JAKARTA GROWTH FUND, INC.
November 24, 1999
To Our Shareholders:
We present the Semi-Annual Report of the Jakarta Growth Fund, Inc. (the
"Fund") for the six months ended September 30, 1999. The Net Asset Value per
Share ("NAV") of the Fund on September 30, 1999 was $2.25, representing an
increase of 12.5%, and a decrease of 30.1% for the past six months and past
quarter, respectively. The closing market price of the Fund on September 30,
1999 on the New York Stock Exchange was $3.125, representing a premium of
39.0% to the NAV. The Fund's total net assets amounted to $11,287,556 on
September 30, 1999.
The Jakarta Stock Exchange Composite Index (the "JSE Index") increased
from 393.63 to 547.94, or 39.2%, during the six months ended September 30,
1999. Including the Indonesian Rupiah (the "Rupiah") appreciation of 3.9%
during the six months, this represented a total net increase of 44.6% in
United States dollar terms. For the quarter ended September 30, 1999, the JSE
Index decreased by 17.2%, in local currency terms and declined by 31.2% in
U.S. dollar terms, respectively.
THE PORTFOLIO
At September 30, 1999, the Fund had invested 96.7% of its total net assets
in Indonesian equities.
The Fund had significant holdings in the Telecommunications, Consumer
Goods and Distribution, and Paper and Pulp sectors of 18.7%, 17.8%, and 13.3%,
respectively.
During the last quarter, the Fund added four new equity issues and no
equity issues were eliminated. The new issues added were: Golden
Agri-Resources Ltd., palm oil and palm kernel; H.M. Sampoerna, cigarettes;
Multipolar Corporation, computer equipment; and Sunson Textile Manufacturing
Co., yarn, cloth and other products.
INDONESIAN ECONOMY
The Indonesian stock market rally that followed the peaceful General
Election on June 7, 1999 took an abrupt turn on news of the Bank Bali scandal
and the violence that paralyzed East Timor after its overwhelming vote for
independence from Indonesia. Amid these disturbing events, the Rupiah also
declined to a low of approximately 9,000 Rupiah to one U.S. dollar in early
September from its post-election high of approximately 6,500. At September 30,
1999, the Rupiah was trading at 8,325 to one U.S. dollar.
The key issues that are troubling Indonesia are as follows:
BANK BALI SCANDAL
One of Indonesia's five largest private banks, Bank Bali was
connected with a scandal involving the payment of 546 billion Rupiah
(about $68 million at the current exchange rate) to a Golungar Karya
Party ("Golkar") linked finance company, PT Era Giat Prima, for its
services in recovering 904 billion Rupiah worth of loans relating to the
Indonesian Bank Restructuring Agency ("IBRA"). Both the International
Monetary Fund ("IMF") and the World Bank have demanded an independent
audit of the Central Bank, as part of the probe into the Bank Bali scan-
dal. According to the audit by Pricewaterhouse Coopers LLP, the
investigation into the Bank Bali scandal has uncovered "numerous"
indications of fraud, as well as the transfer of millions of dollars to
senior Indonesian officials and politically connected individuals. Seven
key government officials (including the Finance Minister, Central Bank
Governor, Minister of State Enterprises and the Chairman of the IBRA)
have already been implicated based on the partial release of the
investigation report. Although it faces international pressure now, the
government had refused to release the full investigation report based on
the excuse that this will violate Banking Secrecy laws. In the meantime,
both the IMF and World Bank have suspended further fresh loan
disbursements to Indonesia. In addition, all discussions on debt
rescheduling have been put on hold by the Paris Club.
THE EAST TIMOR SAGA
The violence and damage inflicted by the pro-Indonesian militia in
East Timor after its vote of independence have received massive
international criticism. Despite the initial nationalistic feelings of
resentment, the inability of the Indonesian military forces to restore
peace and order in East Timor, coupled with massive international
pressure, resulted in President Habibie's decision to allow an uncondi-
tional international peace-keeping force into the territory.
The deployment of an international peace-keeping force may help to
contain the violence that we have seen in East Timor over recent weeks but
it may also spark fresh confrontations between the peace-keeping force and
the pro-Indonesian militia. Any casualties among the peace-keeping force
can then be used to rebuke Indonesia, especially if the peace-keeping
force can gather proof that the pro-Indonesian militia are getting support
from the Indonesian military. This could have serious ramifications for
the financial assistance programs to Indonesia.
Although very much a remote possibility at the moment, the
independence of East Timor may set a precedent for other delinquent
provinces like Aceh and Irian Jaya to also petition for independence. If
this materializes, Indonesia will face the immense risk of being
separated. In fact, this is exactly the reason why some of the
politicians and military commanders in Indonesia were against East
Timor's independence in the first place.
