<PAGE>
As filed with the Securities and Exchange Commission
on October 11, 2000
Securities Act File No. 33-33037
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. / /
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) $2,772 was wired to the Securities and Exchange Commission's account at
Mellon Bank in payment of the required registration fee due in connection
with this Registration Statement.
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., a Maryland corporation (the "Fund").
The special meeting is scheduled to be held at 11:00 a.m., Eastern
time, on December 18, 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") 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.
<PAGE>
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
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,
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 18, 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
<PAGE>
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,
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 18, 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 _____, 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,
Michael A. Pignataro, Chief Financial Officer and Secretary
_____ __, 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 18, 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 _____, 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,
John J. Boretti
Secretary
_____ __, 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 OCTOBER 11, 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 18, 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 18, 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.
<PAGE>
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 _____, 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 LAQ 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 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
2
<PAGE>
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 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
3
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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................. 7
SYNOPSIS............................................................. 8
EXPENSE TABLE........................................................ 14
FINANCIAL HIGHLIGHTS................................................. 16
RISK FACTORS AND SPECIAL CONSIDERATIONS.............................. 19
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES..................... 25
UNITED STATES FEDERAL INCOME TAXES................................... 32
INFORMATION ABOUT THE MERGER......................................... 34
ADDITIONAL INFORMATION ABOUT THE FUNDS............................... 42
MANAGEMENT OF THE FUNDS.............................................. 55
EXPERTS.............................................................. 67
REQUIRED VOTE........................................................ 67
LEGAL PROCEEDINGS.................................................... 67
LEGAL OPINIONS....................................................... 67
ADDITIONAL INFORMATION............................................... 67
</TABLE>
4
<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:
5
<PAGE>
- 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 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 proposals 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.
6
<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.
7
<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.
8
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT OBJECTIVES JAKARTA FUND INDONESIA FUND
AND POLICIES
<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 investing
of Indonesian companies and primarily in Indonesian equity
non-Indonesian companies that and debt securities
derive a significant proportion
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 all,
its total assets in Indonesian and at least 65%, of its total
equity securities 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,
not invest in lower-rated except only up to 5% of its
securities assets may 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 and "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.
9
<PAGE>
<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>
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
10
<PAGE>
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.
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
11
<PAGE>
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 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.
12
<PAGE>
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.
13
<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
year ended March 31, 2000 and the Indonesia Fund's operating expenses
for the year 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.
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
14
<PAGE>
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>
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.
15
<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.
16
<PAGE>
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
Period
April 19,
1990*
For the Years Ended March 31, Through
