,
which may differ from the then current net asset value.
NON-DIVERSIFIED STATUS
Each Fund is classified as a non-diversified investment company under the
Investment Company Act. Non-diversified investment companies are not limited by
the Investment Company Act in the proportion of assets that may be invested in
the securities of a single issuer. Each Fund, however, is subject to local laws
which limit investments in a single issuer and the diversification requirements
imposed by the Code for qualification as a regulated investment company. As a
non-diversified investment company, each Fund may invest a greater proportion of
its assets in the obligations of a smaller number of issuers and, as a result,
may be subject to greater risk with respect to its portfolio securities.
CHARTER PROVISIONS
Certain provisions of each Fund's Articles of Incorporation and By-Laws may
inhibit that Fund's possible conversion to open-end status and limit the ability
of other persons to acquire control of the Fund's Board of Directors. In certain
circumstances, these provisions might also inhibit the ability of shareholders
to sell their shares at a premium over prevailing market prices.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
ORGANIZATION. The Jakarta Fund and the Indonesia Fund are both closed-end,
non-diversified management investment companies registered under the Investment
Company Act. Both Funds are
20
<PAGE>
organized as corporations under the laws of the State of Maryland. The Jakarta
Fund is managed by NAM-U.S.A. (the investment manager), NAM-Ltd. (the investment
adviser) and NAM-Singapore (the sub-adviser). CSAM manages and advises the
Indonesia Fund. The shares of common stock of the Jakarta Fund are listed and
trade on the BSE and the OTC Bulletin Board under the symbols "JGF" and "JGFI",
respectively. The shares of common stock of the Indonesia Fund are listed and
trade on the NYSE under the symbol "IF." Upon the Effective Date and after the
Merger, the Indonesia Fund's shares will continue to be traded on the NYSE under
the symbol "IF", while shares of the Jakarta Fund will be delisted and the
Jakarta Fund will cease to exist.
The shares of common stock of each Fund have equal non-cumulative voting
rights and equal rights with respect to dividends, assets and dissolution. Each
Fund's shares of common stock are fully paid and non-assessable and have no
preemptive, conversion or other subscription rights. Fluctuations in the market
price of the Fund's shares is the principal investment risk of an investment in
either Fund. Portfolio management, market conditions, investment policies and
other factors affect such fluctuations. Although currently the investment
objectives, policies and restrictions of the Funds are similar, there are
differences between them, as discussed below. There can be no assurance that
either Fund will achieve its stated investment objective.
CURRENT INVESTMENT OBJECTIVES. Long-term capital appreciation is the
principal investment objective of each Fund, although the Indonesia Fund also
seeks income as a secondary consideration. The Jakarta Fund seeks to achieve its
investment objective through investments primarily in equity securities of
Indonesian companies and non-Indonesian companies that derive a significant
proportion of their revenue from Indonesia or that hold a significant proportion
of their assets in Indonesia. The Jakarta Fund's equity investments in
Indonesian companies will consist primarily of securities listed on the Jakarta
Stock Exchange. The Indonesia Fund seeks to achieve its investment objective by
investing primarily in Indonesian equity and debt securities. The investment
objective is a fundamental policy of each Fund and cannot be changed without the
approval of the holders of a "majority of each Fund's outstanding voting
securities," as defined in the Investment Company Act. A majority of a Fund's
outstanding voting securities means the lesser of:
- 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented, or
- more than 50% of the outstanding shares.
In selecting industries and companies for investment by the Indonesia Fund,
CSAM considers factors such as:
- overall growth prospects,
- competitive position in domestic and export markets,
- technology,
- research and development,
- productivity, labor costs, raw material costs and sources,
- profit margins, return on investment, and
- capital resources, government regulation and management.
In evaluating investments for the Jakarta Fund, NAM-U.S.A., NAM-Ltd. and
NAM-Singapore, as the case may be, utilize internal financial, economic and
credit analysis resources as well as information obtained from other sources.
No assurance can be given that either Fund's investment objective will be
achieved.
21
<PAGE>
COMPARISON OF CURRENT INVESTMENT POLICIES.
The following table highlights the differences between the Funds' investment
objectives and policies:
<TABLE>
<CAPTION>
INVESTMENT OBJECTIVES
AND POLICIES JAKARTA FUND INDONESIA FUND
------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Fundamental Investment Policy At least 65% of total assets Substantially all, and at least 65%,
invested in Indonesian equity of total assets invested in
securities Indonesian equity and debt
securities
% of Assets That May Be Invested in Up to 35% A substantial portion*
Debt Securities
% of Assets That May Be Invested in Not permitted Not more than 5%
Lower-Quality or Unrated Debt
Securities
% of Assets That May Be Invested in Up to 25% Up to 20% (including investments in
Unlisted Equity Securities new and early stage companies)
</TABLE>
* Since inception, the Indonesia Fund has not invested any of its assets in
debt securities. At present, the portfolio manager does not currently intend to
invest more than 20% of the Indonesia Fund's assets in debt securities.
The Jakarta Fund's policy, under normal market conditions, is the investment
of at least 65% of its total assets in Indonesian equity securities. The
Indonesia Fund's policy, under normal market conditions, is the investment of
substantially all, and at least 65%, of its total assets in Indonesian equity
and debt securities. These policies and the investment limitations are
fundamental and may not be changed without the approval of a majority of each
Fund's outstanding voting securities. All other policies and percentage
limitations of each Fund as described below may be modified by that Fund's Board
of Directors if, in the reasonable exercise of its business judgment, it
determines that modification is necessary or appropriate to carry out that
Fund's investment objective.
The Jakarta Fund defines Indonesian securities as:
- securities listed on the Jakarta Stock Exchange,
- equity securities of companies that derive a significant portion (at least
40%) of their revenue from Indonesia or that hold a significant portion
(at least 40%) of their assets in Indonesia,
- securities of Indonesian companies that are not listed or traded on the
Jakarta Stock Exchange, private placements, partnerships, joint ventures
and other forms of non-corporate investment,
- securities issued or guaranteed by the Republic of Indonesia, its agencies
or instrumentalities,
- money market instruments of Indonesian banks, and
- securities of other closed-end investment companies that invest a
substantial portion of their assets in Indonesian securities to the extent
permitted under the Investment Company Act.
The Indonesia Fund defines Indonesian securities as:
- securities traded principally on stock exchanges or in the
over-the-counter market in Indonesia,
- securities of companies that derive 50% or more of their total revenue
from goods produced, sales made or services performed in Indonesia,
22
<PAGE>
- securities (including American Depositary Receipts) of companies organized
under the laws of Indonesia, the securities of which are publicly traded
on recognized securities exchanges outside Indonesia,
- securities of Indonesian companies that are not listed or traded on a
stock exchange,
- securities issued or guaranteed by the Republic of Indonesia, its agencies
or instrumentalities, Bank Indonesia or other Indonesia banks, and
- securities of investment companies that invest primarily in Indonesian
securities.
The Indonesia Fund's definition of Indonesian securities may also include
securities of companies that have characteristics and business relationships
common to companies in other geographic regions. As a result, the value of the
securities of these companies may reflect economic and market forces in other
regions as well as in Indonesia.
Indonesian equity securities in which the Funds may invest consist
predominantly of:
- common stock,
- preferred stock, and
- convertible securities and warrants.
Indonesian debt securities that the Funds may acquire include:
- bonds,
- notes and debentures of any maturity of the Indonesian Government, and
- obligations of the Indonesian Government's agencies or instrumentalities,
Bank Indonesia, banks and other companies deemed suitable by the Fund's
adviser (including repurchase agreements with respect to obligations of
the Indonesian Government or Bank Indonesia).
In addition, the Indonesia Fund may acquire participations in loans.
CSAM may invest in securities that it determines to be suitable investments
for the Indonesia Fund regardless of such securities' ratings. The Indonesia
Fund may not, however, invest more than 5% of its assets in debt securities that
are determined by CSAM to be comparable to securities rated below investment
grade by S&P or Moody's. The Jakarta Fund may also invest in the following
fixed-income securities: non-convertible preferred stock, obligations issued by
the U.S. Government or its agencies or instrumentalities and money market
instruments (such as short-term obligations issued or guaranteed by the U.S. or
Indonesian Government, commercial paper and time deposits, certificates of
deposit and bankers' acceptances of U.S. or Indonesian banks). The Jakarta Fund
will only invest in fixed-income securities that either are rated A, A-2 or
higher by Moody's or A, A-2 or higher by S&P or, if unrated, are determined by
its adviser to be of comparable quality.
The Jakarta Fund may invest up to 25% of its total assets in unlisted
Indonesian equity securities in the form of private placements, partnerships,
joint ventures and other forms of non-corporate investments. The Indonesia Fund
may invest up to 20% of its total assets in unlisted Indonesian equity
securities (including those issued by new and early stage companies whose
securities are not publicly traded). The Indonesia Fund will only invest in such
unlisted securities that, in CSAM's opinion, present opportunities for
substantial growth over a period of two to five years.
TEMPORARY INVESTMENTS. The Indonesia Fund may, for cash management
purposes, invest up to 25% of its assets in certain short-term instruments and
may, for temporary defensive purposes, invest up to 100% of its assets in
certain short-term instruments. The Jakarta Fund may, as a temporary defensive
measure, invest up to 100% of its assets in Rupiah or U.S. dollar-denominated
fixed-income securities.
23
<PAGE>
The Indonesia Fund may invest in the following short-term instruments:
- obligations of the U.S. Government, its agencies or instrumentalities
(including repurchase agreements with respect to these securities),
- bank obligations (including certificates of deposit, time deposits and
bankers' acceptances) of U.S. banks and foreign banks denominated in any
currency,
- floating rate securities and other instruments denominated in any currency
issued by international development agencies, banks and other financial
institutions, governments and their agencies and instrumentalities, and
corporations located in countries that are members of the Organization for
Economic Cooperation and Development,
- obligations of U.S. corporations that are rated no lower than A-2 by S&P
or A-2 by Moody's or the equivalent by another rating service or, if
unrated, deemed to be of equivalent quality by CSAM, and
- shares of money market funds that are authorized to invest in short-term
instruments described above.
Repurchase agreements are contracts under which the buyer of a security
simultaneously buys and commits to resell the security to the seller at an
agreed upon price and date. Normally, CSAM will invest less than 20% of the
Indonesia Fund's total assets in repurchase agreements.
CURRENCY TRANSACTIONS. CSAM generally does not seek to hedge against
declines in the value of the Indonesia Fund's non-dollar-denominated portfolio
securities resulting from currency devaluations or fluctuations, but may do so
in the future if deemed appropriate by CSAM. If suitable hedging instruments are
available on a timely basis and on acceptable terms, CSAM may, in its
discretion, hedge all or part of the value of the Indonesia Fund's
non-dollar-denominated portfolio securities, although it is not obligated to do
so. The Jakarta Fund may deal in forward foreign exchange contracts between the
U.S. dollar and the Rupiah as a hedge against possible variations in the foreign
exchange rate between these currencies. Each Fund will be subject to the risk of
changes in value of the Rupiah, unless it engages in hedging transactions.
The Jakarta Fund is also authorized to purchase or sell listed or
over-the-counter foreign currency options, foreign currency futures and related
options on foreign currency futures as a short or long hedge against possible
variations in foreign exchange rates. These transactions may be effected with
respect to hedges on non-U.S. dollar denominated securities owned by the Jakarta
Fund, sold by the Jakarta Fund but not yet delivered, or committed or
anticipated to be purchased by the Jakarta Fund. Although certain risks are
involved in options and futures transactions, the Jakarta Fund believes that,
because it will engage in options and futures transactions only for currency
hedging purposes, its options and futures portfolio strategies will not subject
it to certain risks frequently associated with speculation in options and
futures transactions. The Jakarta Fund intends to enter into options and futures
transactions, on an exchange or in the over-the-counter market, only if there
appears to be a liquid secondary market for such options or futures.
Foreign currency options provide the holder the right to buy or to sell a
currency at a fixed price on a future date. Listed options are third-party
contracts (i.e., performance of the parties' obligations is guaranteed by an
exchange or clearing corporation) which are issued by a clearing corporation,
traded on an exchange and have standardized strike prices and expiration dates.
Over-the-counter options are two-party contracts and have negotiated strike
prices and expiration dates. A futures contract on a foreign currency is an
agreement between two parties to buy and sell a specified amount of a currency
for a set price on a future date. Futures contracts and options on futures
contracts are traded on boards of trade or futures exchanges. The Jakarta Fund
will not speculate in foreign currency options, futures or related options.
Accordingly, the Jakarta Fund will not hedge a currency substantially in
24
<PAGE>
excess of the market value of the securities denominated in such currency which
it owns, the expected acquisition price of securities which it has committed or
anticipates to purchase which are denominated in such currency, and, in the case
of securities which have been sold by the Fund but not yet delivered, the
proceeds thereof in its denominated currency. Further, the Jakarta Fund will
segregate cash, cash equivalents, U.S. Government securities or other high grade
liquid debt securities denominated in U.S. dollars or Rupiah having a market
value substantially representing any subsequent decrease in the market value of
such hedged security, less any initial or variation margin held in the account
of its broker. The Jakarta Fund may not incur potential net liabilities of more
than 33-1/3% of its total assets from foreign currency options, futures or
related options.
Under regulations of the Commodity Futures Trading Commission ("CFTC"), the
futures trading activities described above will not result in the Jakarta Fund
being deemed a "commodity pool," as defined under such regulations, provided
that the Fund adheres to certain restrictions. In particular, the Jakarta Fund
may purchase and sell futures contracts and options thereon only for bona fide
hedging purposes, as defined under CFTC regulations, any may not purchase or
sell any such futures contracts or options if, immediately thereafter, the sum
of the amount of initial margin deposits on the Fund's existing futures position
and premiums paid for outstanding options would exceed 5% of the market value of
its net assets. Margin deposits may consist of cash or securities acceptable to
the broker and the relevant contract market.
PORTFOLIO TURNOVER RATE. Neither Fund engages in the trading of securities
for the purpose of realizing short-term profits, but adjusts its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish its investment objective. It is not anticipated that the annual
portfolio turnover rate of the Indonesia Fund following the Merger will exceed
50%. A high rate of portfolio turnover involves correspondingly greater
brokerage commission expenses than a lower rate, which expenses must be borne by
the Fund and its shareholders. High portfolio turnover may also result in the
realization of substantial net short-term capital gains and any distributions
resulting from such gains will be taxable at ordinary income rates for U.S.
federal income tax purposes. The Jakarta Fund's portfolio turnover rates for the
fiscal years ended March 31, 2000 and 1999 were 46% and 11%, respectively. The
Indonesia Fund's portfolio turnover rates for the fiscal years ended
December 31, 1999 and 1998 were 47.38% and 36.58%, respectively. The portfolio
turnover rate is calculated by dividing the lesser of sales or purchases of
portfolio securities by the average monthly value of a Fund's portfolio
securities. For purposes of this calculation, portfolio securities exclude
purchases and sales of debt securities having a maturity at the date of purchase
of one year or less.
BORROWING. Borrowing increases exposure to capital risk, and borrowed funds
are subject to interest costs that may offset or exceed the return earned on
investment of the amounts borrowed. Nevertheless, both Funds are authorized to
borrow money from banks. The Indonesia Fund may borrow amounts up to 10% of its
total assets (not including the amount borrowed) for the following reasons:
- for temporary or emergency purposes,
- for such short-term credits as may be necessary for the clearance or
settlement of transactions, and
- to pay any dividends required to be distributed to maintain the Fund's
qualification as a regulated investment company under the Code.
The Jakarta Fund may also borrow money in amounts of up to 10% of the value
of its total assets at the time of such borrowings. The Indonesia Fund will not
make additional investments when borrowings exceed 5% of its total assets. The
Indonesia Fund may pledge its assets to secure such borrowings. Collateral
arrangements with respect to the writing of options or the purchase or sale of
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futures contracts or related options or forward currency contracts are not
deemed a pledge of assets or the issuance of a senior security.
FUNDAMENTAL POLICIES. Each Fund has "fundamental" investment policies which
may not be changed without the prior approval of the holders of a majority of
each Fund's outstanding voting securities, and "non-fundamental" investment
policies which may be modified by each Fund's Board of Directors if, in the
reasonable exercise of its business judgment, the Board determines that
modification is necessary or appropriate to carry out that Fund's investment
objective. Following is a description of certain of the Funds' current
fundamental investment policies which are substantially similar:
1. Neither Fund may invest more than 25% of the total value of its
assets in a particular industry. This restriction does not apply to
investments in U.S. Government securities.
2. Neither Fund may issue senior securities or borrow money, except
that either Fund may borrow from a lender for the reasons specified above
under "Borrowing" and the Indonesia Fund may also pledge its assets in
connection with any borrowings (although this ability to pledge is limited
by the Indonesia Fund's Articles of Incorporation).
3. Neither Fund may lend money to other persons except through the
purchase of debt obligations, loans or participation interests in loans
(Indonesia Fund only), and the entering into of repurchase agreements or
reverse repurchase agreements (Indonesia Fund only) consistent with
applicable regulatory requirements, in each case consistent with the Fund's
investment objective and policies.
4. Neither Fund may make short sales of securities or maintain a short
position in any security.
5. Neither Fund may purchase securities on margin, except such
short-term credits as may be necessary or routine for the clearance or
settlement of transactions and the maintenance of margin with respect to
forward contracts or other hedging securities.
6. Neither Fund may underwrite securities of other issuers, except
insofar as either Fund may be deemed an underwriter under the Securities Act
in selling portfolio securities.
7. Neither Fund may purchase or sell commodities or real estate, except
that either Fund may invest in securities secured by real estate or
interests in real estate or in securities issued by companies, including
real estate investment trusts, that invest in real estate or interests in
real estate, and may purchase and sell forward contracts on foreign
currencies to the extent permitted under applicable law (and the Jakarta
Fund may also purchase and sell financial and currency options, futures
contracts and related options).
8. Neither Fund may make investments for the purpose of exercising
control over, or management of, the issuers of any securities.
9. The Jakarta Fund may not purchase securities of other investment
companies, except in connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market of securities of
closed-end investment companies where no underwriter's or dealer's
commission or profit, other than customary broker's commission, is involved
and only if immediately thereafter not more than 10% of the Jakarta Fund's
total assets would be invested in such securities.
In addition to the foregoing restrictions, each Fund is subject to
investment limitations and other restrictions in Indonesia.
Under the Investment Company Act, neither Fund may:
- invest more than 5% of its total assets in the securities of any one
investment company, nor
- acquire more than 3% of the outstanding voting securities of any such
company.
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In addition, the Funds may not invest more than 10% of their total assets in
securities issued by all investment companies. As a shareholder in any
investment company, each Fund will bear its ratable share of that investment
company's expenses, and would remain subject to payment of the company's
advisory, sub-advisory and administrative fees with respect to assets so
invested.
UNITED STATES FEDERAL INCOME TAXES
The following is a brief summary of certain United States federal income tax
issues that apply to each Fund. Shareholders should consult their own tax
advisers with regard to the federal tax consequences of the purchase, ownership
and disposition of each Fund's shares, as well as tax consequences arising under
the laws of any state, foreign country, or other taxing jurisdiction.
Each Fund has qualified, and intends to continue to qualify and elect to be
treated, as a regulated investment company, or "RIC", for each taxable year
under Subchapter M of the Code. A RIC generally is not subject to federal income
tax on income and gains distributed in a timely manner to its shareholders.
Each Fund intends to distribute annually to its shareholders substantially
all of its investment company taxable income. The Jakarta Fund also intends to
distribute, at least annually, all of its net realized capital gains, if any.
The Board of Directors of the Indonesia Fund will determine annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including any capital loss carryovers. An additional
distribution may be made to the extent necessary to avoid the payment of a 4%
U.S. federal excise tax. However, if the Indonesia Fund retains for investment
an amount equal to its net long-term capital gains in excess of its net
short-term capital losses and capital loss carryovers, it will be subject to a
corporate tax, currently at a rate of 35%, on the amount retained. In that
event, the Indonesia Fund expects to designate such retained amounts as
undistributed capital gains in a notice to its shareholders. In that event, each
shareholder:
- will be required to include in income for United States federal income tax
purposes, as long-term capital gains, its proportionate share of the
undistributed amount,
- will be entitled to credit its proportionate share of the 35% tax paid by
the Indonesia Fund on the undistributed amount against its United States
federal income tax liabilities, if any, and to claim a refund to the
extent its credits exceed its liabilities, if any, and
- will be entitled to increase its tax basis, for United States federal
income tax purposes, in its shares by an amount equal to 65% of the amount
of undistributed capital gains included in the shareholder's income.
Income received by the Funds from sources within countries other than the
United States may be subject to withholding and other taxes imposed by such
countries, which will reduce the amount available for distribution to
shareholders. If more than 50% of the value of either Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, that
Fund will be eligible and intends to elect to "pass-through" to shareholders the
amount of foreign income and similar taxes it has paid. Pursuant to this
election, shareholders of the electing Fund will be required to include in gross
income (in addition to the full amount of the taxable dividends actually
received) their pro rata share of the foreign taxes paid by that Fund. Each such
shareholder will also be entitled either to deduct (as an itemized deduction)
its pro rata share of foreign taxes in computing its taxable income or to claim
a foreign tax credit against its U.S. federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a shareholder who
does not itemize deductions, but such a shareholder may be eligible to claim the
foreign tax credit. The deduction for foreign taxes is not allowable in
computing alternative minimum taxable income. Each shareholder will be notified
within 60 days after the close of that Fund's taxable year whether the foreign
taxes paid by the Fund will "pass through" for that year.
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Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of each Fund's income flows through to its shareholders. Any gains
from the sale of securities by either Fund will be treated as derived from U.S.
sources and certain currency fluctuation gains, including fluctuation gains from
foreign currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by each Fund. Because of the limitation,
shareholders taxable in the United States may be unable to claim a credit for
the full amount of their proportionate share of the foreign taxes paid by a
Fund. The foreign tax credit also cannot be used to offset more than 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals.
Shareholders will be notified annually by each Fund as to the United States
federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to its shareholders. Furthermore, shareholders
will also receive, if appropriate, various written notices after the close of
each Fund's taxable year regarding the United States federal income tax status
of certain dividends, distributions and deemed distributions that were paid, or
that are treated as having been paid, by that Fund to its shareholders during
the preceding taxable year. For a more detailed discussion of tax matters
affecting each Fund and its shareholders, including a discussion of Indonesian
taxes, see "Taxation" in the SAI.
INFORMATION ABOUT THE MERGER
GENERAL. Under the Plan, the Jakarta Fund will merge with and into the
Indonesia Fund on the Effective Date. As a result of the Merger and on the
Effective Date:
- the Jakarta Fund will no longer exist, and
- the Indonesia Fund will be the surviving corporation.
The Jakarta Fund will then:
- deregister as an investment company under the Investment Company Act,
- cease its separate existence under Maryland law,
- withdraw from registration under the Securities Exchange Act of 1934, or
the "Securities Act."
Each share of outstanding stock of the Jakarta Fund will convert into an
equivalent dollar amount of full shares (and the right to receive cash in lieu
of fractional shares) of stock of the Indonesia Fund, based on the net asset
value per share of each Fund calculated at 4:00 p.m. on the Business Day
preceding the Effective Date. The Indonesia Fund will not issue any fractional
shares to the Jakarta Fund shareholders. The Indonesia Fund will purchase all
fractional shares at the current net asset value of the shares and remit the
cash proceeds to former shareholders of the Jakarta Fund in proportion to their
fractional shares. No sales charge or fee of any kind will be charged to the
Jakarta Fund shareholders in connection with their receipt of common stock of
the Indonesia Fund in the Merger.
Under Maryland law, shareholders of a corporation whose shares are traded
publicly on a national securities exchange, such as the Indonesia Fund's shares,
are not entitled to demand the fair value of their shares upon a merger (i.e.,
appraisal rights); therefore, the shareholders of the Indonesia Fund will be
bound by the terms of the Merger. The term "national security exchange" is not
defined in Maryland law and there is some uncertainty as to whether a regional
stock exchange, such as the BSE, is a national securities exchange for purposes
of Maryland law. Accordingly, Jakarta Fund's Board of Directors has determined
that shareholders of Jakarta Fund are entitled to appraisal rights in view of
this uncertainty. A condition to the Merger is that holders of not more than 10%
of the outstanding
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shares of the Jakarta Fund exercise these rights of appraisal by filing a
written objection with the Jakarta Fund in connection with the Merger at or
before that Fund's special meeting of shareholders and by not voting in favor of
the Merger. See "Information on Appraisal Rights" below. Any shareholder of
either Fund may sell his or her shares of common stock at any time prior to the
Merger on the NYSE (in the case of the Indonesia Fund) or the BSE or the OTC
Bulletin Board (in the case of the Jakarta Fund).
The Plan may be terminated and the Merger abandoned, whether before or after
approval by the Funds' shareholders, at any time prior to the Effective Date:
- by the mutual written consent of the Board of Directors of each Fund, or
- by either Fund if the conditions to that Fund's obligations under the Plan
have not been satisfied or waived.
If the Merger has not been consummated by February 28, 2001, the Plan
automatically terminates on that date, unless a later date is mutually agreed
upon by the Board of Directors of each Fund.
INFORMATION ON APPRAISAL RIGHTS. Under the Maryland General Corporation
Law, certain relevant sections of which are attached as Exhibit B, each
shareholder of the Jakarta Fund will be entitled to demand and receive payment
of the "fair value" of his or her shares in cash, if he or she:
- prior to or at the special meeting of shareholders, files with the Jakarta
Fund a written objection to the Merger;
- does not vote in favor of the Merger; and
- within 20 days after the Articles of Merger have been accepted for record
by the Maryland State Department of Assessments and Taxation (the "SDAT"),
makes a written demand on the Indonesia Fund for payment of his or her
shares (a "Payment Demand") stating the number of shares for which payment
is demanded.
A written objection to the Merger may be delivered to the Jakarta Fund at
the special meeting of shareholders, or if sent prior thereto should be sent to
the Jakarta Fund c/o Nomura Asset Management U.S.A. Inc., 180 Maiden Lane, New
York, New York 10038-4936, Attn: John J. Boretti.
A subsequent Payment Demand should be sent to the Indonesia Fund, c/o Credit
Suisse Asset Management, LLC, 466 Lexington Avenue, New York, New York
10017-3140, Attn: Michael A. Pignataro. Any Jakarta Fund shareholder who fails
to comply with the above requirements will be bound by the terms of the Merger.
Under the Maryland General Corporation Law, "fair value" is determined as of the
close of business on the day of the shareholders' meeting of the Jakarta Fund.
Fair value does not include any appreciation or depreciation that results,
directly or indirectly, from the Merger. A Jakarta Fund shareholder who makes a
Payment Demand would not be entitled to receive any of the dividends or
distributions that will be payable to shareholders of record on a record date
that is after the close of business on the day the Jakarta Fund shareholders
vote on the Merger.
The Indonesia Fund will promptly deliver or send by certified mail, return
receipt requested, to each Jakarta Fund shareholder who has properly filed a
written objection to the Merger and not voted in its favor, written notice of
the date of acceptance of the Articles of Merger by the SDAT. This notice may
include a written offer by the Indonesia Fund to pay the objecting shareholder
what the Indonesia Fund considers to be the "fair value" of his or her shares of
common stock of the Jakarta Fund. Within 50 days after the acceptance of the
Articles of Merger by SDAT, the Indonesia Fund or any shareholder who has made a
Payment Demand but has not received payment for his or her shares may petition a
court of equity in Baltimore City, Maryland for an appraisal to determine the
"fair value" of such shares. If the court finds that a shareholder is entitled
to appraisal of his or her stock, the court will appoint three disinterested
appraisers to determine the "fair value" of such shares on terms and
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<PAGE>
conditions the court considers proper. The appraisers will, within 60 days after
appointment (or such longer period as the court may direct), file with the court
and mail to each party their report stating their conclusion as to the "fair
value" of the shares. Within 15 days after the filing of the report, any party
may object to the report and request a hearing. The court will, upon motion of
any party, enter an order either confirming, modifying or rejecting the report
and, if confirmed or modified, enter judgment directing the time within which
payment must be made. If the appraisers' report is rejected, the court may
determine the "fair value" of the shares of common stock of the Jakarta Fund
shareholder requesting appraisal or may remit the proceeding to the same or
other appraisers. Any judgment entered pursuant to a court proceeding will
include interest from the date of the shareholders' meeting unless the court
finds that the shareholder's refusal to accept a written offer to purchase the
stock previously made by the Indonesia Fund was arbitrary and vexatious or not
in good faith. The costs of the proceeding (not including attorneys' fees) will
be determined by the court and will be assessed against the Indonesia Fund or,
under certain circumstances, the shareholder, or both.
At any time after the filing of a petition for appraisal, the court may
require a shareholder who has filed such petition to submit his or her
certificates representing shares to the clerk of the court for notation of the
pendency of the appraisal proceedings. In order to receive payment, whether by
agreement with the Indonesia Fund or pursuant to a judgment, the Jakarta Fund
shareholder must surrender the stock certificates endorsed in blank and in
proper form for transfer. A Jakarta Fund shareholder who has made a Payment
Demand shall cease to have any rights as a shareholder, except the right to
receive the payment of the "fair value" of the shares. The rights of a Jakarta
Fund shareholder who has made a Payment Demand may be restored only upon:
- the withdrawal, with the consent of the Indonesia Fund, of the Payment
Demand;
- the failure both of the shareholder and the Indonesia Fund to file a
petition for appraisal within the time required;
- the determination of the court that the shareholder is not entitled to an
appraisal; or
- the abandonment or rescission of the Merger.
REASONS FOR THE MERGER. The Board of Directors of each Fund considered and
unanimously approved the proposed Merger at separate meetings of each Board held
on October 11, 2000 (with respect to the Jakarta Fund) and September 28, 2000
(with respect to the Indonesia Fund). A majority of the Directors of the
Indonesia Fund were present at the telephonic meeting. For the reasons discussed
below, the Board of Directors of each Fund, including the Non-interested
Directors of each Fund, after consideration of the potential benefits of the
Merger to the shareholders of that Fund, the options available and consequences
that could potentially occur without the Merger, and the expenses expected to be
incurred by that Fund in connection with the Merger, unanimously determined that
the proposed Merger is advisable and in the best interests of each respective
Fund and its shareholders.
Since the Jakarta Fund was established, its Board of Directors on a
quarterly basis has reviewed the trading price of the Fund's shares. One recent
issue has been the trading of the Fund's shares on the BSE. Although the Jakarta
Fund explored various alternatives designed to maintain its continued listing on
the NYSE, the Jakarta Fund fell below the minimum market capitalization
requirements for continued listing on the NYSE and initiated the listing process
with the BSE. Following notification on March 18, 2000 that trading in the
Jakarta Fund's shares on the NYSE would be suspended, the Fund was successful in
having its shares listed on the BSE. Since that time, however, the Jakarta
Fund's shares have traded at both a premium and a discount. In the context of
the Jakarta Fund Board's consideration of the impact of the market price
discount on the Jakarta Fund and its shareholders, the Board noted that the
Indonesia Fund's shares have frequently traded, and currently trade, at a
premium. The Board also noted the benefits of the Indonesia Fund's NYSE listing,
as well as its marginally better historical performance.
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The Board of each Fund also separately noted that it is anticipated that the
combined Fund would have an expense ratio lower than the current expense ratio
for either Fund, and substantially lower in the case of the Jakarta Fund. In
addition, the Boards noted that the Merger may result in a more liquid trading
market for shares of the Indonesia Fund than either Fund currently enjoys
separately. More importantly, the Merger would assist the Indonesia Fund in
maintaining the liquid trading market for its shares on the NYSE. The minimum
market capitalization for continued listing on the NYSE is $15 million. The
Indonesia Fund's average market capitalization for the 30 consecutive trading
day period ended August 31, 2000 approximated $15 million. After giving effect
to the Merger and based on current market prices, the Indonesia Fund's market
capitalization is expected to total approximately $17.5 million. In light of the
proposed Merger and the expected increase in assets, the NYSE has indicated that
it will continue to maintain the Indonesia Fund's listing, subject to
satisfaction of the listing standards at the time the Merger is consummated and
thereafter. After the Merger the Indonesia Fund's shares would be subject to
delisting from the NYSE if its average market capitalization for a
30 consecutive trading day period falls below $15 million.
In deciding to approve the Merger, the Non-interested Directors considered
many factors, including, but not limited to, market information, analyses and
advice provided to them by their respective investment managers. In addition, in
considering the merits of the proposed Merger, the Boards also considered the
larger asset size of the combined Fund relative to each constituent Fund
standing alone and the potential for economies of scale that may result from the
larger asset size of the combined Fund. Based on data presented by CSAM and
NAM-U.S.A., the Board of Directors of each Fund considered the anticipation that
the Indonesia Fund would have a lower expense ratio than the current expense
ratio for either Fund, and this expense ratio would be substantially lower in
the case of the Jakarta Fund. See "Expense Table." Further, it is anticipated
that the Merger itself may focus the attention of more securities analysts on
the combined Fund than previously followed either Fund individually. Once the
Merger is consummated, it is believed that the Indonesia Fund will be the only
publicly available fund in the United States that concentrates in Indonesian
securities.
Debevoise & Plimpton, counsel to the Non-Interested Directors of the Jakarta
Fund, assisted the Non-interested Directors in their consideration of these
matters. Brown & Wood LLP, counsel to the Jakarta Fund and NAM-U.S.A., also
assisted the Jakarta Fund is its consideration of these matters. Morrison &
Foerster, counsel to the Non-interested Directors of the Indonesia Fund,
assisted the Non-interested Directors in their consideration of these matters.
Willkie Farr & Gallagher, counsel for the Indonesia Fund and CSAM, also assisted
the Indonesia Fund in its consideration of these matters.
THERE CAN BE NO GUARANTEE THAT ANY OF THESE POTENTIAL BENEFICIAL RESULTS
WILL BE REALIZED.
The Board of Directors of each Fund, in declaring advisable and recommending
the proposed Merger, also considered the following:
(1) the capabilities and resources of CSAM and its affiliates in the areas
of investment management and shareholder servicing;
(2) expense ratios and information regarding fees and expenses of the Funds,
both currently and on a pro forma basis;
(3) the terms and conditions of the Merger and whether it would result in
dilution of the interests of existing shareholders;
(4) the compatibility of each Fund's portfolio securities, investment
objective, policies and restrictions;
(5) the tax consequences to each Fund and its shareholders in connection
with the Merger;
(6) the anticipated expenses of the Merger; and
(7) the benefits of continued listing on the NYSE.
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In reviewing issues relating to the structure of the Merger and which Fund
should be the surviving corporation in the Merger, each Board also considered
the following information:
- the comparative performance records of the two Funds,
- public and market perception of the two Funds,
- the current trading forum of each Fund,
- the relative size of the two Funds, and
- the investment policies, strategies and personnel CSAM intends to utilize
in managing the Indonesia Fund.
Based on the factors discussed above, the Board of Directors of each Fund
concluded that the estimated expenses of the Merger are outweighed by the
benefits that are anticipated to be derived from the Merger.
After consideration of the above issues CSAM and NAM-U.S.A. proposed, and
the Board of Directors of each Fund approved, the Merger.
IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF EACH FUND, THE MERGER SERVES
THE BEST INTERESTS OF EACH FUND AND ITS SHAREHOLDERS.
TERMS OF THE MERGER AGREEMENT. The following is a summary of the
significant terms of the Plan. This summary is qualified in its entirety by
reference to the Plan, which is attached as Exhibit A.
At the Effective Date, each share of common stock of the Jakarta Fund will
convert into an equivalent dollar amount (to the nearest one ten-thousandth of
one cent) of full shares (and the right to receive cash in lieu of fractional
shares) of common stock of the Indonesia Fund, based on the net asset value per
share of each Fund calculated at 4:00 p.m. on the Business Day preceding the
Effective Date. The Indonesia Fund will not issue any fractional shares to the
Jakarta Fund shareholders. The Indonesia Fund will purchase all fractional
shares at the current net asset value of the shares and remit the cash proceeds
to former shareholders of the Jakarta Fund in proportion to their fractional
shares.
For purposes of valuing assets in connection with the Merger, the assets of
the Jakarta Fund will be valued pursuant to the principles and procedures
consistently utilized by the Indonesia Fund, which principles and procedures are
similar to those utilized by the Jakarta Fund in valuing its own assets and
determining its own liabilities. As a result, it is not expected that the
Indonesia Fund's valuation procedures as applied to the Jakarta Fund's portfolio
securities will result in any difference from the valuation that would have
resulted from the application of the Jakarta Fund's valuation procedures to such
securities. The net asset value per share of common stock of the Indonesia Fund
will be determined in accordance with these principles and procedures, and the
Indonesia Fund will certify the computations involved.
The Indonesia Fund will issue separate certificates or share deposit
receipts for common stock of the Indonesia Fund to shareholders of the Jakarta
Fund. The Indonesia Fund will deliver these certificates or share deposit
receipts representing shares of common stock of the Indonesia Fund to
BankBoston, N.A. c/o EquiServe, L.P., as the transfer agent and registrar for
common stock of the Indonesia Fund. The Indonesia Fund will not permit any
Jakarta Fund shareholder to receive new certificates representing shares of
common stock of the Indonesia Fund until the shareholder has surrendered his or
her outstanding certificates representing shares of the common stock of the
Jakarta Fund or, in the event of lost certificates, posted adequate bond. The
Jakarta Fund will request that its shareholders surrender their outstanding
certificates representing shares of the common stock of the Jakarta Fund or post
adequate bond therefor. Dividends payable to holders of record of shares of the
Indonesia Fund as of any date after the Effective Date and prior to the exchange
of certificates by any shareholder of the Jakarta Fund will be paid to such
shareholder, without interest; however, such dividends will not be paid unless
and until such shareholder surrenders his or her stock certificates of the
Jakarta Fund for exchange.
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PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. UPON CONSUMMATION
OF THE MERGER, SHAREHOLDERS OF THE JAKARTA FUND WILL BE FURNISHED WITH
INSTRUCTIONS FOR EXCHANGING THEIR STOCK CERTIFICATES FOR STOCK CERTIFICATES OF
THE INDONESIA FUND.
The Plan provides, among other things, that the Merger will not take place
without:
- the requisite approval of the shareholders of the Jakarta Fund and the
Indonesia Fund,
- the effectiveness of a Registration Statement on Form N-14,
- the continued listing of the Indonesia Fund's shares on the NYSE through
the completion date of the Merger, and
- confirmation by the Jakarta Fund that not more than 10% of the outstanding
shares of the Jakarta Fund have (i) filed a written objection to the
Merger with the Jakarta Fund in connection with the Merger at or before
that Fund's special meeting of shareholders and (ii) have not voted in
favor of the Merger Proposal.
The Plan may be terminated at any time prior to the Effective Date by mutual
agreement of each Fund's Board of Directors or by either Fund if the other has
violated a condition of the Plan. The Plan will automatically terminate after
February 28, 2001 if the Merger has not been consummated, unless such time is
extended by mutual agreement of the Board of Directors of each Fund.
