JAKARTA GROWTH FUND, INC.
May 24, 1999
To Our Shareholders:
We present the Annual Report of the Jakarta Growth Fund, Inc. (the
"Fund") for the fiscal year ended March 31, 1999. The Net Asset Value per
Share ("NAV") of the Fund on March 31, 1999 was $2.00, representing a decrease
of 17.7% and 6.1% for the year and the past quarter, respectively. The change
in NAV represents the change in the share price. The closing market price of
the Fund on March 31, 1999 on the New York Stock Exchange was $2.1875,
representing a premium of 9.4% to the NAV. The Fund's total net assets
amounted to $10,034,818 on March 31, 1999.
The Jakarta Stock Exchange Composite Index (the "JSE Index") declined
from 541.43 to 393.63, or 27.3%, during the year ended March 31, 1999.
Including the Indonesian rupiah (the "Rupiah") depreciation of 1.2% during the
year, this represented a total net decrease of 28.1 % in United States dollar
terms. For the quarter ended March 31, 1999, the JSE Index decreased by 1.1%
in local currency terms and declined by 8.5% in U.S. dollar terms,
respectively.
The Fund outperformed the JSE Index (in U.S. dollar terms) by 240 basis
points in the first quarter of 1999. The outperformance was largely
attributable to the relatively strong performance of the top five holdings of
the Fund and helped by the weakness of the Rupiah during the quarter. For the
year ended March 31, 1999, the Fund has outperformed the JSE Index by 10.4
percentage points.
PORTFOLIO
At March 31, 1999, the Fund had invested 63.5% of its total net assets in
Indonesian equities.
Due to the Asian crisis, the Fund adopted a defensive strategy in the
quarter ending December 31, 1997 and invested a significant portion of its
assets in U.S. short-term debt securities. At March 31, 1999, the Fund had
approximately 37.3% of its net assets invested in U.S. short-term debt
securities.
The Fund had significant holdings in the Telecommunications, Paper and
Pulp, and Consumer Goods and Distribution sectors of 15.1%, 11.2%, and 11.0%,
respectively.
During the last quarter, the Fund made no new equity purchases and no
equity issues were eliminated.
INDONESIAN ECONOMY
Indonesia's real Gross Domestic Product ("GDP") contraction deepened into
the final quarter of 1998, declining by 19.5% year-over-year ("y-o-y") after
declining by 18.4% y-o-y in the third quarter. The slowdown is spearheaded by
deceleration in investment and weak external demand. Furthermore, fiscal
stimulus is constrained by the commitment of government resources to social
safety nets, subsidies, and recapitalization of the financial system.
Consequently, the only engine for growth in 1999 is expected to be household
spending. However, burdened with rising unemployment and a massive decline in
wealth due to the devaluation of the Rupiah, the growth led by the increase in
consumption spending will not be strong enough to pull Indonesia out of a
recession in 1999.
Meanwhile, there are some signs in recent economic data released
indicating that Indonesia's economic contraction has bottomed. Although the
Fund has seen some stability in recent months, the domestic economy is still
very weak as reflected in poor import numbers in January 1999 (imports
declined by approximately 28% y-o-y). Foreign direct investment approvals also
had a marked decline in the quarter ended March 31, 1999 to $560 million,
sharply lower than the $5 billion approval in the first quarter of 1998.
A more stable Rupiah coupled with less disruptions to the domestic
distribution channels resulted in a declining inflation rate in recent months.
Annualized consumer inflation eased to 45.4% in March 1999, down significantly
from the 70 to 80% y-o-y inflation rate last year. The sharp decline in
inflation has raised expectations of further interest rate reductions this
year, with an increasing number of economists expecting short-term interest
rates to decrease to approximately 30% from the current level of 37% by the
middle of this year. The government is also considering implementing inflation
targets in the future, and has sought assistance from the New Zealand
government.
The Rupiah exchange rate has stabilized significantly since the second
half of 1998. Currency stability was largely maintained throughout the course
of the first quarter of 1999, although the eruption of ethnic, religious and
student riots periodically threatened it. There is very limited interbank
trading of the Rupiah and the direction of the currency is primarily dictated
by the conversion of bilateral/multilateral aid money into the local
currency. While the recent success in rescheduling some of the external debt
of the private sector and the government will ease some of the imminent
pressure on capital outflows, uncertainty over the general election may still
act as a destabilizing factor for the currency. As such, the Fund still does
not rule out the possibility of the Rupiah falling towards the 10,000 Rupiah
per one U.S. dollar level in the coming months.
Indonesia has made some progress in its Financial sector restructuring
effort this quarter. On March 13, 1999, the Indonesian government announced
the liquidation of 38 banks (including some owned by politically
well-connected businessmen) and took over seven others deemed to have a strong
branch networks and a significant number of customers. Nine banks qualified
for the government recapitalization program, but the banks had to come up with
20% of the recapitalization cost by April 21, 1999. Eight out of the nine
banks have recapitalized (75 trillion Rupiah). Bank Niaga was eliminated from
the program. With the closure, the number of banks in Indonesia has now
declined to 170 from 240.