--------------------------------------------------------------------------------------------- March 31,
2000 1999 1998 1997 1996 1995 1994 1993 1992 1991
-------- -------- ------- ------- ------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <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 $7.21 $6.49 $8.51 $10.99**
----- ----- ------ ----- ----- ----- ----- ----- ----- ------
Net investment
income/(loss) (0.06) (0.04) 0.03 0.01 0.06 0.01 0.03 0.07 0.05 0.22
Net realized and
unrealized gain/(loss)
on investments
and foreign currency 0.30 (0.39) (7.70) 1.00 1.47 (1.60) 2.12 (0.73) (1.89) (2.56)
---- ------ ------ ---- ---- ------ ---- ------ ------
Total from investment
operations 0.24 (0.43) (7.67) 1.01 1.53 (1.59) 2.15 0.80 (1.84) (2.34)
---- ------ ------ ---- ---- ------ ---- ---- ------ ------
Distributions to
shareholders from:
Net investment income -- -- (0.02) -- (0.11) (0.02) (0.02) (0.08) (0.12) (0.14)
---- ---- ------ ---- ------ ------ ------ ------ ------ ------
Net realized capital
gains -- -- -- -- -- -- -- -- (0.06) --
Return of capital -- -- -- -- -- -- (0.04) -- -- --
---- ---- ------ ---- ------ ------ ------ ------ ------ ------
Total distributions -- -- (0.02) -- (0.11) (0.02) (0.06) (0.08) (0.18) (0.14)
---- ---- ------ ---- ------ ------ ------ ------ ------ ------
Net asset value,
end of year $2.24 $2.00 $2.43 $10.12 $9.11 $7.69 $9.30 $7.21 $6.49 $8.51
----- ----- ----- ------ ----- ----- ----- ----- ----- -----
Market value, end of
year $2.3125 $2.1875 $4.0625 $8.875 $9.250 $8.125 $9.375 $7.500 $7.250 $7.750
Total investment
return+ 5.7% (46.2%) (54.0%) (4.1%) 15.3% (13.1%) 25.6% 4.7% (4.0%) (34.2%)
Net asset value
total return+ 12.0% (17.7%) (75.3%) 11.1% 20.0% (17.1%) 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) $11,239 $10,035 $12,208 $50,788 $45,693 $38,552 $46,647 $36,128 $32,533 $42,639
Operating expenses 3.89% 4.66% 2.60% 2.07% 1.94% 1.91% 1.88% 2.06% 2.15% 1.83%+
Net investment income
(loss) (2.37%) (1.94%) 0.53% 0.12% 0.70% 0.15% 0.36% 1.06% 0.63% 2.30%+
Portfolio turnover 46% 11% 68% 35% 44% 37% 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
17
<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 For the Period
Ended March 9, 1990*
June 30, For the Years Ended December 31, through
2000 --------------------------------------------------------------------------------------- December 31,
(unaudited) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
----------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <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 $14.03 $7.63 $7.72 $10.38 $13.78**
----- ----- ----- ------ ----- ----- ------ ----- ----- ------ ------
Net investment
income/(loss) (0.04) (0.05) (0.04) 0.03 0.01 -- (0.03) (0.03) 0.01 0.04 0.22
Net realized and
unrealized gain/(loss)
on investments and
foreign currency
related transactions (1.96) 1.87 (0.83) (7.13) 1.33 0.16 (4.82) 6.43 (0.10) (2.65) (2.90)
------ ---- ----- ----- ---- ---- ----- ---- ----- ----- -----
Net increase/
(decrease) in net
assets resulting
from operations (2.00) 1.82 (0.87) (7.10) 1.34 0.16 (4.85) 6.40 (0.09) (2.61) (2.68)
------ ---- ----- ----- ---- ---- ----- ---- ----- ----- -----
Dividends and
distributions to
shareholders:
Net investment income -- -- -- -- -- -- -- -- -- (0.05) (0.19)
Net realized gain on
investments and
foreign currency
related transactions -- (0.05) -- -- -- -- -- -- -- -- (0.53)
------ ---- ----- ----- ---- ---- ----- ---- ----- ----- -----
Total dividends and
distributions to
shareholders -- (0.05) -- -- -- -- -- -- -- (0.05) (0.72)
------ ---- ----- ----- ---- ---- ----- ---- ----- ----- -----
Net asset value, end
of period $2.48 $4.48 $2.71 $3.58 $10.68 $9.34 $9.18 $14.03 $7.63 $7.72 $10.38
===== ===== ===== ===== ====== ===== ===== ====== ===== ===== ======
Market value, end
of period $3.375 $5.438 $3.438 $4.625 $9.750 $10.125 $12.000 $20.750 $9.000 $8.375 $9.875
====== ====== ====== ====== ====== ======= ======= ======= ====== ====== ======
Total investment
return (a) (37.93)% 59.58% (25.68)% (52.56)% (3.70)% (15.63)% (42.17)% 130.56% 7.46% (14.71)% (24.15)%
======== ====== ======== ======== ======= ======== ======== ======= ===== ======== ========
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $11,449 $20,669 $12,491 $16,486 $49,223 $43,060 $42,297 $64,661 $35,186 $35,590 $47,817
Ratio of expenses
to average net
assets 3.71%(b) 3.18% 4.21% 1.89% 1.91% 1.96% 1.83% 1.98% 2.04% 2.00% 2.15%(b)
Ratio of net
investment
income/(loss) to
average net assets (2.54)%(b) (1.43)% (1.37)% 0.33% 0.10% 0.05% (0.25)% (0.30)% 0.09% 0.49% 2.05%(b)
Portfolio turnover
rate 10.05% 47.38% 36.58% 48.19% 34.67% 24.10% 31.56% 63.77% 22.39% 32.27% 17.68%
------------------------------------------------------------------------------------------------------------------------------------
* 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.
</TABLE>
18
<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
19
<PAGE>
- 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
- 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$34,000,000,000. For the six months ended June 30, 2000, the average daily
equity trading value on the Jakarta Exchange was US$94,000,000. 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. See "Appendix A" in the SAI for more information.