The Plan may be amended, modified or supplemented by mutual agreement of the
Jakarta Fund and the Indonesia Fund. However, no amendments which would have the
effect of changing the provisions for determining the number of shares to be
issued to the Jakarta Fund shareholders will be permitted following the special
meeting unless those shareholders consent to the amendment.
EXPENSES OF THE MERGER. In evaluating the proposed Merger, CSAM and
NAM-U.S.A. have estimated the amount of expenses the Funds would incur,
including NYSE listing fees, SEC registration fees, legal and accounting fees
and proxy and distribution costs. The estimated total expenses pertaining to the
Merger are $357,000. Each Fund will bear its own legal, accounting and mailing
expenses relating to the Merger and one-half of all other Merger-related
expenses, except that if the Merger is completed, the Indonesia Fund will bear
the first $200,000 of the Jakarta Fund's expenses under this formula. If the
Merger is not completed for any reason (other than breach by the Jakarta Fund of
its obligations under the Plan), the Indonesia Fund will bear all of the Jakarta
Fund's ordinary Merger-related expenses, including its legal, accounting and
mailing expenses as described above, but excluding any extraordinary expenses
such as litigation expenses. Counsel to the Indonesia Fund has taken a lead role
in drafting this Proxy Statement/Prospectus, and the Indonesia Fund will bear
the fees and expenses of such counsel. For more information about the expenses
of the Merger, see "Synopsis--Expenses of the Merger."
The expenses of the Merger, assuming its consummation, are expected to
result in a reduction in the Indonesia Fund's net asset value per share of
approximately $0.07 and no reduction in the Jakarta Fund's net asset value.
TAX CONSIDERATIONS. The Plan and Merger are conditioned upon the receipt by
the Jakarta Fund and the Indonesia Fund of an opinion from Brown & Wood LLP and
Willkie Farr & Gallagher, respectively, substantially to the effect that, based
upon the facts, assumptions and representations of the parties, for federal
income tax purposes:
- the Merger will constitute a tax-free "reorganization" within the meaning
of Section 368(a)(1) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of Section 368(b) of the Code,
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- no gain or loss will be recognized by either Fund as a result of the
Merger,
- the basis of the assets of the Jakarta Fund in the hands of the Indonesia
Fund will be the same as the basis of such assets to the Jakarta Fund
immediately prior to the Merger,
- the holding period of the assets of the Jakarta Fund in the hands of the
Indonesia Fund will include the period during which such assets were held
by the Jakarta Fund,
- no gain or loss will be recognized by the shareholders of the Jakarta Fund
upon the conversion of their Jakarta Fund shares into common stock of the
Indonesia Fund except with respect to cash received upon the sale of
fractional share interests,
- the basis of shares of the Indonesia Fund received by the shareholders of
the Jakarta Fund (including fractional share interests) will be the same
as the basis of the shares of the Jakarta Fund exchanged therefor,
- the holding period of shares of the Indonesia Fund (including fractional
share interests) received by the shareholders of the Jakarta Fund will
include the holding period during which the shares of the Jakarta Fund
exchanged therefor were held, provided that at the time of the exchange
the shares of the Jakarta Fund were held as capital assets in the hands of
the shareholders of the Jakarta Fund, and
- cash received for fractional shares will generate gain or loss to
shareholders receiving such cash.
While the Jakarta Fund is not aware of any adverse state or local tax
consequences of the proposed Merger, it has not requested any ruling or opinion
with respect to such consequences and shareholders may wish to consult their own
tax advisers with respect to such matters.
ADDITIONAL INFORMATION ABOUT THE FUNDS
DESCRIPTION OF SECURITIES TO BE ISSUED. The authorized stock of the
Indonesia Fund consists of 100,000,000 shares of common stock, U.S.$0.001 par
value. Shares of the Indonesia Fund entitle its holders to one vote per share.
Holders of the Indonesia Fund's common stock are entitled to share equally in
dividends authorized by the Fund's Board of Directors payable to the holders of
such common stock and in the net assets of the Indonesia Fund available on
liquidation for distribution to holders of such common stock. Shares have
noncumulative voting rights and no conversion, preemptive or other subscription
rights, and are not redeemable. The outstanding shares of common stock of the
Indonesia Fund are fully paid and non-assessable. In the event of liquidation,
each share of common stock is entitled to its proportion of the Fund's assets
after payment of debts and expenses. The Indonesia Fund holds shareholder
meetings annually.
The following table shows information about the common stock of each Fund as
of June 30, 2000.
<TABLE>
<CAPTION>
(3) (4)
AMOUNT HELD AMOUNT ISSUED
(2) BY FUND AND OUTSTANDING
(1) AMOUNT FOR ITS OWN EXCLUSIVE OF AMOUNT
TITLE OF CLASS AUTHORIZED ACCOUNT SHOWN UNDER (3)
---------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
JAKARTA FUND Common Stock, 100,000,000 None 5,017,564
$0.10 par value
INDONESIA FUND Common Stock, 100,000,000 None 4,608,989
$0.001 par value
</TABLE>
The shares of common stock of the Jakarta Fund are listed and traded on the
BSE under the symbol "JGF." The Jakarta Fund's common stock also trades on the
OTC Bulletin Board under the symbol "JGFI." The shares of common stock of the
Indonesia Fund are listed and trade on the NYSE under the symbol "IF." As of
June 30, 2000, the net asset value of the Jakarta Fund common stock was
34
<PAGE>
$1.67, and the market price per share was $1.50. As of that same date, the net
asset value of the Indonesia Fund common stock was $2.48, and the market price
per share was $3.38.
DISCOUNT TO NET ASSET VALUE. Shares of closed-end investment companies
frequently trade at a discount to net asset value. This characteristic is a risk
separate and distinct from the risk that the Funds' net asset values may
decrease, and this risk may be greater for shareholders expecting to sell their
shares in a relatively short period. THE SHARES OF COMMON STOCK OF THE FUNDS
SHOULD THUS BE VIEWED AS BEING DESIGNED PRIMARILY FOR LONG-TERM INVESTORS AND
SHOULD NOT BE CONSIDERED A VEHICLE FOR TRADING PURPOSES.
Although the shares of the Jakarta Fund have traded at a premium, they have
also traded at a discount from net asset value, and, as of June 30, 2000, traded
at a market price discount of 10.18%. The Indonesia Fund's shares have
historically traded in the market at a premium, and as of the same date traded
at a market price premium of 36.09%. It is not possible to state whether shares
of the Indonesia Fund will trade at a premium or discount to net asset value
leading up to or following the Merger, or the extent of any such premium or
discount. The Directors of the Indonesia Fund will periodically consider any
market price discount and the effect of any such discount on the Indonesia Fund
and its shareholders.
PER SHARE DATA FOR JAKARTA GROWTH FUND, INC.
COMMON STOCK TRADED ON THE NYSE/BSE*
<TABLE>
<CAPTION>
PREMIUM
(DISCOUNT)
MARKET PRICE NET ASSET VALUE AS % OF NAV
PERIOD ------------------- ------------------- -------------------
(CALENDAR YEAR) HIGH LOW HIGH LOW HIGH LOW
--------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter............................. $4.625 $2.938 $2.730 $1.830 102.850% 32.780%
Second Quarter............................ 4.063 2.688 2.550 1.570 106.040 47.060
Third Quarter............................. 3.188 1.750 1.800 1.370 89.730 17.690
Fourth Quarter............................ 2.063 1.625 2.260 1.420 31.370 9.950
1999
First Quarter............................. 2.688 2.000 2.280 1.840 22.660 3.630
Second Quarter............................ 3.938 2.188 3.420 2.010 42.500 8.830
Third Quarter............................. 3.813 2.750 3.370 2.040 34.800 7.570
Fourth Quarter............................ 3.500 2.875 3.090 2.410 32.260 3.160
2000
First Quarter............................. 3.125 2.313 3.060 2.150 14.630 0.980
Second Quarter............................ 2.188 1.125 2.160 1.500 2.200 (47.180)
Third Quarter............................. 1.531 1.000 1.700 1.260 14.09 (35.06)
</TABLE>
------------------
* The Jakarta Fund traded on the NYSE from January 29, 1990 until April 12,
2000, at which time it began trading on the BSE and the OTC Bulletin Board.
35
<PAGE>
PER SHARE DATA FOR THE INDONESIA FUND, INC.
COMMON STOCK TRADED ON THE NYSE
<TABLE>
<CAPTION>
PREMIUM
MARKET PRICE NET ASSET VALUE AS % OF NAV
PERIOD ------------------- ------------------- -------------------
(CALENDAR YEAR) HIGH LOW HIGH LOW HIGH LOW
--------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1998
First Quarter.................................... $7.18 $4.00 $3.65 $2.30 123% 39%
Second Quarter................................... 5.88 3.31 3.73 1.70 139 56
Third Quarter.................................... 4.06 2.31 2.11 1.41 93 50
Fourth Quarter................................... 4.56 2.56 2.98 1.40 83 27
1999
First Quarter.................................... 4.19 3.00 3.13 2.26 54 24
Second Quarter................................... 7.00 3.31 5.41 2.61 76 19
Third Quarter.................................... 7.00 4.75 5.11 2.95 67 25
Fourth Quarter................................... 6.00 4.88 4.50 3.40 58 20
2000
First Quarter.................................... 5.69 3.88 4.62 3.09 37 18
Second Quarter................................... 4.38 3.31 3.17 2.23 57 19
Third Quarter.................................... 3.50 2.63 2.63 1.97 48 16
</TABLE>
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of the Jakarta Fund and the Indonesia Fund as of June 30, 2000
and on a pro forma basis as of that same date giving effect to the Merger:(1)
<TABLE>
<CAPTION>
INDONESIA JAKARTA PRO FORMA PRO FORMA
FUND FUND ADJUSTMENTS MERGER
----------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Net assets................................. $11,449,492 $8,367,438 $(370,104) $19,446,826(1)
Net asset value per share.................. $ 2.48 $ 1.67 N/A $ 2.41(2)
Shares outstanding......................... 4,608,989 5,017,564 N/A 8,075,518(3)
</TABLE>
--------------
(1) Assumes that the Merger had been consummated on June 30, 2000, and is for
information purposes only. No assurance can be given as to how many shares
of the Indonesia Fund common stock shareholders of the Jakarta Fund will
receive on the date the Merger takes place, and the foregoing should not be
relied upon to reflect the number of shares of the Indonesia Fund common
stock that actually will be received on or after such date. Assumes accrual
of estimated Merger expenses of $357,000 and write-off of Jakarta Fund's
prepaid costs of $13,104, which will not be assumed by the Indonesia Fund.
(2) Net asset value per share after Merger-related expenses and distribution of
ordinary income, if any.
(3) Assumes the issuance of 3,466,529 shares in exchange for the net assets of
the Jakarta Fund. The number of shares issued was based on the net asset
value of each Fund, net of estimated Merger expenses and distributions, on
June 30, 2000.
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund intends to distribute
dividends from its net investment income and any net realized capital gains
after utilization of capital loss carryforwards annually to prevent application
of a federal excise tax. An additional distribution may be made if necessary.
Any dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year in which it is declared. Dividends
and distributions of each Fund are invested in shares of the Fund in accordance
with each Fund's Dividend Reinvestment Plan and credited to the shareholder's
account on the settlement date which is usually three Business Days from the
purchase date or, at the shareholder's election, paid in cash.
36
<PAGE>
If the Merger is approved by each Fund's shareholders, then as soon as
practicable before the Effective Date, each Fund will pay its shareholders a
cash distribution of all undistributed 2000 net investment income unless such
amounts are immaterial. It is expected that any calendar year realized net
capital gains will be offset through the utilization of capital loss
carryforwards prior to the Effective Date.
PORTFOLIO VALUATION. Investments of each Fund are stated at value in each
Fund's financial statements. All equity securities of the Indonesia Fund are
valued at the closing price on the exchange or market on which the security is
primarily traded ("Primary Market"). If the security does not trade on the
Primary Market, it shall be valued at the closing price on another exchange
where it trades. If there are no such sale prices, the value shall be the most
recent bid price, and if there is no bid price, the security shall be valued at
the most recent asked price. If no pricing service is available and there are
more than two dealers, the value shall be the mean of the highest bid price and
lowest ask price. If there is only one dealer, then the value shall be the mean
if bid and ask prices are available, otherwise the value shall be the bid price.
The Indonesia Fund uses a local market quotation for investments in the banking
sector. Both Funds value short-term investments having a maturity of 60 days or
less on the basis of amortized cost. Investments traded on stock exchanges are
valued by the Jakarta Fund at the last sale price on the principle market on
which such securities are traded as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. Securities traded in the over-the-counter market are valued by the
Jakarta Fund at the last reported sales price as of the close of business on the
day the securities are being valued or, if none is available, at the mean of the
bid and offer price at the close of the day. Short-term debt securities which
mature in 60 days or less are valued by the Jakarta Fund at amortized cost if
their original maturity at the date of purchase was 60 days or less, or by
amortizing their value on the 61st day prior to maturity if their term to
maturity at the date of purchase exceeded 60 days. Securities and other assets,
including futures contracts and related options, are stated at market value or
otherwise at fair value as determined in good faith by or under the direction of
the Board of Directors of the Jakarta Fund. All other securities and assets are
valued at fair value as determined in good faith by each Fund's Board of
Directors. The Board of Directors of each Fund has established general
guidelines for calculating fair value of securities that are not readily
marketable. At June 30, 2000, the Funds held no assets in securities valued in
good faith by its Board of Directors. The net asset value per share of the
Indonesia Fund is calculated daily, with the exception of those days on which
the NYSE is closed. The net asset value per share of the Jakarta Fund is
calculated daily.
PORTFOLIO TRANSACTIONS. The Indonesia Fund may utilize CS First Boston
Corporation ("CSFB") and other affiliates of Credit Suisse in connection with
the purchase or sale of securities in accordance with rules or exemptive orders
promulgated by the SEC when CSAM believes that the charge for the transaction
does not exceed usual and customary levels.
Decisions to buy and sell securities for each Fund are made by their
respective investment advisers, subject to the overall review of each Fund's
Board of Directors. Portfolio securities transactions for the Funds will be
placed on behalf of each Fund by persons authorized by their respective
investment advisers. CSAM manages other accounts that may invest in Indonesian
securities. Although investment decisions for the Indonesia Fund are made
independently from those of the other accounts managed by CSAM, investments of
the type the Indonesia Fund may make may also be made by those other accounts.
When the Indonesia Fund and one or more other accounts managed by CSAM are
prepared to invest in, or desire to dispose of, the same security, available
investments or opportunities for each will be allocated in a manner believed by
CSAM to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Indonesia Fund or the size of the position
obtained or disposed of by the Fund.
Transactions on United States and some foreign stock exchanges involve the
payment of negotiated brokerage commissions, which may vary among different
brokers. The cost of securities purchased from
37
<PAGE>
underwriters includes an underwriter's commission or concession, and the prices
at which securities are purchased from and sold to dealers in the
over-the-counter markets include an undisclosed dealer's mark-up or mark-down.
Generally, the supervision and regulation of foreign stock exchanges and brokers
differ from, and in some cases may be less than, the supervision and regulation
of exchanges and brokers in the U.S.
Both Funds may invest in securities traded in over-the-counter markets, and
intend to deal directly with the dealers who make markets in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. Under the Investment Company Act, persons affiliated with a
fund are prohibited from dealing with the fund as principal in the purchase and
sale of securities. Since transactions in the over-the-counter market usually
involve transactions with dealers acting as principal for their own account,
neither Fund will deal with affiliated persons, including CSFB (with respect to
the Indonesia Fund) and NAM-U.S.A. (with respect to the Jakarta Fund) and their
respective affiliates, in connection with such transactions.
In selecting brokers or dealers to execute portfolio transactions on behalf
of a Fund, each investment adviser seeks the best overall terms available and
considers, among other things, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, in selecting
brokers or dealers to execute a particular transaction and in evaluating the
best overall terms available, each investment adviser may consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) provided to a Fund and/or other accounts over
which the adviser exercises investment discretion. CSAM's advisory fee is not
reduced as a result of its receiving such brokerage and research services.
The Board of Directors of the Jakarta Fund will from time to time consider
the possibilities of seeking to recapture for the benefit of the Jakarta Fund
brokerage commissions and other expenses of possible portfolio transactions by
conducting portfolio transactions through affiliated entities.
Each Fund's Board of Directors reviews periodically the commissions paid by
the Funds to determine if the commissions paid over representative periods of
time were reasonable in relation to the benefits inuring to the Funds.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN. The Indonesia Fund operates a
Dividend Reinvestment and Cash Purchase Plan, the InvestLink-SM- Program, or the
Program, sponsored and administered by Bank Boston, N.A. c/o EquiServe, L.P.,
pursuant to which Fund dividends and distributions, net of any applicable U.S.
withholding tax, are reinvested in shares of the Fund. Bank Boston, N.A. c/o
EquiServe, L.P, serves as the Program Administrator for the shareholders of the
Indonesia Fund in administering the Program. The Jakarta Fund also operates a
Dividend Reinvestment Plan, the Reinvestment Plan, pursuant to which the Plan
Agent (on behalf of participating shareholders) reinvests dividends and
distributions of shares of the Jakarta Fund. State Street Bank and Trust Company
serves as the Plan Agent for the Jakarta Fund.
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 Program or the Reinvestment
Plan, as the case may be. The receipt of dividends and distributions in stock
under the Program or the Reinvestment Plan will not relieve participants of any
income tax (including withholding tax) that may be payable on such dividends or
distributions.
Certain distributions of cash attributable to (a) some of the dividends and
interest amounts paid to the Funds and (b) certain capital gains earned by the
Funds that are derived from securities of Indonesian issuers are subject to
taxes payable by the Funds at the time amounts are remitted. Such
38
<PAGE>
taxes will be borne by the Funds and allocated to all shareholders in proportion
to their interests in the Funds.
THE INDONESIA FUND. An interested shareholder 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.
If the Board of Directors of the Indonesia 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 Program will
receive cash and participants in the Program will receive shares of common stock
of the Indonesia Fund purchased on the open market by the Program Administrator.
The number of shares of common stock 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. Such purchases will be made by participating brokers as agent for the
participants using normal cash settlement practices. All shares of common stock
purchased through the Program will be allocated to participants as of the
settlement date, which is usually three Business Days from 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.
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 Indonesia 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.
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.
39
<PAGE>
Participants in the Program also have the option of making additional cash
payments, or bank account deductions, to the Program Administrator for the
purchase of shares of common stock of the Fund, in any amount from $100 up to
$100,000 annually. 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 these
transaction charges, participants will be assessed per share processing fees
which include brokerage commissions. Participants will not be charged any fee
for reinvesting dividends.
All correspondence concerning the Program should be directed to the Program
Administrator at Bank Boston, N.A. c/o EquiServe, L.P, InvestLink Program,
P.O. Box 8040, Boston, MA 02266-8040.
THE JAKARTA FUND. The Reinvestment Plan is available automatically for any
holder of common stock with shares registered in his/her own name who wishes to
purchase additional shares with income dividends or capital gains distributions
received on shares owned, unless such shareholder elects to receive all
dividends and capital gain distributions in cash, paid by check and mailed to
the shareholder. The Jakarta Fund shares will be acquired by the Plan Agent for
shareholders either through open market purchases if the Jakarta Fund is trading
at a discount or through the issuance of authorized but unissued shares if the
Jakarta Fund is trading at net asset value or a premium. If the market price of
a share on the payable date of a dividend or distribution is at or above the
Jakarta Fund's net asset value per share on such date, the number of shares to
be issued by the Jakarta Fund to each shareholder receiving shares in lieu of
cash dividends or distributions will be determined by dividing the amount of the
cash dividends or distributions to which such shareholder would be entitled by
the greater of the net asset value per share on such date or 95% of the market
price of a share on such date. If the market price of a share on such
distribution date is below the net asset value per share, the number of shares
to be issued to such shareholders will be determined by dividing such amount,
less brokerage commission, by the per share market price.
Purchases will be made by the Plan Agent from time to time on the BSE or
elsewhere to satisfy dividend and distribution investment requirements under the
Plan. Purchases will be suspended on any day when the closing price (or the mean
between the closing bid and ask prices if there were no sales) of the shares on
the BSE on the preceding trading day was higher than the net asset value per
share. If on the dividend payable date, purchases by the Jakarta Fund are
insufficient to satisfy dividend or distribution investments and on the last
trading day immediately preceding the dividend payable date the closing price or
the mean between the closing bid and ask prices of the shares is lower than or
the same as the net asset value per share, the Plan Agent will continue to
purchase shares until all investments by shareholders have been completed or the
closing price or the mean between the bid and ask prices of the shares becomes
higher than the net asset value, in which case the Jakarta Fund will issue the
necessary additional shares from authorized but unissued shares. If on the last
trading day immediately preceding the dividend payable date, the closing price
or the mean between the bid and ask prices of the shares is higher than the net
asset value per share and if the number of shares previously purchased on the
BSE or elsewhere is insufficient to satisfy dividend investments, the Jakarta
Fund will issue the necessary additional shares from authorized but unissued
shares. There will be no brokerage charges with respect to shares issued
directly by the Jakarta Fund to satisfy the dividend investment requirements.
However, each participant will pay a pro rata share of brokerage commissions
incurred with respect to the Jakarta Fund's open market purchases of shares. In
each case, the cost per share of shares purchased for each shareholder's account
will be the average cost, including brokerage commissions, of any shares
purchased in the open market plus the cost of any shares issued by the Jakarta
Fund. For the fiscal year ended March 31, 2000, the Jakarta Fund did not
purchase any shares in the open market for dividend reinvestment purposes or
issue any new shares.
40
<PAGE>
All correspondence concerning the Reinvestment Plan should be directed to
the Plan Agent, State Street Bank and Trust Company, P.O. Box 8209, Boston,
Massachusetts 02266-8209.
CORPORATE GOVERNANCE PROVISIONS. Both Funds are Maryland corporations and
in many respects have similar charter and by-law provisions.
SPECIAL VOTING PROVISIONS AND REQUIREMENTS. The Articles of Incorporation
and By-laws of each Fund contain provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund, to cause it to engage in certain transactions or to modify its structure.
The Board of Directors of the Indonesia Fund is divided into three classes each
having a term of three years. Each year, the term of one class expires and the
successor or successors elected to such class will serve for a three-year term.
This provision could delay for up to two years the replacement of a majority of
the Board of Directors of the Indonesia Fund. The Jakarta Fund does not have a
classified board.
Conversion of the Indonesia Fund from a closed-end to an open-end investment
company requires the affirmative vote of at least 75% of the Board of Directors
and 75% of the outstanding shares of the Indonesia Fund unless approved by at
least 75% of the Continuing Directors (as defined below). If the conversion is
approved by at least 75% of the Continuing Directors, the affirmative vote of
the holders of at least 66 2/3% of the outstanding shares of the Indonesia Fund
will be required to approve such conversion in addition to at least 75% of the
Board of Directors. Conversion of the Jakarta Fund from a closed-end to an
open-end investment company requires the favorable vote of the holders of at
least 75% of the Fund's outstanding shares, unless the transaction is authorized
by the affirmative vote of 66 2/3% of the Directors. In such a case, the
affirmative vote of a majority of the Jakarta Fund's shares would be necessary
to effectuate the conversion. Converting to an open-end investment company could
restrict the ability of either Fund to redeem its shares otherwise than in kind
due to the limited depth of the markets for certain securities in which the
Funds may invest. As a result, there can be no assurance that the Funds could
realize the then market value of the portfolio securities the Funds would be
required to liquidate to meet redemption requests.
The affirmative vote of at least 75% of the Directors and of the holders of
at least 75% of the shares of the Indonesia Fund is required to authorize any of
the following transactions:
(i) merger, consolidation or share exchange of the Fund with or into any
other person;
(ii) issuance or transfer by the Fund (in one or a series of transactions in
any 12-month period) of any securities of the Fund to any other person
or entity for cash, securities or other property (or combination
thereof) having an aggregate fair market value of $1,000,000 or more,
excluding sales of securities of the Fund in connection with a public
offering, issuances of securities of the Fund pursuant to a dividend
reinvestment plan adopted by the Fund and issuances of securities of
the Fund upon the exercise of any stock subscription rights distributed
by the Fund;
(iii) sale, lease, exchange, mortgage, pledge, transfer or other disposition
by the Fund (in one or a series of transactions in any 12-month period)
to or with any person of any assets of the Fund having an aggregate
fair market value of $1,000,000 or more, except for portfolio
transactions effected by the Fund in the ordinary course of its
business (transactions within clauses (i) and (ii) and this clause
(iii) each being known individually as a "Business Combination");
(iv) any proposal as to the voluntary liquidation or dissolution of the Fund
or any amendment to the Fund's Articles of Incorporation to terminate
its existence; and
(v) any shareholder proposal as to specific investment decisions made or to
be made with respect to the Fund's assets.
41
<PAGE>
With regard to the Indonesia Fund, in the case of a Business Combination or
a voluntary liquidation proposal as described in clause (iv) above, a 75%
shareholder vote will not be required if the transaction is approved by a vote
of at least 75% of the Continuing Directors and by a vote of holders of 66 2/3%
of the Fund's shares, or no shareholder vote if certain conditions regarding the
consideration paid by the person entering into, or proposing to enter into, a
Business Combination with the Fund and various other requirements are satisfied.
A "Continuing Director" is any member of the Board of Directors of the
Indonesia Fund who:
- is not a person or affiliate of a person (other than an investment company
advised by the Fund's initial investment adviser or any of its affiliates)
who enters or proposes to enter into a Business Combination with the
Indonesia Fund (such person or affiliate, an "Interested Party"), and
- who has been a member of the Board of Directors of the Indonesia Fund for
a period of at least 12 months, or is a successor of a Continuing Director
who is unaffiliated with an Interested Party and is recommended to succeed
a Continuing Director by a majority of the Continuing Directors then on
the Board of Directors of the Indonesia Fund.
As permitted by the Maryland General Corporation Law ("MGCL"), the Jakarta
Fund has elected to have certain statutory provisions which (absent an
exemption) prohibit "business combinations" with "interested stockholders" (as
such terms are defined in the MGCL) for a period five years from the date an
"interested stockholder" becomes such and thereafter requires that any such
"business combination" be approved by the affirmative vote of 80% of the Jakarta
Fund's total outstanding voting stock and 66 2/3% of the total voting stock,
excluding shares held by the "interested stockholder." The Board of Directors of
the Jakarta Fund has resolved expressly to exempt the Merger from the
application of MGCL's statutory provisions relating to "business combinations".
In addition, the Articles of Incorporation of the Jakarta Fund require the
favorable vote of the holders of at least 75% of the Jakarta Fund's shares, then
entitled to be voted, to approve, adopt or authorize the following:
(i) a merger or consolidation or statutory share exchange of the Fund with
other corporations,
(ii) a sale of all or substantially all of the Fund's assets (other than in
the regular course of the Fund's investment activities), or
(iii) a liquidation or dissolution of the Fund,
unless such action has been approved, adopted or authorized by the affirmative
vote of two-thirds of the total number of Directors fixed in accordance with the
By-laws, in which case the affirmative vote of a majority of the Jakarta Fund's
shares is required. The affirmative vote of 75% or more of the outstanding
shares of the Jakarta Fund then entitled to vote is required to amend any or all
of the foregoing provisions and certain other provisions contained in the
Articles of Incorporation.
The Indonesia Fund's By-laws contain provisions the effect of which is to
prevent matters, including nominations of directors, from being considered at
shareholders' meetings where the Fund has not received sufficient prior notice
of the matters. The Jakarta Fund's By-Laws do not contain any similar
provisions.
The provisions described above could have the effect of depriving
shareholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging a third party from
42
<PAGE>
seeking to obtain control of either Fund in a tender offer or similar
transaction. In the opinion of each Fund's Board of Directors, however, these
provisions offer several possible advantages, including:
- they may require persons seeking control of either Fund to negotiate with
its management regarding the price to be paid for the shares required to
obtain such control,
- they promote continuity and stability, and
- they enhance each Fund's ability to pursue long-term strategies that are
consistent with its investment objectives.
The Board of Directors of each Fund has determined that the foregoing voting
requirements, which are generally greater than the minimum requirements under
Maryland law and the Investment Company Act, are in the best interests of
shareholders generally.
REMOVAL OF DIRECTORS. Directors of the Indonesia Fund may be removed, with
or without cause, while Directors of the Jakarta Fund may only be removed with
cause, only by a vote of the holders of 75% of the shares of the respective Fund
entitled to be voted on that matter.
BY-LAWS. The Jakarta Fund's By-laws provide, among other things, that a
special meeting of shareholders may be called on the written request of at least
25% of the holders of the outstanding shares of the Fund entitled to vote at
that meeting to the extent permitted by Maryland law. The Indonesia Fund's
By-laws provide, among other things, that:
- a majority of the outstanding capital stock of such Fund is required to
request a special meeting of shareholders,
- certain advance notice requirements must be met in order for shareholders
to submit proposals at annual meetings and for nominations by stockholders
for election to the Board of Directors, and
- the power to amend the By-laws is reserved to the Board of Directors,
except as otherwise required by the Investment Company Act.
The full text of the Indonesia Fund's Articles of Incorporation and By-Laws
are on file with the SEC and these documents, as may be amended from time to
time, will govern the Indonesia Fund after the Merger.
INTEREST OF CERTAIN PERSONS. CSAM may be considered to have a financial
interest in the Merger, arising from the fact that the amount of its management
fee under the advisory agreement between CSAM and the Indonesia Fund will
increase as the amount of the Indonesia Fund's assets increases, and the amount
of those assets will increase by virtue of the Merger.
43
<PAGE>
MANAGEMENT OF THE FUNDS
DIRECTORS AND PRINCIPAL OFFICERS. The business and affairs of each Fund are
managed under the direction of that Fund's Board of Directors, and the day to
day operations are conducted through or under the direction of the officers of
that Fund.
Directors and Executive Officers of the Indonesia Fund are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND
------------------------------------------------------------ -------------------------------
<S> <C>
Dr. Enrique R. Arzac (1) Director
Columbia University Graduate School of Business
New York, New York 10027
Richard H. Francis (1) Director
40 Grosvenor Road
Short Hills, NJ 07078
Lawrence J. Fox (1) Director
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103
William W. Priest, Jr. Chairman of the Board
466 Lexington Avenue
16th Floor
New York, New York 10017
Robert B. Hrabchak Chief Investment Officer
466 Lexington Avenue
16th Floor
New York, New York 10017
Raoul Rayos Investment Officer
466 Lexington Avenue
16th Floor
New York, New York 10017
Hal Liebes Senior Vice President
466 Lexington Avenue
16th Floor
New York, New York 10017
Michael A. Pignataro Chief Financial Officer and
466 Lexington Avenue Secretary
16th Floor
New York, New York 10017
</TABLE>
------------------
(1) Indicates Non-interested Directors of the Indonesia Fund and members of its
audit committee.
All the directors and executive officers, as a group, of the Indonesia Fund,
as of June 30, 2000, owned less than 1% of the outstanding shares of the
Indonesia Fund.
Dr. Enrique R. Arzac, 58, is a Professor of Finance and Economics at the
Graduate School of Business, Columbia University (1971-present). Dr. Arzac is
also a Director of ten other CSAM-advised investment companies, and he is a
Director of The Adams Express Company and Petroleum and Resources Corporation.
44
<PAGE>
Richard H. Francis, 67, is currently retired. He was an Executive Vice
President and Chief Financial Officer of Pan Am Corporation and Pan American
World Airways, Inc. (1988-1991). Mr. Francis is also a Director of forty-six
other CSAM-advised investment companies.
Lawrence J. Fox, 56, is a Partner of Drinker Biddle & Reath (1976-present)
and a former Managing Partner of Drinker Biddle & Reath (1992-1998). Mr. Fox is
also a Director of two other CSAM-advised investment companies.
William W. Priest, Jr., 58, has been Chairman and Managing Director of CSAM
since May 2000. Prior to May 2000, Mr. Priest was Chairman, Chief Executive
Officer and Executive Director of CSAM and Chairman-Management Committee of
CSAM. He is a Director of fifty-six other CSAM-advised investment companies.
Robert H. Hrabchak, 36, has been a Director of CSAM since January 1999. He
was a Vice President of CSAM (6/97-1/99). Mr. Hrabchak was a Senior Portfolio
Manager for Merrill Lynch Asset Management, Hong Kong (1/95-5/97), and an
Associate with Salomon Brothers Inc. (4/93-1/95).
Raoul H. Rayos, 34, has been a Vice President of CSAM since May 1999. He was
a Senior Asian Equity Analyst with Merrill Lynch Asset Management (2/94-4/99).
Hal Liebes, 36, has been a Managing Director and General Counsel of CSAM
since December 1999. He was Director and General Counsel of CSAM (3/97-12/99).
Mr. Liebes was Vice President and Counsel for Lehman Brothers, Inc. (6/96-3/97),
Vice President and Legal Counsel for CSAM (6/95-6/96) and Chief Compliance
Officer for CS First Boston Investment Management (3/94-6/95). He is also an
executive officer of other CSAM-advised investment companies.
Michael A. Pignataro, 40, has been a Vice President of CSAM since
December 1995. He was an Assistant Vice President and the Chief Administrative
Officer for Investment Companies of CSAM (9/89-12/95). Mr. Pignataro is also an
executive officer of other CSAM-advised investment companies.
Directors and Executive Officers of the Jakarta Fund are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND
------------------------------------------------------------ -------------------------------
<S> <C>
William G. Barker, Jr. (1) Director
111 Parsonage Road
Greenwich, CT 06830
Nobuo Katayama (2) Director and President
180 Maiden Lane
New York, NY 10038
Chor Weng Tan (1) Director
3 Park Avenue
New York, NY 10016
Arthur R. Taylor (1) Director
2400 Chew Street
Allentown, PA 18104
John F. Wallace (2) Director
17 Rhoda Street
West Hempstead, NY 11552
Keisuke Haraguchi Vice President
180 Maiden Lane
New York, NY 10038
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND
------------------------------------------------------------ -------------------------------
<S> <C>
David G. Stoeffel Vice President
180 Maiden Lane
New York, NY 10038
John J. Boretti Secretary and Treasurer
180 Maiden Lane
New York, NY 10038
</TABLE>
------------------
(1) Member of Audit Committee and Nominating Committee of the Board of
Directors.
(2) "Interested Person" of the Jakarta Fund as defined in the Investment Company
Act.
All of the directors and executive officers, as a group, of the Jakarta
Fund, as of June 30, 2000, owned less than 1% of the outstanding shares of the
Jakarta Fund.
William G. Barker, Jr., 67, has been a consultant to the television industry
since 1991.
Nobuo Katayama, 53, has been President of the Jakarta Fund since 1999 and
President and Director of NAM-U.S.A. since 1999. He was a Marketing Officer of
NAM from 1997 to 1999 and a Director and Chief Portfolio Manager of NAM from
1993 to 1997.
Chor Weng Tan, 64, is a Managing Director for Education, The American
Society of Mechanical Engineering since 1991. He was a Director of Tround
International, Inc. from 1984 to 1997.
Arthur R. Taylor, 65, has been President of Muhlenberg College since 1992.
He was Dean of the Faculty of Business of Fordham University from 1985 to 1992.
He was Chairman of Arthur R. Taylor & Co. (investment firm) and Director of
Louisiana Land & Exploration Company and Pitney Bowes, Inc. from 1982 to 1997.
John F. Wallace, 72, was Vice President of the Jakarta Fund from 1997 to
2000 and Secretary and Treasurer of the Jakarta Fund from 1993 to 1997. He was
Senior Vice President of NAM-U.S.A. from 1981 to 2000, Secretary from 1976 to
2000 and Treasurer from 1984 to 2000 and Director from 1986 to 2000.
Keisuke Haruguchi, 50, has been Senior Vice President and Director of
NAM-U.S.A. since 1999 and Senior Manager of NAM from 1997 to 1998. He was
Manager of The Nomura Securities Co., Ltd. ("Nomura") from 1994 to 1996.
David G. Stoeffel, 42, has been Senior Vice President of NAM-U.S.A. since
1999 and Vice President of NAM-U.S.A. since 1998. He was the Eastern Division
Manager of Brinson Funds from 1997 to 1998 and the Northeast Region Funds
Coordinator of Prudential Investments from 1994 to 1997.
John J. Boretti, 48, has been Senior Vice President of NAM-U.S.A. since 1996
and Compliance Officer of NAM-U.S.A. since 1997. He was Vice President and Chief
Financial Officer of Kidder Peabody Asset Management, Inc. and Kidder, Peabody
Mutual Funds and Vice President of Kidder, Peabody & Co. Inc. from 1993 to 1995.
The Indonesia Fund pays each of its directors who is not a director,
officer, partner, co-partner or employee of CSAM or any affiliate thereof an
annual retainer fee of $5,000 plus $500 for each Board of Directors meeting
attended. In addition, the Indonesia Fund will reimburse those directors for
travel and out-of-pocket expenses incurred in connection with Board of Directors
meetings. The aggregate remuneration paid to directors by the Indonesia Fund
during fiscal year 1999 was $20,500.
NAM-U.S.A. pays all compensation of all Directors of the Jakarta Fund who
are affiliated with NAM-U.S.A. or any of its affiliates. The Jakarta Fund pays
to each Director not affiliated with NAM-U.S.A. an annual retainer fee of $5,000
plus $500 per meeting attended, together with such
46
<PAGE>
Director's actual out-of-pocket expenses relating to the attendance at meetings.
Such fees and expenses aggregated $33,283 for the fiscal year ended March 31,
2000. The Jakarta Fund has paid affiliated Directors' out-of-pocket expenses in
connection with attendance at meetings of the Board of Directors; such expenses
aggregated $273 for the fiscal year ended March 31, 2000.
The Articles of Incorporation and By-laws of each Fund provide that the
Funds will indemnify directors and officers and may indemnify employees or
agents of the Fund against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their positions with the
Fund to the fullest extent permitted by law. In addition, each Fund's Articles
of Incorporation provide that the Fund's directors and officers will not be
liable to shareholders for money damages, except in limited instances.
Each of the Non-interested Directors of the Indonesia Fund is also party to
an Indemnification Agreement with the Fund providing for contractual rights of
indemnity and advancement of expenses. However, nothing in the Articles of
Incorporation, the By-laws or the Indemnification Agreement of the Indonesia
Fund protects or indemnifies a director, officer, employee or agent against any
liability to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person's office. Insurance obtained by either
Fund shall not protect or purport to protect officers or directors or the
investment adviser of that Fund against any liability to the Fund or its
shareholders to which they would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of their
obligations and duties.
INVESTMENT MANAGERS. CSAM, located at 466 Lexington Avenue, 16th Floor, New
York, New York 10017, is the investment manager to the Indonesia Fund pursuant
to an investment advisory agreement. NAM-U.S.A., located at 180 Maiden Lane, New
York, New York 10038, is the investment manager to the Jakarta Fund pursuant to
an investment management agreement. NAM-U.S.A. has retained NAM to act as the
Jakarta Fund's investment adviser, and NAM, in turn, has retained NAM-Singapore
to act as the Jakarta Fund's sub-adviser. The address of NAM-U.S.A. is 180
Maiden Lane, New York, New York 10038-4936. The address of NAM is 1-14, 2-chome,
Nihonbashi, Chuo-ku, Toyko 103-8260, Japan. The address of NAM-Singapore is 6
Battery Road 40-02, Singapore 049909.