There were no major surprises within the latest economic statistics
released. Deflation still rules with consumer prices falling for the
seventh consecutive month in September, by 0.68% from the August 19, 1999
level. On an annual basis, Consumer Price Index ("CPI") is now at a
record low of 1.3%, a dramatic improvement from the 82.4% rate
experienced in the same month last year. The sharp decline in the
inflation rate has also resulted in a continuous decline in interest
rates during the quarter. Currently, the one-month Sertificate of Bank
Indonesia ("SBI") rate has declined to approximately 13% from 18.8% on
June 30, 1999.
Trade numbers released during the quarter were pleasantly above
market expectations, with the monthly trade surplus exceeding $2 billion.
July non oil exports, while remaining weak, had significant upward
revisions from -17% to -14% year-over-year ("y-o-y"). August trade numbers
were even more robust: non-oil exports increased a massive 66% after
rising nearly 35% y-o-y in July. However, imports remained depressed, a
clear indication of the weak state of current domestic demand. In the
eight months through August, the trade surplus has increased to $14.9
billion.
INDONESIA AFTER THE PRESIDENTIAL ELECTION
After hovering around the 550 level for most of October, the
Indonesian stock market staged a dramatic rally after Mr. Abdurrahman
Wahid (or Gus Dur) and Ms. Megawati Sukarnoputri were elected as the new
President and Vice-President of Indonesia. The JSE Index surged to 644
(the highest level in the past 13 weeks) amid the volatile trading
session last week when Ms. Megawati was thought to have won the
presidential post after Mr. Habibie pulled out from the race. However,
the surprise victory by Gus Dur sent the Indonesian stock market tumbling
by more than 11% from its intra-day high. Some rioting also took place in
several cities, including Jakarta, as Ms. Megawati's supporters protested
violently against the outcome of the Presidential election. Events took
another turn during the Vice-Presidential election when Armed Forces
Chief (General Wiranto) and Parliamentary Speaker (Akbar Tanjung)
withdrew from the race. In the end, in a climax-filled two days, Ms.
Megawati Sukarnoptri was finally elected Vice President of Indonesia. The
Indonesian stock market responded positively to the news despite many
health limitations of Gus Dur, who could hardly see and walk as a result
of two strokes that he had previously. However, trading was largely
dominated by the locals with the foreigners remaining at the sideline,
partly due to the Year 2000 concern, and also to wait for the appointment
of the new cabinet.
The Gus Dur and Ms. Megawati duo can be regarded as one of the best
combinations as it appeased not only the Muslim groups but also the
reformist groups. They are likely to have enhanced unity among the
Indonesians and put an end to the civil unrest which has seriously
disrupted the social harmony that Indonesians enjoyed prior to the
crisis. At the same time, both the parties led by Gus Dur and Ms.
Megawati are also "cleaner" than the previous ruling Golkar Party. As a
result, restructuring efforts, in particular the Financial sector
reform, should be able to progress at a quicker pace. Both of them are
also seen as very receptive to Indonesian Chinese and this should
provide relief to the battered Indonesian Chinese community.
Having mentioned the positives, there are still a number of major
problems that Gus Dur and Ms. Megawati need to tackle quickly and
decisively. First, the composition of the new cabinet must not be
perceived as corrupted as the previous one. In fact, Gus Dur has already
sparked some controversy after considering the inclusion of a few
Suharto-era ministers in a council intended to create a new national
economic strategy.
Second, Indonesia's relations with the international community have
turned sour after the East Timor saga and the Bank Bali scandal. Given
the need of external aid to finance Indonesia's fiscal deficit and to
restructure the Indonesian corporations, it is imperative for the new
government to mend ties with the international community promptly. This
effort is demonstrated by the recent approval by the Parliament to
release the full investigation report by PricewaterhouseCoopers LLP on
the Bank Bali scandal. This action is likely to result in an improvement
in the relations with IMF and World Bank, which are expected to resume
their loan disbursements to Indonesia soon.
Third, the new government needs to deal with the threat of
separatist movements in provinces such as Aceh, Iriah Jaya and Ambon. Gus
Dur has already assigned the responsibility for handling the restive
provinces of Iriah Jaya, Ambon and Riau to Ms. Megawati. At the same
time, he would handle the resource-rich Aceh, given his connections with
Aceh's Islamic leaders.
Last but not least, Corporate and Financial sector reforms have to
be expedited so as to regain the confidence of foreign investors. Amid
the uncertain ties leading to the Presidential election, the Fund has not
seen too much corporate restructuring activity in the past quarter. This
is likely to change given that the fear associated with political
uncertainties has been reduced. Although the adjustment process can be a
long and tedious one, it is beneficial to Indonesia in the longer term.