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:
20
<PAGE>
- 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 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:
21
<PAGE>
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
22
<PAGE>
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 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 under way.
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
23
<PAGE>
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.
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.
24
<PAGE>
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 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." AUpon the Effective Date and after the Merger, the Indonesia Fund's shares
willcontinue to be traded on the NYSE under the symbol "IF", while Mshares 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
25
<PAGE>
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.
COMPARISON OF CURRENT INVESTMENT POLICIES.
The following table highlights the differences between the Funds'
investment objectives and policies:
<TABLE>
<CAPTION>
INVESTMENT OBJECTIVES JAKARTA FUND INDONESIA FUND
AND POLICIES
--------------------------------------- ------------------------------------- -------------------------------------
<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 Up to 35% A substantial portion
Invested in
Debt Securities
</TABLE>
26
<PAGE>
<TABLE>
<S> <C> <C>
% of Assets That May Be Not permitted Not more than 5%
Invested in Lower-Quality or
Unrated Debt Securities
% of Assets That May Be Up to 25% Up to 20% (including
Invested in Unlisted investments in new and
Equity Securities early stage companies)
</TABLE>
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 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,
- 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.
27
<PAGE>
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. 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.
28
<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. 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.
29
<PAGE>
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 exchange. 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 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.
30
<PAGE>
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 future 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.
31
<PAGE>
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.
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
32
<PAGE>
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.
33
<PAGE>
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
34
<PAGE>
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 appraisal rights in view of this uncertainty. A condition
to the Merger is that holders of not more than 10% of the outstanding 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
35
<PAGE>
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 at 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 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.
36
<PAGE>
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.
37
<PAGE>
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.
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 $20 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.
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.
38
<PAGE>
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.
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.
39
<PAGE>
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, attached hereto 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 its shareholders to surrender their
outstanding certificates representing shares of the common stock of the
Jakarta Fund or post adequate bond therefore. 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.
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.
40
<PAGE>
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
41
<PAGE>
& 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,
- 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
42
<PAGE>
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>
(4)
Amount Issued
(3) and Outstanding
(1) (2) Amount held by Fund Exclusive of Amount
Title of Class Amount Authorized for its Own 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, $0.001 100,000,000 None 4,608,989
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 $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.
43
<PAGE>
PER SHARE DATA FOR JAKARTA GROWTH FUND, INC.
COMMON STOCK TRADED ON THE NYSE/BSE*
<TABLE>
<CAPTION>
PREMIUM
(DISCOUNT)
PERIOD MARKET PRICE NET ASSET VALUE AS % OF NAV
(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.
44
<PAGE>
PER SHARE DATA FOR THE INDONESIA FUND, INC.
COMMON STOCK TRADED ON THE NYSE
<TABLE>
<CAPTION>
PREMIUM
PERIOD MARKET PRICE NET ASSET VALUE AS % OF NAV
(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>
45
<PAGE>
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 ADJUSTMENTS PRO FORMA
FUND FUND 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.
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 did not trade on the
Primary Market, it shall be valued at the closing price on another
46
<PAGE>
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 weekly.
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 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
47
<PAGE>
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
48
<PAGE>
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 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.
49
<PAGE>
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.
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
50
<PAGE>
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.
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
51
<PAGE>
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.
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.
52
<PAGE>
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.
53
<PAGE>
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 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.
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<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
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND
---------------- ----------------------
<S> <C>
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.
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
56
<PAGE>
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
David G. Stoeffel Vice President
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.
57
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE FUND
---------------- ----------------------
<S> <C>
John J. Boretti Secretary and Treasurer
180 Maiden Lane
New York, NY 10038
</TABLE>
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
58
<PAGE>
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 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.
59
<PAGE>
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, 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.
60
<PAGE>
<TABLE>
<CAPTION>
NAME* TITLE WITH NAM-U.S.A. PRESENT PRINCIPAL OCCUPATION
<S> <C> <C>
Nobuo Katayama Director and President Director and President of NAM-U.S.A.
Marti G. Subrahmanyam Director Professor of Finance and Economics,
New York University, Leonard N.
Stern School of Business
Administration
Keisuke Haruguchi Director, Senior Vice President and Director, Senior Vice President of
Treasurer NAM-U.S.A.