INFORMATION CONCERNING CSAM. CSAM is an indirect wholly-owned U.S.
subsidiary of Credit Suisse Group. Credit Suisse Group is a global financial
services company which provides a comprehensive range of banking and insurance
products. As of December 31, 1999, Credit Suisse Group, through its
institutional asset management and mutual fund division, had approximately $203
billion of global assets under management. The principal business address of
Credit Suisse Group is Paradeplatz 8, CH 8070, Zurich, Switzerland.
CSAM is a diversified asset manager, handling global equity, balanced, fixed
income and derivative securities accounts for private individuals, as well as
corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of August 31, 2000,
CSAM-Americas managed approximately $71.3 billion in assets. CSAM is registered
as an investment adviser under the Investment Advisers Act of 1940, or the
Advisers Act.
CSAM has sole investment discretion for the Indonesia Fund's assets under
the supervision of the Fund's Board of Directors and in accordance with the
Fund's stated policies. CSAM will select investments for the Fund and will place
purchase and sale orders on behalf of the Fund. For information about the Fund's
investment advisory fees, including amounts paid for the year ended
December 31, 1999, see "Synopsis--Fees and Expenses--The Indonesia Fund".
CSAM's executive officers and directors are as follows: William W. Priest,
Jr., Richard W. Watt, Hal Liebes (Mr. Priest is a Director and Mr. Liebes is
Senior Vice President of the Indonesia Fund), James P. McCaughan, Laurence R.
Smith, Elizabeth B. Dater, Eugene L. Podsiadlo, Sheila N. Scott,
47
<PAGE>
Timothy T. Taussig, Robert D. Birnbaum, Susan Black, Steven D. Bleiberg, Jo Ann
Corkran, Alain G. De Coster, Gregg M. Diliberto, Paul N. Edwards, Harold W.
Ehrlich, Kyle F. Frey, Jeffrey A. Geller, Robert S. Janis, Kevin K. Keady, Scott
T. Lewis, Richard J. Lindquist, Brady T. Lipp, Stephen J. Lurito, Lynn S.
Martin, Jack Morgenstern, Maryanne S. Mullarkey, Terry S. Newman, Sharon B.
Parente, Roger Reinlieb, Eric N. Remole, Donald C. Schultheis, Harold E. Sharon,
Eugene J. Siembieda, Mark K. Silverstein, Barbara A. Tarmy and Donna M.
Vandenbulcke.
In addition, Robert H. Hrabchak, the Indonesia Fund's Chief Investment
Officer, Raoul Rayos, the Indonesia Fund's Investment Officer, Michael A.
Pignataro, the Indonesia Fund's Chief Financial Officer and Secretary, Rocco A.
Del Guercio, a Vice President of the Indonesia Fund, and Robert M. Rizza, the
Indonesia Fund's Treasurer, are also employees of CSAM.
INFORMATION CONCERNING NAM-U.S.A. NAM-U.S.A. has served as the management
company for the Jakarta Fund since the Fund commenced operations in 1990.
NAM-U.S.A. provides management and administrative services, including
administering shareholder accounts and handling shareholder relations, to the
Jakarta Fund. NAM-U.S.A. is a wholly-owned subsidiary of NAM and NAM is a
subsidiary of Nomura.
NAM-U.S.A. provides global investment advisory services, primarily with
respect to Japanese and other Pacific Basin securities, for U.S. institutional
clients. NAM-U.S.A. acts as one of the investment advisors to five other
investment companies, three of which are U.S. registered investment companies.
The following table sets forth the name, title and principal occupations of
the principal executive officer and each director of NAM-U.S.A. at June 30,
2000.
<TABLE>
<CAPTION>
NAME* TITLE WITH NAM-U.S.A. PRESENT PRINCIPAL OCCUPATION
------------------------------- --------------------- ------------------------------------------
<S> <C> <C>
Nobuo Katayama Director and Director and President of NAM-U.S.A.
President
Marti G. Subrahmanyam Director Professor of Finance and Economics, New
York University, Leonard N. Stern School
of Business Administration
Keisuke Haruguchi Director, Senior Vice Director, Senior Vice President of
President and NAM-U.S.A.
Treasurer
John J. Boretti Senior Vice President Senior Vice President and Compliance
and Compliance Officer of NAM-U.S.A.
Officer
Michael A. Morrongiello Senior Vice President Senior Vice President of NAM-U.S.A.
Kenneth L. Munt Senior Vice President Senior Vice President and Secretary of
and Secretary NAM-U.S.A.
David G. Stoeffel Senior Vice President Senior Vice President of NAM-U.S.A.
</TABLE>
------------------
* The address of Messrs. Katayama, Haruguchi, Boretti, Morrongiello, Munt and
Stoeffel is 180 Maiden Lane, New York, New York 10038. The address of
Mr. Subrahmanyam is the New York University, Leonard N. Stern School of
Business Administration, Henry Kaufman Management Center, 44 West Fourth
Street, New York, New York 10012.
Under the management agreement between the Jakarta Fund and NAM-U.S.A.,
NAM-U.S.A. agrees to provide, or arrange for the provision of, investment
advisory and management services to the Fund, subject to the oversight and
supervision of the Board of Directors of the Fund. In addition to the management
of the Jakarta Fund's portfolio in accordance with the Fund's investment
policies and the responsibility for making decisions to buy, sell or hold
particular securities, NAM-U.S.A. is obligated to
48
<PAGE>
perform, or arrange for the performance of, the administrative and management
services necessary for the operation of the Fund. NAM-U.S.A. is also obligated
to provide all the office space, facilities, equipment and personnel necessary
to perform its duties thereunder. Pursuant to such agreement, NAM-U.S.A. is
authorized to retain NAM to act as an investment advisor for the Fund.
INFORMATION CONCERNING NAM. NAM, the parent company of NAM-U.S.A., has
served as the investment advisor for the Jakarta Fund since the Fund commenced
operations in 1990. NAM is a subsidiary of Nomura, which is the largest
securities company is Japan. NAM provides economic research, securities analysis
and investment recommendations to the Jakarta Fund. NAM provides investment
advisory services for Japanese and international clients. In addition to the
Jakarta Fund, NAM acts as an investment advisor with respect to the following
registered investment companies: Japan OTC Equity Fund, Inc., Korea Equity
Fund, Inc., and Nomura Pacific Basin Fund, Inc.
The following table sets forth the name, title and principal occupation of
the principal executive officers of NAM at June 30, 2000.
<TABLE>
<CAPTION>
NAME* TITLE WITH NAM PRESENT PRINCIPAL OCCUPATION
----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Akira Kiyokawa............... President and CEO President and CEO of NAM
Atsushi Kinebuchi............ Executive Vice President Executive Vice President of
NAM
Takanori Tanabe.............. Director and Principal Director and Principal
Executive Officer Executive Officer of NAM
Hisaaki Hino................. Director and Principal Director and Principal
Executive Officer Executive Officer of NAM
Akio Nakaniwa................ Director and Senior Director and Senior Executive
Executive Officer Officer of NAM
Takanori Shimizu............. Director and Senior Director and Senior Executive
Executive Officer Officer of NAM
Masato Tanaka................ Director and Senior Director and Senior Executive
Executive Officer Officer of NAM
Haruo Miyako................. Senior Executive Officer Senior Executive Officer of
NAM
Takahide Mizuno.............. Senior Executive Officer Senior Executive Officer of
NAM
Yukio Suzuki................. Senior Executive Officer Senior Executive Officer of
NAM
Yasunobu Watase.............. Senior Executive Officer Senior Executive Officer of
NAM
Shigeru Fujinuma............. Executive Officer Executive Officer of NAM
Takashi Harino............... Executive Officer Executive Officer of NAM
Masami Kitaoka............... Executive Officer Executive Officer of NAM
Norio Kinoshita.............. Executive Officer Executive Officer of NAM
Takahisa Matsuura............ Executive Officer Executive Officer of NAM
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
NAME* TITLE WITH NAM PRESENT PRINCIPAL OCCUPATION
----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Mitsunori Minamio............ Executive Officer Executive Officer of NAM
Yuji Miyachi................. Executive Officer Executive Officer of NAM
Hirokatsu Ogawa.............. Executive Officer Executive Officer of NAM
Toshiki Sada................. Executive Officer Executive Officer of NAM
Hideyuki Suzuki.............. Executive Officer Executive Officer of NAM
Kazuhiro Yamashita........... Executive Officer Executive Officer of NAM
</TABLE>
------------------
*The address of the principal executive officer and each director is 1-14,
2-chome, Nihonbashi, Chuo-ku, Tokyo 103-8260, Japan.
NAM-Singapore, an affiliate of NAM-U.S.A., has served as the investment
sub-adviser for the Fund since November 1996. NAM-Singapore is a subsidiary of
NAM. NAM-Singapore provides economic research, securities analysis and
investment recommendations to the Fund.
INFORMATION CONCERNING NAM-SINGAPORE. NAM-Singapore, an affiliate of
NAM-U.S.A., has served as the investment sub-adviser for the Jakarta Fund since
November 1996. NAM-Singapore is a subsidiary of NAM. NAM-Singapore provides
economic research, securities analysis and investment recommendations to the
Jakarta Fund. NAM-Singapore provides investment advisory services for Japanese
and international clients. In addition to the Jakarta Fund, NAM-Singapore acts
as an investment advisor to Nomura Pacific Basin Fund, Inc. (a registered
investment company).
The following table sets forth the name, title and principal occupation of
the principal executive officers of NAM-Singapore at June 30, 2000.
<TABLE>
<CAPTION>
NAME* TITLE WITH NAM-SINGAPORE PRESENT PRINCIPAL OCCUPATION
---------------------------------- ------------------------ ----------------------------------
<S> <C> <C>
Yoshimitsu Matsuki................ Managing Director Managing Director of NAM-Singapore
Hirokazu Maki..................... Director Director of NAM-Singapore
</TABLE>
------------------
* The address of the principal executive officer and each director is 6
Battery Road, 40-02 Singapore 049909.
PORTFOLIO MANAGEMENT. Robert H. Hrabchak, who is a Director of CSAM is
primarily responsible for management of the Indonesia Fund's assets.
Mr. Hrabchak is assisted by Raoul Rayos who is a Vice President of CSAM. Nobuo
Katayama is responsible for management of the Jakarta Fund's assets.
ADMINISTRATOR. Bear Stearns Funds Management Inc. serves as the Indonesia
Fund's administrator pursuant to an administrative agreement with the Fund. BSFM
is located at 575 Lexington Avenue, New York, New York 10022. For information
about fees paid to BSFM, see "Synopsis--Fees and Expenses--The Indonesia Fund."
BSFM provides office facilities and personnel adequate to perform the
following services for the Indonesia Fund:
- oversight of the determination and publication of the Indonesia Fund's net
asset value in accordance with the Fund's policy as adopted from time to
time by the Board of Directors,
- maintenance of the books and records of the Indonesia Fund as required
under the Investment Company Act,
- preparation of the Indonesia Fund's U.S. federal, state and local income
tax returns,
- preparation of financial information for the Indonesia Fund's proxy
statements and semiannual and annual reports to shareholders, and
50
<PAGE>
- preparation of certain of the Indonesia Fund's reports to the SEC.
As of September 30, 2000, BSFM provided accounting and/or administrative
services for 29 investment companies and investment partnerships, with combined
total assets of approximately $5.4 billion.
The Indonesia Fund has also retained CSAM to provide certain administrative
and shareholder services to the Fund that are not provided by BSFM, subject to
the supervision and direction of the Board of Directors of the Fund pursuant to
an administrative services agreement with CSAM. These services include:
- furnishing certain internal executive and administrative services,
responding to shareholder inquiries,
- acting as liaison between the Indonesia Fund and its various service
providers,
- furnishing corporate secretarial services, which include assisting in the
preparation of materials for meetings of the Board of Directors,
- coordinating the preparation of proxy statements, reports to shareholders
and filings with state blue sky authorities,
- assisting in the preparation of tax returns, and
- generally assisting in monitoring and developing compliance procedures for
the Indonesia Fund.
CSAM is reimbursed by the Indonesia Fund for costs incurred on behalf of the
Fund (up to $20,000 per annum). Costs incurred on behalf of two or more funds
for which CSAM provides administrative and shareholder services are apportioned
among such funds according to their respective net asset values. The Indonesia
Fund also reimburses CSAM for any out-of-pocket expenses in providing these
services to the Fund, including postage, telephone and other telecommunications
charges and duplicating costs. For information regarding fees paid to CSAM for
administrative services for the year ended December 31, 1999, see
"Synopsis--Fees and Expenses--The Indonesia Fund".
ESTIMATED EXPENSES. Except as otherwise provided in the various services
agreements, CSAM, BSFM and NAM-U.S.A. are each obligated to pay expenses
associated with providing the services contemplated by the agreements to which
they are parties, including compensation of and office space for their
respective officers and employees connected with investment and economic
research, trading and investment management and administration of each Fund, as
well as the fees of all directors of each Fund who are affiliated with those
companies or any of their affiliates. Each Fund pays all other expenses incurred
in the operation of that Fund including, among other things:
- expenses for legal and independent accountants' services,
- costs of printing proxies, stock certificates and shareholder reports,
- charges of the custodians, any sub-custodians and the transfer and
dividend-paying agent's expenses in connection with the Fund's Dividend
Reinvestment and Cash Purchase Plan,
- U.S. SEC fees and fees of Indonesian regulatory bodies,
- fees and expenses of unaffiliated directors,
- accounting and pricing costs,
- membership fees in trade associations,
- fidelity bond coverage for the Fund's officers and employees,
- directors' and officers' errors and omissions insurance coverage,
- interest,
51
<PAGE>
- brokerage costs and stock exchange fees,
- taxes,
- stock exchange listing fees and expenses,
- expenses of qualifying the Fund's shares for sale in various states and
foreign jurisdictions,
- litigation, and
- other extraordinary or non-recurring expenses and other expenses properly
payable by the Fund.
PORTFOLIO MANAGERS. If the Merger is consummated, it is anticipated that
Robert H. Hrabchak will continue as the Chief Investment Officer of the
Indonesia Fund. For more information regarding Mr. Hrabchak, see "Directors and
Principal Officers" above.
CUSTODIAN. Brown Brothers Harriman & Co., 40 Water Street, Boston, MA
02109, is the custodian for both Funds' U.S. and foreign assets.
TRANSFER AGENT AND REGISTRAR. BankBoston, N.A. c/o EquiServe, L.P.,
P.O. Box 1865, Mail Stop 450262, Boston, MA 02105 acts as the transfer agent and
registrar of the Indonesia Fund. State Street Bank and Trust Company, P.O. Box
8209, Boston, Massachusetts 02266-8209, acts as dividend paying agent, transfer
agent and registrar for the Jakarta Fund.
PROXY SOLICITOR. Each Fund has retained Shareholder Communications
Corporation, or SCC, a proxy solicitation firm, to assist the Funds in
soliciting proxies from shareholders. SCC will contact individual shareholders
of record, beneficial owners and banks, brokers and other nominee shareholders.
In return for its services, SCC is entitled to receive $5,000 and reimbursements
for its reasonable expenses.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. The following table
shows certain information based on filings made with the SEC concerning persons
who may be deemed beneficial owners of 5% or more of the shares of common stock
of either Fund because they possessed or shared voting or investment power with
respect to the shares of that Fund:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
FUND NAME AND ADDRESS BENEFICIALLY OWNED OF SHARES
------------------------ ----------------------------- ------------------- ---------
<S> <C> <C> <C>
Jakarta Fund Sarasin Asset Management 468,354 9.3%
Sarasin House
37-39 St. Andrew's Hill
London, England EC4V500
Allied Dunbar Assurance plc 265,800 5.3%
Allied Dunbar Centre
Swindon, England SN1 1EZ and
Treadneedle Investment
Managers Limited
60 St. Mary Axe
London, England EC3A 8JQ
Indonesia Fund Cede & Co.* 4,527,687 98.2%
The Depository Trust Company
55 Water Street, 25th Floor
New York, NY 10041-0098
</TABLE>
* The Indonesia Fund believes that this entity is not the beneficial owner of
shares held of record by it.
52
<PAGE>
EXPERTS
Each Fund has selected PricewaterhouseCoopers LLP, located at Two Commerce
Square, Suite 1700, 2001 Market Street, Philadelphia, PA 19103 (with respect to
the Indonesia Fund) and located at 1177 Avenue of the Americas, New York, New
York 10036-2798 (with respect to the Jakarta Fund), as its independent
accountants who will audit its financial statements.
REQUIRED VOTE
The Merger has been approved by 75% of the Continuing Directors of the
Indonesia Fund. Accordingly, under the Articles of Incorporation of the
Indonesia Fund, approval of the Merger requires the affirmative vote of the
holders of at least 66 2/3% of the outstanding shares of common stock of the
Fund. The Merger has been approved by the affirmative vote of 66 2/3% of the
total number of Directors of the Jakarta Fund. Accordingly, under the Articles
of Incorporation of the Jakarta Fund, approval of the Merger requires the
affirmative vote of a majority of the Jakarta Fund's shares. Subject to such
approval, the Merger is currently scheduled to be consummated within one week
thereof, but may be postponed by mutual agreement of the Funds. The Board of
Directors of each Fund recommends that the shareholders of each Fund vote in
favor of this Proposal.
LEGAL PROCEEDINGS
There are currently no material legal proceedings to which the Funds are a
party.
LEGAL OPINIONS
Certain legal matters in connection with the Merger will be passed upon for
the Indonesia Fund by Willkie Farr & Gallagher and for the Jakarta Fund by
Brown & Wood LLP. As to certain matters of Maryland law, Willkie Farr &
Gallagher will rely on the opinion of Venable, Baetjer and Howard, LLP.
ADDITIONAL INFORMATION
The Proxy Statement/Prospectus does not contain all of the information set
forth in the registration statements and the exhibits relating thereto which the
Funds have filed with the Commission, under the Securities Act and the
Investment Company Act, to which reference is hereby made.
The Funds are subject to the informational requirements of the Securities
Exchange Act and in accordance therewith, file reports and other information
with the SEC. Reports, proxy statements, registration statements and other
information filed by the Funds can be inspected and copied at the public
reference facilities of the SEC in Washington, D.C. and at the New York Regional
Office of the SEC at Seven World Trade Center, New York, New York 10048. Copies
of such materials also can be obtained by mail from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates, or without charge from
the Commission at [email protected].
PROPOSALS OF SHAREHOLDERS. A shareholder desiring to submit a proposal for
inclusion in either Fund's proxy material for a shareholder meeting subsequent
to the special meeting, if any, must be a record or beneficial owner of at least
1% of the outstanding shares of common stock of that Fund or shares of that Fund
with a market value of $2,000 entitled to be voted at the meeting and must have
held such shares for at least one year. Further, the shareholder must continue
to hold such shares through the date on which the meeting is held. Documentary
support regarding the foregoing must be provided along with the proposal. There
are additional requirements regarding proposals of the shareholders, and a
shareholder contemplating submission of a proposal is referred to Rule 14a-8
promulgated under the Securities Exchange Act. Shareholders who meet the above
conditions and
53
<PAGE>
desire to submit a written proposal to the next annual meeting of shareholders,
should send their written proposals to the Indonesia Fund c/o Credit Suisse
Asset Management, LLC, 466 Lexington Avenue, 16th Floor, New York, New York
10017, or to the Jakarta Fund c/o Nomura Asset Management U.S.A. Inc., 180
Maiden Lane, New York, New York 10038-4936, by February 16, 2001 (with respect
to the Indonesia Fund) and by March 2, 2001 (with respect to the Jakarta Fund).
The timely submission of a proposal does not guarantee its inclusion in either
Fund's proxy materials.
OTHER MATTERS TO COME BEFORE THE MEETING. The Board of Directors of each
Fund is not aware of any matters that will be presented for action at the
Meeting other than the matters set forth herein. Should any other matters
requiring a vote of shareholders arise, the proxy in the accompanying form will
confer upon the person or persons entitled to vote the shares represented by
such proxy the discretionary authority to vote the shares as to any such other
matters in their discretion in the interest of the respective Fund. PLEASE
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors of The Indonesia Fund, Inc.
/s/ Michael A. Pignataro
Michael A. Pignataro
Chief Financial Officer and Secretary, The Indonesia Fund, Inc.
By order of the Board of Directors of Jakarta Growth Fund, Inc.
/s/ John J. Boretti
John J. Boretti
Secretary
54
<PAGE>
EXHIBIT A
FORM OF
MERGER AGREEMENT AND PLAN OF REORGANIZATION
A-1
<PAGE>
MERGER AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
JAKARTA GROWTH FUND, INC.
AND
THE INDONESIA FUND, INC.
DATED AS OF OCTOBER 18, 2000
A-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
1. DEFINITIONS........................................................ A-6
2. BASIC TRANSACTION.................................................. A-6
2.1. The Merger.................................................. A-6
2.2. Actions at Closing.......................................... A-6
2.3. Effect of Merger............................................ A-7
3. REPRESENTATIONS AND WARRANTIES OF JAKARTA GROWTH FUND, INC......... A-7
3.1. Organization................................................ A-7
3.2. Registrations and Qualifications............................ A-7
3.3. Regulatory Consents and Approvals........................... A-7
3.4. Noncontravention............................................ A-7
3.5. Financial Statements........................................ A-7
3.6. Annual Report............................................... A-8
3.7. Qualification, Corporate Power, Authorization of
Transaction................................................. A-8
3.8. Legal Compliance............................................ A-8
3.9. Material Contracts.......................................... A-8
3.10. Undisclosed Liabilities..................................... A-8
3.11. Tax Filings................................................. A-8
3.12. Qualification under Subchapter M............................ A-8
3.13. Form N-14................................................... A-9
3.14. Capitalization.............................................. A-9
3.15. Books and Records........................................... A-9
3.16. No Finder's Fees............................................ A-9
4. REPRESENTATIONS AND WARRANTIES OF THE INDONESIA FUND, INC.......... A-9
4.1. Organization................................................ A-9
4.2. Registrations and Qualifications............................ A-9
4.3. Regulatory Consents and Approvals........................... A-10
4.4. Noncontravention............................................ A-10
4.5. Financial Statements........................................ A-10
4.6. Annual Report............................................... A-10
4.7. Qualification, Corporate Power, Authorization of
Transaction................................................. A-10
4.8. Legal Compliance............................................ A-10
4.9. Material Contracts.......................................... A-11
4.10. Undisclosed Liabilities..................................... A-11
4.11. Tax Filings................................................. A-11
4.12. Qualification under Subchapter M............................ A-11
4.13. Form N-14................................................... A-11
4.14. Capitalization.............................................. A-12
4.15. No Finder's Fees............................................ A-12
4.16. Books and Records........................................... A-12
4.17. NYSE Continued Listing...................................... A-12
</TABLE>
A-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
5. CONVERSION TO INDONESIA FUND, INC. COMMON STOCK.................... A-12
5.1. Conversion.................................................. A-12
5.2. Computation of Net Asset Value.............................. A-12
5.3. Issuance of The Indonesia Fund, Inc. Common Stock........... A-13
5.4. Exchange of Certificates Representing The Jakarta Growth
Fund, Inc. Common Stock..................................... A-13
6. COVENANTS OF THE PARTIES........................................... A-14
6.1. Shareholders' Meetings...................................... A-14
6.2. Operations in the Normal Course............................. A-14
6.3. Articles of Merger.......................................... A-14
6.4. Regulatory Filings.......................................... A-15
6.5. Preservation of Assets...................................... A-15
6.6. Tax Matters................................................. A-15
6.7. Shareholder List............................................ A-15
6.8. Termination of Registration as an Investment Company........ A-16
6.9. Indemnification............................................. A-16
6.10 Applicability of Maryland Business Combination Act.......... A-16
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INDONESIA FUND, INC..... A-16
7.1. Approval of Merger; NYSE Listing; Appraisal Rights.......... A-16
7.2. Certificates and Statements by the Jakarta Growth Fund,
Inc......................................................... A-17
7.3. Absence of Litigation....................................... A-17
7.4. Legal Opinions.............................................. A-18
7.5. Auditor's Consent and Certification......................... A-19
7.6. Liabilities................................................. A-19
7.7. Effectiveness of N-14 Registration Statement................ A-20
7.8. Regulatory Filings.......................................... A-20
7.9. Administrative Rulings, Proceedings......................... A-20
7.10. Dividends................................................... A-20
7.11. Custodian's Certificate..................................... A-20
7.12. Books and Records........................................... A-20
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF JAKARTA GROWTH FUND,
INC.............................................................. A-20
8.1. Approval of Merger.......................................... A-20
8.2. Certificates and Statements by the Indonesia Fund, Inc...... A-20
8.3. Absence of Litigation....................................... A-21
8.4. Legal Opinions.............................................. A-21
8.5. Auditor's Consent and Certification......................... A-23
8.6. Effectiveness of N-14 Registration Statement................ A-23
8.7. Regulatory Filings.......................................... A-23
8.8. Satisfaction of the Jakarta Growth Fund, Inc................ A-23
8.9. Dividends................................................... A-23
</TABLE>
A-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
9. PAYMENT OF EXPENSES................................................ A-24
9.1. Allocation.................................................. A-24
10. COOPERATION FOLLOWING EFFECTIVE DATE............................... A-24
11. INDEMNIFICATION.................................................... A-24
11.1. Jakarta Growth Fund, Inc.................................... A-24
11.2. The Indonesia Fund, Inc..................................... A-24
12. TERMINATION, POSTPONEMENT AND WAIVERS.............................. A-24
12.1. Termination................................................. A-24
12.2. Waiver...................................................... A-25
12.3. Expiration of Representations and Warranties................ A-25
13. MISCELLANEOUS...................................................... A-25
13.1. Transfer Restriction........................................ A-25
13.2. Material Provisions......................................... A-26
13.3. Notices..................................................... A-26
13.4. Amendments.................................................. A-27
13.5. Headings.................................................... A-27
13.6. Counterparts................................................ A-27
13.7. Enforceability.............................................. A-27
13.8. Successors and Assigns...................................... A-27
13.9. Governing Law............................................... A-27
</TABLE>
A-5
<PAGE>
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of this 18th day of October, 2000, between Jakarta Growth Fund, Inc. (the
"Target Fund" or the "Jakarta Fund"), a Maryland corporation and a registered
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and The Indonesia Fund, Inc. (the "Acquiring Fund" or the
"Indonesia Fund" and, together with the Target Fund, the "Parties"), a Maryland
corporation and a registered investment company under the 1940 Act.
WHEREAS, this agreement contemplates a tax-free merger transaction which
qualifies for federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the covenants and agreements hereinafter
set forth, the Parties hereto agree as follows:
1. DEFINITIONS
Certain capitalized terms used in this Agreement are specifically defined
herein.
2. BASIC TRANSACTION
2.1. THE MERGER. On and subject to the terms and conditions of this
Agreement, the Target Fund will merge with and into the Acquiring Fund (the
"Merger") at the Effective Date (as defined in Section 2.3 below) in accordance
with the Maryland General Corporation Law ("MGCL"). The Indonesia Fund shall be
the surviving investment company. The Jakarta Fund shall cease to exist as a
separate investment company.
Each share of Common Stock, par value $0.10 per share, of the Jakarta Fund
will be converted into an equivalent dollar amount (to the nearest one
ten-thousandth of one cent) of full shares (and the right to receive cash in
lieu of fractional shares) of Common Stock, par value $0.001 per share, of the
Indonesia Fund based on the net asset value per share of each of the Parties at
4:00 p.m. Eastern Time on the Business Day prior to the Effective Date (the
"Valuation Time"). No fractional shares of the Indonesia Fund will be issued to
Jakarta Fund shareholders. In lieu thereof, the Indonesia Fund will purchase all
fractional shares at their current net asset value for the account of all
holders of fractional interests, and each such holder will receive such holder's
pro rata share of the proceeds of such purchase. Any objecting shareholder of
the Jakarta Fund will have the rights of objecting shareholders in accordance
with Title 3, Subtitle 2 of the Maryland General Corporation Law. The Effective
Date and the Business Day prior to it must each be a day on which the New York
Stock Exchange (the "NYSE") is open for trading (a "Business Day").
From and after the Effective Date, the Acquiring Fund shall possess all of
the properties, assets, rights, privileges, and powers and shall be subject to
all of the restrictions, liabilities, obligations, disabilities and duties of
the Jakarta Fund, all as provided under Maryland law.
The parties intend that the Merger qualify as a reorganization under Section
368(a)(1)(A) of the Code.
2.2. ACTIONS AT CLOSING. At the closing of the transactions contemplated
by this Agreement (the "Closing") on the date thereof (the "Closing Date"),
(i) the Jakarta Fund will deliver to the Indonesia Fund the various certificates
and documents referred to in Article 7 below, (ii) the Indonesia Fund will
deliver to the Jakarta Fund the various certificates and documents referred to
in Article 8 below, and (iii) the Jakarta Fund and the Indonesia Fund will file
jointly with the State Department of Assessments and Taxation of Maryland (the
"Department") articles of merger (the "Articles of Merger") and make all other
filings or recordings required by Maryland law in connection with the Merger.
A-6
<PAGE>
2.3. EFFECT OF MERGER. Subject to the requisite approvals of the
shareholders of the Parties, and to the other terms and conditions described
herein, the Merger shall become effective at such time as the Articles of Merger
are accepted for record by the Department or at such later time as is specified
in the Articles of Merger (the "Effective Date") and the separate corporate
existence of the Jakarta Fund shall cease. As promptly as practicable after the
Merger, the Jakarta Fund's registration under the 1940 Act shall be terminated.
Any reporting responsibility of the Jakarta Fund is, and shall remain, the
responsibility of the Jakarta Fund up to and including the Effective Date.
3. REPRESENTATIONS AND WARRANTIES OF JAKARTA GROWTH FUND, INC.
The Jakarta Fund represents and warrants to the Indonesia Fund that the
statements contained in this Article 3 are correct and complete in all material
respects as of the execution of this Agreement on the date hereof. The Jakarta
Fund represents and warrants to, and agrees with, the Indonesia Fund that:
3.1. ORGANIZATION. The Jakarta Fund is a corporation duly organized and
validly existing under the laws of the State of Maryland and is in good standing
with the Department, and has the requisite corporate power to own all of its
assets and to carry on its business as it is now being conducted and to carry
out this Agreement.
3.2. REGISTRATIONS AND QUALIFICATIONS. The Jakarta Fund is duly registered
under the 1940 Act as a closed-end, non-diversified management investment
company (File No. 811-06035), and such registration has not been revoked or
rescinded and is in full force and effect. The Jakarta Fund has elected and
qualified for the special tax treatment afforded regulated investment companies
("RICs") under Sections 851-855 of the Code at all times since its inception and
intends to continue to so qualify for its taxable year ending upon the Merger.
The Jakarta Fund is qualified as a foreign corporation in every jurisdiction
where required, except to the extent that failure to so qualify would not have a
material adverse effect on the Jakarta Fund.
3.3. REGULATORY CONSENTS AND APPROVALS. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by the Jakarta Fund of the transactions contemplated herein,
except (i) such as have been obtained or applied for under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934 (the
"1934 Act") and the 1940 Act, (ii) such as may be required by state securities
laws and (iii) such as may be required under Maryland law for the acceptance for
record of the Articles of Merger by the Department.
3.4. NONCONTRAVENTION. The Jakarta Fund is not, and the execution,
delivery and performance of this Agreement by the Jakarta Fund will not result,
in any violation of the laws of the State of Maryland or of the Articles of
Incorporation or the Bylaws of the Jakarta Fund, or of any material agreement,
indenture, instrument, contract, lease or other undertaking to which the Jakarta
Fund is a party or by which it is bound, and the execution, delivery and
performance of this Agreement by the Jakarta Fund will not result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Jakarta Fund is a party or by which it is bound.
3.5. FINANCIAL STATEMENTS. The Indonesia Fund has been furnished with a
statement of assets, liabilities and capital and a schedule of investments of
the Jakarta Fund, each as of March 31, 2000, said financial statements having
been examined by PricewaterhouseCoopers LLP, independent public accountants.
These financial statements are in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") and present fairly, in all
material respects, the financial position of the Jakarta Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Jakarta Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein.
A-7
<PAGE>
3.6. ANNUAL REPORT. The Indonesia Fund has been furnished with the Jakarta
Fund's Annual Report to Shareholders for the fiscal year ended March 31, 2000.
3.7. QUALIFICATION, CORPORATE POWER, AUTHORIZATION OF TRANSACTION. The
Jakarta Fund has full corporate power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors, including at least 2/3 of the total number of directors in accordance
with its Bylaws, pursuant to Article XIII of its Articles of Incorporation, and,
subject to shareholder approval, this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
3.8. LEGAL COMPLIANCE. No material litigation or administrative proceeding
or investigation of or before any court or governmental body is presently
pending (in which service of process has been received) or to its knowledge
threatened against the Jakarta Fund or any properties or assets held by it. The
Jakarta Fund knows of no facts which might form the basis for the institution of
such proceedings which would materially and adversely affect its business and is
not a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein contemplated.
3.9. MATERIAL CONTRACTS. There are no material contracts outstanding to
which the Jakarta Fund is a party that have not been disclosed in the N-14
Registration Statement (as defined in Section 3.13 below) or not otherwise
disclosed in writing to the Indonesia Fund prior to the date of this Agreement.
3.10. UNDISCLOSED LIABILITIES. Since March 31, 2000, there has not been
any material adverse change in the Jakarta Fund's financial condition, assets,
liabilities or business and the Jakarta Fund has no known liabilities of a
material amount, contingent or otherwise, required to be disclosed in a balance
sheet in accordance with GAAP other than those shown on the Jakarta Fund's
statements of assets, liabilities and capital referred to above, those incurred
in the ordinary course of its business as an investment company since April 1,
2000, and those incurred in connection with the Merger. Prior to the Effective
Date, the Jakarta Fund will advise the Indonesia Fund in writing of all known
liabilities, contingent or otherwise, whether or not incurred in the ordinary
course of business, existing or accrued. For purposes of this Section 3.10, a
decline in the net asset value per share of the Jakarta Fund due to declines in
market values of securities in the Jakarta Fund's portfolio or the discharge of
Jakarta Fund liabilities will not constitute a material adverse change.
3.11. TAX FILINGS. All federal and other tax returns and information
reports of the Jakarta Fund required by law to have been filed shall have been
filed, or extensions to file such returns or reports shall have been obtained,
and are or will be correct in all material respects, and all federal and other
taxes shown as due or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof,
and, to the best of the Jakarta Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such returns.
All tax liabilities of the Jakarta Fund have been adequately provided for on its
books, and no tax deficiency or liability of the Jakarta Fund has been asserted
and no question with respect thereto has been raised by the Internal Revenue
Service or by any state or local tax authority for taxes in excess of those
already paid, up to and including the taxable year in which the Effective Date
occurs.
3.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation (including the taxable year ending on the Effective Date), the Jakarta
Fund has met the requirements of Subchapter M of the Code for qualification as a
RIC and has elected to be treated as such, has been eligible to and has computed
its federal income tax under Section 852 of the Code, and will have distributed
substantially all of its investment company taxable income and net realized
capital gain (as defined in the Code) that has accrued through the Effective
Date. As of June 30, 2000 and September 30, 2000, the Jakarta Fund has met the
requirements of Subchapter M of the Code for qualification as a RIC.
A-8
<PAGE>
3.13. FORM N-14. The registration statement to be filed by the Indonesia
Fund on Form N-14 relating to the Indonesia Fund Common Stock to be issued
pursuant to this Agreement, and any supplements or amendments thereto or to the
documents therein (as amended, the "N-14 Registration Statement"), on the
effective date of the N-14 Registration Statement, at the time of the
shareholders' meetings referred to in Article 6 of this Agreement and at the
Effective Date, insofar as it relates to the Jakarta Fund (i) shall have
complied or will comply in all material respects with the provisions of the 1933
Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and
(ii) did not or will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and the prospectus included therein did
not or will not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the representations and warranties in this Section 3.13 shall only apply to
statements in, or omissions from, the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Jakarta Fund
in writing for use in the N-14 Registration Statement.
3.14. CAPITALIZATION.
(a) All issued and outstanding shares of the Jakarta Fund (i) have been
offered and sold in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws, (ii) are,
and on the Effective Date will be, duly and validly issued and outstanding,
fully paid and non-assessable, and (iii) will be held at the time of the Closing
by the persons and in the amounts set forth in the records of the transfer agent
as provided in Section 6.7. The Jakarta Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Jakarta Fund shares, nor is there outstanding any security convertible into, or
exchangeable for, any of the Jakarta Fund shares.
(b) The Jakarta Fund is authorized to issue 100,000,000 shares of stock, par
value $0.10 per share, all of which shares are classified as Common Stock and
each outstanding share of which is fully paid, non-assessable and has full
voting rights.
3.15. BOOKS AND RECORDS. The books and records of the Jakarta Fund made
available to the Indonesia Fund are substantially true and correct and contain
no material misstatements or omissions with respect to the operations of the
Jakarta Fund.
3.16. NO FINDER'S FEES. The Jakarta Fund does not owe any broker's or
finder's fee in connection with the transactions provided for in this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE INDONESIA FUND, INC.
The Indonesia Fund represents and warrants to the Jakarta Fund that the
statements contained in this Article 4 are correct and complete in all material
respects as of the execution of this Agreement on the date hereof. The Indonesia
Fund represents and warrants to, and agrees with, the Jakarta Fund that:
4.1. ORGANIZATION. The Indonesia Fund is a corporation duly organized and
validly existing under the laws of the State of Maryland and is in good standing
with the Department, and has the requisite corporate power to own all of its
assets and to carry on its business as it is now being conducted and to carry
out this Agreement.
4.2. REGISTRATIONS AND QUALIFICATIONS. The Indonesia Fund is duly
registered under the 1940 Act as a closed-end, non-diversified management
investment company (File No. 811-06024) and such registration has not been
revoked or rescinded and is in full force and effect. The Indonesia Fund has
elected and qualified for the special tax treatment afforded RICs under Sections
851-855 of the Code at all times since its inception and intends to continue to
so qualify both until consummation of the
A-9
<PAGE>
Merger and thereafter. The Indonesia Fund is qualified as a foreign corporation
in every jurisdiction where required, except to the extent that failure to so
qualify would not have a material adverse effect on the Indonesia Fund.
4.3. REGULATORY CONSENTS AND APPROVALS. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by the Indonesia Fund of the transactions contemplated herein,
except (i) such as have been obtained or applied for under the 1933 Act, the
1934 Act and the 1940 Act, (ii) such as may be required by state securities laws
and (iii) such as may be required under Maryland law for the acceptance for
record of the Articles of Merger by the Department.
4.4. NONCONTRAVENTION. The Indonesia Fund is not, and the execution,
delivery and performance of this Agreement by the Indonesia Fund will not
result, in any violation of the laws of the State of Maryland or of the Articles
of Incorporation or the Bylaws of the Indonesia Fund, or of any material
agreement, indenture, instrument, contract, lease or other undertaking to which
the Indonesia Fund is a party or by which it is bound, and the execution,
delivery and performance of this Agreement by the Indonesia Fund will not result
in the acceleration of any obligation, or the imposition of any penalty, under
any agreement, indenture, instrument, contract, lease, judgment or decree to
which the Indonesia Fund is a party or by which it is bound.