THE STOCK MARKET
After a brief period of euphoria following the election in June, the JSE
Index continued its steady but gradual decline, mainly due to concerns over
political developments and the Bank Bali scandal. After reaching a high of
681 on July 6, 1999, the Indonesian stock market fell 31.2% in U.S. dollar
terms during the quarter. However, trading volume was relatively light during
the quarter, averaging only $87.1 million per day, a 12.1 % quarter over
quarter decline when compared with the second quarter ending June 30, 1999
average daily volume of $99.0 million.
Political problems and the Bank Bali scandal have also taken their toll
on the currency, with the Rupiah reversing its strengthening trend that the
Fund saw in the second quarter ending June 30, 1999. Since early July, the
Rupiah has weakened from 6,750 Rupiah to one U.S. dollar to the level of 8,325
Rupiah to one U.S. dollar at September 30, 1999.
INVESTMENT STRATEGY
During the third quarter, the Fund took advantage of the weakness in the
Indonesian stock market to acquire some stocks. As a result, the cash position
declined to 3.3% at September 30, 1999 from 9.8% at June 30, 1999.
In terms of the stock market outlook, with the presidential election
behind us, the risk premium ascribed to Indonesia as a result of its political
and social instability has declined. Gus Dur has also assured the interna-
tional business community that his government would uphold market-oriented
policy and encourage foreign investors to take an active part in the country's
economic development. Hence in the near term, favorable sentiment is likely
to underpin the Indonesian stock market and the JSE Index may retest the 700
level in the early part of next year, especially if the Year 2000 concerns are
over-rated. The expected resumption of lending by the foreign lenders (such as
the IMF, World Bank, etc.) would further underpin sentiment. The economic
environment in the near term should also be positive for stocks given the very
benign inflation and interest rate outlook, and a firm currency. However, over
the medium to longer term, the stock market will be susceptible to some of
the unpleasant realities of the economic adjustment process.
In terms of sector strategy, the Fund has increased its weighting in the
Consumer sector during the third quarter. The Fund will continue to maintain an
over weight position in this sector for the coming quarter given its strong
forecasted earnings. Although the Fund has increased the weighting in financial
stocks slightly during the third quarter, it is still very much underweight in
this sector relative to the benchmark given the very poor sentiment after the
Bank Bali scandal. Weighting in the Telecommunications sector has been reduced
closer to the neutral position and the Fund is likely to maintain this
weighting in the coming quarter. As to the Mining and Agriculture sector, the
Fund will continue to maintain an overweight position given its relatively
cheap valuations.
We appreciate your continuing support of your Fund.
Sincerely,
Nobuo Katayama
President
________________________________________________________________________________
Year 2000 Issues. Many computer systems were designed using only two
digits to designate years. These systems may not be able to distinguish the
Year 2000 from the Year 1900 (commonly known as the "Year 2000 Problem"). Like
other investment companies and financial and business organizations, the Fund
could be adversely affected if the computer systems used by Nomura Asset
Management U.S.A. Inc. ("NAM-U.S.A.") or other Fund service providers do not
properly address this problem prior to January 1, 2000. NAM-U.S.A. has hired
consultants to analyze these issues and to implement any system modifications
necessary to prepare for the Year 2000. In addition, NAM-U.S.A. has sought
assurances from the Fund's other service providers that they are taking all
necessary steps to ensure that their computer systems will accurately reflect
the Year 2000, and NAM-U.S.A. will continue to monitor the situation. However,
no assurance can be given that the Fund's service providers have anticipated
every step necessary to avoid any adverse effect on the Fund attributable to
the Year 2000 Problem.
In addition the companies in which the Fund invests, the markets for
their securities and related securities trade processing could be adversely
affected by the Year 2000 Problem. If the value of a Fund investment is
adversely affected by a Year 2000 Problem, the Fund's investment return will
be reduced.
________________________________________________________________________________
SHAREHOLDERS ACCOUNT INFORMATION
Shareholders whose accounts are held in their own name may contact the
Fund's transfer agent, State Street Bank and Trust Company at (800) 426-5523
for information concerning their accounts.
________________________________________________________________________________
JAKARTA GROWTH FUND, INC.