John J. Boretti Senior Vice President and Compliance Senior Vice President and Compliance
Officer Officer of NAM-U.S.A.
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
and Secretary of NAM-U.S.A.
David G. Stoeffel Senior Vice President Senior Vice President of NAM-U.S.A.
-----------
*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.
</TABLE>
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 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.
61
<PAGE>
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 Executive Officer Director and Principal Executive Officer of NAM
Hisaaki Hino Director and Principal Executive Officer Director and Principal Executive Officer of NAM
Akio Nakaniwa Director and Senior Executive Officer Director and Senior Executive Officer of NAM
Takanori Shimiziu Director and Senior Executive Officer Director and Senior Executive Officer of NAM
Masato Tanaka Director and Senior Executive Officer Director and Senior Executive 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 Matsura Executive Officer Executive Officer of NAM
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.
62
<PAGE>
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
63
<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,
64
<PAGE>
- 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,
- 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."
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
65
<PAGE>
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
BENEFICIALLY PERCENT
FUND NAME AND ADDRESS 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
</TABLE>
66
<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 on or about
December __, 2000, 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 SEC 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].
67
<PAGE>
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 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.
Michael A. Pignataro
Chief Financial Officer and Secretary, The Indonesia Fund, Inc.
By order of the Board of Directors of Jakarta Growth Fund, Inc.
John J. Boretti
Secretary
68
<PAGE>
EXHIBIT A
FORM OF
MERGER AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
MERGER AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
JAKARTA GROWTH FUND, INC.
AND
THE INDONESIA FUND, INC.
DATED AS OF __________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS..................................................................................1
2. BASIC TRANSACTION............................................................................1
2.1. The Merger..........................................................................1
2.2. Actions at Closing..................................................................2
2.3. Effect of Merger....................................................................2
3. REPRESENTATIONS AND WARRANTIES OF JAKARTA GROWTH FUND, INC...................................2
3.1. Organization........................................................................2
3.2. Registrations and Qualifications....................................................2
3.3. Regulatory Consents and Approvals...................................................2
3.4. Noncontravention....................................................................3
3.5. Financial Statements................................................................3
3.6. Annual Report.......................................................................3
3.7. Qualification, Corporate Power, Authorization of Transaction........................3
3.8. Legal Compliance....................................................................3
3.9. Material Contracts..................................................................3
3.10. Undisclosed Liabilities.............................................................4
3.11. Tax Filings.........................................................................4
3.12. Qualification under Subchapter M....................................................4
3.13. Form N-14...........................................................................4
3.14. Capitalization......................................................................5
3.15. Books and Records...................................................................5
3.16. No Finder's Fees....................................................................5
4. REPRESENTATIONS AND WARRANTIES OF THE INDONESIA FUND, INC....................................5
i
<PAGE>
4.1. Organization........................................................................5
4.2. Registrations and Qualifications....................................................5
4.3. Regulatory Consents and Approvals...................................................6
4.4. Noncontravention....................................................................6
4.5. Financial Statements................................................................6
4.6. Annual Report.......................................................................6
4.7. Qualification, Corporate Power, Authorization of Transaction........................6
4.8. Legal Compliance....................................................................7
4.9. Material Contracts..................................................................7
4.10. Undisclosed Liabilities.............................................................7
4.11. Tax Filings.........................................................................7
4.12. Qualification under Subchapter M....................................................7
4.13. Form N-14...........................................................................8
4.14. Capitalization......................................................................8
4.15. No Finder's Fees....................................................................8
4.16. Books and Records...................................................................8
4.17. NYSE Continued Listing..............................................................8
5. CONVERSION TO INDONESIA FUND, INC. COMMON STOCK..............................................8
5.1. Conversion..........................................................................8
5.2. Computation of Net Asset Value......................................................9
5.3. Issuance of The Indonesia Fund, Inc. Common Stock...................................9
5.4. Exchange of Certificates Representing The Jakarta Growth Fund, Inc. Common Stock....9
6. COVENANTS OF THE PARTIES....................................................................11
6.1. Shareholders' Meetings.............................................................11
ii
<PAGE>
6.2. Operations in the Normal Course....................................................11
6.3. Articles of Merger.................................................................12
6.4. Regulatory Filings.................................................................12
6.5. Preservation of Assets.............................................................12
6.6. Tax Matters........................................................................12
6.7. Shareholder List...................................................................13
6.8. Termination of Registration as an Investment Company...............................13
6.9. Indemnification....................................................................13
6.10 Applicability of Maryland Business Corporation Act.................................14
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INDONESIA FUND, INC..............................14
7.1. Approval of Merger; NYSE Listing; Appraisal Rights.................................14
7.2. Certificates and Statements by the Jakarta Growth Fund, Inc........................15
7.3. Absence of Litigation..............................................................15
7.4. Legal Opinions.....................................................................15
7.5. Auditor's Consent and Certification................................................17
7.6. Liabilities........................................................................18
7.7. Effectiveness of N-14 Registration Statement.......................................18
7.8. Regulatory Filings.................................................................18
7.9. Administrative Rulings, Proceedings................................................18
7.10. Dividends..........................................................................18