4.5. FINANCIAL STATEMENTS. The Jakarta Fund has been furnished with a
statement of assets, liabilities and capital and a schedule of investments of
the Indonesia Fund, each as of December 31, 1999, said financial statements
having been examined by PricewaterhouseCoopers LLP, independent public
accountants. These financial statements are in accordance with GAAP and present
fairly, in all material respects, the financial position of the Indonesia Fund
as of such date in accordance with GAAP, and there are no known contingent
liabilities of the Indonesia Fund required to be reflected on a balance sheet
(including the notes thereto) in accordance with GAAP as of such date not
disclosed therein.
The Jakarta Fund has been furnished with an unaudited statement of assets,
liabilities and capital and a schedule of investments of the Indonesia Fund,
each as of June 30, 2000. This financial statement and schedule of investments
are in accordance with GAAP and present fairly, in all material respects the
financial position of the Indonesia Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the Indonesia Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein.
4.6. ANNUAL REPORT. The Jakarta Fund has been furnished with the Indonesia
Fund's Annual Report to Shareholders for the fiscal year ended December 31,
1999.
4.7. QUALIFICATION, CORPORATE POWER, AUTHORIZATION OF TRANSACTION. The
Indonesia Fund has full corporate power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action of its Board of
Directors (including the approval of at least 75% of the "Continuing Directors"
in accordance with Article VII of its Articles of Incorporation, as amended),
and subject to shareholder approval, this Agreement constitutes a valid and
binding contract enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto.
4.8. LEGAL COMPLIANCE. No material litigation or administrative proceeding
or investigation of or before any court or governmental body is presently
pending (in which service of process has been received) or to its knowledge
threatened against the Indonesia Fund or any properties or assets held by it.
The Indonesia Fund knows of no facts which might form the basis for the
institution of such proceedings which would materially and adversely affect its
business and is not a party to or subject to
A-10
<PAGE>
the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.
4.9. MATERIAL CONTRACTS. There are no material contracts outstanding to
which the Indonesia Fund is a party that have not been disclosed in the N-14
Registration Statement or not otherwise disclosed in writing to the Jakarta Fund
prior to the date of this Agreement.
4.10. UNDISCLOSED LIABILITIES. Since December 31, 1999, there has not been
any material adverse change in the Indonesia Fund's financial condition, assets,
liabilities, or business and the Indonesia Fund has no known liabilities of a
material amount, contingent or otherwise, required to be disclosed in a balance
sheet in accordance with GAAP other than those shown on the Indonesia Fund's
statements of assets, liabilities and capital referred to above, those incurred
in the ordinary course of its business as an investment company since
January 1, 2000, and those incurred in connection with the Merger. Prior to the
Effective Date, the Indonesia Fund will advise the Jakarta Fund in writing of
all known liabilities, contingent or otherwise, whether or not incurred in the
ordinary course of business, existing or accrued. For purposes of this Section
4.10, a decline in the net asset value per share of the Indonesia Fund due to
declines in market values of securities in the Indonesia Fund's portfolio or the
discharge of the Indonesia Fund liabilities will not constitute a material
adverse change.
4.11. TAX FILINGS. All federal and other tax returns and information
reports of the Indonesia Fund required by law to have been filed shall have been
filed, or extensions to file such returns or reports shall have been obtained,
and are or will be correct in all material respects, and all federal and other
taxes shown as due or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the payment thereof,
and, to the best of the Indonesia Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such returns.
All tax liabilities of the Indonesia Fund have been adequately provided for on
its books, and no tax deficiency or liability of the Indonesia Fund has been
asserted and no question with respect thereto has been raised by the Internal
Revenue Service or by any state or local tax authority for taxes in excess of
those already paid, up to and including the taxable year in which the Effective
Date occurs.
4.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation, the Indonesia Fund has met the requirements of Subchapter M of the
Code for qualification as a RIC and has elected to be treated as such, has been
eligible to and has computed its federal income tax under Section 852 of the
Code, and will have distributed substantially all of its investment company
taxable income and net realized capital gain (as defined in the Code) that has
accrued through the Effective Date. As of March 31, 2000 and June 30, 2000 and
September 30, 2000, the Indonesia Fund has met the requirements of Subchapter M
of the Code for qualification as a RIC.
4.13. FORM N-14. The N-14 Registration Statement, on the effective date of
the N-14 Registration Statement, at the time of the shareholders' meetings
referred to in Section 6 of this Agreement and at the Effective Date, insofar as
it relates to the Indonesia Fund (i) shall have complied or will comply in all
material respects with the provisions of the 1933 Act, the 1934 Act and the 1940
Act and the rules and regulations thereunder and (ii) did not or will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and the prospectus included therein did not or will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that the
representations and warranties in this Section 4.13 shall not apply to
statements in, or omissions from, the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Jakarta Fund
in writing for use in the N-14 Registration Statement.
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4.14. CAPITALIZATION.
(a) All issued and outstanding shares of the Indonesia Fund (i) have been
offered and sold in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws, (ii) are,
and on the Effective Date will be, duly and validly issued and outstanding,
fully paid and non-assessable, and (iii) will be held at the time of the Closing
by the persons and in the amounts set forth in the records of the transfer
agent. The Indonesia Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of the Indonesia Fund shares, nor
is there outstanding any security convertible into, or exchangeable for, any of
the Indonesia Fund shares.
(b) The Indonesia Fund is authorized to issue 100,000,000 shares of stock,
par value $0.001 per share, all of which shares are classified as Common Stock
and each outstanding share of which is fully paid, non-assessable and has full
voting rights.
4.15. NO FINDER'S FEES. The Indonesia Fund does not owe any broker's or
finder's fee in connection with the transactions provided for in this Agreement.
4.16. BOOKS AND RECORDS. The books and records of the Indonesia Fund made
available to the Jakarta Fund are substantially true and correct and contain no
material misstatements or omissions with respect to the operations of the
Indonesia Fund.
4.17. NYSE CONTINUED LISTING. The Indonesia Fund knows of no basis upon
which the NYSE would delist the Indonesia Fund's Common Stock after the
Effective Date, except to the extent that the Indonesia Fund's market
capitalization or share price falls below the continued listing requirements
specified in the NYSE rules.
5. CONVERSION TO INDONESIA FUND, INC. COMMON STOCK
5.1. CONVERSION.
(a) Subject to the requisite approval of the shareholders of the Parties,
and the other terms and conditions contained herein, at the Effective Date, each
share of Common Stock of the Jakarta Fund will be converted into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of full shares
(and the right to receive cash in lieu of fractional shares) of Indonesia Fund
Common Stock, computed based on the net asset value per share of each of the
Parties at the Valuation Time.
(b) No fractional shares of the Indonesia Fund will be issued to Jakarta
Fund shareholders. In lieu thereof, the Indonesia Fund will purchase all
fractional shares of the Indonesia Fund at the current net asset value of shares
of the Indonesia Fund for the account of all holders of fractional interests,
and each such holder will receive such holder's pro rata share of the proceeds
of such purchase.
5.2. COMPUTATION OF NET ASSET VALUE. The net asset value per share of the
Parties shall be determined as of the Valuation Time, and no formula will be
used to adjust the net asset value so determined of either of the Parties to
take into account differences in realized and unrealized gains and losses. The
value of the assets of the Jakarta Fund as of the Valuation Time shall be
determined by the Indonesia Fund pursuant to the principles and procedures
consistently utilized by the Indonesia Fund in valuing its own assets and
determining its own liabilities for purposes of the Merger, which principles and
procedures are substantially similar to those employed by the Jakarta Fund when
valuing its own assets and determining its own liabilities. Such valuation and
determination shall be made by the Indonesia Fund in cooperation with the
Jakarta Fund and shall be confirmed in writing by the Indonesia Fund to the
Jakarta Fund. The net asset value per share of Indonesia Fund Common Stock shall
be determined in accordance with such procedures, and the Indonesia Fund shall
certify the computations involved.
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5.3. ISSUANCE OF THE INDONESIA FUND, INC. COMMON STOCK. The Indonesia Fund
shall issue to the shareholders of the Jakarta Fund separate certificates or
share deposit receipts for the Indonesia Fund Common Stock by delivering the
certificates or share deposit receipts evidencing ownership of the Indonesia
Fund Common Stock to BankBoston, N.A. c/o EquiServe, L.P., as the transfer agent
and registrar for the Indonesia Fund Common Stock.
5.4. EXCHANGE OF CERTIFICATES REPRESENTING THE JAKARTA GROWTH FUND, INC.
COMMON STOCK.
(a) As of the Effective Date, the Indonesia Fund shall deposit, or shall
cause to be deposited, with an exchange agent selected by the Indonesia Fund,
which shall be The Indonesia Fund's transfer agent or such other party
reasonably satisfactory to the Jakarta Fund (the "Exchange Agent"), for the
benefit of the holders of shares of the Jakarta Fund Common Stock, for exchange
in accordance with this Article 5, certificates representing the shares of the
Indonesia Fund to be issued in the Merger (the "Merger Consideration") and cash
in lieu of fractional shares of the Merger Consideration to be issued pursuant
to Section 5.1 and paid pursuant to this Section 5.4 in exchange for outstanding
shares of the Jakarta Fund Common Stock.
(b) Promptly after the Effective Date, the Indonesia Fund shall cause the
Exchange Agent to mail to each holder of record of a Certificate or Certificates
(i) a letter of transmittal which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in such form and have such
other provisions as the Indonesia Fund may reasonably specify and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing the Merger Consideration and cash in lieu of
fractional shares of the Merger Consideration. Upon surrender of a Certificate
for cancellation to the Exchange Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
certificates representing the number of whole shares of the Merger Consideration
and (y) a check representing the amount of cash in lieu of fractional shares of
the Merger Consideration, if any, and unpaid dividends and distributions, if
any, which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article 5, after giving effect to
any required withholding tax, and the Certificate so surrendered shall forthwith
be cancelled. No interest will be paid or accrued on the cash in lieu of
fractional shares of the Merger Consideration and unpaid dividends and
distributions, if any, payable to holders of Certificates. In the event of a
transfer of ownership of the Jakarta Fund Common Stock which is not registered
in the transfer records of the Jakarta Fund, certificates representing the
proper number of shares of the Merger Consideration, together with a check for
the cash to be paid in lieu of fractional shares of the Merger Consideration,
may be issued to such a transferee if the Certificate representing shares of
such the Jakarta Fund Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions on the Merger Consideration shall be paid with respect to
any shares of the Jakarta Fund Common Stock represented by a Certificate until
such Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of the
Merger Consideration issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Date theretofore payable with respect to such
whole shares of the Merger Consideration and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Date but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of the Merger Consideration,
less the amount of any withholding taxes which may be required thereon.
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(d) At and after the Effective Date, there shall be no transfers on the
stock transfer books of the Jakarta Fund of the shares of the Jakarta Fund
Common Stock which were outstanding immediately prior to the Effective Date. If,
after the Effective Date, Certificates are presented to the Indonesia Fund, they
shall be cancelled and exchanged for certificates for whole shares of the Merger
Consideration and cash in lieu of fractional shares of the Merger Consideration,
if any, and unpaid dividends and distributions deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures set forth in this
Article 5.
(e) Any portion of the Merger Consideration held by the Exchange Agent
(together with any cash in lieu of fractional shares of the Merger Consideration
and the proceeds of any investments thereof) that remains unclaimed by the
former stockholders of the Jakarta Fund one year after the Effective Date shall
be delivered to the Indonesia Fund. Any former stockholders of the Jakarta Fund
who have not theretofore complied with this Article 5 shall thereafter look only
to the Indonesia Fund for payment of their shares constituting the Merger
Consideration, cash in lieu of fractional shares of the Merger Consideration and
unpaid dividends and distributions on the Merger Consideration deliverable in
respect of each share of the Jakarta Fund Common Stock such stockholder holds as
determined pursuant to this Agreement, in each case, without any interest
thereon.
(f) None of the Indonesia Fund, the Jakarta Fund, the Exchange Agent or any
other person shall be liable to any former holder of shares of the Jakarta Fund
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Indonesia
Fund, the posting by such person of a bond in such reasonable amount as the
Indonesia Fund may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent or the Indonesia
Fund will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration and cash in lieu of fractional shares of the Indonesia Fund
Common Stock, and unpaid dividends and distributions on shares of the Merger
Consideration, deliverable in respect thereof pursuant to this Agreement.
6. COVENANTS OF THE PARTIES
6.1. SHAREHOLDERS' MEETINGS.
(a) Each of the Parties shall hold a meeting of its respective shareholders
for the purpose of considering the Merger as described herein, which meeting has
been called by each Fund for December 28, 2000 and any adjournments thereof.
(b) Each of the Parties agrees to mail to each of its respective
shareholders of record entitled to vote at the special meeting of shareholders
at which action is to be considered regarding the Merger, in sufficient time to
comply with requirements as to notice thereof, a combined Proxy Statement and
Prospectus which complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act and Section 20(a) of the 1940 Act,
and the rules and regulations, respectively, thereunder.
6.2. OPERATIONS IN THE NORMAL COURSE. Each Party covenants to operate its
business in the ordinary course between the date hereof and the Effective Date,
it being understood that such ordinary course of business will include (i) the
declaration and payment of customary dividends and other distributions and
(ii) in the case of the Jakarta Fund, preparing for its deregistration, except
that the distribution of dividends pursuant to Sections 7.11 and 8.9 of this
Agreement shall not be deemed to constitute a breach of the provisions of this
Section 6.2.
6.3. ARTICLES OF MERGER. The Parties agree that, as soon as practicable
after satisfaction of all conditions to the Merger, they will jointly file
executed Articles of Merger with the Department and make all other filings or
recordings required by Maryland law in connection with the Merger.
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6.4. REGULATORY FILINGS.
(a) The Jakarta Fund undertakes that, if the Merger is consummated, it will
file, or cause its agents to file, an application pursuant to Section 8(f) of
the 1940 Act for an order declaring that the Jakarta Fund has ceased to be a
registered investment company.
(b) The Indonesia Fund will file the N-14 Registration Statement with the
SEC and will use its best efforts to ensure that the N-14 Registration Statement
becomes effective as promptly as practicable. The Jakarta Fund agrees to
cooperate fully with the Indonesia Fund, and will furnish to the Indonesia Fund
the information relating to itself to be set forth in the N-14 Registration
Statement as required by the 1933 Act, the 1934 Act, the 1940 Act, and the rules
and regulations thereunder and applicable state securities or blue sky laws.
6.5. PRESERVATION OF ASSETS. The Indonesia Fund agrees that it has no plan
or intention to sell or otherwise dispose of the assets of the Jakarta Fund to
be acquired in the Merger, except for dispositions made in the ordinary course
of business and except for dispositions necessary to comply with Section 6.6(a).
6.6. TAX MATTERS.
(a) The Indonesia Fund agrees that it intends to continue to qualify for the
special tax treatment afforded RICs under Sections 851-855 of the Code at all
times after the consummation of the Merger. The Indonesia Fund agrees that it
will use its reasonable best efforts to take any and all actions necessary to
satisfy all of the requirements necessary to qualify for the special tax
treatment afforded RICs under Sections 851-855 of the Code at all times after
the consummation of the Merger. The Indonesia Fund also agrees that it will
dispose of any of its assets within thirty (30) days after the date of the close
of the Indonesia Fund's first fiscal quarter ending after the Effective Date
(the "First Quarter Closing Date") as are necessary to ensure that the Indonesia
Fund satisfies the requirements under Section 851(b)(3) of the Code as of the
First Quarter Closing Date.
(b) Each of the Parties agrees that by the Effective Date all of its federal
and other tax returns and reports required to be filed on or before such date
shall have been filed and all taxes shown as due on said returns either have
been paid or adequate liability reserves have been provided for the payment of
such taxes. In connection with this covenant, the Parties agree to cooperate
with each other in filing any tax return, amended return or claim for refund,
determining a liability for taxes or a right to a refund of taxes or
participating in or conducting any audit or other proceeding in respect of
taxes. The Indonesia Fund agrees to retain for a period of ten (10) years
following the Effective Date all returns, schedules and work papers and all
material records or other documents relating to tax matters of the Jakarta Fund
for its final taxable year and for all prior taxable periods. Any information
obtained under this Section 6.6 shall be kept confidential except as otherwise
may be necessary in connection with the filing of returns or claims for refund
or in conducting an audit or other proceeding. After the Effective Date, the
Indonesia Fund shall prepare, or cause its agents to prepare, any federal, state
or local tax returns, including any Forms 1099, required to be filed and
provided to required persons by the Jakarta Fund with respect to its final
taxable year ending with the Effective Date and for any prior periods or taxable
years for which the due date for such return has not passed as of the Effective
Date and further shall cause such tax returns and Forms 1099 to be duly filed
with the appropriate taxing authorities and provided to required persons.
Notwithstanding the aforementioned provisions of this Section 6.6, any expenses
incurred by the Indonesia Fund (other than for payment of taxes) in excess of
any accrual for such expenses by the Jakarta Fund in connection with the
preparation and filing of said tax returns and Forms 1099 after the Effective
Date shall be borne by the Indonesia Fund.
6.7. SHAREHOLDER LIST. Prior to the Effective Date, the Jakarta Fund shall
have made arrangements with its transfer agent to deliver to the Indonesia Fund
a list of the names and addresses of all of the shareholders of record of the
Jakarta Fund on the Effective Date and the number of
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shares of Common Stock of the Jakarta Fund owned by each such shareholder,
certified by the Jakarta Fund's transfer agent or President to the best of their
knowledge and belief.
6.8. TERMINATION OF REGISTRATION AS AN INVESTMENT COMPANY. The Jakarta
Fund agrees that the termination of its registration as an investment company
will be effected in accordance with applicable law as soon as practicable
following the Effective Date.
6.9. INDEMNIFICATION.
(a) The Indonesia Fund and the Jakarta Fund agree that, to the extent
consistent with applicable law, including the 1940 Act, all rights to
indemnification and all limitations on liability existing in favor of any
director of the Jakarta Fund who is not an "affiliated person" (as defined in
Section 2(a)(3) of the 1940 Act) of the Jakarta Fund's investment adviser (the
"Indemnitees") as provided in the Jakarta Fund's Articles of Incorporation, the
Jakarta Fund's Bylaws or an agreement between an Indemnitee and the Jakarta Fund
as in effect as of the date hereof and disclosed in writing to the Indonesia
Fund shall survive the Merger and continue in full force and effect in respect
of acts or omissions occurring on or prior to the Effective Date (including in
respect of acts or omissions in connection with this Agreement or the Merger),
including without limitation, the rights to indemnification set forth in, and in
accordance with, Article VI of the Articles of Incorporation of Jakarta Fund;
and the Indonesia Fund, as the surviving corporation in the Merger, assumes the
obligation to provide the Indemnitees with such rights to indemnification.
(b) Notwithstanding any other provisions hereof, the obligations of the
Indonesia Fund contained in this Section 6.9 shall be binding upon the
successors and assigns of the Indonesia Fund. In the event the Indonesia Fund or
any of its successors or assigns (a)consolidates with or merges into any other
person or entity or (b)transfers all or substantially all of its properties or
assets to any person or entity, then, and in each case, proper provision shall
be made so that successors and assigns of the Indonesia Fund, as the case may
be, honor the indemnification obligations set forth in this Section 6.9.
(c) The obligations of the Indonesia Fund under this Section 6.9 shall not
be terminated or modified in such a manner as to adversely affect any Indemnitee
to whom this Section 6.9 applies without the consent of such affected Indemnitee
(it being expressly agreed that the Indemnitees to whom this Section 6.9 applies
shall be third party beneficiaries of this Section 6.9).
(d) The Indonesia Fund shall advance all expenses to any Indemnitee incurred
by enforcing the indemnity or other obligations provided for in this Section 6.9
to the fullest extent permitted under applicable law, including the 1940 Act. To
the extent required by law, such advancement of expenses shall be subject to
delivery of an undertaking to reimburse the Indonesia Fund if it is ultimately
determined that an Indemnitee is not entitled to indemnification.
6.10 APPLICABILITY OF MARYLAND BUSINESS COMBINATION ACT.
The Jakarta Fund shall take such action as may be required by Article IX of
its Articles of Incorporation and the Maryland Business Combination Act to
render Article IX of its Articles of Incorporation and the Maryland Business
Combination Act inapplicable to the Merger and other transactions contemplated
by this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INDONESIA FUND, INC.
The obligations of the Indonesia Fund hereunder shall be subject to the
following conditions:
7.1. APPROVAL OF MERGER; NYSE LISTING; APPRAISAL RIGHTS.
(a) This Agreement shall have been approved by the affirmative vote of the
holders of 66 2/3% of the shares of Common Stock of the Indonesia Fund issued
and outstanding and entitled to vote thereon and the affirmative vote of the
holders of a majority of the shares of Common Stock of the Jakarta Fund issued
and outstanding and entitled to vote thereon; and that the Jakarta Fund shall
have
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delivered to the Indonesia Fund a copy of the resolutions approving this
Agreement adopted by its Board of Directors and shareholders, certified by its
Secretary.
(b) The Indonesia Fund's shares shall have continued to be listed on the
NYSE through the Effective Date.
(c) The holders of not more than 10% of the outstanding shares of the
Jakarta Fund shall have, in accordance with Title 3 Subtitle 2 of the Maryland
General Corporation Law, both: (i) filed with the Jakarta Fund a written
objection to the Merger prior to or at the meeting of shareholders convened to
consider the Merger, and (ii) not voted in favor of the Merger in person or by
proxy.
7.2. CERTIFICATES AND STATEMENTS BY THE JAKARTA GROWTH FUND, INC.
(a) The Jakarta Fund shall have furnished a statement of assets, liabilities
and capital, together with a schedule of investments with their respective dates
of acquisition and tax costs, certified on its behalf by its President (or any
Vice President) and its Treasurer, and a certificate executed by both such
officers, dated the Effective Date, certifying that there has been no material
adverse change in its financial position since March 31, 2000, other than
changes in its portfolio securities since that date or changes in the market
value of its portfolio securities.
(b) The Jakarta Fund shall have furnished to the Indonesia Fund a
certificate signed by its President (or any Vice President), dated the Effective
Date, certifying that, as of the Effective Date, all representations and
warranties made in this Agreement are true and correct in all material respects
as if made at and as of such date and the Jakarta Fund has complied with all of
the agreements and satisfied all of the conditions on its part to be performed
or satisfied at or prior to such date.
(c) The Jakarta Fund shall have delivered to the Indonesia Fund a letter
from PricewaterhouseCoopers LLP, dated the Effective Date, stating that such
firm has performed a limited review of the federal, state and local income tax
returns for the period ended March 31, 2000, and that, based on such limited
review, nothing came to their attention which caused them to believe that such
returns did not properly reflect, in all material respects, the federal, state
and local income taxes of the Jakarta Fund for the period covered thereby; and
that for the period from April 1, 2000 to and including the Effective Date and
for any taxable year ending upon the Effective Date, such firm has performed a
limited review to ascertain the amount of such applicable federal, state and
local taxes, and has determined that either such amount has been paid or
reserves have been established for payment of such taxes, this review to be
based on unaudited financial data; and that based on such limited review,
nothing has come to their attention which caused them to believe that the taxes
paid or reserves set aside for payment of such taxes were not adequate in all
material respects for the satisfaction of federal, state and local taxes for the
period from April 1, 2000 to and including the Effective Date and for any
taxable year ending upon the Effective Date or that the Jakarta Fund would not
continue to qualify as a RIC for federal income tax purposes.
7.3. ABSENCE OF LITIGATION. There shall be no material litigation pending
with respect to the matters contemplated by this Agreement.
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7.4. LEGAL OPINIONS.
(a) The Indonesia Fund shall have received an opinion of Brown & Wood LLP,
as counsel to the Jakarta Fund, in form and substance reasonably satisfactory to
the Indonesia Fund and dated the Effective Date, to the effect that (i) the
Jakarta Fund is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland; (ii) the Agreement has been
duly authorized, executed and delivered by the Jakarta Fund, and, assuming that
the N-14 Registration Statement complies with the 1933 Act, 1934 Act and the
1940 Act, constitutes a valid and legally binding obligation of the Jakarta
Fund, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization or
other similar laws pertaining to the enforcement of creditors' rights generally
and by equitable principles; (iii) to the best of such counsel's knowledge, no
consent, approval, authorization or order of any United States federal or
Maryland state court or governmental authority is required for the consummation
by the Jakarta Fund of the Merger, except such as may be required under the 1933
Act, the 1934 Act, the 1940 Act, the published rules and regulations of the SEC
thereunder and such as may be required under state securities or blue sky laws
and except for the acceptance by the Department of the Articles of Merger for
filing; (iv) such counsel does not know of any contracts or other documents with
respect to the Jakarta Fund related to the Merger of a character required to be
described in the N-14 Registration Statement which are not described therein or,
if required to be filed, filed as required; (v) the execution and delivery of
this Agreement does not, and the consummation of the Merger will not, violate
any material provision of the Articles of Incorporation, as amended, the Bylaws,
as amended, or any agreement (known to such counsel) to which the Jakarta Fund
is a party or by which the Jakarta Fund is bound, except insofar as the parties
have agreed to amend such provision as a condition precedent to the Merger;
(vi) to the best of such counsel's knowledge, no material suit, action or legal
or administrative proceeding is pending or threatened against the Jakarta Fund;
and (vii) all corporate actions required to be taken by the Jakarta Fund to
authorize this Agreement and to effect the Merger have been duly authorized by
all necessary corporate actions on behalf of the Jakarta Fund. In giving the
opinion set forth above, Brown & Wood LLP may state that it is relying on
certificates of officers of the Jakarta Fund with regard to matters of fact and
certain certificates and written statements of governmental officials with
respect to the good standing of the Jakarta Fund.
Such counsel shall also state that (a) while such counsel cannot make any
representation as to the accuracy or completeness of statements of fact in the
N-14 Registration Statement or any amendment or supplement thereto with respect
to the Jakarta Fund, nothing has come to their attention that would lead them to
believe that, on the respective effective dates of the N-14 Registration
Statement and any amendment or supplement thereto with respect to the Jakarta
Fund, (1) the N-14 Registration Statement or any amendment or supplement thereto
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading with respect to the Jakarta Fund, and (2) the prospectus
included in the N-14 Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading with respect to the Jakarta Fund; PROVIDED that such
counsel need not express any opinion or belief as to the financial statements,
other financial data, statistical data or information relating to the Jakarta
Fund contained or incorporated by reference in the N-14 Registration Statement.
(b) The Indonesia Fund shall have received an opinion from Willkie Farr &
Gallagher, as counsel to the Indonesia Fund, dated the Effective Date, to the
effect that for federal income tax purposes (i) the Merger as provided in this
Agreement will constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Code and that the Jakarta Fund and the Indonesia Fund will
each be a "party to a reorganization" within the meaning of Section 368(b) of
the Code; (ii) no gain or loss will be recognized by the Jakarta Fund as a
result of the Merger or upon the conversion of Jakarta Fund
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shares to Indonesia Fund Common Stock; (iii) no gain or loss will be recognized
by the Indonesia Fund as a result of the Merger; (iv) no gain or loss will be
recognized to the shareholders of the Jakarta Fund upon the conversion of their
Jakarta Fund shares into Indonesia Fund Common Stock except to the extent such
shareholders are paid cash in lieu of fractional shares of Indonesia Fund in the
Merger; (v) the tax basis of the Jakarta Fund assets in the hands of the
Indonesia Fund will be the same as the tax basis of such assets in the hands of
the Jakarta Fund immediately prior to the consummation of the Merger;
(vi) immediately after the Merger, the tax basis of the Indonesia Fund Common
Stock received by the shareholders of the Jakarta Fund in the Merger will be
equal, in the aggregate, to the tax basis of the shares of the Jakarta Fund
converted pursuant to the Merger less the portion of such tax basis allocable to
cash received in lieu of fractional shares of the Indonesia Fund in the Merger;
(vii) a shareholder's holding period for the Indonesia Fund Common Stock will be
determined by including the period for which he or she held the Common Stock of
the Jakarta Fund converted pursuant to the Merger, provided that such Jakarta
Fund shares were held as a capital asset; (viii) the Indonesia Fund's holding
period with respect to the Jakarta Fund assets transferred will include the
period for which such assets were held by the Jakarta Fund; and (ix) the payment
of cash to a Jakarta Fund shareholder in lieu of fractional shares of the
Indonesia Fund will be treated as though the fractional shares were distributed
as part of the Merger and then redeemed by the Indonesia Fund with the result
that the Jakarta Fund shareholder will have a capital gain or loss to the extent
the cash distribution differs from such shareholder's basis allocable to the
fractional shares, provided that the converted Jakarta Fund shares were held as
capital assets immediately prior to the conversion and that the shareholder's
proportionate interest in the Indonesia Fund will be reduced as a result of such
cash distribution.
7.5. AUDITOR'S CONSENT AND CERTIFICATION.
(a) The Indonesia Fund shall have received from PricewaterhouseCoopers LLP a
letter dated within five days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to the Indonesia Fund, to the
effect that (i) they are independent public auditors with respect to the
Indonesia Fund within the meaning of the 1933 Act and the applicable published
rules and regulations thereunder; and (ii) in their opinion, the financial
statements and supplementary information of the Indonesia Fund included or
incorporated by reference in the N-14 Registration Statement and reported on by
them comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the published rules and regulations thereunder.
(b) The Indonesia Fund shall have received from PricewaterhouseCoopers LLP a
letter dated within five days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to the Indonesia Fund, to the
effect that they have performed other specified procedures, not constituting an
audit, with respect to certain amounts, percentages, numerical data, financial
information and financial statements appearing in the N-14 Registration
Statement, which previously have been specified by such accountants and which
shall be specified in such letter, and have compared certain of such items with,
and have found such items to be in agreement with, the accounting and financial
records of the Indonesia Fund.
7.6. LIABILITIES. The assets or liabilities of the Jakarta Fund as of the
Effective Date shall not include any assets or liabilities which the Indonesia
Fund, by reason of limitations in its investment objectives and policies as in
effect upon consummation of the Merger or Articles of Incorporation, may not
properly acquire or assume. The Indonesia Fund does not anticipate that there
will be any such assets or liabilities but the Indonesia Fund will notify the
Jakarta Fund if any do exist and shall reimburse the Jakarta Fund for any
reasonable transaction costs incurred by the Jakarta Fund for the liquidation of
such assets and liabilities.
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7.7. EFFECTIVENESS OF N-14 REGISTRATION STATEMENT. The N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending such effectiveness shall have been instituted or, to the knowledge of
the Indonesia Fund, contemplated by the SEC.
7.8. REGULATORY FILINGS. The Indonesia Fund shall have received from the
SEC such orders or interpretations as Willkie Farr & Gallagher, as counsel to
the Indonesia Fund, deems reasonably necessary or desirable under the 1933 Act,
the 1934 Act and the 1940 Act in connection with the Merger, provided that such
counsel shall have requested such orders as promptly as practicable, and all
such orders shall be in full force and effect.
7.9. ADMINISTRATIVE RULINGS, PROCEEDINGS. The SEC shall not have issued an
unfavorable advisory report under Section 25(b) of the 1940 Act, nor instituted
or threatened to institute any proceeding seeking to enjoin consummation of the
Merger under Section 25(c) of the 1940 Act; and no other legal, administrative
or other proceeding shall be instituted or threatened which would materially
affect the financial condition of the Jakarta Fund or would prohibit the Merger.
7.10. DIVIDENDS. Prior to the Effective Date, the Jakarta Fund shall have
declared and paid a dividend or dividends which, together with all such previous
dividends, shall have the effect of distributing to its shareholders
substantially all of its net investment company taxable income that has accrued
through the Effective Date, if any (computed without regard to any deduction of
dividends paid) (unless such amounts are immaterial), and substantially all of
its net capital gain, if any, realized through the Effective Date.
7.11. CUSTODIAN'S CERTIFICATE. The Jakarta Fund's custodian shall have
delivered to the Indonesia Fund a certificate identifying all of the assets of
the Jakarta Fund held or maintained by such custodian as of the Valuation Time.
7.12. BOOKS AND RECORDS. The Jakarta Fund's transfer agent shall have
provided to the Indonesia Fund (i) the originals or true copies of all of the
records of the Jakarta Fund in the possession of such transfer agent as of the
Effective Date, (ii) a certificate setting forth the number of shares of the
Jakarta Fund outstanding as of the Valuation Time, and (iii) the name and
address of each holder of record of any shares and the number of shares held of
record by each such shareholder.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF JAKARTA GROWTH FUND, INC.
The obligations of the Jakarta Fund hereunder shall be subject to the
following conditions:
8.1. APPROVAL OF MERGER. This Agreement shall have been approved by the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Jakarta Fund issued and outstanding and entitled to vote thereon and the
affirmative vote of the holders of at least 66 2/3% of the shares of Common
Stock of the Indonesia Fund issued and outstanding and entitled to vote thereon;
and that the Indonesia Fund shall have delivered to the Jakarta Fund a copy of
the resolutions approving this Agreement adopted by its Board of Directors and
shareholders, certified by its Secretary.
8.2. CERTIFICATES AND STATEMENTS BY THE INDONESIA FUND, INC.
(a) The Indonesia Fund shall have furnished a statement of assets,
liabilities and capital, together with a schedule of investments with their
respective dates of acquisition and tax costs, certified on its behalf by its
President (or any Vice President) and its Treasurer, and a certificate executed
by both such officers, dated the Effective Date, certifying that there has been
no material adverse change in its financial position since December 31, 1999,
other than changes in its portfolio securities since that date or changes in the
market value of its portfolio securities.
(b) The Indonesia Fund shall have furnished to the Jakarta Fund a
certificate signed by its President (or any Vice President), dated the Effective
Date, certifying that, as of the Effective Date, all representations and
warranties made in this Agreement are true and correct in all material respects
as
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if made at and as of such date and the Indonesia Fund has complied with all of
the agreements and satisfied all of the conditions on its part to be performed
or satisfied at or prior to such date.
(c) The Indonesia Fund shall have delivered to the Jakarta Fund a letter
from PricewaterhouseCoopers LLP, dated the Effective Date, stating that such
firm has performed a limited review of the federal, state and local income tax
returns for the period ended December 31, 1999, and that, based on such limited
review, nothing came to their attention which caused them to believe that such
returns did not properly reflect, in all material respects, the federal, state
and local income taxes of the Indonesia Fund for the period covered thereby; and
that for the period from January 1, 2000 to and including the Effective Date,
such firm has performed a limited review to ascertain the amount of such
applicable federal, state and local taxes, and has determined that either such
amount has been paid or reserves have been established for payment of such
taxes, this review to be based on unaudited financial data; and that based on
such limited review, nothing has come to their attention which caused them to
believe that the taxes paid or reserves set aside for payment of such taxes were
not adequate in all material respects for the satisfaction of federal, state and
local taxes for the period from January 1, 2000 to and including the Effective
Date or that the Indonesia Fund would not continue to qualify as a RIC for
federal income tax purposes.
8.3. ABSENCE OF LITIGATION. There shall be no material litigation pending
with respect to the matters contemplated by this Agreement.
8.4. LEGAL OPINIONS.
(a) The Jakarta Fund shall have received an opinion of Willkie Farr &
Gallagher, as counsel to the Indonesia Fund, in form and substance reasonably
satisfactory to the Jakarta Fund and dated the Effective Date, to the effect
that (i) the Indonesia Fund is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland; (ii) the Agreement
has been duly authorized, executed and delivered by the Indonesia Fund, and,
assuming that the N-14 Registration Statement complies with the 1933 Act, 1934
Act and the 1940 Act, constitutes a valid and legally binding obligation of the
Indonesia Fund, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization or other similar laws pertaining to the enforcement of creditors'
rights generally and by equitable principles; (iii) to the best of such
counsel's knowledge, no consent, approval, authorization or order of any United
States federal or Maryland state court or governmental authority is required for
the consummation by the Indonesia Fund of the Merger, except such as may be
required under the 1933 Act, the 1934 Act, the 1940 Act and the published
rules and regulations of the SEC thereunder and such as may be required under
state securities or blue sky laws and except for the acceptance by the
Department of the Articles of Merger for filing; (iv) the N-14 Registration
Statement has become effective under the 1933 Act, no stop order suspending the
effectiveness of the N-14 Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the 1933 Act, and, with respect to the Indonesia Fund, the N-14
Registration Statement, and each amendment or supplement thereto, as of their
respective effective dates, appear on their face to be appropriately responsive
in all material respects to the requirements of the 1933 Act, the 1934 Act and
the 1940 Act and the published rules and regulations of the SEC thereunder;
(v) such counsel does not know of any statutes, legal or governmental
proceedings or contracts with respect to the Indonesia Fund or other documents
related to the Merger of a character required to be described in the N-14
Registration Statement which are not described therein or, if required to be
filed, filed as required; (vi) the execution and delivery of this Agreement does
not, and the consummation of the Merger will not, violate any material provision
of the Articles of Incorporation, as amended, the Bylaws, as amended, or any
agreement (known to such counsel) to which the Indonesia Fund is a party or by
which the Indonesia Fund is bound, except insofar as the parties have agreed to
amend such provision as a condition precedent to the Merger; (vii) to the best
of such counsel's knowledge, no material suit, action or legal or administrative
proceeding is pending or threatened against the
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Indonesia Fund; and (viii) all corporate actions required to be taken by the
Indonesia Fund to authorize this Agreement and to effect the Merger have been
duly authorized by all necessary corporate actions on behalf of the Indonesia
Fund. In giving the opinion set forth above, Willkie Farr & Gallagher may state
that it is relying on certificates of officers of the Indonesia Fund with regard
to matters of fact and certain certificates and written statements of
governmental officials with respect to the good standing of the Indonesia Fund
and on the opinion of Venable, Baetjer and Howard, LLP as to matters of Maryland
law.
Such counsel shall also state that (a) while such counsel cannot make any
representation as to the accuracy or completeness of statements of fact in the
N-14 Registration Statement or any amendment or supplement thereto with respect
to the Indonesia Fund, nothing has come to their attention that would lead them
to believe that, on the respective effective dates of the N-14 Registration
Statement and any amendment or supplement thereto, (1) the N-14 Registration
Statement or any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading with respect
to the Indonesia Fund; and (2) the prospectus included in the N-14 Registration
Statement contained any untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading with respect to the
Indonesia Fund; PROVIDED that such counsel need not express any opinion or
belief as to the financial statements, other financial data, statistical data or
information relating to the Indonesia Fund contained or incorporated by
reference in the N-14 Registration Statement.