FUND HIGHLIGHTS-SEPTEMBER 30,1999
(Unaudited)
KEY STATISTICS:
Net Assets ........................................... $11,287,556
Net Asset Value per Share ............................ $2.25
Closing NYSE Market Price ............................ $3.125
Percentage Change in Net Asset Value per Share* ...... 12.5%
Percentage Change in NYSE Market Price* .............. 42.9%
MARKET INDEX:
RUPIAH U.S$
Jakarta Stock Exchange Composite Index* .............. 39.2% 44.6%
*From April 1, 1999 through September 30, 1999
ASSET ALLOCATION:
Indonesian Stocks ..................................... 96.7%
Cash and Cash Equivalents ............................. 3.3
-----
Total Investments ..................................... 100.0
Other Assets Less Liabilities, Net .................... 0.0
-----
Total ................................................. 100.0%
=====
INDUSTRY DIVERSIFICATION:
% OF % OF
NET ASSETS NET ASSETS
Telecommunications .................. 18.7 Conglomerate ............ 4.6
Consumer Goods and Distribution ..... 17.8 Banking ................. 3.6
Paper and Pulp ...................... 13.3 Pharmaceuticals ......... 3.2
Agribusiness and Fishing ............ 9.8 Cement .................. 3.0
Mining .............................. 9.4 Retail .................. 1.1
Food and Beverage ................... 5.9 Commercial Services ..... 0.6
Manufacturing ....................... 5.7
TEN LARGEST EQUITY HOLDINGS BY MARKET VALUE
MARKET % OF
SECURITY VALUE NET ASSETS
Gudang Garam .................................. $1,368,240 12.1
Telekomunikasi Indonesia ...................... 1,270,261 11.3
Indah Kiat Paper & Pulp ....................... 1,137,897 10.1
Indonesian Satellite Corporation .............. 832,769 7.4
Indofood Sukes Makmur ......................... 666,366 5.9
Tambang Timah ................................. 542,943 4.8
Sunson Textile Manufacturing Co ............... 525,526 4.7
Astra International ........................... 521,905 4.6
Aneka Tambang ................................. 517,123 4.6
Astra Argo Niaga Lestari....................... 391,832 3.5
JAKARTA GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
SEPTEMBER 30,1999
(Unaudited)
% OF
MARKET NET
SHARES COST VALUE ASSETS
------ ---- ----- ------
INDONESIAN EQUITY SECURITIES
AGRIBUSINESS AND FISHING
Astra Argo Niaga Lestari.......... 1,864,000 $ 643,811 391,832 3.5
Palm oil
Cahaya Kalbar..................... 2,200,000 1,879,504 356,757 3.1
Palm oil
Daya Guna Samudera................ 577,148 413,119 188,916 1.7
Fishing
Golden Agri-Resources Ltd......... 455,000 290,342 168,350 1.5
--------- ------- ---
Palm oil and palm kernel
Total Agribusiness and Fishing.... 3,226,776 1,105,855 9.8
--------- --------- ---
BANKING
Bank Pan Indonesia (warrants)..... 513,379 35,048 19,425 0.2
Commercial bank
Lippo Bank........................ 18,400,000 703,204 386,787 3.4
--------- --------- ---
Commercial bank
Total Banking..................... 738,252 406,212 3.6
--------- --------- ---
CEMENT
Semen Gresik...................... 212,000 197,129 338,691 3.0
--------- --------- ---
Cement manufacturer
COMMERCIAL SERVICES
Citra Munya Nusaphala Persada .... 1,000,000 82,928 66,066 0.6
--------- --------- ---
Toll road operator and
developer
CONGLOMERATE
Astra International.............. 1,755,500 712,152 521,905 4.6
--------- --------- ---
Automobile distribution,
agribusiness and electronics
CONSUMER GOODS AND DISTRIBUTION
Gudang Garam...................... 676,000 486,096 1,368,240 12.1
Cigarettes
H.M. Sampoerna.................... 200,000 508,770 354,955 3.1
Cigarettes
Mayora Indah...................... 3,800,000 352,461 296,697 2.6
--------- --------- ---
Biscuits and candies
Total Consumer Goods
and Distribution................ 1,347,327 2,019,892 17.8
--------- --------- ----
FOOD AND BEVERAGE
Indofood Sukes Makmur............. 700,000 502,756 666,366 5.9
--------- --------- ----
Food processor
See notes to financial statements
JAKARTA GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS -(Continued)
SEPTEMBER 30,1999
(Unaudited)
% of
Market Net
Shares Cost Value Assets
------ ---- ----- ------
MANUFACTURING
Intikeramik Alamasri Industri.... 3,000,000 $ 593,445 $ 117,118 1.0
Porcelain tile
Sunson Textile
Manufacturing Co................. 7,000,000 571,912 525,526 4.7
--------- --------- ---
Yarn, cloth and other products
Total Manufacturing ............. 1,165,357 642,644 5.7
--------- --------- ---
MINING
Aneka Tambang..................... 2,969,000 401,927 517,123 4.6
Mining
Tambang Timah..................... 800,000 494,764 542,943 4.8
--------- --------- ---
Tin mining
Total Mining...................... 896,691 1,060,066 9.4
--------- --------- ---
PAPER AND PULP
Indah Kiat Paper & Pulp........... 2,978,205 1,331,693 1,064,283 9.4
Indah Kiat Paper & Pulp
(warrants)..................... 320,856 31,005 73,614 0.7
Pulp and paper products
Pabrik Kertas Tjiwi Kimia ........ 1,245,134 698,459 302,870 2.7
Pabrik Kertas Tjiwi Kimia
(warrants)..................... 480,090 132,726 57,668 0.5
--------- --------- ---
Writing and printing paper
Total Paper and Pulp.............. 2,193,883 1,498,435 13.3
--------- --------- ---
PHARMACEUTICALS
Tempo Scan Pacific................ 795,000 1,671,405 355,721 3.2
--------- --------- ---
Pharmaceuticals
RETAIL
Multipolar Corporation............ 352,500 17,399 11,644 0.1