7.11. Custodian's Certificate............................................................18
7.12. Books and Records..................................................................18
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF JAKARTA GROWTH FUND, INC.........................19
8.1. Approval of Merger.................................................................19
8.2. Certificates and Statements by the Indonesia Fund, Inc.............................19
iii
<PAGE>
8.3. Absence of Litigation..............................................................20
8.4. Legal Opinions.....................................................................20
8.5. Auditor's Consent and Certification................................................22
8.6. Effectiveness of N-14 Registration Statement.......................................22
8.7. Regulatory Filings.................................................................22
8.8. Satisfaction of the Jakarta Growth Fund, Inc.......................................23
8.9. Dividends..........................................................................23
9. PAYMENT OF EXPENSES.........................................................................23
9.1. Allocation.........................................................................23
10. COOPERATION FOLLOWING EFFECTIVE DATE........................................................23
11. INDEMNIFICATION.............................................................................24
11.1. Jakarta Growth Fund, Inc...........................................................24
11.2. The Indonesia Fund, Inc............................................................24
12. TERMINATION, POSTPONEMENT AND WAIVERS.......................................................24
12.1. Termination........................................................................24
12.2. Waiver.............................................................................25
12.3. Expiration of Representations and Warranties.......................................25
13. MISCELLANEOUS...............................................................................26
13.1. Transfer Restriction...............................................................26
13.2. Material Provisions................................................................26
13.3. Notices............................................................................26
13.4. Amendments.........................................................................27
13.5. Headings...........................................................................27
13.6. Counterparts.......................................................................27
13.7. Enforceability.....................................................................28
iv
<PAGE>
13.8. Successors and Assigns.............................................................28
13.9. Governing Law......................................................................28
</TABLE>
v
<PAGE>
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is made as of this _______ day of _________, 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.
1
<PAGE>
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.
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.
2
<PAGE>
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.
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
<PAGE>
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.
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
4
<PAGE>
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 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.
5
<PAGE>
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.
6
<PAGE>
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
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.
7
<PAGE>
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.
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
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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.
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
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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.
(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.
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(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 18,
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
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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.
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
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<PAGE>
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 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.
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(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 CORPORATION ACT.
The Jakarta Fund shall take such action as may be required
by Article IX of its Articles of Incorporation and the Maryland
Business Corporation Act to render Article IX of its Charter and the
Maryland Business Corporation 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 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.
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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.
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
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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
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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 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,
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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.
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
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<PAGE>
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 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
19
<PAGE>
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 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
20
<PAGE>
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
21
<PAGE>
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.
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.
22
<PAGE>
(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.
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
23
<PAGE>
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
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.
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<PAGE>
(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.
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<PAGE>
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.
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
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<PAGE>
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
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.
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<PAGE>
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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<PAGE>
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.
THE INDONESIA FUND, INC.
By:
----------------------------
Name:
----------------------------
Attest:
----------------------------
Title:
----------------------------
JAKARTA GROWTH FUND, INC.
By:
----------------------------
Name:
----------------------------
Attest:
----------------------------
Title:
----------------------------
29
<PAGE>
EXHIBIT B
SECTIONS 3-202 THROUGH 3-213 OF THE MARYLAND
GENERAL CORPORATION LAW
<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
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(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 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 stockholders 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.
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(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) 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
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(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.
(2) Within 15 days after the report is filed, any party may object to
it and request a hearing.
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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.
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(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.
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.