(b) The Jakarta Fund shall have received an opinion from Brown & Wood LLP,
as counsel to the Jakarta Fund, dated the Effective Date, to the effect that for
federal income tax purposes (i) the Merger as provided in this Agreement will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code and that the Jakarta Fund and the Indonesia Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by the Jakarta Fund as a result of the Merger or upon
the conversion of Jakarta Fund shares to Indonesia Fund Common Stock; (iii) no
gain or loss will be recognized by the Indonesia Fund as a result of the Merger;
(iv) no gain or loss will be recognized to the shareholders of the Jakarta Fund
upon the conversion of their shares into Indonesia Fund Common Stock except to
the extent such shareholders are paid cash in lieu of fractional shares of
Indonesia Fund in the Merger; (v) the tax basis of the Jakarta Fund assets in
the hands of the Indonesia Fund will be the same as the tax basis of such assets
in the hands of the Jakarta Fund immediately prior to the consummation of the
Merger; (vi) immediately after the Merger, the tax basis of the Indonesia Fund
Common Stock received by the shareholders of the Jakarta Fund in the Merger will
be equal, in the aggregate, to the tax basis of the shares of the Jakarta Fund
converted pursuant to the Merger less the portion of such tax basis allocable to
cash received in lieu of fractional shares of the Indonesia Fund in the Merger;
(vii) a shareholder's holding period for the Indonesia Fund Common Stock will be
determined by including the period for which he or she held the Common Stock of
the Jakarta Fund converted pursuant to the Merger, provided that such Jakarta
Fund shares were held as a capital asset; (viii) the Indonesia Fund's holding
period with respect to the Jakarta Fund assets transferred will include the
period for which such assets were held by the Jakarta Fund; and (ix) the payment
of cash to a Jakarta Fund shareholder in lieu of fractional shares of the
Indonesia Fund will be treated as though the fractional shares were distributed
as part of the Merger and then redeemed by the Indonesia Fund with the result
that the Jakarta Fund shareholder will have a capital gain or loss to the extent
the cash distribution differs from such shareholder's basis allocable to the
fractional shares, provided that the converted Jakarta Fund shares were held as
capital assets immediately prior to the conversion and that the shareholder's
proportionate interest in the Indonesia Fund will be reduced as a result of such
cash distribution.
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8.5. AUDITOR'S CONSENT AND CERTIFICATION.
(a) The Jakarta Fund shall have received from PricewaterhouseCoopers LLP a
letter dated within five days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to the Jakarta Fund, to the
effect that (i) they are independent public auditors with respect to the Jakarta
Fund within the meaning of the 1933 Act and the applicable published rules and
regulations thereunder; and (ii) in their opinion, the financial statements and
supplementary information of the Jakarta Fund incorporated by reference in the
N-14 Registration Statement and reported on by them comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and the published rules and regulations thereunder.
(b) The Jakarta Fund shall have received from PricewaterhouseCoopers LLP a
letter dated within five days prior to the effective date of the N-14
Registration Statement and a similar letter dated within five days prior to the
Effective Date, in form and substance satisfactory to the Jakarta Fund, to the
effect that they have performed other specified procedures, not constituting an
audit, with respect to certain amounts, percentages, numerical data, financial
information and financial statements appearing in the N-14 Registration
Statement, which previously have been specified by such accountants and which
shall be specified in such letter, and have compared certain of such items with,
and have found such items to be in agreement with, the accounting and financial
records of the Jakarta Fund.
8.6. EFFECTIVENESS OF N-14 REGISTRATION STATEMENT. The N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending such effectiveness shall have been instituted or, to the knowledge of
the Jakarta Fund, contemplated by the SEC.
8.7. REGULATORY FILINGS.
(a) The Jakarta Fund shall have received from the SEC such orders or
interpretations as Brown & Wood LLP, as counsel to the Jakarta Fund, deems
reasonably necessary or desirable under the 1933 Act, the 1934 Act and the 1940
Act in connection with the Merger, provided that such counsel or counsel to the
Jakarta Fund shall have requested such orders as promptly as practicable, and
all such orders shall be in full force and effect.
(b) The SEC shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act, nor instituted or threatened to institute any
proceeding seeking to enjoin consummation of the Merger under Section 25(c) of
the 1940 Act; and no other legal, administrative or other proceeding shall be
instituted or threatened which would materially affect the financial condition
of the Jakarta Fund or would prohibit the Merger.
(c) The Indonesia Fund shall have received from any relevant state
securities administrator such order or orders as are reasonably necessary or
desirable under the 1933 Act, the 1934 Act, the 1940 Act, and any applicable
state securities or blue sky laws in connection with the transactions
contemplated hereby, and that all such orders shall be in full force and effect.
8.8. SATISFACTION OF THE JAKARTA GROWTH FUND, INC. All proceedings taken
by the Indonesia Fund and its counsel in connection with the Merger and all
documents incidental thereto shall be satisfactory in form and substance to the
Jakarta Fund.
8.9. DIVIDENDS. Prior to the Effective Date, the Indonesia Fund shall have
declared and paid a dividend or dividends which, together with all such previous
dividends, shall have the effect of distributing to its shareholders
substantially all of its net investment company taxable income that has accrued
through the Effective Date, if any (computed without regard to any deduction of
dividends paid) (unless such amounts are immaterial), and substantially all of
its net capital gain, if any, realized through the Effective Date.
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<PAGE>
9. PAYMENT OF EXPENSES
9.1. ALLOCATION. Each Fund will bear its own legal, accounting and mailing
expenses relating to the Merger and one-half of all other Merger-related
expenses (including, but not limited to, all costs related to the preparation
and distribution of the N-14 Registration Statement, proxy solicitation
expenses, SEC registration fees, and NYSE listing fees), except that if the
Merger is consummated the Indonesia Fund shall bear the first $200,000 of
expenses otherwise to be borne by the Jakarta Fund under this formula. If the
Merger is not consummated for any reason other than a material breach by the
Jakarta Fund of its obligations under this Agreement, the Indonesia Fund will
bear all of the Jakarta Fund's ordinary Merger-related expenses, including its
legal, accounting and mailing expenses as set forth above, but excluding any
extraordinary expenses such as litigation expenses. Counsel to the Indonesia
Fund has taken the lead role in drafting the N-14 Registration Statement and
this Agreement, and the Indonesia Fund will bear the fees and expenses of such
counsel. To give effect to the cost allocation set forth in this Section 9.1,
the net asset value of the Jakarta Fund as of the Effective Date shall exclude
the expenses of up to $200,000 and the liabilities of the Indonesia Fund as of
the Effective Date will reflect up to $200,000 of costs to be assumed pursuant
to this Section 9.1.
10. COOPERATION FOLLOWING EFFECTIVE DATE
In case at any time after the Effective Date any further action is necessary
to carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification as described below). The Jakarta Fund acknowledges and agrees
that from and after the Effective Date, the Indonesia Fund shall be entitled to
possession of all documents, books, records, agreements and financial data of
any sort pertaining to the Jakarta Fund.
11. INDEMNIFICATION
11.1. JAKARTA GROWTH FUND, INC. The Indonesia Fund agrees to indemnify and
hold harmless the Jakarta Fund and each of the Jakarta Fund's directors and
officers from and against any and all losses, claims, damages, liabilities or
expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which jointly and severally, the
Jakarta Fund or any of its directors or officers may become subject, insofar as
any such loss, claim, damage, liability or expense (or actions with respect
thereto) arises out of or is based on any breach by the Indonesia Fund of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
11.2. THE INDONESIA FUND, INC. The Jakarta Fund agrees to indemnify and
hold harmless the Indonesia Fund and each of the Indonesia Fund's directors and
officers from and against any and all losses, claims, damages, liabilities or
expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which jointly and severally, the
Indonesia Fund or any of its directors or officers may become subject, insofar
as any such loss, claim, damage, liability or expense (or actions with respect
thereto) arises out of or is based on any breach by the Jakarta Fund of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
12. TERMINATION, POSTPONEMENT AND WAIVERS
12.1. TERMINATION.
(a) Notwithstanding anything to the contrary in this Agreement, this
Agreement may be terminated and the Merger abandoned at any time (whether before
or after adoption by the shareholders of each of the Parties) prior to the
Effective Date, or the Effective Date may be postponed, (i) by mutual agreement
of the Parties' Board of Directors; (ii) by the Board of Directors of the
Indonesia Fund if any of the obligations of the Jakarta Fund set forth in this
Agreement has not been fulfilled or waived by such Board or if the Jakarta Fund
has made a material and intentional misrepresentation herein or in connection
herewith; or (iii) by the Board of Directors of the Jakarta
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Fund if any of the obligations of the Indonesia Fund set forth in this Agreement
has not been fulfilled or waived by such Board or if the Indonesia Fund has made
a material and intentional misrepresentation herein or in connection herewith.
(b) If the transaction contemplated by this Agreement shall not have been
consummated by February 28, 2001, this Agreement automatically shall terminate
on that date, unless a later date is mutually agreed to by the Boards of
Directors of the Parties.
(c) In the event of termination of this Agreement pursuant to the provisions
hereof, the Agreement shall become void and have no further effect, and there
shall not be any liability hereunder on the part of either of the Parties or
their respective directors or officers, except for any such material breach or
intentional misrepresentation, as to each of which all remedies at law or in
equity of the party adversely affected shall survive.
12.2. WAIVER. At any time prior to the Effective Date, any of the terms or
conditions of this Agreement may be waived by the Board of Directors of either
the Jakarta Fund or the Indonesia Fund (whichever is entitled to the benefit
thereof), if, in the judgment of such Board after consultation with its counsel,
such action or waiver will not have a material adverse effect on the benefits
intended in this Agreement to the shareholders of the Fund, on behalf of which
such action is taken.
12.3. EXPIRATION OF REPRESENTATIONS AND WARRANTIES.
(a) The respective representations and warranties contained in Articles 3
and 4 of this Agreement shall expire with, and be terminated by, the
consummation of the Merger, and neither of the Parties nor any of their
officers, directors, agents or shareholders shall have any liability with
respect to such representations or warranties after the Effective Date. This
provision shall not protect any officer, director, agent or shareholder of the
Parties against any liability to the entity for which that officer, director,
agent or shareholder so acts or to its shareholders to which that officer,
director, agent or shareholder would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties in
the conduct of such office.
(b) If any order or orders of the SEC with respect to this Agreement shall
be issued prior to the Effective Date and shall impose any terms or conditions
which are determined by action of the Boards of Directors of the Parties to be
acceptable, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the shareholders of the Parties,
unless such terms and conditions shall result in a change in the method of
computing the number of shares of Indonesia Fund Common Stock to be issued
pursuant to this Agreement, in which event, unless such terms and conditions
shall have been included in the proxy solicitation materials furnished to the
shareholders of the Parties prior to the meetings at which the Merger shall have
been approved, this Agreement shall not be consummated and shall terminate
unless the Parties call special meetings of shareholders at which such
conditions so imposed shall be submitted for approval.
13. MISCELLANEOUS
13.1. TRANSFER RESTRICTION. Pursuant to Rule 145 under the 1933 Act, and
in connection with the issuance of any shares to any person who at the time of
the Merger is, to its knowledge, an affiliate of a party to the Merger pursuant
to Rule 145(c), the Indonesia Fund will cause to be affixed upon the
certificate(s) issued to such person (if any) a legend as follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT TO THE INDONESIA FUND, INC. (OR ITS STATUTORY
SUCCESSOR) UNLESS (I) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 OR (II) IN
THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE FUND, SUCH
REGISTRATION IS NOT REQUIRED.
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<PAGE>
and, further, that stop transfer instructions will be issued to the Indonesia
Fund's transfer agent with respect to such shares. The Jakarta Fund will provide
the Indonesia Fund on the Effective Date with the name of any Jakarta Fund
Shareholder who is to the knowledge of the Jakarta Fund an affiliate of it on
such date.
13.2. MATERIAL PROVISIONS. All covenants, agreements, representations and
warranties made under this Agreement and any certificates delivered pursuant to
this Agreement shall be deemed to have been material and relied upon by each of
the parties, notwithstanding any investigation made by them or on their behalf.
13.3. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Indonesia Fund:
Hal Liebes, Esq.
Senior Vice President
The Indonesia Fund, Inc.
466 Lexington Avenue
New York, New York 10017
With copies to:
Daniel Schloendorn, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Avenue, N.W.
Suite 5500
Washington, D.C. 20006
If to the Jakarta Fund:
Nobuo Katayama
President
Jakarta Growth Fund, Inc.
180 Maiden Lane
New York, New York 10038-4936
With copies to:
John A. MacKinnon, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
Marcia L. MacHarg, Esq.
Debevoise & Plimpton
555 13th Street, N.W.
Washington, D.C. 20004
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<PAGE>
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
13.4. AMENDMENTS. This Agreement may be amended, modified or supplemented
in such manner as may be mutually agreed upon in writing by the authorized
officers of the Indonesia Fund and the Jakarta Fund; provided, however, that
following the meeting of the Indonesia Fund and Jakarta Fund shareholders to
approve the Merger, no such amendment may have the effect of changing the
provisions for determining the number of the Indonesia Fund shares to be issued
to the Jakarta Fund shareholders under this Agreement to the detriment of such
shareholders without their further approval.
13.5. HEADINGS. The Article headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
13.7. ENFORCEABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
13.8. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns, but
no assignment or transfer hereof or of any rights or obligations hereunder shall
be made by any party without the written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and the
shareholders of the Parties and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement, except for Section 6.9
hereof, which shall be for the benefit of, and enforceable by, the Indemnitees.
13.9. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of New York, without
regard to its principles of conflicts of law.
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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed by its President or Vice President and attested by its Secretary or
Assistant Secretary.
<TABLE>
<S> <C> <C> <C>
THE INDONESIA FUND, INC.
By: /s/ Hal Liebes
--------------------------------------------
Name: Hal Liebes
--------------------------------------------
Attest: /s/ Michael A. Pignataro
--------------------------------------------
Title: Senior Vice President; Secretary
--------------------------------------------
JAKARTA GROWTH FUND, INC.
By: /s/ Nobuo Katayama
--------------------------------------------
Name: Nobuo Katayama, President
--------------------------------------------
Attest: /s/ John J. Boretti
--------------------------------------------
Title: Secretary
--------------------------------------------
</TABLE>
A-28
<PAGE>
EXHIBIT B
SECTIONS 3-202 THROUGH 3-213 OF THE MARYLAND
GENERAL CORPORATION LAW
B-1
<PAGE>
3-202 RIGHT TO FAIR VALUE OF STOCK. -- (a) Except as provided in subsection (c)
of this section, a stockholder of a Maryland corporation has the right to demand
and receive payment of the fair value of the stockholder's stock from the
successor if:
(1) The corporation consolidates or merges with another corporation;
(2) The stockholder's stock is to be acquired in a share exchange;
(3) The corporation transfers its assets in a manner requiring action
under Section 3-105(e) of this title;
(4) The corporation amends its charter in a way which alters the contract
rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholders rights,
unless the right to do so is reserved by the charter of the
corporation; or
(5) The transaction is governed by Section 3-602 of this title or
exempted by Section 3-603(b) of this title.
(b) (1) Fair value is determined as of the close of business:
(i) With respect to a merger under Section 3-106 of this title of a
90 percent or more owned subsidiary with or into its parent
corporation, on the day notice is given or waived under Section
3-106; or
(ii) With respect to any other transaction, on the day the
stockholders voted on the transaction objected to.
(2) Except as provided in paragraph (3) of this subsection, fair value
may not include any appreciation or depreciation which directly or
indirectly results from the transaction objected to or from its
proposal.
(3) In any transaction governed by Section 3-602 of this title or
exempted by Section 3-603(b) of this title, fair value shall be value
determined in accordance with the requirements of Section
3-603(b) of this title.
(c) Unless the transaction is governed by Section 3-602 of this title or is
exempted by Section 3-603(b) of this title, a stockholder may not demand the
fair value of the stockholder's stock and is bound by the terms of the
transaction if:
(1) The stock is listed on a national securities exchange, is designated
as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or is
designated for trading on the NASDAQ small cap market:
(i) With respect to a merger under Section 3-106 of this title of a
90 percent or more owned subsidiary with or into its parent
corporation, on the date notice is given or waived under Section
3-106; or
(ii) With respect to any other transaction, on the record date for
determining stockholders entitled to vote on the transaction
objected to;
(2) The stock is that of the successor in a merger; unless:
(i) The merger alters the contract rights of the stock as expressly
set forth in the charter, and the charter does not reserve the
right to do so; or
(ii) The stock is to be changed or converted in whole or in part in
the merger into something other than either stock in the
successor or cash, scrip, or other rights or
B-2
<PAGE>
interests arising out of provisions for the treatment of
fractional shares of stock in the successor;
(3) The stock is not entitled to be voted on the transaction or the
stockholder did not own the shares of stock on the record date for
determining stockholders entitled to vote on the transaction;
(4) The charter provides that the holders of the stock are not entitled
to exercise the rights of an objecting stockholder under this
subtitle; or
(5) The stock is that of an open-end investment company registered with
the Securities and Exchange Commission under the Investment Company
Act of 1940 and the value placed on the stock in the transaction is
its net asset value.
3-203 PROCEDURE BY STOCKHOLDER. -- (a) A stockholder of a corporation who
desires to receive payment of the fair value of the stockholder's stock under
this subtitle:
(1) Shall file with the corporation a written objection to the proposed
transaction:
(i) With respect to a merger under Section 3-106 of this title of a
90 percent or more owned subsidiary with or into its parent
corporation, within 30 days after notice is given or waived under
Section 3-106; or
(ii) With respect to any other transaction, at or before the
stockholders' meeting at which the transaction will be considered
or, in the case of action taken under Section 2-505(b) of this
article, within 10 days after the corporation gives the notice
required by Section 2-505(b) of this article;
(2) May not vote in favor of the transaction; and
(3) Within 20 days after the Department accepts the articles for record,
shall make a written demand on the successor for payment for the
stockholder's stock, stating the number and class of shares for which
the stockholder demands payment.
(b) A stockholder who fails to comply with this section is bound by the
terms of the consolidation, merger, share exchange, transfer of assets, or
charter amendment.
3-204 EFFECT OF DEMAND ON DIVIDEND AND OTHER RIGHTS. -- A stockholder who
demands payment for his stock under this subtitle:
(1) Has no right to receive any dividends or distributions payable to
holders of record of that stock on a record date after the close of
business on the day as at which fair value is to be determined under
Section 3-202 of this subtitle; and
(2) Ceases to have any rights of a stockholder with respect to that
stock, except the right to receive payment of its fair value.
3-205 WITHDRAWAL OF DEMAND. -- A demand for payment may be withdrawn only with
the consent of the successor.
3-206 RESTORATION OF DIVIDEND AND OTHER RIGHTS. -- (a) The rights of a
stockholder who demands payment are restored in full, if:
(1) The demand for payment is withdrawn;
(2) A petition for an appraisal is not filed within the time required by
this subtitle;
(3) A court determines that the stockholder is not entitled to relief; or
(4) The transaction objected to is abandoned or rescinded.
B-3
<PAGE>
(b) The restoration of a stockholder's rights entitles him to receive the
dividends, distributions, and other rights he would have received if he had not
demanded payment for his stock. However, the restoration does not prejudice any
corporate proceedings taken before the restoration.
3-207 PROCEDURE BY SUCCESSOR. -- (a) (1) The successor promptly shall notify
each objecting stockholder in writing of the date the articles are accepted for
record by the Department.
(2) The successor also may send a written offer to pay the objecting
stockholder what it considers to be the fair value of his stock. Each
offer shall be accompanied by the following information relating to
the corporation which issued the stock:
(i) A balance sheet as of a date not more than six months before the
date of the offer;
(ii) A profit and loss statement for the 12 months ending on the date
of the balance sheet; and
(iii) Any other information the successor considers pertinent.
(b) The successor shall deliver the notice and offer to each objecting
stockholder personally or mail them to him by registered mail at the address he
gives the successor in writing, or, if none, at his address as it appears on the
records of the corporation which issued the stock.
3-208 PETITION FOR APPRAISAL; CONSOLIDATION OF PROCEEDINGS; JOINDER OF
OBJECTORS. -- (a) Within 50 days after the Department accepts the articles for
record, the successor or an objecting stockholder who has not received payment
for his stock may petition a court of equity in the county where the principal
office of the successor is located or, if it does not have a principal office in
this State, where the resident agent of the successor is located, for an
appraisal to determine the fair value of the stock.
(b) (1) If more than one appraisal proceeding is instituted, the court shall
direct the consolidation of all the proceedings on terms and conditions it
considers proper.
(2) Two or more objecting stockholders may join or be joined in an
appraisal proceeding.
3-209 CERTIFICATE MAY BE NOTED. -- (a) At any time after a petition for
appraisal is filed, the court may require the objecting stockholders parties to
the proceeding to submit their stock certificates to the clerk of the court for
notation on them that the appraisal proceeding is pending. If a stockholder
fails to comply with the order, the court may dismiss the proceeding as to him
or grant other appropriate relief.
(b) If any stock represented by a certificate which bears a notation is
subsequently transferred, the new certificate issued for the stock shall bear a
similar notation and the name of the original objecting stockholder. The
transferee of this stock does not acquire rights of any character with respect
to the stock other than the rights of the original objecting stockholder.
3-210 APPRAISAL OF FAIR VALUE. -- (a) If the court finds that the objecting
stockholder is entitled to an appraisal of his stock, it shall appoint three
disinterested appraisers to determine the fair value of the stock on terms and
conditions the court considers proper. Each appraiser shall take an oath to
discharge his duties honestly and faithfully.
(b) Within 60 days after their appointment, unless the court sets a longer
time, the appraisers shall determine the fair value of the stock as of the
appropriate date and file a report stating the conclusion of the majority as to
the fair value of the stock.
(c) The report shall state the reasons for the conclusion and shall include
a transcript of all testimony and exhibits offered.
(d) (1) On the same day that the report is filed, the appraisers shall mail
a copy of it to each party to the proceedings.
B-4
<PAGE>
(2) Within 15 days after the report is filed, any party may object to it
and request a hearing.
3-211 CONSIDERATION BY COURT OF APPRAISERS' REPORT. -- (a) The court shall
consider the report and, on motion of any party to the proceeding, enter an
order which:
(1) Confirms, modifies, or rejects it; and
(2) If appropriate, sets the time for payment to the stockholder.
(b) (1) If the appraisers' report is confirmed or modified by the order,
judgment shall be entered against the successor and in favor of each objecting
stockholder party to the proceeding for the appraised fair value of his stock.
(2) If the appraisers' report is rejected, the court may:
(i) Determine the fair value of the stock and enter judgment for the
stockholder; or
(ii) Remit the proceedings to the same or other appraisers on terms
and conditions it considers proper.
(c) (1) Except as provided in paragraph (2) of this subsection, a judgment
for the stockholder shall award the value of the stock and interest from the
date as to which fair value is to be determined under Section 3-202 of this
subtitle, and
(2) The court may not allow interest if it finds that the failure of the
stockholder to accept an offer for the stock made under Section 3-207
of this subtitle was arbitrary and vexatious or not in good faith. In
making this finding, the court shall consider:
(i) The price which the successor offered for the stock;
(ii) The financial statements and other information furnished to the
stockholder; and
(iii) Any other circumstances it considers relevant.
(d) (1) The costs of the proceedings, including reasonable compensation and
expenses of the appraisers, shall be set by the court and assessed against the
successor. However, the court may direct the costs to be apportioned and
assessed against any objecting stockholder if the court finds that the failure
of the stockholder to accept an offer for the stock made under Section 3-207 of
this subtitle was arbitrary and vexatious or not in good faith. In making this
finding, the court shall consider:
(i) The price which the successor offered for the stock;
(ii) the financial statements and other information furnished to the
stockholder; and
(iii) Any other circumstances it considers relevant.
(2) Costs may not include attorney's fees or expenses. The reasonable
fees and expenses of experts may be included only if:
(i) The successor did not make an offer for the stock under Section
3-207 of this subtitle; or
(ii) The value of the stock determined in the proceeding materially
exceeds the amount offered by the successor.
(e) The judgment is final and conclusive on all parties and has the same
force and effect as other decrees in equity. The judgment constitutes a lien on
the assets of the successor with priority over any mortgage or other lien
attaching on or after the effective date of the consolidation, merger, transfer,
or charter amendment.
B-5
<PAGE>
3-212 SURRENDER OF STOCK. -- The successor is not required to pay for the stock
of an objecting stockholder or to pay a judgment rendered against it in a
proceeding for an appraisal unless, simultaneously with payment:
(1) The certificates representing the stock are surrendered to it,
indorsed in blank, and in proper form for transfer; or
(2) Satisfactory evidence of the loss or destruction of the certificates
and sufficient indemnity bond are furnished.
3-213 RIGHTS OF SUCCESSOR WITH RESPECT TO STOCK. -- (a) A successor which
acquires the stock of an objecting stockholder is entitled to any dividends or
distributions payable to holders of record of that stock on a record date after
the close of business on the day as at which fair value is to be determined
under Section 3-202 of this subtitle.
(b) After acquiring the stock of an objecting stockholder, a successor in a
transfer of assets may exercise all the rights of an owner of the stock.
(c) Unless the articles provide otherwise stock in the successor of a
consolidation, merger, or share exchange otherwise deliverable in exchange for
the stock of an objecting stockholder has the status of authorized but unissued
stock of the successor. However, a proceeding for reduction of the capital of
the successor is not necessary to retire the stock or to reduce the capital of
the successor represented by the stock.
B-6
<PAGE>
0000-JPS-00
<PAGE>
PROXY CARD FOR
THE INDONESIA FUND, INC.
<PAGE>
PROXY
THE INDONESIA FUND, INC.
The Proxy is Solicited on Behalf of the Board of Directors
P
The undersigned hereby appoints Michael A. Pignataro and Hal Liebes as
R Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side
O and in accordance with their judgment on such other matters as may properly
come before the meeting or any adjournments thereof, all shares of The
X Indonesia Fund, Inc. that the undersigned is entitled to vote at the
special meeting of shareholders to be held on December 28, 2000, and
Y at any adjournments thereof.
------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
------------- -------------
<PAGE>
PLEASE MARK
/X/ VOTE AS IN
THIS EXAMPLE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
1. To approve a Merger Agreement and Plan of
Reorganization whereby the Jakarta Growth FOR AGAINST ABSTAIN
Fund, Inc. will merge with and into The
Indonesia Fund, Inc. / / / / / /
MARK HERE FOR ADDRESS CHANGE / /
AND NOTE AT LEFT
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign exactly as name
appears at left. When shares
are held by joint tenants, both
should sign. When signing as
attorney, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by
president or other authorized
officer. If in a partnership,
please sign in partnership name
by authorized person.
Signature:__________________ Date:___________ Signature:_______ Date:___________
<PAGE>
PROXY CARD FOR
JAKARTA GROWTH FUND, INC.
<PAGE>
PROXY
JAKARTA GROWTH FUND, INC.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
The undersigned hereby appoints Nobuo Katayama and John J. Boretti as
R Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side
O and in accordance with their judgment on such other matters as may properly
come before the meeting or any adjournments thereof, all shares of the
X Jakarta Growth Fund, Inc. held of record by the undersigned on November
3, 2000 at the special meeting of shareholders to be held on December 28,
Y 2000, and at any adjournments thereof.
------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON SEE REVERSE
SIDE REVERSE SIDE SIDE
------------- -------------
<PAGE>
PLEASE MARK
/X/ VOTE AS IN
THIS EXAMPLE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
1. To approve a Merger Agreement and Plan of
Reorganization whereby the Jakarta Growth FOR AGAINST ABSTAIN
Fund, Inc. will merge with and into The
Indonesia Fund, Inc. / / / / / /
MARK HERE FOR ADDRESS CHANGE / /
AND NOTE AT LEFT
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign exactly as name
appears at left. When shares
are held by joint tenants, both
should sign. When signing as
attorney, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by
president or other authorized
officer. If in a partnership,
please sign in partnership name
by authorized person.
Signature:__________________ Date:___________ Signature:_______ Date:___________
<PAGE>
PART B
SUBJECT TO COMPLETION DATED NOVEMBER 20, 2000
THE INDONESIA FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
MERGER OF
JAKARTA GROWTH FUND, INC.
180 MAIDEN LANE, 26TH FLOOR
NEW YORK, NEW YORK 10038-4936
(212) 509-8181
WITH AND INTO
THE INDONESIA FUND, INC.
466 LEXINGTON AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10017
(212) 875-3500
This Statement of Additional Information, or SAI, relates
specifically to the proposed merger (the "Merger") of Jakarta Growth Fund,
Inc. (the "Jakarta Fund") with and into The Indonesia Fund, Inc. (the
"Indonesia Fund") in accordance with the General Corporation Law of the State
of Maryland. This Statement of Additional Information consists of this cover
page, the information contained herein, and the following documents, each of
which has been filed electronically with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference herein:
(1) The audited financial statements, notes to the audited financial
statements and report of the independent accountants for the Jakarta
Fund for the fiscal year ended March 31, 2000 included in the Jakarta
Fund's 2000 Annual Report to Shareholders; and
(2) The audited financial statements, notes to the audited financial
statements and report of the independent accountants for the Indonesia
Fund for the fiscal year ended December 31, 1999 included in the
Indonesia Fund's 1999 Annual Report to Shareholders.
This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the Proxy Statement/Prospectus dated November
__, 2000, relating to the Merger. A copy of the Proxy Statement/Prospectus may
be obtained without charge by writing to the Indonesia Fund at 466 Lexington
Avenue, New York, New York 10017, to the Jakarta Fund at 180 Maiden Lane, New
York, New York 10038-4936, or by calling Shareholders Communications Corporation
at 1 (800) 403-7916.
This Statement of Additional Information is dated November __, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES................................................3
MANAGEMENT OF THE FUNDS.........................................................................9
PORTFOLIO TRANSACTIONS.........................................................................14
TAXATION.......................................................................................15
FINANCIAL STATEMENTS...........................................................................22
PRO FORMA FINANCIAL STATEMENTS.................................................................22
APPENDIX A......................................................................................1
</TABLE>
2
<PAGE>
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
ORGANIZATION. Both the Jakarta Fund and the Indonesia Fund are
closed-end, non-diversified management investment companies registered under the
Investment Company Act of 1940, or the Investment Company Act. The Jakarta Fund
and the Indonesia Fund are sometimes collectively referred to in this SAI as the
"Funds" and individually, as the context may require, as the "Fund." Both Funds
are organized as corporations under the laws of the State of Maryland. The
Indonesia Fund is managed and advised by Credit Suisse Asset Management, LLC, or
CSAM, formerly known as BEA Associates. The Jakarta Fund is managed by Nomura
Asset Management U.S.A., Inc., NAM-U.S.A. Nomura Asset Management Co., Ltd.,
NAM-LTD., acts as investment adviser to the Jakarta Fund and Nomura Asset
Management Singapore, NAM-Singapore, acts as sub-investment adviser to the
Jakarta Fund. The shares of common stock of the Indonesia Fund are listed and
trade on the New York Stock Exchange, or NYSE, under the symbol "IF". The
Jakarta Fund's shares of common stock are listed and trade on the Boston Stock
Exchange, or BSE, under the symbol "JGF". The Jakarta Fund's shares also trade
on the OTC Bulletin Board under the symbol "JGFI".
The shares of common stock of each Fund have equal non-cumulative
voting rights and equal rights with respect to dividends, assets and
dissolution. Each Fund's shares of common stock are fully paid and
non-assessable and have no preemptive, conversion or other subscription rights.
Fluctuations in the market price of the Fund's shares is the principal
investment risk of an investment in either Fund. Portfolio management, market
conditions, investment policies and other factors affect such fluctuations.
Although currently the investment objectives, policies and restrictions of the
Funds are similar, there are differences between them, as discussed below. There
can be no assurance that either Fund will achieve its stated objective.
CURRENT INVESTMENT OBJECTIVES. Long-term capital appreciation is the
principal investment objective of each Fund, although the Indonesia Fund also
seeks income as a secondary consideration. Each Fund seeks to achieve its
investment objective by investing primarily in Indonesian equity securities. The
Jakarta Fund seeks to achieve its investment objective through investments
primarily in equity securities of Indonesian companies and non-Indonesian
companies that derive a significant proportion of their revenue from Indonesia
or that hold a significant proportion of their assets in Indonesia. The Jakarta
Fund's equity investments in Indonesian companies will consist primarily of
securities listed on the Jakarta Stock Exchange. The Indonesia Fund seeks to
achieve its investment objective by investing primarily in Indonesian equity and
debt securities. The investment objective is a fundamental policy of each Fund
and cannot be changed without the approval of the holders of a "majority of each
Fund's outstanding voting securities." As used throughout this SAI, for each
Fund, a "majority of the Fund's outstanding voting securities" means the lesser
of:
- 67% of the shares of that Fund's common stock represented
at a meeting at which more than 50% of the outstanding shares
of that Fund's common stock are represented, or
- more than 50% of the outstanding shares of common stock.
3
<PAGE>
COMPARISON OF CURRENT INVESTMENT POLICIES. A more detailed
discussion of the current investment policies of each Fund can be found in
the Proxy Statement/Prospectus. The discussion below is limited to describing
non-principal investment strategies that may be employed by the Funds and
related risks, as well as providing additional information on techniques
already described in the Proxy Statement/Prospectus.
REPURCHASE AGREEMENTS AND PARTICIPATION INTERESTS. Each Fund may invest
in securities pursuant to repurchase agreements, although the Indonesia Fund
will not invest more than 20% of its total assets in these instruments.
Repurchase agreements are contracts under which the buyer of a security
simultaneously buys and commits to resell the security to the seller at an
agreed upon price and date. Repurchase agreements may involve risks in the event
of default or insolvency of the seller, including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities.
The Indonesia Fund may, to the extent permitted by Indonesian law, also
purchase loans or participation interests in loans ("Participations") that have
been made by one or more banks in an amount up to 20% of its total assets. These
investments will be, in CSAM's judgment, of a quality equivalent to investments
bearing an "A" rating by Moody's Investors Services Inc. ("Moody's") or Standard
& Poor's Rating Services Inc. ("S&P"). These interests may be backed by an
agreement with a lending bank to repurchase the loans or by specific collateral.
There is no readily available secondary trading market in such participation
interests. The only Indonesian banks with which the Fund will enter into such
arrangements will be banks regulated by Bank Indonesia having a net worth of
more than US$200 million.
Loan agreements may include various restrictive covenants designed to
limit the activities of the borrower in an effort to protect the right of the
lenders to receive timely payments of interest on and repayment of principal of
the loans. Restrictive covenants in loan agreements may include mandatory
prepayment provisions arising from excess cash flow and typically include
restrictions on dividend payments, specific mandatory minimum financial ratios,
limits on total debt and other financial tests. Breach of the covenants, if not
waived by the lenders, is generally an event of default under the applicable
loan agreement and may give the lenders the right to accelerate principal and
interest payments. CSAM will consider the terms of any restrictive covenants, as
well as the performance history of the loans, in deciding whether to invest in
loans for the Indonesia Fund's portfolio.
The Indonesia Fund's investment in Participations typically will result
in the Fund having a contractual relationship only with the lender, not with the
borrower. The Indonesia Fund normally will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the lender
selling the Participation and only upon receipt by the lender of the payments
from the borrower. In connection with purchasing Participations, the Indonesia
Fund generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement, nor any rights of set-off against the borrower, and
the Indonesia Fund may not directly benefit from any collateral supporting the
loan in which it has purchased the Participation. As a result, the Indonesia
Fund will assume the credit risk of both the borrower and the lender selling the
Participation. In the event of the insolvency of the lender selling a
Participation, the Indonesia Fund may be treated as a general creditor of the
lender, and may not benefit from any set-off between the lender and the
borrower. The Indonesia Fund will acquire
4
<PAGE>
Participations only if the lender interpositioned between the Indonesia Fund
and the borrower is deemed by CSAM to be creditworthy.
DEBT SECURITIES. Each Fund may invest in Indonesian debt securities,
although the Indonesia Fund may invest a substantial portion of its assets in
these instruments when CSAM believes that it is appropriate. The Indonesia Fund,
however, will not invest more than 5% of its assets in Indonesian debt
securities that are determined by CSAM to be comparable to securities rated B or
below by Moody's or S&P. The Jakarta Fund may not invest in lower-rated debt
securities.
The market value of debt obligations may be expected to vary depending
upon, among other factors, interest rates, the ability of the issuer to repay
principal and interest, any change in investment rating and general economic
conditions.
Bonds rated below investment grade may have speculative characteristics
and changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than is the
case with higher grade bonds. Investors should be aware that ratings are
relative and subjective and are not absolute standards of quality.
Securities rated below investment grade and comparable unrated
securities: (i) will likely have some quality and protective characteristics
that, in the judgment of the rating organizations, are outweighed by large
uncertainties or major risk exposures to adverse conditions, and (ii) are
predominately speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation.
While the market values of medium- and lower-rated securities and
unrated securities of comparable quality tend to react less to fluctuations in
interest rate levels than do those of higher-rated securities, the market values
of certain of these securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than higher-quality
securities. In addition, medium- and lower-rated securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
medium- and lower-rated securities and unrated securities are often highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their obligations during an economic
downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
An economic recession could disrupt severely the market for such
securities and may adversely affect the value of such securities and the ability
of the issuers of such securities to repay principal and pay interest thereon.
The Indonesia Fund may have difficulty disposing of certain of these securities
because there may be a thin trading market. Because there is no established
retail secondary market for many of these securities, the Indonesia Fund
anticipates that these securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market for
these securities does exist, it generally is not as liquid as the secondary
market for higher-rated securities. The lack of a liquid secondary market for
certain lower-rated debt securities also may make it more difficult for the
Indonesia Fund to
5
<PAGE>
obtain accurate market quotations for purposes of valuing the Fund and
calculating its net asset value.
The market value of securities in medium- and lower-rated categories is
also more volatile than that of higher quality securities. Factors adversely
impacting the market value of these securities will adversely impact the
Indonesia Fund's net asset value. The Indonesia Fund may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings of such securities.
At times, adverse publicity regarding lower-rated securities has depressed the
prices for such securities to some extent.
CURRENCY TRANSACTIONS. CSAM generally does not seek to hedge against
declines in the value of the Indonesia Fund's non-dollar-denominated portfolio
securities resulting from currency devaluations or fluctuations, but may do so
in the future if deemed appropriate by CSAM. If suitable hedging instruments are
available on a timely basis and on acceptable terms, CSAM may, in its
discretion, hedge all or part of the value of the Indonesia Fund's
non-dollar-denominated portfolio securities, although it is not obligated to do
so. The Jakarta Fund may deal in forward foreign exchange contracts between the
U.S. dollar and the Indonesian rupiah (the "Rupiah") as a hedge against possible
variations in the foreign exchange rate between these currencies. Each Fund will
be subject to the risk of changes in value of the Rupiah, unless it engages in
hedging transactions.
A forward currency contract involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. Each Fund's dealings in forward currency contracts will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of forward currency
contracts with respect to specific receivables or payables of a Fund generally
arising in connection with the purchase or sale of its portfolio securities or
in anticipation of receipt of dividend or interest payments. Position hedging is
the purchase or sale of forward currency contracts with respect to portfolio
security positions denominated or quoted in the currency.