Computer equipment
Ramayana Lestari Sentosa.......... 200,000 91,675 108,108 1.0
--------- --------- ---
Department store
Total Retail ..................... 109,074 119,752 1.1
--------- --------- ---
TELECOMMUNICATIONS
Indonesian Satellite Corporation
(Inclosat) .................... 619,000 1,352,866 832,769 7.4
International telecommunications
Telekomunikasi Indonesia ......... 3,584,720 2,886,770 1,270,261 11.3
--------- --------- ---
Domestic telecommunications
Total Telecommunications ......... 4,239,636 2,103,030 18.7
--------- --------- ---
TOTAL INVESTMENTS IN INDONESIAN
EQUITY SECURITIES ............. 17,083,366 10,904,635 96.7
--------- --------- ---
See notes to financial statements
JAKARTA GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS -(Continued)
SEPTEMBER 30,1999
(Unaudited)
% of
Principal Market Net
Amount Cost Value Assets
------- ---- ----- ------
NVESTMENTS IN SHORT-TERM SECURITIES
Commercial Paper
Kittyhawk Funding, 5.10%,
due 10/04/99................... $380,000 $379,830 $379,830 3.3
--------- --------- ---
TOTAL INVESTMENTS IN SHORT-TERM
SECURITIES..................... 379,830 379,830 3.3
--------- --------- ---
TOTAL INVESTMENTS................. 17,463,196 11,284,465 100.0
OTHER ASSETS LESS
LIABILITIES, NET................ 3,298 3,091 0.0
--------- --------- ----
NET ASSETS........................ $ 17,466,494 $11,287,556 100.0
============ =========== =====
Portfolio securities and foreign currency
holdings were translated at the
following exchange rate as of September 30, 1999.
Indonesia rupiah IDR 8,325 = $1.00
See notes to financial statements
JAKARTA GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30,1999
(Unaudited)
ASSETS:
Investments in securities, at market value
(cost-$17,083,366)..................................... $ 10,904,635
Investments in short-term securities,
at market value (cost-$379,830)........................ 379,830
Cash .................................................... 93,491
Receivable for dividends and interest ................... 6,067
--------
Total Assets..................................... 11,384,023
----------
LIABILITIES:
Accrued management fee 10,327
Other accrued expenses 86,140
------
Total Liabilities 96,467
------
NET ASSETS:
Capital stock (par value of 5,017,564 shares of
capital stock outstanding, authorized
100,000,000, par value $0.10 each) .................... 501,756
Paid-in capital ......................................... 53,117,037
Accumulated net realized loss on investments
and foreign currency transactions ..................... (36,058,887)
Unrealized net depreciation on investments
and foreign exchange .................................. (6,178,939)
Accumulated undistributed net investment loss ........... (93,411)
---------
Net Assets ...................................... $ 11,287,556
============
Net asset value per share $2.25
=====
See notes to financial statements
JAKARTA GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,1999
(Unaudited)
INCOME:
Dividend income
(less $21,108 withholding taxes)........... $119,610
Interest income ............................... 47,774
------
Total Income ......................... $ 167,384
EXPENSES:
Management fee ................................ 75,591
Custodian fees ................................ 58,745
Auditing and tax reporting fees ............... 24,339
Legal fees .................................... 23,058
Shareholder reports ........................... 17,568
Registration fees ............................ 16,170
Directors' fees and expenses .................. 10,065
Annual meeting expenses ....................... 10,065
Transfer agency fees .......................... 7,503
Insurance fees ................................ 1,830
Miscellaneous ................................. 2,562
-----
Total Expenses ...................... 247,496
-------
INVESTMENT LOSS-NET ........................... (80,112)
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Realized loss on investments and
foreign currency transactions:
Net realized loss on investments .............. (2,275,944)
Net realized loss on foreign exchange ......... (143,829)
---------
Net realized loss on investments
and foreign exchange ........................ (2,419,773)
-----------
Change in net unrealized depreciation on
translation of foreign currency and
other assets and liabilities
denominated in foreign currency ............. 2,411,266
Change in net unrealized
depreciation on investments ................. 1,341,357
---------
Net realized and unrealized gain on
investments and foreign exchange............. 1,332,850
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....................... $1,252,738
==========
See notes to financial statements
JAKARTA GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year
September 30, 1999 Ended
(Unaudited) March 31, 1999
FROM INVESTMENT ACTIVITIES:
Net investment loss ......................... $ (80,112) $ (187,011)
Net realized loss on investments ............ (2,275,944) (1,766,648)
Net realized loss on foreign exchange ....... (143,829) (7,017,983)
Change in net unrealized depreciation on
investments and foreign exchange ............ 3,752,623 6,798,805
--------- -----------
Increase (decrease) in net assets derived
from investment activities and net