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PART B
SUBJECT TO COMPLETION DATED OCTOBER 11, 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.....................................................................................36
</TABLE>
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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.
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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 and related risks 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
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<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
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<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 options or future
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
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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 the Indonesia 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
excessive 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 $107,412 $ (98,930) 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 (199,473) 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 (440,817) 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 (2,398) 2.7
---------- ---------- ------------ -------
CEMENT MANUFACTURER
TOTAL CEMENT ......................................... 314,197 309,404 (4,793) 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 (280,514) 5.0
---------- ---------- ------------ -------
CIGARETTES
TOTAL CONSUMER GOODS AND DISTRIBUTION ................ 1,823,070 1,803,039 (20,031) 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 (271,048) 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 (31,800) 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) (301,520) (35) (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 51,127 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 7.22%
---------- ---------- ---------- -------
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 3.63%
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.
-9-
<PAGE>
<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-
-10-
<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$1.8
-11-
<PAGE>
billion for the same period in 1999 to US$ 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.
-12-
<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
-13-
<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
-------------------------------------------------------------------------------
-14-
<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".
-15-
<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".
16
<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".
17
<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".
18
<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".
<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.
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(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
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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.
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<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. Form of Merger Agreement and Plan of Reorganization is filed
herewith as Exhibit A.
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. To be filed by
amendment.
(b) Opinion and consent of Venable, Baetjer and Howard, LLP. To be filed
by amendment.
12.(a) Opinion and Consent of Willkie Farr & Gallagher with respect to tax
matters. To be filed by amendment.
(b) Opinion and consent of Brown & Wood LLP with respect to tax matters.
To be filed by amendment.
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<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.
15. Not Applicable
16. Powers of Attorney (incorporated in signature page to Registration
Statement included herein)
17(a) Code of Ethics.
(b) Proxy Cards.
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
44
<PAGE>
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
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<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
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 11th day of October, 2000.
The Indonesia Fund, Inc.
By: /s/ William W. Priest, Jr.
----------------------------------------------
Name: William W. Priest, Jr.
Title: Chairman of the Board and President
Each person whose signature appears below hereby constitutes and appoints
Michael A. Pignataro and Hal Liebes and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement on Form N-14 and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and hereby grants to such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that such attorneys-in-fact
and agents or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
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>
/s/ William W. Priest, Jr.
--------------------------
William W. Priest, Jr. Chairman of the Board and President October 11, 2000
/s/ Dr. Enrique R. Arzac
--------------------------
Dr. Enrique R. Arzac Director October 11, 2000
/s/ Lawrence J. Fox
--------------------------
Lawrence J. Fox Director October 11, 2000
/s/ Richard H. Francis
--------------------------
Richard H. Francis Director October 11, 2000
/s/ Michael A. Pignataro
--------------------------
Michael A. Pignataro Chief Financial Officer and Secretary October 11, 2000
(Principal Financial Officer)
</TABLE>
46
<PAGE>
EXHIBIT NO. EXHIBIT
EXHIBITS
1(a) Articles of Incorporation of the Registrant, dated January 5, 1990.
1(b) Articles of Amendment of the Registrant dated February 14, 1990.
1(c) Articles of Amendment of the Registrant dated February 22, 1990
2. Amended and Restated By-laws of the Registrant dated November 9,
1999.
4. Form of Merger Agreement and Plan of Reorganization is filed
herewith as Exhibit A.
6. Investment Advisory Agreement between the Registrant and BEA
Associates (now Credit Suisse Asset Management, LLC) dated
December 21, 1990.
9. Custodian Agreement between the Registrant and Brown Brothers
Harriman & Co., dated June 14, 1995, as amended.
13(a) Registrar, Transfer Agency and Service Agreement between the
Registrant and the First National Bank of Boston, dated
September 12, 1995.
13(b) Administrative Services Agreement between the Registrant and BEA
Associates dated April 30, 1992.
13(c) Administration Agreement between the registrant and Bear Stearns
Fund Management, Inc. dated June 23, 1995.
13(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.
13(e) First Amendment to Credit Agreement dated June 21, 2000.
14. Consents of PricewaterhouseCoopers LLP.
16. Powers of Attorney (incorporated in signature page to Registration
Statement included herein)
17(a) Code of Ethics.
(b) Proxy Cards.
47