The Indonesia Fund may not position hedge with respect to a particular
currency to an extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio denominated or quoted
in or currently convertible into that particular currency. If the Indonesia Fund
enters into a position hedging transaction, the custodian of the Indonesia
Fund's assets being hedged will segregate cash or readily marketable securities
in an amount equal to the value of the Indonesia Fund's total assets committed
to the consummation of the forward contract. If the value of the securities
segregated declines, additional cash or securities will be segregated so that
the value of these securities will equal the amount of the Indonesia Fund's
commitment with respect to the contract.
Each Fund may enter into forward foreign currency contracts in several
circumstances. When a Fund enters into a contract for the purchase or sale of
securities denominated in a foreign currency, or when a Fund anticipates the
receipt in a foreign currency of interest or dividend payments, it may desire to
"lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such interest or dividend payment, as the case may be. By entering into a
forward
6
<PAGE>
contract for a fixed amount of dollars for the purchase or sale of the amount
of foreign currency involved in the underlying transactions, a Fund will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date on which the security is
purchased or sold, or on which the dividend payment is declared, and the date
on which such dividend or interest payment is to be received.
At or before the maturity of a forward currency contract, a Fund may
either sell a portfolio security and make delivery of the currency, or retain
the security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency that it is obligated to deliver.
If a Fund retains the portfolio security and engages in an offsetting
transaction, such Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between a
Fund's entering into a forward contract for the sale of a currency and the date
it enters into an offsetting contract for the purchase of the currency, such
Fund will realize a gain to the extent the price of the currency it has agreed
to sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, a Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. The use of forward currency contracts does not eliminate
fluctuations in the underlying prices of the securities, but it does establish a
rate of exchange that can be achieved in the future. In addition, although
forward currency contracts limit the risk of loss due to a decline in the value
of the hedged currency, at the same time, they limit any potential gain that
might result should the value of the currency increase. If a devaluation is
generally anticipated, a Fund may not be able to contract to sell the currency
at a price above the devaluation level it anticipates.
The Jakarta Fund is also authorized to purchase or sell listed or
over-the-counter foreign currency options, foreign currency futures and related
options on foreign currency futures as a short or long hedge against possible
variations in foreign exchange rates. These transactions may be effected with
respect to hedges on non-U.S. dollar denominated securities owned by the Jakarta
Fund, sold by the Jakarta Fund but not yet delivered, or committed or
anticipated to be purchased by the Jakarta Fund. Although certain risks are
involved in options and futures transactions, the Jakarta Fund believes that,
because it will engage in options and futures transactions only for currency
hedging purposes, its options and futures portfolio strategies will not subject
it to certain risks frequently associated with speculation in options and
futures transactions.
The Jakarta Fund intends to enter into options and futures
transactions, on an exchange or in the over-the-counter market, only if there
appears to be a liquid secondary market for such options or futures. There can
be no assurance, however, that a liquid secondary market will exist at any
specific time. Thus, it may not be possible to close an option or futures
transaction. The inability to close options and futures positions also could
have an adverse impact on the Jakarta Fund's ability to effectively hedge its
portfolio. Due to the high volatility in the price of options, the Jakarta Fund
bears a significant risk of losing the entire premium when it purchases put or
call options. There is also the risk of loss by the Jakarta Fund of margin
deposits or collateral in
7
<PAGE>
the event of bankruptcy of a broker with whom the Fund has an open position
in an option or futures contract.
The liquidity of a secondary market in a futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. Prices have in the past
moved beyond the daily limit on a number of consecutive trading days.
The successful use of these transactions also depends on the ability of
the Jakarta Fund to forecast correctly the direction and extent of foreign
exchange rate movements within a given time frame. To the extent these rates
remain stable during the period in which a futures contract is held by the
Jakarta Fund or move in a direction opposite to that anticipated, the Jakarta
Fund may realize a loss on the hedging transaction which is not fully or
partially offset by an increase in the value of portfolio securities. As a
result, the Jakarta Fund's total return for such period may be less than if it
had not engaged in the hedging transaction.
8
<PAGE>
MANAGEMENT OF THE FUNDS
DIRECTORS AND PRINCIPAL OFFICERS
The names, addresses and principal occupations of the directors and
principal officers of each Fund are described under "Management of the Funds --
Directors and Principal Officers" in the Proxy Statement/Prospectus.
COMPENSATION OF DIRECTORS AND PRINCIPAL OFFICERS
The following tables show certain compensation information for the
directors of the Indonesia Fund for the fiscal year ended December 31, 1999 and
for the directors of the Jakarta Fund for the fiscal year ended March 31, 2000.
None of either Fund's executive officers or directors who are also officers or
directors of that Fund's investment adviser(s) received any compensation from
the Funds for such period.
THE INDONESIA FUND
<TABLE>
<CAPTION>
PENSION OR TOTAL TOTAL NUMBER
RETIREMENT COMPENSATION OF BOARDS OF
BENEFITS ESTIMATED FROM FUND AND CSAM-ADVISED
AGGREGATE ACCRUED AS ANNUAL FUND COMPLEX INVESTMENT
COMPENSATION PART OF FUND BENEFITS UPON PAID TO COMPANIES
NAME OF DIRECTOR FROM FUND EXPENSES RETIREMENT DIRECTORS SERVED
-------------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Dr. Enrique R. Arzac(1)............ $ 0 0 0 $99,500 11
Richard H. Francis(2).............. $7,000 0 0 $45,250(2) 47
Lawrence J. Fox(1)................. $ 0 0 0 0 3
Peter J. Kaplan(3)................. $7,000 0 0 $7,000 1
C. Oscar Morong, Jr.(3)............ $6,500 0 0 $6,500 1
William W. Priest Jr.(4)........... $ 0 0 0 0 55
</TABLE>
--------------------------------------
(1) Dr. Arzac and Mr. Fox were elected to the Board of the Indonesia Fund
on April 27, 2000.
(2) As of July 6, 1999, Mr. Francis serves on the Board of
46 open-end investment companies advised by CSAM and this
amount reflects compensation received from those funds for the
six-month period ended December 31, 1999. Total compensation
from the Fund complex is expected to be greater for the year ended
December 31, 2000 as a result of Mr. Francis' full year of service as a
Director to those open-end funds.
(3) Mr. Morong resigned from the Board of the Indonesia Fund in August
1999. Mr. Kaplan passed away in January 2000.
(4) Indicates interested directors of the Indonesia Fund.
9
<PAGE>
THE JAKARTA FUND
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM FUND AND
BENEFITS ESTIMATED FUND COMPLEX
AGGREGATE ACCRUED AS ANNUAL PAID TO TOTAL NUMBER
COMPENSATION PART OF FUND BENEFITS UPON DIRECTORS OF BOARDS OF
FROM FUND EXPENSES RETIREMENT DURING THE NAM-U.S.A.-MANAGED
FOR ITS FISCAL FOR ITS FISCAL FOR ITS FISCAL CALENDAR INVESTMENT
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED COMPANIES
NAME OF DIRECTOR MARCH 31, 2000 MARCH 31, 2000 MARCH 31, 2000 DECEMBER 31, 1999* SERVED
-------------------------------- -------------- -------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
William G. Barker $7,500 $0 $0 $32,500 4
George H. Chittenden** $7,000 $0 $0 $32,500 4
Nobuo Katayama(1) $0 $0 $0 $0 4
Chor Weng Tan $7,000 $0 $0 $30,500 4
Arthur R. Taylor $7,500 $0 $0 $32,500 4
John F. Wallace(1) $0 $0 $0 $0 4
</TABLE>
--------------------------------
* In addition to the Jakarta Fund, the "Fund Complex" includes Japan OTC
Equity Fund, Inc., Korea Equity Fund Inc. and Nomura Pacific Basin Fund,
Inc. Because the funds in the Fund Complex do not share a common fiscal
year, the information relating to compensation from the Fund Complex
paid to the Directors is provided as of December 31, 1999.
** Mr. Chittenden passed away in September 2000.
(1) Indicates interested directors of the Jakarta Fund.
ADVISORY AND SUB-ADVISORY ARRANGEMENTS
CSAM serves as the investment adviser to the Indonesia Fund pursuant to
an advisory agreement with that Fund (the "CSAM Advisory Agreement"). NAM-U.S.A.
acts as the Jakarta Fund's investment manager pursuant to a management agreement
(the "NAM-U.S.A. Agreement"). NAM-U.S.A. has retained NAM to act as the Jakarta
Fund's investment adviser pursuant to an investment advisory agreement (the "NAM
Advisory Agreement"). NAM, in turn, has retained NAM-Singapore to act as the
Jakarta Fund's sub-adviser pursuant to a sub-advisory agreement (the
"NAM-Singapore Sub-Advisory Agreement"). The NAM-U.S.A. Agreement, the NAM
Advisory Agreement and the NAM-Singapore Sub-Advisory Agreement are referred to
collectively as the "NAM Advisory Agreements."
The CSAM Advisory Agreement provides that CSAM shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Indonesia Fund in connection with the matters to which the CSAM Advisory
Agreement relates, except liability resulting from willful misfeasance, bad
faith or gross negligence on the part of CSAM in the performance of its
duties or from reckless disregard of its obligations and duties under the
CSAM Advisory Agreement. Under the NAM Advisory Agreements, no investment
adviser will be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in the
execution and management of the Jakarta Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties under the
applicable NAM Advisory Agreement.
For more information about CSAM and the CSAM Advisory Agreement, see
"Synopsis - Fees and Expenses - The Indonesia Fund," and "Management" in the
Proxy
10
<PAGE>
Statement/Prospectus. For more information about NAM-U.S.A., NAM,
NAM-Singapore and the NAM-Advisory Agreements, see "Synopsis--Fees and
Expenses--The Jakarta Fund" and "Management" in the Proxy
Statement/Prospectus.
The table below sets forth the investment advisory fees earned by CSAM
for the Indonesia Fund for the last three fiscal years.
<TABLE>
<S> <C>
December 31, 1997 $425,631
December 31, 1998 $113,027
December 31, 1999 $169,382
</TABLE>
The table below sets forth the investment advisory fees earned by
NAM-U.S.A., NAM and NAM-Singapore for the Jakarta Fund for the last three fiscal
years.
<TABLE>
<S> <C>
NAM U.S.A:
March 31, 1998 $348,195
March 31, 1999 $104,629
March 31, 2000 $161,712
NAM:
March 31, 1998 $159,116
March 31, 1999 $ 47,521
March 31, 2000 $ 68,222
NAM SINGAPORE:
March 31, 1998 $ 79,558
March 31, 1999 $ 23,761
March 31, 2000 $ 34,111
</TABLE>
For information about each Fund's custodian, transfer agent and
registrar, see "Management of the Funds" in the Proxy Statement/Prospectus.
For information about each Fund's independent accountants, see "Experts"
in the Proxy Statement/Prospectus.
DURATION AND TERMINATION; NON-EXCLUSIVE SERVICES
Unless earlier terminated as described below, the CSAM Advisory
Agreement remains in effect if approved annually by either (i) the Board
of Directors of the Indonesia Fund or (ii) the "vote of a majority of
the outstanding voting securities" of the Indonesia Fund, and in either
11
<PAGE>
case, the vote of a majority of the Non-interested Directors (as
defined in the Investment Company Act), cast in person at a meeting called
for such purpose. The CSAM Advisory Agreement terminates automatically
on its assignment by any party and may be terminated without penalty
on 60 days' written notice by the Board of Directors or the vote of the
holders of a majority of the Indonesia Fund's outstanding shares. CSAM may
terminate the Advisory Agreement, without penalty, upon 90 days' written
notice.
Unless earlier terminated as described below, the NAM Advisory
Agreements will remain in effect until August 1, 2002 and thereafter if
approved annually by (i) the Board of Directors of the Jakarta Fund, or by
the vote of a majority of the outstanding voting securities of the Jakarta
Fund; and (ii) a majority of the Non-interested Directors, cast in person at
a meeting called for such purpose. The NAM Advisory Agreements terminate
automatically upon their assignment by any party and may be terminated at any
time, without penalty, by the Board of Directors of the Jakarta Fund or by
vote of a majority of the outstanding voting securities of the Jakarta Fund,
or by the relevant investment adviser, on 60 days' written notice to the
other party.
The Administration Agreement between Bear Stearns Funds
Management Inc. ("BSFM") and the Indonesia Fund is terminable on 60 days'
notice by either party.
The following table sets forth the amounts BSFM earned as
administrative fees and the amounts CSAM was reimbursed for administrative fees.
<TABLE>
<S> <C> <C>
---------------------------------------------------------------
Year Ended BSFM CSAM
---------------------------------------------------------------
December 31, 1997 $42,550 $5,544
---------------------------------------------------------------
December 31, 1998 $11,303 $1,272
---------------------------------------------------------------
December 31, 1999 $16,944 $2,871
---------------------------------------------------------------
</TABLE>
The services of CSAM, NAM-U.S.A., NAM, NAM-Singapore and the
Indonesia Fund's administrator are not deemed to be exclusive, and
nothing in the relevant service agreements will prevent any of them or
their affiliates from providing similar services to other investment
companies and other clients (whether or not such clients' investment
objectives and policies are similar to those of the relevant Fund) or from
engaging in other activities.
CODE OF ETHICS
The Indonesia Fund and CSAM have each adopted a written Code of
Ethics (the "Indonesia Fund Code"), which restricts the ability of certain
personnel covered by the Indonesia Fund Code, such as directors, officers
or advisory persons ("Access Persons"), to invest in securities,
including securities that may be purchased by the Indonesia Fund. The
purpose of the Indonesia Fund Code is to ensure that (i) the interests of
CSAM clients, including the Indonesia Fund, is always placed first, (ii)
all personal securities transactions be conducted in such a manner as to
avoid any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility and (iii) Access Persons
not take inappropriate advantage of their positions. The Indonesia Fund
Code also contains provisions designed to address the conflicts of interest
that could arise from personal trading by advisory personnel, including
12
<PAGE>
requiring Access Persons to file initial holdings reports, quarterly
transaction reports and annual holdings reports as required by Rule 17j-1(d)
of the Investment Company Act. The Indonesia Fund Code also provides that
(1) with certain limited exceptions, all advisory persons must obtain
preclearance before executing any personal securities transactions; (2)
Access Persons may not execute personal trades in a security if there are
any pending orders in that security by the Indonesia Fund; and (3) advisory
persons may not invest in initial public offerings.
The Jakarta Fund, NAM-U.S.A., NAM and NAM-Singapore have each
adopted a written Code of Ethics (the "Jakarta Fund Code"), which restricts
the ability of certain personnel covered by the Jakarta Fund Code, such as
directors, officers or advisory persons ("Access Persons"), to invest in
securities, including securities that may be purchased or held by the
Jakarta Fund. Like the Indonesia Fund Code, the purpose of the Jakarta
Fund Code is to ensure that Access Persons do not take inappropriate
advantage of their positions in effecting personal securities
transactions and that personal securities transactions by Access
Persons are conducted in such a manner as to avoid any actual or potential
conflict of interest or abuse of an individual's position of responsibility.
In this manner, the Jakarta Fund Code contains provisions that
prohibit Access Persons from purchasing any security which, to his or her
knowledge at the time, is being purchased or sold or is being considered for
purchase or sale by the Jakarta Fund, except under limited circumstances such
as automatic dividend reinvestment plans, non-volitional purchases or sales
and other instances in which the Access Person has no direct or indirect
control or influence over the transaction. Like the Indonesia Fund Code, the
Jakarta Fund Code also contains provisions designed to address conflicts of
interest that could arise from personal trading by advisory personnel,
including requiring Access Persons to file initial holdings reports,
quarterly transaction reports and annual holdings reports as required by
Rule 17j-1(d) of the Investment Company Act.
The Board of Directors of each Fund reviews the administration of its
Code at least annually and may impose sanctions for violations of its Code.
13
<PAGE>
PORTFOLIO TRANSACTIONS
Each Fund's policy with respect to the execution of portfolio
transactions is described in the Proxy Statement/Prospectus. See "Additional
Information About The Funds--Portfolio Transactions."
The aggregate amounts paid by the Jakarta Fund in brokerage commissions
for the fiscal years ended March 31, 1997, 1998, 1999 and 2000 were $237,312,
$16,455 and $83,230, respectively, and the aggregate amounts paid by the
Indonesia Fund for the fiscal years ended December 31, 1997, 1998 and 1999 were
$7,543, $67,897 and $109,298, respectively. For the fiscal year ended December
31, 1999, the Indonesia Fund did not pay any commissions to brokers and dealers
who provided research services.
The table below sets forth, for the last three fiscal years, (i) the
total dollar amount of brokerage commissions paid by each Fund to affiliated
brokers, (ii) the percentage of each Fund's aggregate brokerage commissions paid
to affiliated brokers, and (iii) the percentage of each Fund's aggregate dollar
amount of transactions involving the payment of commissions effected through
affiliated brokers.
<TABLE>
<CAPTION>
------------------------- ------------------ ------------------- ------------- -----------------
PERCENTAGE OF
AGGREGATE DOLLAR
TOTAL DOLLAR AMOUNT PERCENTAGE OF AMOUNT OF
OF BROKERAGE AGGREGATE TRANSACTIONS
COMMISSIONS PAID TO BROKERAGE EFFECTED THROUGH
FUND YEAR ENDED AFFILIATES COMMISSIONS AFFILIATES
------------------------- ----------------- ------------------- ------------- ----------------
<S> <C> <C> <C> <C>
Jakarta Fund March 31, 1998 $ 0 0% 0%
------------------------- ----------------- ------------------- ------------- ----------------
March 31, 1999 $ 0 0% 0%
------------------------- ----------------- ------------------- ------------- ----------------
March 31, 2000 $ 0 0% 0%
------------------------- ----------------- ------------------- ------------- ----------------
The Indonesia Fund December 31, 1997 $ 0 0% 0%
------------------------- ----------------- ------------------- ------------- ----------------
December 31, 1998 $ 0 0% 0%
------------------------- ----------------- ------------------- ------------- ----------------
December 31, 1999 $ 0 0% 0%
------------------------- ----------------- ------------------- ------------- ----------------
</TABLE>
The Indonesia Fund has the benefit of an exemptive order of the SEC
issued under the Investment Company Act authorizing the Fund and other
investment companies advised by CSAM to co-invest in securities issued in
privately-negotiated transactions, subject to the terms and conditions of the
order.
14
<PAGE>
TAXATION
The following is a summary of certain material United States federal
income tax considerations, and Indonesian tax considerations, regarding the
purchase, ownership and disposition of shares in either Fund. Each prospective
shareholder is urged to consult his or her own tax adviser with respect to the
specific federal, state, local and foreign tax consequences of investing in
either Fund. The summary is based on the laws in effect on the date of this SAI,
which are subject to change.
UNITED STATES FEDERAL INCOME TAXES
THE FUNDS AND THEIR INVESTMENTS
Each Fund has qualified, and intends to continue to qualify and elect
to be treated, as a regulated investment company for each taxable year under the
Code. To so qualify, each Fund must, among other things: (a) derive at least 90%
of its gross income in each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
stock or securities or foreign currencies, or other income (including, but not
limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
and (b) diversify its holdings so that, at the end of each quarter of that
Fund's taxable year, (i) at least 50% of the market value of that Fund's assets
is represented by cash, securities of other regulated investment companies,
United States government securities and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of that Fund's assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its assets
is invested in the securities (other than United States government securities or
securities of other regulated investment companies) of any one issuer or any two
or more issuers that such Fund controls and which are determined to be engaged
in the same or similar trades or businesses or related trades or businesses.
Each Fund expects that all of its foreign currency gains will be directly
related to its principal business of investing in stocks and securities.
As a regulated investment company, neither Fund will be subject to
United States federal income tax on its net investment income (I.E., income
other than its net realized long-term and short-term capital gains) and its net
realized long-term and short-term capital gains, if any, that it distributes to
its shareholders, provided that an amount equal to at least 90% of its
investment company taxable income (I.E., 90% of its taxable income minus the
excess, if any, of its net realized long-term capital gains over its net
realized short-term capital losses (including any capital loss carryovers), plus
or minus certain other adjustments as specified in section 852 of the Code) for
the taxable year is distributed to its shareholders, but will be subject to tax
at regular corporate rates on any income or gains that it does not distribute.
Furthermore, each Fund will be subject to a United States corporate income tax
with respect to such distributed amounts in any year that it fails to qualify as
a regulated investment company or fails to meet this distribution requirement.
Any dividend declared by either Fund in October, November or December of any
calendar year and payable to shareholders of record on a specified date in such
a month shall be deemed to have been received by each shareholder on December 31
of such calendar year and to have been paid by that Fund not later than such
December 31, provided that such dividend is actually paid by that Fund during
January of the following calendar year.
15
<PAGE>
Each Fund intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Jakarta Fund
also intends to distribute, at least annually, all of its net realized capital
gains, if any. The Board of Directors of the Indonesia Fund will determine
annually whether to distribute any such net realized long-term capital gains in
excess of net realized short-term capital losses (including any capital loss
carryovers). The Indonesia Fund currently expects to distribute any such excess
annually to its shareholders. However, if the Indonesia Fund retains for
investment an amount equal to its net long-term capital gains in excess of its
net short-term capital losses and capital loss carryovers, it will be subject to
a corporate tax (currently at a rate of 35%) on the amount retained. In that
event, the Indonesia Fund expects to designate such retained amounts as
undistributed capital gains in a notice to its shareholders who (a) will be
required to include in income for United States federal income tax purposes, as
long-term capital gains, their proportionate shares of the undistributed amount,
(b) will be entitled to credit their proportionate shares of the 35% tax paid by
that Fund on the undistributed amount against their United States federal income
tax liabilities, if any, and to claim refunds to the extent their credits exceed
their liabilities, if any, and (c) will be entitled to increase their tax basis,
for United States federal income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed capital gains included in the
shareholder's income.
The Code imposes a 4% nondeductible excise tax on each Fund to the
extent such Fund does not distribute by the end of any calendar year at least
98% of its net investment income for that year and 98% of the net amount of its
capital gains (both long-term and short-term) for the one-year period ending, as
a general rule, on October 31 of that year. For this purpose, however, any
income or gain retained by such Fund that is subject to corporate income tax
will be considered to have been distributed by year-end. In addition, the
minimum amounts that must be distributed in any year to avoid the excise tax
will be increased or decreased to reflect any underdistribution or
overdistribution, as the case may be, from the previous year. Each Fund
anticipates that it will pay such dividends and will make such distributions as
are necessary in order to avoid the application of this tax.
Exchange control regulations may restrict repatriations of investment
income and capital or the proceeds of securities sales by foreign investors such
as the Funds and may limit the Funds' abilities to pay sufficient dividends and
to make sufficient distributions to satisfy the 90% and excise tax distribution
requirements.
Each Fund will maintain accounts and calculate income in U.S. dollars.
In general, gains and losses on the disposition, or receipt of principal, of
debt securities denominated in a foreign currency that are attributable to
fluctuation in exchange rates between the date the debt security is acquired and
the date of disposition, or receipt of principal, gains and losses attributable
to fluctuations in exchange rates that occur between the time such Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time such Fund actually collects such
receivables or pays such liabilities, and gains and losses from the disposition
of foreign currencies and foreign currency forward contracts will be treated as
ordinary income or loss. If either Fund acquires a debt security denominated in
Rupiah, such security may bear interest at a high nominal rate that takes into
account expected decreases in the value of the principal amount of the security
due to anticipated devaluations of the currency. In the case of such debt
securities, each Fund would be required to include the stated interest in income
as it accrues, but would generally realize an ordinary loss attributable to
devaluations of
16
<PAGE>
the currency with respect to principal only when the security is disposed of or
the principal amount is received.
Each Fund's transactions in foreign currencies, forward contracts,
options and futures contracts (including options and futures contracts on
foreign currencies) will be subject to special provisions of the Code that,
among other things, may affect the character of gains and losses realized by
such Fund (I.E., may affect whether gains or losses are ordinary or capital),
accelerate recognition of income to such Fund and defer the Fund's losses. These
rules could therefore affect the character, amount and timing of distributions
to shareholders. These provisions also (a) will require each Fund to
mark-to-market certain types of the positions in its portfolio (I.E., treat them
as if they were closed out) and (b) may cause each Fund to recognize income
without receiving cash with which to pay dividends or make distributions in
amounts necessary to satisfy the distribution requirements for avoiding income
and excise taxes. Each Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it acquires any foreign currency, forward contract, option, futures
contract or hedged investment in order to mitigate the effect of these rules and
prevent disqualification of such Fund as a regulated investment company.
PASSIVE FOREIGN INVESTMENT COMPANIES
If either Fund purchases shares in certain foreign investment entities,
called "passive foreign investment companies" (a "PFIC"), that Fund may be
subject to United States federal income tax on a portion of any "excess
distribution" or gain from the disposition of such shares even if such income is
distributed as a taxable dividend by the Fund to its shareholders. Additional
charges in the nature of interest may be imposed on that Fund in respect of
deferred taxes arising from such distributions or gains. If such Fund were to
invest in a PFIC and elected to treat the PFIC as a "qualified electing fund"
under the Code (a "QEF Election"), in lieu of the foregoing requirements, such
Fund would be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if not
distributed to the Fund, and such amounts would be subject to the 90% and excise
tax distribution requirements described above.
Alternatively, either Fund may make a mark-to-market election that will
result in such Fund being treated as if it had sold and repurchased all of the
PFIC stock at the end of each year for its fair market value. In such case, the
Fund would report any such gains as ordinary income and would deduct any such
losses as ordinary losses to the extent of previously recognized gains. The
election, once made, would be effective for all subsequent taxable years of the
Fund, unless revoked with the consent of the IRS. By making the election, the
Fund could potentially ameliorate the adverse tax consequences with respect to
its ownership of shares in a PFIC, but in any particular year may be required to
recognize income in excess of the distributions it receives from PFICs and its
proceeds from dispositions of PFIC stock. Such Fund may have to distribute this
"phantom" income and gain to satisfy the 90% distribution requirement and to
avoid imposition of the 4% excise tax. Each Fund will make the appropriate tax
elections if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.
DIVIDENDS AND DISTRIBUTIONS
Dividends of net investment income and distributions of net realized
short-term capital gains are taxable to a United States shareholder as ordinary
income, whether paid in cash or in
17
<PAGE>
shares. Distributions of net long-term capital gains, if any, that either Fund
designates as capital gains dividends are taxable as long-term capital gains,
whether paid in cash or in shares and regardless of how long a shareholder has
held shares of the Fund. Dividends and distributions paid by a Fund (except for
the portion thereof, if any, attributable to dividends on stock of U.S.
corporations received by the Fund) will not qualify for the deduction for
dividends received by corporations. Distributions in excess of such Fund's
current and accumulated earnings and profits will, as to each shareholder, be
treated as a tax-free return of capital, to the extent of a shareholder's basis
in his shares of the Fund, and as a capital gain thereafter (if the shareholder
held his shares of the Fund as capital assets).
Shareholders reinvesting dividends or distributions in shares pursuant
to each Fund's Dividend Reinvestment Plan will be treated for United States
federal income tax purposes as receiving a distribution in the amount equal to
the amount of money that the shareholders receiving cash dividends or
distributions will receive, and will have a cost basis in the shares received
equal to such amount.
Investors considering buying shares just prior to a dividend or capital
gain distribution should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution
which nevertheless will be taxable to them.
If either Fund is the holder of record of any stock on the record date
for any dividends payable with respect to such stock, such dividends are
included in the Fund's gross income not as of the date received but as of the
later of (a) the date such stock became ex-dividend with respect to such
dividends (I.E., the date on which a buyer of the stock would not be entitled to
receive the declared, but unpaid, dividends) or (b) the date the Fund acquired
such stock. Accordingly, in order to satisfy its income distribution
requirements, the Fund may be required to pay dividends based on anticipated
earnings, and shareholders may receive dividends in an earlier year than would
otherwise be the case.
SALES OF SHARES
Upon the sale or exchange of his shares, a shareholder will realize a
taxable gain or loss equal to the difference between the amount realized and his
basis in his shares. Such gain or loss will be treated as capital gain or loss,
if the shares are capital assets in the shareholder's hands, and will be
long-term capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for one year or less. Any
loss realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced, including replacement through the reinvesting of
dividends and capital gains distributions in a Fund under the applicable
Dividend Reinvestment Plan, within a period of 61 days beginning 30 days before
and ending 30 days after the disposition of the shares. In such a case, the
basis of the shares acquired will be increased to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of a Fund share held by the
shareholder for six months or less will be treated for United States income tax
purposes as a long-term capital loss to the extent of any distributions or
deemed distributions of long-term capital gains received by the shareholder with
respect to such share.
18
<PAGE>
FOREIGN TAXES
Income received by a Fund from sources within countries other than the
United States may be subject to withholding and other taxes imposed by such
countries, which will reduce the amount available for distribution to
shareholders. If more than 50% of the value of a Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, that
Fund will be eligible and intends to elect to "pass-through" to shareholders the
amount of foreign income and similar taxes it has paid. Pursuant to this
election, shareholders of the Fund will be required to include in gross income
(in addition to the full amount of the taxable dividends actually received)
their pro rata share of the foreign taxes paid by that Fund. Each such
shareholder will also be entitled either to deduct (as an itemized deduction)
its pro rata share of such foreign taxes in computing its taxable income or to
claim a foreign tax credit against its U.S. federal income tax liability,
subject to limitations. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions, but such a shareholder may be
eligible to claim the foreign tax credit. The deduction for foreign taxes is not
allowable in computing alternative minimum taxable income. Each shareholder will
be notified within 60 days after the close of that Fund's calendar year whether
the foreign taxes paid by the Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of each Fund's income flows through to its shareholders. Any gains
from the sale of securities by a Fund will be treated as derived from U.S.
sources and certain currency fluctuation gains, including fluctuation gains from
foreign currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by a Fund. Because of the limitation, shareholders
taxable in the United States may be unable to claim a credit for the full amount
of their proportionate share of the foreign taxes paid by a Fund. The foreign
tax credit also cannot be used to offset more than 90% of the alternative
minimum tax (as computed under the Code for purposes of this limitation) imposed
on corporations and individuals.
BACKUP WITHHOLDING
Each Fund may be required to withhold, for United States federal income
tax purposes, 31% of the dividends and distributions payable to shareholders who
fail to provide such Fund with their correct taxpayer identification number or
to make required certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders are or may be exempt from backup
withholding. Backup withholding is not an additional tax and any amount withheld
may be credited against a shareholder's United States federal income tax
liabilities. Additional tax withholding requirements which apply with respect to
foreign investors are discussed below.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a foreign
investor (such as a nonresident alien individual, a foreign trust or estate, a
foreign corporation or a foreign
19
<PAGE>
partnership) depends, in part, on whether the shareholder's income from a Fund
is "effectively connected" with a United States trade or business carried on by
the shareholder.
If the foreign investor is not a resident alien and the income from
such Fund is not effectively connected with a United States trade or business
carried on by the foreign investor, distributions of net investment income and
net realized short-term capital gains will be subject to a 30% (or lower treaty
rate) United States withholding tax. Furthermore, foreign investors may be
subject to an increased United States tax on their income resulting from that
Fund's election (described above) to "pass-through" amounts of foreign taxes
paid by such Fund, but may not be able to claim a credit or deduction with
respect to the foreign taxes treated as having been paid by them. Distributions
to a non-resident alien of net realized long-term capital gains, amounts
retained by the Indonesia Fund which are designated as undistributed capital
gains, if any, and gains realized upon the sale of shares of a Fund generally
will not be subject to United States tax unless the foreign investor who is a
nonresident alien individual is physically present in the United States for more
than 182 days during the taxable year. However, a determination by the Indonesia
Fund not to distribute long-term capital gains will cause that Fund to incur a
U.S. federal tax liability with respect to retained long-term capital gains,
thereby reducing the amount of cash held by the Fund that is available for
investment, and the foreign investor may not be able to claim a credit or
deduction with respect to such taxes.
In general, if a foreign investor is a resident alien or if dividends
or distributions from a Fund are effectively connected with a United States
trade or business carried on by the foreign investor, then dividends of net
investment income, distributions of net short-term and long-term capital gains,
amounts retained by the Indonesia Fund that are designated as undistributed
capital gains and any gains realized upon the sale of shares of a Fund will be
subject to United States income tax at the rates applicable to United States
citizens or domestic corporations. If the income from a Fund is effectively
connected with a United States trade or business carried on by a foreign
investor that is a corporation, then such foreign investor may also be subject
to the 30% (or lower treaty rate) branch profits tax.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described in
this section. Shareholders may be required to provide appropriate documentation
to establish their entitlement to the benefits of such a treaty. Foreign
investors are advised to consult their own tax advisers with respect to (a)
whether their income from a Fund is or is not effectively connected with a
United States trade or business carried on by them, (b) whether they may claim
the benefits of an applicable tax treaty, and (c) any other tax consequences to
them of an investment in a Fund.
NOTICES
Shareholders will be notified annually by each Fund as to the United
States federal income tax status of the dividends, distributions and deemed
distributions made by the Fund to its shareholders. Furthermore, shareholders
will also receive, if appropriate, various written notices after the close of
each Fund's taxable year regarding the United States federal income tax status
of certain dividends, distributions and deemed distributions that were paid (or
that are treated as having been paid) by the Fund to its shareholders during the
preceding taxable year.
20
<PAGE>
INDONESIAN TAXES
Under Indonesian tax laws, a withholding tax is imposed on dividends
and interest income from Indonesian sources at a maximum rate of 15% and such
withholding taxes are reflected as a reduction of the related revenue. There is
no withholding tax on realized gains. In addition, each Fund is subject to a tax
at a rate of 0.1% on the gross sales proceeds on the disposition of equity
securities listed on the Indonesian stock exchanges. No further Indonesian tax
is applicable to the Funds, or their shareholders, other than shareholders (such
as residents of Indonesia) who are subject to tax in Indonesia for reasons other
than their status as shareholders in the Funds. This summary of Indonesian tax
laws is based upon current law and interpretations thereof. No assurance can be
given that applicable tax laws and interpretations thereof will not change in
the future. No advance rulings have been sought or obtained from the Indonesian
authorities.
OTHER TAXATION
Distributions also may be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES
AFFECTING THE FUNDS AND THEIR SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM
OF AN INVESTMENT IN THE INDONESIA FUND.
21
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements, notes to the financial statements and
report of the independent auditors of the Indonesia Fund for the fiscal year
ended December 31, 1999 and the Jakarta Fund for the fiscal year ended March 31,
2000 are incorporated by reference herein and are included in the Funds' Annual
Reports to Shareholders. The Annual Reports may be obtained without charge, by
writing to Shareholder Communications Corporation, 17 State Street, New York,
New York 10004, or by calling 1 (800) 403-7916.
PRO FORMA FINANCIAL STATEMENTS
The following tables set forth the unaudited pro forma condensed
statement of assets and liabilities, unaudited pro forma condensed statement
of operations and the unaudited pro forma schedule of investments for each
Fund as of and for the twelve month period ended June 30, 2000 and as
adjusted to give effect to the Merger.
22
<PAGE>
PRO FORMA CONDENSED STATEMENT
OF ASSETS AND LIABILITIES
AS OF JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THE INDONESIA JAKARTA GROWTH PRO FORMA
FUND, INC. FUND, INC. ADJUSTMENTS COMBINED
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value $10,949,960 $ 8,668,957 $ 19,618,917
Cash 612,639 94,169 706,808
Receivables:
Investments sold -- 151,514 151,514
Dividends and interest 4,797 7,172 11,969
Prepaid expenses 8,193 13,104 $ (13,104)(a) 8,193
------------ ----------- ---------- -------------
Total Assets 11,575,589 8,934,916 (13,104) 20,497,401
=========== =========== =========== =============
LIABILITIES
Payables:
Merger related expenses -- -- 357,000(b) 357,000
Investments purchased -- 493,068 493,068
Investment advisory fees 31,389 18,893 50,282
Administration fees 4,201 -- 4,201
Other accrued expenses 90,507 55,517 146,024
------------ ----------- ---------- -------------
Total Liabilities 126,097 567,478 357,000 1,050,575
------------ ----------- ---------- -------------
Net Assets $11,449,492 $ 8,367,438 $(370,104) $ 19,446,826
============ =========== ========= =============
Net Assets Consist Of:
Capital stock, shares issued
and outstanding $ 4,609 $ 501,756 $(498,289)(c) $ 8,076
Paid-in-capital 60,557,698 52,674,471 498,289(c) 113,730,458
Accumulated net investment loss (188,631) (59,194) (617,929)
Accumulated net realized loss on investments and foreign
currency related transactions (43,078,561) (38,730,622) (370,104)(a)(b) (81,809,183)
Net unrealized depreciation in value of investments and
translation of other assets and liabilities
denominated in foreign currencies (5,845,623) (6,018,973) (11,864,596)
------------ ----------- ---------- -------------
Net Assets applicable to shares outstanding $11,449,492 $ 8,367,438 $(370,104) $ 19,446,826
============ =========== ========= =============
Shares Outstanding 4,608,989 5,017,564 8,075,518
------------ ----------- -------------
Net Asset Value $2.48 $1.67 $2.41
============ =========== =============
</TABLE>
See accompanying notes to the Pro Forma Financial Statements.
23
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THE INDONESIA JAKARTA GROWTH SURVIVING FUND
FUND, INC. FUND, INC. ADJUSTMENTS PRO FORMA
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends $ 163,508 $ 131,025 $ -- $ 294,533
Interest 55,513 32,156 -- 87,669
Less: Foreign taxes withheld (24,526) (19,654) -- (44,180)
------------- ------------ ----------- -------------
Total Investment Income 194,495 143,527 -- 338,022
------------- ------------ ----------- -------------
Expenses:
Investment advisory fees 169,062 149,962 (31,842)(d) 287,182
Audit and tax reporting fees 38,430 48,678 (47,108)(e) 40,000
Legal fees 46,378 46,116 (42,494)(e) 50,000
Administration fees 21,297 -- 14,703 (f) 36,000
Custodian fees 70,272 118,040 (113,312)(g) 75,000
Printing/Shareholder reports 70,030 35,136 (30,166)(e) 75,000
Accounting fees 45,124 -- (124)(e) 45,000
Directors' fees 22,144 33,556 (30,700)(e) 25,000
Transfer agent fees 33,410 15,006 (13,416)(e) 35,000
Annual meeting expenses -- 20,130 (20,130)(e) 0
NYSE listing/Registration fees 16,215 26,736 (26,781)(e) 16,170
Insurance 8,601 3,660 (3,061)(e) 9,200
Other 19,876 5,124 (5,000)(e) 20,000
------------- ------------ ----------- -------------
Total Expenses 560,839 502,144 (349,431) 713,552
------------- ------------ ----------- -------------
Net Investment Loss (366,344) (358,617) 349,431 (375,530)
------------- ------------ ----------- -------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN
CURRENCY RELATED TRANSACTIONS
Net realized loss from:
Investments (1,455,286) (1,040,537) -- (2,495,823)
Foreign Currency related transactions (51,388) (2,788,157) -- (2,839,545)
Net change in unrealized depreciation in value of
investments and translation of other assets and
liabilities denominated in foreign currencies (8,760,339) (3,612,262) -- (12,372,601)
------------- ------------ ----------- -------------
Net realized and unrealized loss on investments and foreign
currency related transactions (10,267,013) (7,440,956) -- (17,707,969)
------------- ------------ ----------- -------------
NET DECREASE IN NET ASSETS RESULTING $ (10,633,357) $ (7,799,573) $ 349,431 $ (18,083,499)
FROM OPERATIONS ============= ============ =========== =============
</TABLE>
See accompanying notes to the Pro Forma Financial Statements.