increase (decrease) in net assets ........... 1,252,738 (2,172,837)
NET ASSETS:
Beginning of period ......................... 10,034,818 12,207,655
---------- -----------
End of period (including accumulated net
investment loss of $93,411
and $13,299, respectively) .................. $ 11,287,556 $ 10,034,818
------------ ------------
See notes to financial statements
JAKARTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS-(Unaudited)
1. Significant Accounting Policies
Jakarta Growth Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. The Fund was incorporated in Maryland on January 29, 1990 and
investment operations commenced on April 19, 1990. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of Securities--Investments traded on stock exchanges are
valued 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 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. Securities for which market quotations are not readily available
and restricted securities are valued in good faith at fair value using methods
determined by the Board of Directors. In determining fair value, consideration
is given to cost, operating and other financial data. Short-term debt
securities which mature in 60 days or less are valued 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 Fund.
(b) Foreign Currency Transactions--Transactions denominated in Indonesian
rupiah ("Rupiah") are recorded in the Fund's records at the current prevailing
rate at the time of the transaction. Asset and liability accounts that are
denominated in Rupiah are adjusted to reflect the current exchange rate at
the end of the period. Transaction gains or losses resulting from changes in
the exchange rate during the reporting period or upon settlement of foreign
currency transactions are included in operations for the current period.
The net assets of the Fund are presented at the exchange rate and market
values at the end of the period. The Fund isolates that portion of the change
in unrealized appreciation (depreciation) included in the statement of
operations arising as a result of changes in Rupiah rates at September 30,
1999 on investments and other assets and liabilities. Net realized foreign
exchange gains or losses includes foreign exchange gains or losses arising
from sales of portfolio securities, sales and maturities of short-term
securities, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books, and the United States dollar equivalent of the amounts actually
received or paid.
(c) Security Transactions, Investment Income, Distributions to
Shareholders--Security transactions are accounted for on the trade date.
Dividend income and distributions are recorded on the ex-dividend date and
interest income is recorded on the accrual basis. Realized gains and losses on
the sale of investments are calculated on the identified cost basis.
Distributions from net investment income and net realized gains are
determined in accordance with Federal income tax regulations, which may
differ from generally accepted accounting principles. To the extent these
"book/tax" differences are permanent in nature (i.e., that they result from
other than timing of recognition--"temporary"), such accounts are reclassified
within the capital accounts based on their Federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net realized gains for financial reporting
purposes, but not for tax purposes, are reported as distributions in excess
of net realized gains.
(d) Capital Account Reclassification -- For the year ended March 31, 1999,
the Fund's undistributed net investment loss and accumulated net realized loss
were decreased by $173,712 and $28,168, respectively, with an offsetting
decrease in additional paid in capital of $201,880. This adjustment was
primarily the result of the reclassification of net foreign currency losses,
and a net operating loss.
(e) Income Taxes--A provision for United States income taxes has not been
made since it is the intention of the Fund to qualify as a regulated
investment company under the Internal Revenue Code of 1986 as amended and to
distribute within the allowable time limit all taxable income to its
shareholders.
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, the 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.
JAKARTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS-(Unaudited) (Continued)
(f) Use of Estimates in Financial Statement Preparation--The preparation of
financial statements in accordance with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual
results could differ from these estimates.
(g) Concentration of Risk--A significant portion of the Fund's net assets
consists of Indonesian securities which involve certain considerations and
risks not typically associated with investments in the United States. In
addition to the smaller size, less liquidity and greater volatility, the In-
donesian securities market is less developed than the U.S. securities market
and there is often substantially less publicly available information about
Indonesian issuers than there is about U.S. issuers. Future economic and
political developments in Indonesia could adversely affect the liquidity or
value, or both, of securities in which the Fund is invested. Further, the Fund
may be exposed to currency devaluation and other exchange rate fluctuations.