24
<PAGE>
Jakarta Growth Fund, Inc.
The Indonesia Fund, Inc.
Notes to Pro Forma Financial Statements (unaudited)
1. Basis of Combination.
The unaudited Pro Forma Condensed Portfolio of Investments, Pro
Forma Condensed Statement of Assets and Liabilities and Pro Forma Condensed
Statement of Operations give effect to the proposed merger (the "Merger") of
the Jakarta Growth Fund, Inc. ("JGF") into The Indonesia Fund, Inc. ("IF").
The proposed Merger will be accounted for by the method of accounting for
tax-free mergers of investment companies (sometimes referred to as the
pooling-of-interest basis). As a result of the Merger, each share of common
stock of JGF will convert into an equivalent dollar amount (to the nearest
one ten-thousandth of one cent) of full shares (and the right to receive cash
in lieu of fractional shares) of common stock of IF, based on the net asset
value per share of each Fund.
The pro forma combined statements should be read in conjunction with
the historical financial statements of the constituent Fund and the notes
thereto incorporated by reference in the Registration Statement filed on
Form N-14.
IF and JGF are both closed-end, non-diversified management
investment companies registered under the Investment Company Act of 1940, as
amended.
Pro Forma Adjustments:
The Pro Forma adjustments below reflect the impact of the Merger
between IF and JGF.
(a) To remove certain prepaid expenses associated
with JGF, in the statement of assets and liabilities,
which will not be assumed by IF.
(b) To reflect estimated expenses to be incurred
in connection with the Merger. In addition, IF will
assume all of JGF's Merger-related expenses up to
$200,000.
(c) To restate the common stock par value of JGF ($0.10 per share)
to conform with the common stock par value of IF ($0.001 per
share).
(d) Adjustment based on contractual agreement with the
investment advisor for the combined Fund.
(e) Assumes elimination of duplicative charges in
the combination and reflects management's estimates
of combined pro forma operations.
(f) Adjustment based on the contractual agreement
with the administrator for the combined Fund.
(g) Adjustment based on the contractual agreement
with the custodian for the combined
Fund.
25
<PAGE>
2. Significant Accounting Policies
The following is a summary of significant accounting policies which
are consistently followed by each of IF and JGF in the preparation of its
financial statements.
MANAGEMENT ESTIMATES: The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
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 of each Fund are stated at value
in each Fund's financial statements. All equity securities of the Indonesia
Fund are valued at the closing price on the exchange or market on which the
security is primarily traded ("Primary Market"). If the security did not
trade on the Primary Market, it shall be valued at the closing price on
another exchange where it trades. If there are no such sale prices, the value
shall be the most recent bid price, and if there is no bid price, the
security shall be valued at the most recent asked price. If no pricing
service is available and there are more than two dealers, the value shall be
the mean of the highest bid price and lowest ask price. If there is only one
dealer, then the value shall be the mean if bid and ask prices are available,
otherwise the value shall be the bid price. The Indonesia Fund uses a local
market quotation for investments in the banking sector. Both Funds value
short-term investments having a maturity of 60 days or less on the basis of
amortized cost. Investments traded on stock exchanges are valued by the
Jakarta Fund at the last sale price on the principal market on which such
securities are traded as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price.
Securities traded in the over-the-counter market are valued by the Jakarta
Fund at the last reported sales price as of the close of business on the day
the securities are being valued or, if none is available, at the mean of the
bid and offer price at the close of the day. Short-term debt securities which
mature in 60 days or less are valued by the Jakarta Fund at amortized cost if
their original maturity at the date of purchase was 60 days or less, or by
amortizing their value on the 61st day prior to maturity if their term to
maturity at the date of purchase exceeded 60 days. Securities and other
assets, including futures contracts and related options, are stated at market
value or otherwise at fair value as determined in good faith by or under the
direction of the Board of Directors of the Jakarta Fund. All other
securities and assets are valued at fair value as determined in good faith by
each Fund's Board of Directors. The Board of Directors of each Fund has
established general guidelines for calculating fair value of securities that
are not readily marketable. The net asset value per share of the Indonesia
Fund is calculated daily, with the exception of those days on which the New
York Stock Exchange is closed. The net asset value per share of the Jakarta
Fund is calculated weekly.
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 each 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.
Income received by each Fund from sources within Indonesia and
other countries may be subject to withholding and other taxes imposed by such
countries.
26
<PAGE>
FOREIGN CURRENCY TRANSLATIONS: The books and records of each Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis: market value of investment securities,
assets and liabilities at the current rate of exchange; and purchases and
sales of investment securities, income and expenses at the relevant rates of
exchange prevailing on the respective dates of such transactions.
Each 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.
However, each Fund does isolate the effect of fluctuations in foreign
exchange rates when determining the gain or loss upon the sale or maturity of
foreign currency denominated debt obligations pursuant to U.S. federal income
tax regulations, with such amount categorized as foreign exchange gain or
loss for both financial reporting and U.S. federal income tax reporting
purposes.
Net currency gains or losses 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 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 each Fund's books and the U.S. dollar equivalent of the
amounts actually received.
DISTRIBUTIONS OF INCOME AND GAINS: Each Fund intends to distribute
annually to its shareholders substantially all of its investment company
taxable income. The Jakarta Fund also intends to distribute, at least
annually, all of its net realized capital gains, if any. The Board of
Directors of the Indonesia Fund will determine annually whether to distribute
any net realized long-term capital gains in excess of net realized short-term
capital losses, including any capital loss carryovers. 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 each 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.
OTHER: Securities denominated in currencies other than U.S. dollars
are subject to changes in value due to fluctuations in exchange rates.
27
<PAGE>
SCHEDULE OF INVESTMENTS OF JAKARTA GROWTH FUND, INC. AS OF
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED GAIN % OF
SHARES COST MARKET VALUE OR LOSS NET ASSETS
------------ ----------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C>
INDONESIAN EQUITY SECURITIES
AGRIBUSINESS
Astra Argo Niaga Lestari ............................. 545,000 $ 206,342 $107,413 $ (98,929) 1.3
PALM OIL
Cahaya Kalbar ........................................ 1,521,000 1,283,915 95,578 (1,188,337) 1.1
PALM OIL
Golden Agri-Resources Ltd. ........................... 455,000 290,342 90,868 (199,474) 1.1
---------- ---------- ------------ -------
PALM OIL AND PALM KERNEL
TOTAL AGRIBUSINESS ................................... 1,780,599 293,859 (1,486,740) 3.5
---------- ---------- ------------ -------
BANKING
Bank Central Asia .................................... 405,000 66,334 65,938 (396) 0.8
COMMERCIAL MANUFACTURE
Lippo Bank ........................................... 18,400,000 703,204 262,782 (440,422) 3.1
---------- ---------- ------------ -------
COMMERCIAL BANK
TOTAL BANKING ........................................ 769,538 328,720 (440,818) 3.9
---------- ---------- ------------ -------
CEMENT
Indocement Tunggal Prakarsa .......................... 218,500 82,905 80,510 (2,395) 1.0
CEMENT MANUFACTURER
Semen Gresik ......................................... 252,000 231,292 228,895 (2,397) 2.7
---------- ---------- ------------ -------
CEMENT MANUFACTURER
TOTAL CEMENT ......................................... 314,197 309,405 (4,792) 3.7
---------- ---------- ------------ -------
CONGLOMERATE
Astra Graphia ........................................ 576,000 47,934 47,712 (222) 0.6
SERVICE AND CONSULTATION, EQUIPMENT AND OFFICE
Bimantra Citra ....................................... 1,622,000 385,291 227,015 (158,276) 2.7
---------- ---------- ------------ -------
MEDIA TELECOMMUNICATIONS AND TRANSPORTATION
TOTAL CONGLOMERATE ................................... 433,225 274,727 (158,498) 3.3
---------- ---------- ------------ -------
COMMERCIAL SERVICES
Citra Munya Nusaphala Persada ........................ 1,000,000 82,928 57,127 (25,801) 0.7
---------- ---------- ------------ -------
TOLL ROAD OPERATOR AND DEVELOPER
CONSUMER GOODS AND DISTRIBUTION
Astra International Inc. ............................. 1,020,000 408,361 320,480 (87,881) 3.8
AUTOMOBILES, MOTORCYCLES
Gudang Garam ......................................... 659,000 717,029 1,065,393 348,364 12.7
CIGARETTES
H.M. Sampoerna ....................................... 287,500 697,680 417,167 (280,513) 5.0
---------- ---------- ------------ -------
CIGARETTES
TOTAL CONSUMER GOODS AND DISTRIBUTION ................ 1,823,070 1,803,040 (20,030) 21.5
---------- ---------- ------------ -------
</TABLE>
See Accompanying Notes to the Pro Forma Financial Statements.
28
<PAGE>
<TABLE>
<CAPTION>
UNREALIZED GAIN % OF
SHARES COST MARKET VALUE OR LOSS NET ASSETS
------------ ----------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C>
FOOD AND BEVERAGE
Indofood Sukses Makmur ............................... 983,000 $ 917,261 $ 536,284 $ (380,977) 6.4
---------- ---------- ------------ -------
FOOD PROCESSOR
MANUFACTURING
Intikeramik Alamasri Industri ........................ 1,600,000 321,320 50,271 (271,049) 0.6
PORCELAIN TILE
Kedawung Seta Industry Ltd. .......................... 3,587,000 309,501 225,404 (84,097) 2.7
METAL, ALUMINUM, CARDBOARD AND ENAMEL
Sunson Textile Manufacturer .......................... 5,057,500 414,728 274,472 (140,256) 3.3
---------- ---------- ------------ -------
YARN, CLOTH AND OTHER PRODUCTS
TOTAL MANUFACTURING .................................. 1,045,549 550,147 (495,402) 6.6
---------- ---------- ------------ -------
MINING
Aneka Tambang ........................................ 830,000 98,899 104,313 5,414 1.2
MINING
Tambang Timah ........................................ 300,000 126,332 89,117 (37,215) 1.1
---------- ---------- ------------ -------
TIN MINING
TOTAL MINING ......................................... 225,231 193,430 (31,801) 2.3
---------- ---------- ------------ -------
NON-FERROUS METALS
International Nickel Indonesia ....................... 34,000 25,136 24,667 (469) 0.3
---------- ---------- ------------ -------
NICKEL AND ASSOCIATED MINERAL PRODUCTS
OIL AND GAS
Medco Energi International ........................... 810,000 99,566 101,799 2,233 1.2
---------- ---------- ------------ -------
SUPPORT SERVICES FOR OIL AND NATURAL GAS
PAPER AND PULP
Indah Kiat Paper & Pulp .............................. 1,851,205 693,945 375,423 (318,522) 4.5
Indah Kiat Paper & Pulp (warrants) ................... 320,856 31,005 28,044 (2,961) 0.3
PULP AND PAPER PRODUCTS
Pabrik Kertas Tjiwi Kimia ............................ 348,000 59,195 57,652 (1,543) 0.7
Pabrik Kertas Tjiwi Kimia (warrants) ................. 480,090 0 32,911 32,911 0.4
---------- ---------- ------------ -------
WRITING AND PRINTING PAPER
TOTAL PAPER AND PULP ................................. 784,145 494,030 (290,115) 5.9
---------- ---------- ------------ -------
PHARMACEUTICALS
Kalbe Farma .......................................... 920,000 69,882 68,323 (1,559) 0.8
PHARMACEUTICALS FOR HUMANS AND ANIMALS
Tempo Scan Pacific ................................... 795,000 1,671,405 322,451 (1,348,954) 3.9
---------- ---------- ------------ -------
PHARMACEUTICALS
TOTAL PHARMACEUTICALS ................................ 1,741,287 390,774 (1,350,513) 4.7
---------- ---------- ------------ -------
</TABLE>
See Accompanying Notes to the Pro Forma Financial Statements.
29
<PAGE>
<TABLE>
<CAPTION>
UNREALIZED GAIN % OF
SHARES COST MARKET VALUE OR LOSS NET ASSETS
------------ ----------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C>
RETAIL
Hero Supermarket ..................................... 37,500 $ 7,506 $ 7,498 $ (8) $ 0.1
SUPERMARKETS
Matahari Putra Prima ................................. 1,080,000 95,972 92,545 (3,427) 1.1
DEPARTMENT STORE
Multipolar Corporation ............................... 4,727,500 496,395 337,582 (158,813) 4.0
COMPUTER EQUIPMENT
Ramayana Lestari Sentosa ............................. 530,000 322,698 339,103 16,406 4.0
---------- ---------- ------------ -------
DEPARTMENT STORE
TOTAL RETAIL ......................................... 922,570 776,728 (145,824) 9.3
---------- ---------- ------------ -------
TELECOMMUNICATIONS
Indonesian Satellite Corporation
(Indosat) ............................................ 375,000 711,954 441,302 (270,652) 5.3
INTERNATIONAL TELECOMMUNICATIONS
Telekomunikasi Indonesia ............................. 3,964,720 2,311,638 1,392,918 (918,720) 16.6
---------- ---------- ------------ -------
DOMESTIC TELECOMMUNICATIONS
TOTAL TELECOMMUNICATIONS ............................. 3,023,592 1,834,220 (1,189,372) 21.9
---------- ---------- ------------ -------
TOTAL INVESTMENTS IN INDONESIAN EQUITY SECURITIES .... 13,987,895 7,968,957 (6,018,938) 95.2
---------- ---------- ------------ -------
</TABLE>
See Accompanying Notes to the Pro Forma Financial Statements.
30
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL UNREALIZED GAIN % OF
AMOUNT COST MARKET VALUE OR LOSS NET ASSETS
------------ ----------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENTS IN SHORT-TERM SECURITIES
TIME DEPOSIT
FIRST NATIONAL BANK
CALL ACCOUNT 7.00% DUE 07/03/00 ..................... $ 700,000 $ 700,000 $ 700,000 $ 0 8.4
----------- ---------- ------------ -------
TOTAL INVESTMENT IN SHORT-TERM SECURITIES ........... 700,000 700,000 0 8.4
----------- ---------- ------------ -------
TOTAL INVESTMENTS ................................... 14,687,895 8,668,957 (6,018,938) 103.6
----------- ---------- ------------ -------
LIABILITIES IN EXCESS OF OTHER ASSETS, NET .......... (301,484) (301,519) (36) (3.6)
----------- ---------- ------------ -------
NET ASSETS .......................................... $14,386,411 $8,367,438 $ (6,018,973) 100.0
----------- ---------- ------------ -------
----------- ---------- ------------ -------
</TABLE>
Portfolio securities and foreign currency holdings were translated at the
following exchange rate as of June 30, 2000.
Indonesia rupiah IDR 8,752.50 = $1.00
See Accompanying Notes to the Pro Forma Financial Statements.
31
<PAGE>
SCHEDULE OF INVESTMENTS OF THE INDONESIA FUND, INC. AS OF JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Description No. of Cost Value Unrealized % of Net
Shares Gain/(Loss) Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQUITY OR EQUITY-LINKED SECURITIES-95.64%
AGRICULTURE-0.89%
PT Perusahaan Perkebunan London Sumatra Indonesia Tbk + 1,235,600 $1,276,296 $102,349 ($1,173,947) 0.89%
---------- ----------- ----------- -------
AUTOMOTIVE-5.96%
PT Astra International Tbk + 2,171,000 1,109,399 682,120 (427,279) 5.96%
---------- ----------- ----------- -------
BEER, BEVERAGES, LIQUORS & TOBACCO-19.24%
PT Gudang Garam Tbk 720,500 899,153 1,164,819 265,666 10.17%
PT Hanjaya Mandala Sampoerna Tbk 715,500 458,964 1,038,201 579,237 9.07%
---------- ----------- ----------- -------
1,358,117 2,203,020 844,903 19.24%
---------- ----------- ----------- -------
COMMERCIAL BANKS-1.51%
PT Bank Internasional Indonesia, Warrants
(expiring 04/16/02) +,++ 15,787,200 64,614 46,897 (17,717) 0.41%
PT Bank Pan Indonesia Tbk + 2,950,000 255,548 126,393 (129,155) 1.10%
---------- ----------- ----------- -------
320,162 173,290 (146,872) 1.51%
---------- ----------- ----------- -------
FISHERY-0.30%
PT Daya Guna Samudera Tbk 518,000 235,116 34,030 (201,086) 0.30%
---------- ----------- ----------- -------
FOOD & KINDRED PRODUCTS-5.02%
PT Indofood Sukses Makmur Tbk + 1,054,000 328,990 575,019 246,029 5.02%
---------- ----------- ----------- -------
MANUFACTURING-6.31%
PT Semen Gresik (Persero) Tbk 442,500 918,369 401,928 (516,441) 3.51%
PT Unilever Indonesia Tbk 26,000 50,878 320,823 269,945 2.80%
---------- ----------- ----------- -------
969,247 722,751 (246,496) 6.31%
---------- ----------- ----------- -------
MEDICAL-DRUGS-11.40%
PT Dankos Laboratories Tbk + 4,725,000 648,002 499,357 (148,645) 4.36%
PT Kalbe Farma + 4,150,000 615,048 308,198 (306,850) 2.69%
PT Tempo Scan Pacific Tbk + 1,227,000 915,722 497,669 (418,053) 4.35%
---------- ----------- ----------- -------
2,178,772 1,305,224 (873,548) 11.40%
---------- ----------- ----------- -------
PAPER PRODUCTS-9.63%
Asia Pulp & Paper Company Ltd. ADR + 90,900 910,834 460,181 (450,653) 4.02%
PT Indah Kiat Pulp & Paper Corporation Tbk +,+++ 2,510,500 779,942 509,127 (270,815) 4.45%
PT Pabrik Kertas Tjiwi Kimia + 801,811 183,780 132,834 (50,946) 1.16%
---------- ----------- ----------- -------
1,874,556 1,102,142 (772,414) 9.63%
---------- ----------- ----------- -------
QUARRYING-1.44%
PT Tambang Timah Tbk 555,000 448,363 164,867 (283,496) 1.44%
---------- ----------- ----------- -------
REAL ESTATE DEVELOPMENT-2.46%
PT Jaya Real Property Tbk + 3,283,000 486,815 281,320 (205,495) 2.46%
---------- ----------- ----------- -------
RETAILING-11.22%
PT Matahari Putra Prima Tbk + 5,941,000 862,711 509,083 (353,628) 4.45%
32
<PAGE>
Description No. of Cost Value Unrealized % of Net
Shares Gain/(Loss) Assets
------------------------------------------------------------------------------------------------------------------------------------
PT Ramayana Lestari Sentosa Tbk + 1,211,500 $ 893,158 $ 775,139 $ (118,019) 6.77%
---------- ----------- ----------- -------
1,755,869 1,284,222 (471,647) 11.22%
---------- ----------- ----------- -------
TELECOMMUNICATIONS-19.01%
PT Telekomunikasi Indonesia 2,534,220 1,303,753 890,343 (413,410) 7.77%
PT Telekomunikasi Indonesia ADR 185,442 2,237,597 1,286,504 (951,093) 11.24%
---------- ----------- ----------- -------
3,541,350 2,176,847 (1,364,503) 19.01%
---------- ----------- ----------- -------
TEXTILES-1.25%
PT Indo-Rama Synthetics Tbk + 1,470,000 859,545 142,759 (716,786) 1.25%
---------- ----------- ----------- -------
TOTAL INVESTMENTS-95.64%
(Cost $16,742,597) 16,742,597 10,949,960 (5,792,637) 95.64%
---------- ----------- ----------- -------
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES-4.36% 499,532 4.36%
----------- -------
NET ASSETS-100.00% $11,449,492 100.00%
=========== -------
</TABLE>
--------------------------------------------------------------------------------
+ Security is non-income producing.
++ With additional 397,837,440 call options attached, expiring 05/28/02, and
126,297,600, cert. of entitlement attached, maturing 06/30/02, with no
market value.
+++ With additional 5 warrants attached, expiring 07/11/02, with no market
value.
ADR American Depositary Receipts.
================================================================================
33
<PAGE>
PRO FORMA CONDENSED SCHEDULE OF INVESTMENTS AS OF
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
THE INDONESIA FUND, JAKARTA GROWTH FUND, PRO FORMA COMBINED
INC. INC. FUND
Description No. of Value No. of Value No. of Value % of Net
Shares Shares Shares Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EQUITY OR EQUITY-LINKED SECURITIES-95.47%
AGRIBUSINESS-1.48%
Astra Argo Niagra Lestari 545,000 $107,413 545,000 $107,413 0.55%
Cahaya Kalbar 1,521,000 95,578 1,521,000 95,578 0.49%
Golden Agri-Resources Ltd. 455,000 90,868 455,000 90,868 0.47%
---------- ---------- -------
293,859 293,859 1.51%
---------- ---------- -------
AGRICULTURE-0.52%
PT Perusahaan Perkebunan London
Sumatra Indonesia Tbk + 1,235,600 $102,349 1,235,600 102,349 0.53%
---------- ---------- -------
AUTOMOTIVE-5.06%
PT Astra International Tbk + 2,171,000 682,120 1,020,000 320,480 3,191,000 1,002,600 5.15%
---------- ---------- ---------- -------
BANKING-1.66%
Bank Central Asia 405,000 65,938 405,000 65,938 0.34%
Lippo Bank 18,400,000 262,782 18,400,000 262,782 1.35%
---------- ---------- -------
328,720 328,720 1.69%
---------- ---------- -------
BEER, BEVERAGES, LIQUORS &
TOBACCO-18.59%
Pt Gudang Garam Tbk 720,500 1,164,819 659,000 1,065,393 1,379,500 2,230,212 11.47%
PT Hanjaya Mandala Sampoena Tbk 715,500 1,038,201 287,500 417,167 1,003,000 1,455,368 7.48%
---------- ---------- ---------- -------
2,203,020 1,482,560 3,685,580 18.95%
---------- ---------- ---------- -------
CEMENT-0.41%
Indocement Tunggal Prakarsa 218,500 80,510 218,500 80,510 0.41%
---------- ---------- -------
COMMERCIAL BANKS-0.88%
PT Bank Internasional Indonesia,
Warrants (expiring 04/16/02) +,++ 15,787,200 46,897 15,787,200 46,897 0.24%
PT Bank Pan Indonesia Tbk + 2,950,000 126,393 2,950,000 126,393 0.65%
---------- ---------- -------
173,290 173,290 0.89%
---------- ---------- -------
COMMERCIAL SERVICES-0.29%
Citra Munya Nasaphala Persada 1,000,000 57,127 1,000,000 57,127 0.29%
---------- ---------- -------
CONGLOMERATE-1.39%
Astra Graphia 576,000 47,712 576,000 47,712 0.25%
Bimantra Citra 1,622,000 227,015 1,622,000 227,015 1.17%
---------- ---------- -------
274,727 274,727 1.42%
---------- ---------- -------
FISHERY-0.17%
PT Daya Guna Samudera Tbk 518,000 34,030 518,000 34,030 0.17%
---------- ---------- -------
FOOD & KINDRED PRODUCTS-5.61%
PT Indofood Sukses Makmur Tbk + 1,054,000 575,019 983,000 536,284 2,037,000 1,111,303 5.71%
---------- ---------- ---------- -------
34
<PAGE>
THE INDONESIA FUND, JAKARTA GROWTH FUND, PRO FORMA COMBINED
INC. INC. FUND
Description No. of Value No. of Value No. of Value % of Net
Shares Shares Shares Assets
------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING-7.58%
Intkeramik Alamasri Industries 1,600,000 $ 50,271 1,600,000 $ 50,271 0.26%
Kedawung Setia Industry Ltd. 3,587,000 225,404 3,587,000 225,404 1.16%
PT Semen Gresik (Persero) Tbk 442,500 $401,928 252,000 228,895 694,500 630,823 3.24%
PT Sunson Textile Manufacturer Tbk 5,057,500 274,472 5,057,500 274,472 1.41%
PT Unilever Indonesia Tbk 26,000 320,823 26,000 320,823 1.65%
---------- ---------- ---------- -------
722,751 779,042 1,501,793 7.72%
---------- ---------- ---------- -------
MEDICAL-DRUGS-8.56%
PT Dankos Laboratories Tbk + 4,725,000 499,357 4,725,000 499,357 2.57%
PT Kalbe Farma + 4,150,000 308,198 920,000 68,323 5,070,000 376,521 1.93%
PT Tempo Scan Pacific Tbk + 1,227,000 497,669 795,000 322,451 2,022,000 820,120 4.22%
---------- ---------- ---------- -------
1,305,224 390,774 1,695,998 8.72%
---------- ---------- ---------- -------
MINING-0.53%
Aneka Tambang 830,000 104,313 830,000 104,313 0.54%
---------- ---------- -------
NON-FERROUS METALS-0.12%
International Nickel Indonesia 34,000 24,667 34,000 24,667 0.13%
---------- ---------- -------
OIL & GAS-0.51%
Medco Energi International 810,000 101,799 810,000 101,799 0.52%
---------- ---------- -------
PAPER PRODUCTS-8.05%
Asia Pulp & Paper Company Ltd. ADR + 90,900 460,181 90,900 460,181 2.37%
PT Indah Kiat Pulp & Paper
Corporation Tbk + 2,510,500 509,127 1,851,205 375,423 4,361,705 884,550 4.55%
PT Indah Kiat Pulp & Paper
Corporation Tbk
Warrants (expiring 7/11/02) + 5 0 320,856 28,044 320,861 28,044 0.14%
PT Pabrik Kertas Tjiwi Kimia + 801,811 132,834 348,000 57,652 1,149,811 190,486 0.98%
PT Pabrik Kertas Tjiwi Kiama, Warrants + 480,090 32,911 480,090 32,911 0.17%
---------- ---------- ---------- -------
QUARRYING-1.28% 1,102,142 494,030 1,596,172 8.21%
---------- ---------- ---------- -------
PT Tambang Timah Tbk 555,000 164,867 300,000 89,117 855,000 253,984 1.31%
---------- ---------- ---------- -------
REAL ESTATE DEVELOPMENT-1.42%
PT Jaya Real Property Tbk 3,283,000 281,320 3,283,000 281,320 1.45%
---------- ---------- -------
RETAILING-10.40%
Hero Supermarket 37,500 7,498 37,500 7,498 0.04%
PT Matahari Putra Prima Tbk + 5,941,000 509,083 1,080,000 92,545 7,021,000 601,628 3.09%
PT Multipolar Corporation Tbk 4,727,500 337,582 4,727,500 337,582 1.74%
PT Ramayana Lestari Sentosa Tbk + 1,211,500 775,139 530,000 339,103 1,741,500 1,114,242 5.73%
---------- ---------- ---------- -------
1,284,222 776,728 2,060,950 10.60%
---------- ---------- ---------- -------
TELECOMMUNICATIONS-20.24%
Indonesian Satellite Corporation 375,000 441,302 375,000 441,302 2.27%
PT Telekomunikasi Indonesia 2,534,220 890,343 3,964,720 1,392,918 6,498,940 2,283,261 11.74%
PT Telekomunikasi Indonesia ADR 185,442 1,286,504 185,442 1,286,504 6.62%
---------- ---------- ---------- -------
2,176,847 1,834,220 4,011,067 20.63%
---------- ---------- ---------- -------
35
<PAGE>
THE INDONESIA FUND, JAKARTA GROWTH FUND, PRO FORMA COMBINED
INC. INC. FUND
Description No. of Value No. of Value No. of Value % of Net
Shares Shares Shares Assets
------------------------------------------------------------------------------------------------------------------------------------
TEXTILES-0.72%
PT Indo-Rama Synthetics Tbk + 1,470,000 $142,759 1,470,000 $142,759 0.73%
---------- ---------- -------
TOTAL EQUITY OR EQUITY-LINKED
SECURITIES-95.47%
(cost - $30,730,492) 10,949,960 $7,968,957 18,918,917 97.28%
---------- ---------- ---------- -------
SHORT-TERM INVESTMENTS-3.53%
Principal
Amount
TIME DEPOSIT ---------
First National Bank (call account 700,000 $700,000 $ 700,000 3.60%
7.00% due 7/3/00) ---------- ---------- -------
(cost - $700,000)
TOTAL SHORT-TERM INVESTMENTS-3.53% 700,000 700,000 3.60%
---------- ---------- -------
TOTAL INVESTMENTS-99.00% $10,949,960 8,668,957 19,618,917 100.88%
(cost - $31,430,492) ----------- ---------- ---------- -------
CASH AND OTHER ASSETS IN EXCESS OF 499,532 (301,519) 198,013 1.02%
LIABILITIES-1.00% ----------- ---------- ---------- -------
PRO FORMA ADJUSTMENTS (370,104) (1.90%)
---------- -------
NET ASSETS-100% $11,449,492 $8,367,438 $19,446,826 100.00%
=========== ========== =========== =======
</TABLE>
--------------------------------------------------------------------------------
+ Security is non-income producing.
++ With additional 397,837,440 call options attached, expiring 05/28/02,
and 126,297,600 certificates of entitlement attached, maturing
06/30/02, with no market value.
ADR American Depositary Receipts.
================================================================================
36
<PAGE>
APPENDIX A
THE INFORMATION SET FORTH IN THIS APPENDIX HAS BEEN EXTRACTED FROM
VARIOUS GOVERNMENTAL AND PRIVATE PUBLICATIONS. THE INDONESIA FUND AND ITS BOARD
OF DIRECTORS MAKE NO REPRESENTATION AS TO THE ACCURACY OF THE INFORMATION NOR
HAS THE INDONESIA FUND OR ITS BOARD OF DIRECTORS ATTEMPTED TO VERIFY IT;
FURTHERMORE, NO REPRESENTATION IS MADE THAT ANY CORRELATION EXISTS BETWEEN THE
STATE OF INDONESIA OR THE INDONESIAN ECONOMY IN GENERAL AND THE PERFORMANCE OF
THE INDONESIA FUND.
THE REPUBLIC OF INDONESIA
GENERAL INFORMATION
GEOGRAPHY AND POPULATION
The Republic of Indonesia is located on the equator between continental
Asia and Australia and extends over part of the world's largest archipelago.
Indonesia has a land area of approximately 740,000 square miles and territorial
waters nearly four times that size. Indonesia comprises over 17,000 islands,
which stretch 3,200 miles from east to west and 1,100 miles from north to south.
More than half of Indonesia's land is forested and much is mountainous and
volcanic. Indonesia's main islands are Java, Bali, Sumatra, Kalimantan,
Sulawesi, Irian Jaya and the Moluccas. The main cities of Indonesia include
Jakarta, Surabaya and Jogjakarta on Java, Palembang and Medan on Sumatra,
Kendari on Sulawesi, Balikpapan on Kalimantan and Jayapura on Irian Jaya.
Jakarta is the capital of Indonesia.
Indonesia's population currently stands at over 200 million, making it
the fourth most populous nation in the world behind China, India, and the United
States. From 1971-1980, Indonesia's population grew at an average rate of 2.3%,
from 1980-1989, at an average rate of 2.2% and from 1990-1997 at an average rate
of 1.7%.
Bahasa Indonesia is Indonesia's national language. Islam is the
dominant religion, although Christianity and Hinduism are also practiced.
Religious freedom is constitutionally guaranteed. The Indonesian people are
basically of Malay extraction, but the country has significant Chinese, Arab and
Eurasian representations.
FORM OF GOVERNMENT
Indonesia is a republic based on a 1945 constitution. Executive power
is vested in the president, who is elected every five years by the People's
Consultative Assembly (the "Assembly"), the highest authority in the state. The
Assembly meets every five years to elect the president and vice president,
interpret the Constitution and generally to establish guidelines for the
president to implement. The Assembly consists of 1,000 members, of whom 500 are
appointed by the president. Decisions of the Assembly are made by consensus or,
in the absence of a consensus, a two-thirds vote of a quorum consisting of
two-thirds of the Assembly.
The president is chief-of-state, chief executive and supreme commander
of the armed forces. The legislative branch of the government is the House of
People's Representatives (the "House"). Four hundred of the House's 500 members
are elected by universal suffrage for five-year terms and 100 are appointed by
the president. This branch can introduce legislation and must approve all laws
and the state budget.
-1-
<PAGE>
Other branches of the government include the Supreme Court, the Supreme
Advisory Council and the Supreme Audit Board. The Supreme Court's 51 members are
recommended by the Assembly and appointed by the president and are responsible
for exercising all judicial power of the state. The Supreme Advisory Council and
the Supreme Audit Board consist of members recommended by the Assembly and
appointed by the president and are responsible for advising the president and
for the settlement of all financial affairs.
In 1968, the Assembly formally elected Suharto to a full five-year term
as president. He was reelected to additional five-year terms in 1973, 1978,
1983, 1998, 1993 and 1998. Due to civil unrest and a financial crisis that
started in 1997, President Suharto was forced to resign in May 1998. Following
President Suharto's resignation, Vice President B.J. Habibie was sworn in as
President. Elections were held in 1999 and a new President, Abdurrhmam Wahid,
took office in October of that year. The first free parliamentary election since
1995 was held in 1999 and gave a 37.4% majority to the Indonesian Democracy
Party-Struggle ("PDI-P"). As of 1999, there were over forty political parties in
Indonesia with Golkar (the Joint Secretariat of Functional Groups) and PDI-P
being the leading parties.
INTERNATIONAL ORGANIZATIONS
Indonesia participates in a number of international organizations,
including: the United Nations, the International Monetary Fund ("IMF"), the
World Bank, the Association of South East Asian Nations ("ASEAN"), the
Nonaligned Movement, the Organization of the Islamic Conference, the
Organization of Petroleum Exporting Countries, the Asian Development Bank, the
Group of 77, the International Atomic Energy Agency and the Islamic Development
Bank. Indonesia is also a party to the General Agreement on Tariffs and Trade
and is a member of the World Trade Organization.
THE INDONESIAN ECONOMY
RECENT DEVELOPMENTS
The Indonesian economy stabilized in 1999 following the sharp
contraction and high inflation of 1998. By following a tight monetary policy,
the government reduced inflation from over 70% in 1998 to 2% in 1999. Banks,
however, are still suffering the impact of the financial crisis experienced by
Indonesia in 1997-1998. During that period, 70% of bank loans were estimated to
be non-performing. The banking system's total credit fell by almost 50% during
1999, from Rp 545 trillion at year-end 1998 to Rp 278 trillion at year end-1999.
The total number of banks has declined from 238 pre-financial crisis to 162 as
of a recent date. The government, however, has recapitalized a handful of
private banks and has begun recapitalizing the state-owned banking sector. New
lending, however, remains almost unavailable as banks continue to be wary of
issuing new debt in an environment where little progress has been made in
restructuring the huge burden of outstanding debts.
IMF payments were suspended in late 1999 as the result of evidence that
a private bank had illegally made payments it received from the government to
one of the political parties. The new government, however, moved quickly to
re-establish an active relationship with the IMF and the World Bank and, in
January 2000, signed a new Memorandum of Economic and Financial Policies with
the IMF.
-2-
<PAGE>
The following table presents selected economic data about the Indonesia
economy for the periods indicated.
KEY ECONOMIC INDICATORS
(Billions of U.S. Dollars unless otherwise indicated)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
1997 1998 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME, PRODUCTION AND EMPLOYMENT: (1)
Nominal GDP 216 94 67
Real GDP Growth (pct) 7.6 (13.2) (4.0)
GDP by Sector:
Agriculture 34.5 18.4 15.0
Manufacturing 54.9 23.4 16.7
Services 67.5 35.7 26.4
Government 11.5 4.1 3.16
Per Capita GDP (US$) 1,116 465 550(2)
Labor Force (millions) 87.0 92.6 96.6
Unemployment Rate (pct) 4.6 10 10
MONEY AND PRICES (ANNUAL PERCENTAGE GROWTH):
Money Supply (M2) (pct) 23.2 62.3 10.2(3)
Consumer Price Inflation (pct) 8.0 75.0 0.02(4)
Exchange Rate (Rupiah/US$ annual average) 2,909 10,014 7,948
BALANCE OF PAYMENTS AND TRADE: (1)
Total Exports FOB 56.2 50.4 21.7
Exports to U.S. 9.2 9.3 5.3
Total Imports CIF 41.7 27.3 11.5
Imports from U.S. 4.5 2.3 1.1
Trade Balance 14.5 23.1 10.2
Balance with U.S. 4.7 7.0 4.2
External Public Debt 56.4 71.4 70.7
Debt Service Payments/GDP (pct) 3.8 7.6 6.7(5)
Current Account Balance/GDP(pct) (6) (0.9) 3.9 2.7
Fiscal Deficit/GDP (pct) (6) 1.1 2.2 5.0
Gold and Foreign Exchange
Reserves (end of period) 17.4 23.5 26.7
Aid from U.S. (millions of US$) 71 135 139(6)
Aid from All Other Sources 5.2 5.2 7.8(7)
-------------------------------------------------------------------------------------
</TABLE>
(1) 1999 GDP and export/import figures are for January-June. (Average Rp/US$
exchange rates were 8,775 for the first quarter/calendar year 1999 and
7,921 for the second quarter/calendar year 1999.)
(2) 1999 per capita GDP figure is rough estimate. The increase in 1999 over
1998 is due to the strengthening of the Rp/$ exchange rate.
(3) 1999 figure is for January-August.
(4) 1999 figure is for January-September.
(5) 1999 figure as of March 31 (includes debts of state-owned enterprises).
-3-
<PAGE>
(6) Fiscal year.
(7) 1999 figure is amount pledged.
SOURCES: 1999 COUNTRY REPORTS ON ECONOMIC POLICY AND TRADE PRACTICES RELEASED BY
THE BUREAU OF ECONOMIC AND BUSINESS AFFAIRS, U.S. DEPARTMENT OF STATE, MARCH
2000 (CITING: GOVERNMENT OF INDONESIA, U.S. DEPARTMENT OF COMMERCE (FOR TRADE
WITH U.S.), IMF (EXCHANGE RATES), U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT (FOR
BILATERAL ASSISTANCE)).
GROSS DOMESTIC PRODUCT
Indonesia's real gross domestic product ("GDP") declined 13% in 1998
and experienced negligible growth in 1999. The following tables present detailed
information regarding GDP by sector, as well as the percentage change of GDP by
sector for the period 1996 through 1999.