2. Management Agreement and Transactions With Affiliated Persons
Nomura Asset Management U.S.A. Inc. (the "Manager") acts as the Manager of
the Fund pursuant to a management agreement. Under the agreement, the Manager
provides all office space, facilities and personnel necessary to perform its
duties. Pursuant to such management agreement, the Manager has retained its
parent company, Nomura Asset Management Co., Ltd. (the "Investment Advisor"),
to act as investment advisor for the Fund. Pursuant to the investment advisory
agreement, the Investment Advisor has retained its subsidiary Nomura Asset
Management Singapore Limited (the "Sub-Advisor") to act as investment
sub-advisor to the Fund.
As compensation for its services to the Fund, the Manager receives a
monthly fee, at the annual rate of 1.10% of the value of the Fund's average
weekly net assets. For services performed under the Investment Advisory
Agreement, the Investment Advisor receives a monthly fee from the Manager at
the annual rate of 0.50% of the Fund's average weekly net assets. For services
performed under the terms of the Investment Sub-Advisory Agreement, the
Sub-Advisor receives a monthly fee from the Investment Advisor at the annual
rate of 0.25% of the Fund's average weekly net assets. Under the Management
Agreement, the Fund paid or accrued fees to the Manager of $75,591 for the six
months ended September 30, 1999. Under the Investment Advisory Agreement, the
Manager informed the Fund that the Investment Adviser earned fees of $34,514
for the six months ended September 30, 1999 of which $17,257 were paid to the
Sub-Advisor. At September 30, 1999, the fee payable to the Manager, by the
Fund, was $10,327.
Certain officers and/or directors of the Fund are officers and/or directors
of the Manager. The Nomura Securities Co., Ltd. (the Manager's indirect
parent) earned no commissions on the execution of portfolio security transac-
tions for the six months ended September 30, 1999. The Fund pays each Director
not affiliated with the Manager an annual fee of $5,000 plus $500 per meeting
attended, together with such Director's actual expenses related to at-
tendance at meetings. Such fees and expenses for unaffiliated Directors
aggregated $10,065 for the six months ended September 30, 1999.
3. Purchases and Sales of Investments
Purchases and sales of investments, exclusive of investments in foreign
currencies and short-term securities, for the six months ended September 30,
1999 were $4,544,616 and $1,494,417, respectively.
As of September 30, 1999, net unrealized depreciation on investments,
exclusive of investments in foreign currency and short-term securities, for
Federal income tax purposes was $6,178,731 of which $1,409,734 related to
appreciated securities and $7,588,465 related to depreciated securities. The
aggregate cost of investments, exclusive of investments in foreign currencies
and short-term securities, of $379,830 at September 30, 1999 for Federal income
tax purposes was $17,083,366.
The Fund has a capital loss carryforward as of March 31, 1999 of
$33,524,037 of which $1,217,005 expires March 31, 2001, $5,504,417 expires
March 31, 2002, $1,284,915 expires March 31, 2003, $1,711,790 expires March
31, 2005, $6,504,011 expires March 31, 2006 and $17,301,899 expires March 31,
2007.
Capital losses and currency losses incurred after October 31, within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. Accordingly, the Fund incurred and elected to defer capital
losses of $115,077, and $13,299 currency losses for the year ended March 31,
1999.
JAKARTA GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share of common stock outstanding
throughout the period.
<TABLE>
<CAPTION>
For the Six
Months Ended
September 30, 1999 For the Year Ended March 31,
----------------------------
(Unaudited) 1999 1998 1997 1996 ' 1995
----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 2.00 $ 2.43 $10.12 $9.11 $7.69 $9.30
------ ------ ------ ------ ----- -----
Net investment income (loss) ..................... (0.02) (0.04) 0.03 0.01 0.06 0.01
Net realized and unrealized gain
(loss) on investments and foreign currency 0.27 (0.39) (7.70) 1.00 1.47 (1.60)
------ ------- ------ ------ ---- ------
Total from investment operations ................ 0.25 (0.43) (7.67) 1.01 1.53 (1.59)
------ ------- ------ ------ ---- ------
Distributions to shareholders from:
Net investment income ............................ - - (0.02) - (0.11) (0.02)
------ ------ ------ ------ ---- ------
Total distributions ................................. - - (0.02) - (0.11) (0.02)
------ ------ ------ ------ ---- ------
Net asset value, end of period ...................... $2.25 $2.00 $2.43 $10.12 $9.11 $7.69
====== ====== ====== ====== ===== =====
Market value, end of period ......................... $3.125 $2.1875 $4.0625 $8.875 $9.250 $8.125
Total investment return+............................. 42.9% (46.2%) (54.0%) (4.1%) 15.3% (13.1%)
Net asset value total return++....................... 12.5% (17.7%) (75.3%) 11.1% 20.0% (17.1%)
Ratio to average net assets/supplemental data:
Net assets, end of period (in 000) ................. $11,288 $10,035 $12,208 $50,788 $45,693 $38,552
Operating expenses .............................. 3.70%+ 4.66% 2.60% 2.07% 1.94% 1.91%
Net investment income ........................... (1.20%)+ (1.94%) 0.53% 0.12% 0.70% 0.15%
Portfolio turnover .............................. 13% 11% 68% 35% 44% 37%
</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.
+Annualized
JAKARTA GROWTH FUND, INC.
SUPPLEMENTAL PROXY INFORMATION (Unaudited)
The 1999 Annual Meeting of the Shareholders of the Fund was held on at the
Fund's offices, 180 Maiden Lane, New York, New York on November 9, 1999. The
purpose of the meeting was to elect six Directors to serve for the ensuing
year; to consider and act upon a proposal to ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of the Fund for its
fiscal year ending March 31, 2000; and to transact such other business as may
properly come before the Meeting or any adjournment thereof.
At the Meeting, the following persons were elected by the shareholders to
serve as Directors of the Fund: William G. Barker, Jr., George H. Chittenden,
Nobuo Katayama, Chor Weng Tan, Arthur R. Taylor, and John F. Wallace. The
shareholders ratified the selection of PricewaterhouseCoopers LLP, to serve as
the Fund's independent accountants for the fiscal year ending March 31, 2000.
No other business was transacted at the meeting.
The results of the voting at the Annual Meeting are as follows:
1. To elect the Fund's Board of Directors:
<TABLE>
<CAPTION>
% of % of
Shares Voted outstanding Shares Voted outstanding
For Shares Withhold Authority Shares
------------ ----------- ------------------ ----------
<S> <C> <C> <C> <C>
William G. Barker, Jr. ........................ 2,799,032 55.8 56,611 1.1
George H. Chittenden .......................... 2,799,516 55.8 56,127 1.1
Nobuo Katayama ................................ 2,799,338 55.8 56,305 1.1
Chor Weng Tan ................................. 2,797,776 55.8 57,867 1.1
Arthur R. Taylor .............................. 2,798,836 55.8 56,807 1.1
John F. Wallace ............................... 2,796,538 55.7 59,105 1.2
</TABLE>
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants of the Fund:
<TABLE>
<CAPTION>
% of % of % of
Shares Voted outstanding Shares Voted outstanding Shares outstanding
For Shares Against Shares Abstained Shares
------------ ----------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
2,830,526 56.4 18,937 0.4 6,180 0.1
</TABLE>
BOARD OF DIRECTORS
William G. Barker, Jr.
George H. Chittenden
Nobuo Katayama
Chor Weng Tan
Arthur R. Taylor
John F. Wallace
OFFICERS
Nobuo Katayama, President
Keisuke Haruguchi, Vice President
David G. Stoeffel, Vice President
John F. Wallace, Vice President
John J. Boretti, Secretary and Treasurer
Terence P. Brennan, Assistant Secretary and
Assistant Treasurer
MANAGER
Nomura Asset Management U.S.A. Inc.
180 Maiden Lane
New York, New York 10038-4936
Internet Address
www.nomura-asset.com
INVESTMENT ADVISOR
Nomura Asset Management Co., Ltd.
2-1-14 Nihonbashi, Chuo-ku,
Tokyo 103-8260, Japan
INVESTMENT SUB-ADVISOR
Nomura Asset Management Singapore Limited
6 Battery Road
Singapore 049909
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street Boston, Massachusetts 02109-3661
DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
P.O. Box 8209
Boston, Massachusetts 02266-8209
COUNSEL
Brown & Wood LLP
One World Trade Center
New York, New York 10048-0557
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036-2798
JAKARTA GROWTH FUND, INC.
180 MAIDEN LANE
NEW YORK, NEW YORK 10038-4936
This Report, including the Financial Statements, is transmitted to the
Shareholders of Jakarta Growth Fund, Inc. for their information. This is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in the Report.
The accompanying Financial Statements, including the Schedule of Investments,
have not been examined by the Fund's independent accountants,
PricewaterhouseCoopers LLP, and accordingly, they express no opinion thereon.
JAKARTA
Growth
Fund, Inc,
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1999