<TABLE>
<CAPTION>
GROSS DOMESTIC PRODUCT BY SECTOR
(BILLIONS RUPIAHS)
1996 1997 1998 1999(1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT CURRENT PRICES:
Agriculture, livestock, forestry and fishery .. 88,791.8 101,009.4 173,912.0 218,044.6
Mining and quarrying .......................... 46,088.1 55,561.7 133,353.1 112,637.8
Manufacturing ................................. 136,425.9 168,178.0 238,064.1 284,804.3
Electricity, gas and water .................... 6,892.6 7,832.4 11,234.8 13,369.1
Construction .................................. 42,024.8 46,678.8 61,756.4 73,418.0
Trade, hotel and restaurant ................... 87,137.2 99,581.9 167,244.4 183,626.8
Transportation and communication .............. 34,926.3 38,530.9 51,937.2 66,076.8
Financial, ownership & business services ...... 43,981.9 54,360.3 70,007.2 70,777.0
Services ...................................... 46,299.4 55,962.0 82,102.5 96,687.5
Gross Domestic Product ........................ 532,568.0 627,695.4 989,611.7 1,119,441.9
Gross Domestic Product (non-oil and gas) ...... 490,255.3 587,037.0 877,849.5 1,014,893.7
</TABLE>
----------
(1) Preliminary figures
SOURCE: STATISTICS OF INDONESIA, REPUBLIC OF INDONESIA "GROSS DOMESTIC PRODUCT
STATISTICS- SELECTED TABLES"
-4-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE CHANGE OF GROSS DOMESTIC PRODUCT BY SECTOR
1996 1997 1998 1999(1)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT CURRENT PRICES:
Agriculture, livestock, forestry and fishery 3.14% 1.00% (0.68)% 2.08%
Mining and quarrying 6.30 2.12 2.76 (1.71)
Manufacturing 11.59 5.25 (11.44) 2.59
Electricity, gas and water 13.63 12.37 2.61 8.21
Construction 12.76 7.36 (36.46) 1.63
Trade, hotel and restaurant 8.16 5.83 (18.04) (0.43)
Transportation and communication 8.68 7.01 (15.13) (0.72)
Financial, ownership and business services 6.04 5.93 (26.63) 8.07
Services 3.40 3.62 (3.15) 1.76
Gross Domestic Product 7.82 4.70 (13.01) 0.31
Gross Domestic Product (non-oil and gas) 8.16 5.23 (14.09) 0.50
</TABLE>
----------
(1) Preliminary figures
SOURCE: STATISTICS OF INDONESIA, REPUBLIC OF INDONESIA "SELECTED TABLES"
PRICES
Indonesia's inflation rate as measured by the consumer price index
reached a high of approximately 77% in 1998, but decreased to approximately 2%
for the year ended December 31, 1999. The following tables provide information
regarding Indonesia's consumer price index and wholesale price index for the
periods indicated.
-5-
<PAGE>
CONSUMER PRICE INDICES
CONSUMER PRICE INDICES INDONESIA (1996 = 100)
GROUP
<TABLE>
<CAPTION>
PREPARED
FOOD,
BEVERAGES EDUCATION, TRANSPORTATION
MONTH FOOD & HOUSING CLOTHING HEALTH RECREATION AND GENERAL
TOBACCO & SPORTS COMMUNICATION
PRODUCTS
[1] [2] [3] [4] [5] [6] [7] [8] [9]
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
December 263.22 211.58 159.03 219.71 212.54 161.84 163.70 198.64
1999
January 281.09 213.80 160.62 232.11 214.07 161.40 164.95 204.54
February 287.60 216.87 162.06 234.23 214.12 161.89 164.29 207.12
March 281.65 216.34 162.92 234.71 215.80 162.05 169.16 206.75
April 275.09 215.52 164.04 233.58 216.57 162.04 169.07 205.34
May 271.38 215.20 164.91 231.18 217.60 162.59 170.06 204.76
June 268.25 215.16 165.34 228.32 218.22 163.06 170.23 204.07
July 258.96 214.87 166.06 224.69 219.48 163.87 169.94 201.93
August 248.54 215.33 165.87 226.56 220.98 166.48 169.68 200.05
September 239.06 216.26 166.12 229.63 220.00 169.52 169.94 198.68
October 237.24 216.13 166.45 232.23 220.06 170.17 171.31 198.79
November*) 240.00 216.51 165.93 228.38 219.97 170.42 171.56 199.00
December 249.54 219.20 166.77 233.21 220.37 170.44 172.20 202.45
2000
January 256.85 220.00 167.56 237.47 220.87 170.43 173.68 205.12
February 256.00 220.17 168.34 239.79 221.85 170.23 173.45 205.27
March 250.16 219.97 169.05 240.09 222.43 171.83 174.01 204.34
April 246.16 225.28 171.03 240.50 224.87 173.50 176.83 205.48
May 246.08 225.07 174.18 242.55 225.76 174.91 181.19 207.21
June 246.47 227.25 174.87 244.56 226.50 175.41 182.54 208.24
July 251.39 229.45 176.06 248.54 229.42 178.51 183.37 210.91
</TABLE>
--------
Note: *) Since November 1999, have been using the combined CPI of 43
cities (excluded Dili).
-6-
<PAGE>
WHOLESALE PRICE INDEX
(YEARLY AVERAGES)
<TABLE>
<CAPTION>
1994(1) 1995(1) 1996(1) 1997 1998 1999
--------------------------------------------------------------------------
SECTOR
<S> <C> <C> <C> <C> <C> <C>
Agriculture ........... 298 355 399 170 298 410
Mining and quarrying .. 237 266 296 141 173 214
Manufacturing ......... 231 256 265 132 217 268
Imports ............... 215 230 243 129 286 289
Exports ............... 157 178 203 148 417 366
General Index ......... 215 240 258 140 288 314
</TABLE>
----------
(1) Use 1983 as base year, 1983 = 100
SOURCE: STATISTICS INDONESIA, REPUBLIC OF INDONESIA, "WHOLESALE PRICE INDEXES -
SELECTED TABLES"
FOREIGN TRADE
Indonesian exports increased by an average of 11% per year during the
period 1993 to 1996. Indonesia's total exports in fiscal year 1997/1998 were US$
56.2 billion, growing only 7.9% compared to that of the previous fiscal year.
Non-oil and gas exports accounted for US$ 45.9 billion, or an increase of 17.0%
during this period. During this period, Indonesia's total imports were US $42.7
billion (a decrease of 6.8% from the previous fiscal year). Non-oil and gas
imports decreased by 6.1% to US$ 38.6 billion, and oil and gas imports decreased
by 13.0% to US$ 4.1 billion.
During 1998-1999, imports collapsed and exports sagged, largely because
of the disarray in the financial sector. First quarter 2000 figures, however,
reflect that non-oil exports have recovered to 93% of their pre-crisis levels
(i.e., third quarter 1997), while total exports were at almost 100% of the
pre-crisis level. Imports of capital goods (primarily machinery and other
equipment vital for manufacturing) declined to 30% of their 1997 level in 1999
(according to preliminary estimates).
The following tables provide information on Indonesia's exports and
imports for the periods indicated.
EXPORTS
(US$ MILLIONS)
<TABLE>
<CAPTION>
2000
1996 1997 1998 1999 (JAN-APR.)*
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Oil and Gas 11,721.8 11,622.5 7,872.2 9,792.2 4,332.3
Non Oil and Gas 38,092.9 41,821.0 40,975.5 38,873.2 14,768.1
-------- -------- -------- -------- --------
Total 49,814.7 53,443.6 48,847.7 48,665.4 19,100.4
======== ======== ======== ======== ========
</TABLE>
----------
* Very preliminary figures
SOURCE: STATISTICS INDONESIA, REPUBLIC OF INDONESIA, SELECTED TABLES "EXPORTS".
-7-
<PAGE>
IMPORTS
(US$ MILLIONS)
<TABLE>
<CAPTION>
1998
1994 1995 1996 1997 (JAN-JUNE)*
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Oil and Gas 2,367.4 2,910.8 3,595.5 3,924.1 1,450.9
Non Oil and Gas 29,616.1 37,717.9 39,333.0 37,755.7 11,821.6
-------- -------- -------- -------- --------
Total 31,983.5 40,628.7 42,928.5 41,679.8 13,272.5
======== ======== ======== ======== ========
</TABLE>
----------
* Preliminary figures
SOURCE: STATISTICS INDONESIA, REPUBLIC OF INDONESIA, SELECTED TABLES "IMPORTS".
Indonesia's principal export markets are Japan and the United States,
which accounted for approximately 21.4% and 14.2%, respectively of total exports
in 1999. Exports to the European Economic Community ("EEC") accounted for
approximately 14.6% of total exports in 1999, while ASEAN countries accounted
for approximately 16.7%. Exports to these countries consist largely of oil and
gas, raw materials such as rubber, palm oil, tin and timber as well as coffee,
tobacco and fishery products. The following table provides information on the
value and growth of Indonesia's foreign trade with main partner countries for
the periods 1998 and 1999.
<TABLE>
<CAPTION>
VALUE AND GROWTH OF FOREIGN TRADE WITH MAIN PARTNER COUNTRIES
1998 -1999
PARTNER COUNTRY 1998 1999 GROWTH (%)
--------------- ---- ---- ----------
EXPORT IMPORT EXPORT IMPORT EXPORT IMPORT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ASIA
1. Japan 9,116.0 4,292.5 10,397.2 2,913.3 14.05 -32.13
2. Singapore 5,718.3 2,542.8 4,930.5 2,525.9 -13.78 -0.66
3. Republic of Korea 2,567.8 1,527.8 3,319.8 1,330.1 29.29 -12.94
4. Taiwan 1,720.7 994.6 1,757.5 784.1 2.14 -21.16
5. China 1,832.0 906.3 2,008.9 1,242.1 9.66 37.05
6. Hong Kong 1,865.0 263.7 1,330.0 227.5 -28.69 -13.73
EUROPE
1. Germany 1,401.3 2,365.7 1,233.9 1,398.5 -11.95 -40.88
2. Netherlands 1,512.3 338.4 1,543.6 346.7 2.07 2.45
3. United Kingdom 1,143.1 920.3 1,176.1 511.2 2.89 -44.45
4. France 547.3 568.1 503.2 371.6 -8.06 -34.59
5. Italy 858.8 480.4 655.5 276.9 -23.67 -42.36
AMERICA
1. USA 7,031.0 3,517.3 6,896.5 2,839.0 -1.91 -19.28
2. Canada 411.7 504.2 353.5 421.2 -14.14 -16.46
AUSTRALIA & OCEANIA
1. Australia 1,533.5 1,760.5 1,484.8 1,460.4 -3.18 -17.05
-8-
<PAGE>
<CAPTION>
PARTNER COUNTRY 1998 1999 GROWTH (%)
--------------- ---- ---- ----------
EXPORT IMPORT EXPORT IMPORT EXPORT IMPORT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
2. New Zealand 103.9 142.9 108.5 110.0 4.43 -23.02
</TABLE>
SOURCE: STATISTICS INDONESIA, REPUBLIC OF INDONESIA, SELECTED TABLES "FOREIGN
TRADE STATISTICS".
RESERVES
The following table provides information on Indonesia's total official
reserves for the years ended December 31, 1995 through 1999.
<TABLE>
<CAPTION>
OFFICIAL RESERVES
(US$ MILLIONS)
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Gold 1,07 1,030 809 803 812
Foreign Exchange 13,306 17,820 16,088 22,401 26,245
Reserve Position 401 429 ----- ----- 200
SDR's(1) 1 2 499 312 -----
- - --- --- -----
Total Official Reserves
(Minus Gold) 13,708 18,251 16,587 22,713 26,445
====== ====== ====== ====== ======
</TABLE>
----------
(1) Special Drawing Rights of the International Monetary Fund
SOURCE: INTERNATIONAL MONETARY FUND, "INTERNATIONAL FINANCIAL STATISTICS
SEPTEMBER 2000"
MONETARY POLICY
EXTERNAL DEBT
Indonesia's foreign debt totaled about $145 billion as of September
1999, with about $72 billion owed by the public sector and $73 billion by the
private sector. In 1998, Indonesia signed a Memorandum of Understanding with its
official creditors to reschedule public sector debt principal contracted before
July 1, 1997 and falling due between August 1998 and the end of March 2000. In
1999, the government introduced a monitoring system to collect information on
all foreign exchange transactions, including foreign borrowing. Borrowing in
connection with state-owned enterprises has been regulated since 1991. The
following table provides information on Indonesia's foreign and domestic debt
for the periods 1995 to 1999.
FOREIGN AND DOMESTIC DEBT, 1995-1999
(US$ BILLIONS)
<TABLE>
<CAPTION>
YEAR FOREIGN DOMESTIC TOTAL DEBT%/GDP
---- ------- -------- ----- ---------
<S> <C> <C> <C> <C>
1995 63.5 0.0 63.5 31%
1996 56.3 0.0 56.3 25%
1997 57.9 0.0 57.9 27%
1998 71.5 0.0 71.5 72%
1999 78.9 68.7 147.6 105%
</TABLE>
Note: 1999's Domestic Debt figure is based on Rp 312 trillion in bank
recapitalization bonds issued, plus Rp 228 trillion in bonds issued to repay
Bank Indonesia for liquidity credits (converted at the 1999 average exchange
rate of RP 7855.2/USD).
SOURCE: DATA FROM BANK INDONESIA, BUSINESS NEWS
PRIVATIZATIONS
Indonesia has a budget target of Rp 6.5 trillion (US$ 722 million) to
be raised from privatizations in fiscal year 2000. On June 29, 2000, the
government launched a revised state-
-9-
<PAGE>
owned enterprise master plan in response to concerns about lagging privatization
and continuing "high-cost" practices in the 164 enterprises. The revised plan
aims to accelerate state-owned enterprise restructuring and privatization and to
establish good governance practices. The government has slated 10 companies from
a variety of sectors (including, mining, plantations, airport operations and
fertilizer) to be fully or partially privatized before the end of 2000. Nine
state-owned enterprises are on "standby" for privatization in 2000 and the
others for more gradual privatization through 2004. There can be no assurance
that any of these privitizations will occur on schedule or at all.
FOREIGN INVESTMENT
Foreign direct investment in Indonesia is governed generally by the
Foreign Investment Law of January 1967. That law stipulates that foreign
companies may invest and operate in Indonesia either independently or in
joint-ventures with local partners with the approval of the government for a
maximum period of 30 years (with the possibility of an extension) subject to
meeting specified local ownership levels. In 1994, the government lowered the
initial domestic ownership requirements for joint ventures to 5% and lengthened
to 15 years the time period within which independently investing companies must
divest a percentage (usually one to five percent) of their shares to allow local
investors to take up a minority holding in the company. In mid-1998, the
government opened several previously restricted sectors to foreign investment,
reducing the number of sectors restricted for foreign direct investment to 25,
16 of which are completely closed to investment while the remaining nine allow
minority foreign equity participation. The government also removed foreign
ownership limitations on banks and on firms publicly traded on Indonesian stock
markets.
The Indonesian Government, through the Capital Investment Coordinating
Board ("BKPM"), has instituted a series of reforms over the past three years
designed to stimulate foreign direct investment into Indonesia. These reforms
include a simplified investment approval process, an effective doubling of the
number of business areas open to foreign investment and reduced minimum
investment levels. Although most sectors of the Indonesian economy are now open
for direct investment by foreigners on the same basis as by Indonesians, certain
areas, such as food and beverages, printing, transportation and equipment,
aircraft manufacturing and communications, are generally closed to investment
and new project undertakings by foreigners unless at least 65%, and in some
cases 100%, of the total expected output of the project will be exported. If
companies in these sectors seek to be listed on an Indonesian exchange, the
ability of foreigners to acquire shares of such companies may be restricted in
the absence of the approval of the Indonesian Minister of Finance.
Investment interest in Indonesia has fallen substantially since the
onset of the economic crisis in mid-1997. According to statistics from BKPM,
from 1967 through December 1999, the government approved 7,665 foreign
investment applications worth more than US$ 228.2 billion (excluding investment
approvals in oil and gas, banking and financial services). While foreign
investment approvals reached almost US$ 34 billion in 1997, they declined to
less than US$ 14 billion in 1998 and reached only US$ 10.89 billion in 1999.
However, realized foreign investment showed modest signs of recovery in 1999,
rising from US$ 2.9 billion in 1998 to US$ 7.6 billion in 1999 (US$ 3.0 billion
of the 1999 total was for a single proposed project, an oil refinery). The
downward trend of investment approval values continued to show very modest signs
of abatement in 2000. According to the most recent BKPM statistics covering
January 1, 2000 through June 15, 2000, foreign investment approvals were up
16.7%, rising from US$1.8
-10-
<PAGE>
billion for the same period in 1999 to US$ 2.1 billion in 2000. The number of
approved projects rose from 483 to 589.
FINANCIAL SECTOR
Bank Indonesia acts as Indonesia's central bank with the responsibility
to support and regulate most financial institutions in Indonesia as well as to
act as the sole issuer of Indonesian currency and Indonesia's lender of last
resort to the banking system. Bank Indonesia supervises and regulates all
financial institutions except insurance companies and nonbank financial
institutions. Bank Indonesia sets the value of the Rupiah on a daily basis.
Commercial banking in Indonesia is presently dominated by state-owned
banks which in the aggregate account for approximately 65% of Indonesia's
outstanding loans. All state commercial banks are authorized to deal in foreign
exchange. In addition, there are currently private domestic banks, licensed
branches of foreign banks, several recently licensed joint venture private banks
and a large number of representative offices of foreign banks as well as locally
incorporated joint venture merchant banks, leasing and insurance companies and,
most recently, a joint venture finance company. There is also a national
development bank and numerous other regional and private development banks, as
well as a national housing bank to promote home ownership financing.
The Indonesian banking sector was badly impacted by the Rupiah's sharp
plunge against the U.S. dollar. The Rupiah's fall has multiplied the value of
the Indonesian banks' foreign debts as well as the value of their dollar loans,
which mostly fall under the nonperforming category. The banking crisis has
decreased the amount of overseas credit available to local exporters to import
their raw materials, while domestic financing is virtually nonexistent since
local banks are now unable to risk more nonperforming debt. In an effort to
restructure the ailing banking sector, the government:
- established the Indonesian Bank Restructuring Agency ("IBRA") which is
charged with restructuring and speeding up the recovery of Bank
Indonesia's liquidity credits already injected into problem banks;
- modified paid-up capital requirements; and
- suspended the operation of seven ailing banks, took over the management
of seven additional banks deemed to be unsound under the IBRA and
placed 40 banks (including three state-owned banks and 11 provincial
development banks) under its supervision.
-11-
<PAGE>
THE INDONESIAN SECURITIES MARKETS
THE JAKARTA STOCK EXCHANGE
The Jakarta Stock Exchange became a private institution in 1991. There
are 197 securities houses which are Members and shareholders of the Exchange.
The Members consist of broker-dealers, underwriters and investment management
companies.
The Jakarta Stock Exchange is open for trading Monday through Friday
with two daily trading sessions. On Monday through Thursday, the first session
is from 9:30 a.m. to 12:00 noon followed by an afternoon session from 1:30 p.m.
to 4:00 p.m. On Friday, the first session is from 9:00 a.m. to 11:30 a.m.
followed by an afternoon session from 2:00 p.m. to 4:00 p.m.
In May 1995, the Jakarta Stock Exchange began operation of the Jakarta
Automated Trading System ("JATS"). JATS is an integrated system covering
settlement and central custodian, and providing real-time information. JATS has
the capacity to process up to 140,000 transactions a day with the possibility of
increasing capacity up to 500,000 transactions a day.
Trades on the Jakarta Stock Exchange are required to be settled within
four trading days after the date of the transaction. Share certificates are in
collective form, meaning that one share certificate represents all shares owned.
Thus, when a portion of the shares are sold, the share certificate must be sent
to the issuer for splitting. Upon completion of a trade, both the buyer and the
seller will endorse the back of the security. If the security does not require
splitting, the buyer's broker need not send the actual security for
registration. Indonesia does not have a central register. Virtually all listed
companies presently maintain their own share registers. Under rules established
by the Capital Market Supervising Agency (the "BAPEPAM"), physical
re-registration of the shares must take place within 10 to 14 days after the
date of the trade, although registration can actually take several weeks. Share
certificates must be physically delivered before registration can take place.
Brokerage commissions on the Jakarta Exchange are negotiated, but may
not exceed 1% of the value of the transaction. Additionally, a stamp duty fee of
Rp. 1,000 (US$.55) is payable on every transaction.
THE SURABAYA EXCHANGE
The Surabaya Exchange is the first stock exchange in Indonesia to be
managed by a private company and began operating in 1989. In July 1995, the
Surabaya Stock Exchange merged with the Indonesian OTC market.
The Surabaya Stock Exchange is open for trading Monday through Friday
with two trading sessions on Friday. The trading hours on Monday through
Thursday are between 9:30 a.m. to 5:00 p.m. On Friday, the first session is from
9:30 a.m. to 11:30 followed by an afternoon session from 1:30 p.m. to 5:00 p.m.
In 1996, the Surayaba Stock Exchange implemented its remote trading
system called S-MART (Surabaya Market Information and Automated Remote Trading).
S-MART divides the market into two segments, the First Market and Second Market.
The First Market provides trading facilities for stocks, derivatives and
fixed-income securities. The Second Market
-12-
<PAGE>
provides trading facilities for market-makers and odd-lots. S-MART is also
equipped with access to the Internet.
The Surayaba Stock Exchange has built a website called the "SSX Net" to
enhance market transparency. The SSX Net is designed to provide information
about the Exchange, listed companies, member companies and supporting parties in
the capital market industry. In June 1997, anticipating increasing activity in
the bond market, the Surayaba Stock Exchange established the Over-the-Counter
Fixed Income Service ("OTC-FIS") system, which provides trade information on a
real-time basis for fixed-income securities (bonds). The purpose of OTC-FIS is
to make the bond market more structured and transparent, and eventually to
increase market efficiency.
Brokerage commissions on the Surabaya Stock Exchange are limited to 1%
of the transaction value. Additionally, a transaction tax of 0.1% of the gross
value of the sales transaction is charged on each transaction. Sales
transactions by founding shareholders are subject to an additional tax of 5% on
the gross value.
The following tables provide information on the market capitalization,
total listed stocks, stocks trading, daily average trading value and composite
stock price indices for each of the Jakarta Stock Exchange and the Surabaya
Stock Exchange for the periods indicated:
MARKET CAPITALIZATIONS
1990 -- AUGUST 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
END OF JAKARTA STOCK EXCHANGE SURABAYA STOCK EXCHANGE
PERIOD CAPITALIZATION CHANGE CAPITALIZATION CHANGE
VALUE (%) VALUE (%)
(TRILLION RP) (TRILLION RP)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1990 14.2 229.2 13.2 202.6
1991 16.4 15.9 19.0 43.9
1992 24.8 51.1 23.8 26.1
1993 69.3 179.0 54.1 126.9
1994 103.8 49.8 103.8 92.0
1995 152.2 46.6 158.7 52.9
1996 215.0 41.2 191.6 20.7
1997 159.9 (25.6) 141.6 (26.1)
1998 175.7 9.9 157.9 11.5
1999 451.8 157.1 407.7 158.2
2000
January 410.5 ( 9.1) 369.4 ( 9.4)
February 368.9 (10.1) 332.9 ( 9.9)
March 368.0 ( 0.3) 337.0 1.2
April 330.5 (10.2) 301.5 (10.5)
May 290.1 (12.2) 260.9 (13.5)
June 330.2 13.8 294.9 13.0
July 331.1 0.2 297.1 0.7
-------------------------------------------------------------------------------
-13-
<PAGE>
MARKET CAPITALIZATIONS
1990 -- AUGUST 31, 2000
<CAPTION>
-------------------------------------------------------------------------------
END OF JAKARTA STOCK EXCHANGE SURABAYA STOCK EXCHANGE
PERIOD CAPITALIZATION CHANGE CAPITALIZATION CHANGE
VALUE (%) VALUE (%)
(TRILLION RP) (TRILLION RP)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
August 318.3 (3.9) 283.7 (4.5)
</TABLE>
-----------------------
SOURCE: BAPEBAM, "DEVELOPMENT OF INDONESIAN CAPITAL MARKET AUGUST 2000".
-14-
<PAGE>
TOTAL LISTED STOCKS
1990 -- AUGUST 31, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
END OF JAKARTA STOCK EXCHANGE SURABAYA STOCK EXCHANGE
PERIOD LISTED SHARES LISTED SHARES
(BILLION) (BILLION)
---------------------------------------------------------------------------
<S> <C> <C>
1990 1.78 1.60
1991 3.73 3.86
1992 6.25 5.39
1993 9.79 8.16
1994 23.85 19.92
1995 45.79 39.63
1996 77.24 66.80
1997 135.67 118.47
1998 170.55 147.69
1999 846.13 802.51
2000
January 870.55 824.95
February 868.95 828.34
March 872.65 848.53
April 874.56 852.60
May 896.98 854.14
June 900.85 846.44
July 1,090.41 1,033.58
August 1,106.86 1,034.03
----------------------------------------------------------------------------
</TABLE>
--------------
SOURCE: BAPEBAM, "DEVELOPMENT OF INDONESIAN CAPITAL MARKET AUGUST 2000".
15
<PAGE>
<TABLE>
<CAPTION>
STOCKS TRADING
1990 -- AUGUST 31, 2000
----------------------------------------------------------------------------------------------------------------------
JAKARTA STOCK EXCHANGE SURABAYA STOCK EXCHANGE
--------------------------------------------------- ---------------------------------------------------
VOLUME CHANGE VALUE CHANGE VOLUME CHANGE VALUE CHANGE
PERIOD (BILLION) (%) (TN. RP) (%) (BILLION) (%) (TN. RP) (%)
------------------------------------------------------------------ ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990 0.70 600.0 7.31 661.5 0.01 100.0 0.14 366.7
1991 1.01 44.3 5.78 (20.9) 0.01 0.0 0.04 (71.4)
1992 1.71 69.3 7.95 37.5 0.04 300.0 0.14 250.0
1993 3.84 124.6 19.09 140.1 0.27 575.0 1.15 721.4
1994 5.29 37.8 25.48 33.5 0.50 85.2 1.78 54.8
1995 10.65 101.3 32.36 27.0 1.72 244.0 5.25 194.9
1996 29.53 177.3 75.73 134.0 1.55 (9.9) 4.10 (21.9)
1997 76.60 159.4 120.39 59.0 4.90 216.1 10.75 162.2
1998 90.62 18.3 99.68 (17.2) 2.23 (54.5) 3.12 (71.0)
1999 178.48 97.0 147.88 48.4 7.03 215.2 13.20 323.1
2000 104.53 (41.4) 98.70 (33.3) 3.95 (43.8) 9.19 (30.4)
January 25.99 - 23.51 - 0.20 - 0.22 -
February 14.40 (44.6) 16.58 (29.5) 0.20 0.0 0.29 31.8
March 11.43 (20.6) 15.26 ( 8.0) 1.45 625.0 4.77 1,544.8
April 6.43 (43.7) 6.77 (55.6) 0.32 (77.9) 1.08 (77.4)
May 9.85 53.2 10.48 54.8 0.77 140.6 1.69 56.5
June 10.18 3.4 10.46 ( 0.2) 0.45 (41.6) 0.48 (71.6)
July 9.92 ( 2.6) 6.26 (40.2) 0.12 (73.3) 0.04 (91.7)
August 13.41 35.2 7.49 19.6 0.42 250.0 0.59 1,375.0
----------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------
SOURCE: BAPEBAM, "DEVELOPMENT OF INDONESIAN CAPITAL MARKET AUGUST 2000".
16
<PAGE>
<TABLE>
<CAPTION>
DAILY AVERAGE TRADING VALUE
1990 -- AUGUST 31, 2000
----------------------------------------------------------------------------------------------------------------
JAKARTA STOCK CAPITALIZATION SURABAYA STOCK EXCHANGE
---------------------------- -----------------------
PERIOD (BILLION RP) (CHANGE %) (BILLION RP) (CHANGE %)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1990 30.1 671.5 0.6 205.3
1991 23.6 (21.6) 0.2 (70.7)
1992 32.2 36.6 0.6 223.5
1993 77.6 141.0 4.7 749.1
1994 104.0 34.1 7.3 55.5
1995 131.5 26.5 21.4 194.2
1996 304.1 131.2 16.5 (22.9)
1997 489.4 60.9 43.7 165.3
1998 403.6 (17.5) 12.7 (70.9)
1999 598.7 48.4 53.4 320.1
2000 601.3 0.4 57.0 6.7
January 1,306.0 - 12.2 -
February 828.9 (36.5) 14.7 20.5
March 726.5 (12.4) 227.0 1,444.2
April 398.5 (45.1) 63.8 (71.9)
May 476.2 19.5 76.9 20.5
June 522.9 9.8 23.9 (68.9)
July 298.0 (43.0) 1.9 (92.1)
August 340.6 14.3 27.0 1,321.1
----------------------------------------------------------------------------------------------------------------
</TABLE>
---------------
SOURCE: BAPEBAM, "DEVELOPMENT OF INDONESIAN CAPITAL MARKET AUGUST 2000".
17
<PAGE>
<TABLE>
<CAPTION>
COMPOSITE STOCK PRICE INDEXES
1990 -- AUGUST 31, 2000
------------------------------------------------------------------------------------------------------------------
JAKARTA STOCK EXCHANGE SURABAYA STOCK EXCHANGE
-------------------------------------------- ----------------------------------------------
PERIOD HIGH LOW CLOSE HIGH LOW CLOSE
------------------------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1990 681.94 371.94 417.79 356.32 201.70 223.12
1991 427.02 224.71 247.39 230.99 152.59 157.62
1992 331.05 246.95 274.33 170.80 153.48 158.43
1993 588.76 273.30 588.76 272.01 153.29 272.01
1994 612.88 447.04 469.64 364.37 270.09 313.47
1995 519.17 414.20 513.84 366.07 312.27 366.07
1996 637.43 512.48 637.43 569.31 366.11 568.58
1997 740.83 339.53 401.71 656.14 299.28 351.95
1998 554.10 256.83 398.03 506.48 216.44 351.51
1999 716.46 372.31 676.91 708.69 330.31 566.57
2000 703.48 444.44 466.38 569.84 334.56 343.93
January 703.48 634.67 636.37 569.84 505.23 510.34
February 639.25 568.55 576.54 520.24 458.81 456.81
March 596.18 546.52 583.27 465.30 434.29 449.78
April 570.90 519.04 526.73 453.72 396.94 401.35
May 550.32 454.32 454.32 414.16 342.05 342.05
June 515.11 444.44 515.11 387.80 334.56 387.80
July 513.77 492.19 492.19 380.85 359.77 360.21
August 505.79 466.38 466.38 377.33 343.93 343.93
------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------
SOURCE: BAPEBAM, "DEVELOPMENT OF INDONESIAN CAPITAL MARKET AUGUST 2000".
18
<PAGE>
PART C
OTHER INFORMATION
Item 15. Indemnification
A policy of insurance covering Credit Suisse Asset Management, LLC, its
affiliates, and all of the registered investment companies advised by Credit
Suisse Asset Management, LLC insures the Registrant's directors and officers and
others against liability arising by reason of an alleged breach of duty caused
by any negligent act, error or accidental omission in the scope of their duties.
Article VIII of the Registrant's Articles of Incorporation states as follows:
ARTICLE VIII
LIMITATION ON LIABILITY; INDEMNIFICATION
(1) To the fullest extent that limitations on the liability of directors
and officers are permitted by the Maryland General Corporation Law, no director
or officer of the Corporation shall have any liability to the Corporation or its
stockholders for damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at the time of
any proceeding in which liability is asserted.
(2) Any person who was or is a party or is threatened to be made a party
in any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is a current or former director or officer of the Corporation, or is
or was serving while a director or officer of the Corporation at the request of
the Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by the Corporation against
judgments, penalties, fines, excise taxes, settlements and reasonable expenses
(including attorneys' fees) actually incurred by such person in connection with
such action, suit or proceeding to the fullest extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933 and the Investment
Company Act of 1940 as such statutes are now or hereafter in force. In addition,
the Corporation shall also advance expenses to its currently acting and its
former directors and officers to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law, the Securities
Act of 1933 and the Investment Company Act of 1940. The Board of Directors may
by Bylaw, resolution or agreement make further provision for indemnification of
directors, officers, employees and agents to the fullest extent permitted by the
Maryland General Corporation Law.
(3) No provision of this Article shall be effective to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
C-1
<PAGE>
(4) References to the Maryland General Corporation Law in this Article are
to that law as from time to time amended. No amendment to the charter of the
Corporation shall affect any right of any person under this Article based on any
event, omission or proceeding prior to the amendment.
Articles 5.2 and 5.3 of Registrant's By-Laws state as follows:
INDEMNIFICATION AND INSURANCE
ARTICLE 5.2. INDEMNITY.
(a) The Company shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Company shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law. The Company
shall indemnify its directors and officers who, while serving as directors or
officers, also serve at the request of the Company as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Company or any Stockholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office ("disabling conduct").
(b) Any current or former director or officer of the Company seeking
indemnification within the scope of this Article shall be entitled to advances
from the Company for payment of the reasonable expenses incurred by him in
connection with the matter as to which he is seeking indemnification in the
manner and to the fullest extent permissible under the Maryland General
Corporation Law. The person seeking indemnification shall provide to the Company
a written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Company has been met and a written
undertaking to repay any such advance if it should ultimately be determined that
the standard of conduct has not been met. In addition, at least one of the
following conditions shall be met: (i) the person seeking indemnification shall
provide security in form and amount acceptable to the Company for his
undertaking; (ii) the Company is insured against losses arising by reason of the
advance; or (iii) a majority of a quorum of directors of the Company who are
neither "interested persons" as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, nor parties to the proceeding ("disinterested
non-party directors"), or independent legal counsel, in a written opinion, shall
have determined, based on a review of facts readily available to the Company at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.
(c) At the request of any person claiming indemnification under this
Article, the Board of Directors shall determine, or cause to be determined, in a
manner consistent with the Maryland General Corporation Law, whether the
standards required by this Article have been met. Indemnification shall be made
only following: (i) a final decision on the merits by a court or
C-2
<PAGE>
other body before whom the proceeding was brought that the person to be
indemnified was not liable by reason of disabling conduct or (ii) in the absence
of such a decision, a reasonable determination, based upon a review of the
facts, that the person to be indemnified was not liable by reason of disabling
conduct by (a) the vote of a majority of a quorum of disinterested non-party
directors or (b) an independent legal counsel in a written opinion.
(d) Employees and agents who are not officers or directors of the Company
may be indemnified, and reasonable expenses may be advanced to such employees or
agents, as may be provided by action of the Board of Directors or by contract,
subject to any limitations imposed by the Investment Company Act of 1940.
(e) The Board of Directors may make further provision consistent with law
for indemnification and advance of expenses to directors, officers, employees
and agents by resolution, agreement or otherwise. The indemnification provided
by this Article shall not be deemed exclusive of any other right, with respect
to indemnification or otherwise, to which those seeking indemnification may be
entitled under any insurance or other agreement or resolution of stockholders or
disinterested directors or otherwise.
(f) References in this Article are to the Maryland General Corporation Law
and to the Investment Company Act of 1940, as from time to time amended. No
amendment of these Bylaws shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
ARTICLE 5.3. INSURANCE. The Company may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company or who, while a director, officer, employee or agent of the Company, is
or was serving at the request of the Company as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan,
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position; PROVIDED that no insurance
may be purchased by the Company on behalf of any person against any liability to
the Company or to its Stockholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
C-3
<PAGE>
Item 16. Exhibits
1(a) Articles of Incorporation of the Registrant, dated January 5, 1990.*
(b) Articles of Amendment of the Registrant dated February 14, 1990.*
(c) Articles of Amendment of the Registrant dated February 22, 1990.*
2. Amended and Restated By-laws of the Registrant dated November 9,
1999.*
3. Not Applicable.
4. Merger Agreement and Plan of Reorganization is filed herewith as
Exhibit A to the Prospectus forming part of the Registration
Statement.
5. Not Applicable.
6. Investment Advisory Agreement between the Registrant and BEA Associates
(now Credit Suisse Asset Management, LLC) dated December 21, 1990.*
7. Not Applicable.
8. Not Applicable.
9. Custodian Agreement between the Registrant and Brown Brothers
Harriman & Co., dated June 14, 1995, as amended.*
10. Not Applicable.
11 (a) Opinion and Consent of Willkie Farr & Gallagher is filed herewith.
(b) Opinion and consent of Venable, Baetjer and Howard, LLP is filed
herewith.
12.(a) Form of Opinion and Consent of Willkie Farr & Gallagher with respect
to tax matters is filed herewith.
(b) Form of Opinion and Consent of Brown & Wood LLP with respect to tax
matters is filed herewith.
* Incorporated by reference to Registrant's Registration Statement on Form
N-14 as filed on October 11, 2000.
C-4
<PAGE>
13(a) Registrar, Transfer Agency and Service Agreement between the Registrant
and the First National Bank of Boston, dated September 12, 1995.*
(b) Administrative Services Agreement between the Registrant and BEA
Associates dated April 30, 1992.*
(c) Administration Agreement between the registrant and Bear Stearns Fund
Management, Inc. dated June 23, 1995.*
(d) Credit Agreement between the Registrant, other CSAM-advised Funds,
Deutsche Bank AG, as administrative agent, State Street Bank and Trust
Company, as operations agent, Bank of Nova Scotia, as syndication
agent, and other lenders (the "Credit Agreement") dated June 23,
1999.*
(e) First Amendment to Credit Agreement dated June 21, 2000.*
14. Consents of PricewaterhouseCoopers LLP are filed herewith.
15. Not Applicable.
16. Powers of Attorney.*
17(a) Code of Ethics.*
(b) Proxy Cards are filed herewith as an exhibit to the Proxy
Statement/Prospectus.
* Incorporated by reference to Registrant's Registration Statement on Form
N-14 as filed on October 11, 2000.
Item 17. Undertakings
(1) The Registrant agrees that prior to any public reoffering of the securities
registered through the use of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering prospectus will
contain the information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under paragraph
(1) above will be filed as a part of an amendment to the registration statement
and will not be used until the amendment is effective, and that, in determining
any liability under the 1933 Act, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered
C-5
<PAGE>
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the State
of New York on the 20th day of November, 2000.
The Indonesia Fund, Inc.
By: /s/ Michael A. Pignataro
----------------------------------------------
Name: Michael A. Pignataro
Title: Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement on Form N-14 has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*
--------------------------
William W. Priest, Jr. Chairman of the Board and President November 20, 2000
*
--------------------------
Dr. Enrique R. Arzac Director November 20, 2000
*
--------------------------
Lawrence J. Fox Director November 20, 2000
*
--------------------------
Richard H. Francis Director November 20, 2000
/s/ Michael A. Pignataro
--------------------------
Michael A. Pignataro Chief Financial Officer and Secretary November 20, 2000
(Principal Financial Officer)
</TABLE>
* By: /s/ Michael A. Pignataro
------------------------
Michael A. Pignataro
* Pursuant to power-of-attorney filed on signature page of Registrant's
Registration Statement on Form N-14 filed on October 11, 2000.
C-7
<PAGE>
EXHIBIT NO. EXHIBIT
EXHIBITS
4. Merger Agreement and Plan of Reorganization is filed
herewith as Exhibit A to the Prospectus forming part of the
Registration Statement.
11(a) Opinion and Consent of Willkie Farr & Gallagher.
11(b) Opinion and Consent of Venable Baetjer and Howard, LLP.
12(a) Form of Opinion and Consent of Willkie Farr & Gallagher with respect
to tax matters.
12(b) Form of Opinion and Consent of Brown & Wood LLP with respect to tax
matters.
14. Consents of PricewaterhouseCoopers LLP.
17.(b) Proxy Cards are filed herewith as an exhibit to the Proxy
Statement/Prospectus forming part of the Registration Statement.