Positive progress was made in the political scene in the first quarter of
1999, specifically with regards to the election preparations. There seems to
be an increasing consensus that the general election will proceed as scheduled
in June 1999. Forty-eight out of the 201 registered parties are eligible to
run in the election to contest the 462 seats in the Lower House-Dewan
Perwakilan Rakyat ("DPR"). However, there will be only five dominant parties
in the coming election, namely the ruling Golungan Karya party ("Golkar"),
Parka Demokrasi Indonesia ("PDI") (chaired by Ms. Megawati Sukarnoputri),
Parti Aman Nasional ("PAN") (chaired by Mr. Amien Rias), Parti Persatuan
Permbangunan ("PPP") (chaired by Mr. Hamzah Haz) and Parti Kabangkiton Bangsa
("PKB") (chaired by Mr. Abdurrahman Wahid). Support for the five main
political parties is evenly spread and it seems that a coalition will have to
be formed in order to win the election. In the upcoming months leading to the
election, there will be a clearer understanding of the possible coalitions
that may emerge. The ability of Angkatan Bersenjata Republik Indonesia
("ABRI") (the "military") to enforce law and order remains a concern of the
upcoming election because they were not able to control the recent riots and
violent clashes between the different ethnic and religious groups in
Indonesia. The riots and clashes from Aceh, Sambas and Maluku had resulted in
over hundreds of casualties and thousands of buildings burned.
THE STOCK MARKET
The Jakarta stock market and the Rupiah managed to stay relatively firm
during the first quarter of 1999 despite numerous ethnic clashes. For the
quarter, the JSE Index declined by 1.1% on thin trading volume (averaging 189
billion Rupiah or approximately $21.7 million per day). Although the stock
market experienced some weakness in the months of January and February, the
government's decision to close down 38 ailing banks and the increased funding
by the International Monetary Fund ("IMF") underpinned both the stock market
and the Rupiah in March.
The stock market is likely to remain nervous in the coming quarter in
view of the rising social/political tensions leading to the June 7 General
Election. However, given the increasing compromise seen among the various
political parties recently, the political scene in Indonesia seems to have
improved. This should translate to lower risk premium, which together with
declining inflation and stabilizing currency allow some leeway for interest
rates to edge down, thereby underpinning stock prices.
INVESTMENT STRATEGY
Our investment in short-term securities as at the end of March 31, 1999
was 37.3%. During the quarter, the Fund did not make any new equity purchases
due to concerns of the increasing number of riots and violent incidents in
some of the rural cities in Indonesia. However, the Jakarta stock market held
up reasonably well due to improved sentiment toward the regional markets as a
whole.
For the coming quarter, the Fund intends to keep a relatively cautious
stance in view of the upcoming General Election on June 7. Although there is
increasing consensus that no major disruptions will occur before the election,
the Fund still has to be cognizant to the risks if conditions deteriorate.
Having said that, Indonesia's economy seems to have stabilized, and domestic
economic activity is also increasing. Department store sales, especially those
targeting the lower-end of the market, have also been relatively strong in
recent months. Given this backdrop, the coming quarter should provide the Fund
with the opportunity to increase its equity exposure, especially on any
substantial market weakness. The Fund is looking to reduce its investment in
short-term securities position toward the 20% level if there are no major
political and social disturbances.
In terms of sector strategy, the Fund will maintain an underweight
position in the Financial sector as the bank re-capitalization program is
progressing very slowly. Nevertheless, the Fund will monitor the situation
very carefully in order to exploit any good buying opportunities. The Fund
still likes Telecommunication stocks, given their strong business franchise,
and the Fund is looking to increase its weighting in Indonesian Satellite
Corporation on price weakness. The Fund is also looking to increase its
weighting in U.S. dollar-based commodities and resource stocks, especially
given the recent turnaround in commodity prices. The Fund is also likely to
increase its exposure to consumer related stocks with the stabilization of the
Indonesian economy.
We appreciate your continuing support of your Fund.
Sincerely,
/s/ Haruo Sawada
Haruo Sawada
President
The Board of Directors and officers of the Jakarta Growth Fund, Inc. take
this opportunity to express their appreciation to Mr. Haruo Sawada, who has
been reassigned, effective May 31, 1999, to new duties at Nomura Asset
Management Co., Ltd. ("NAM"). Mr. Sawada has served as President of Nomura
Asset Management U.S.A., Inc., the Fund's manager ("Manager") and President
and Portfolio Manager of the Fund since 1997.
The Board of Directors of the Fund has elected Mr. Nobuo Katayama to
serve as the President of the Fund and a member of its Board of Directors. Mr.
Katayama, who will succeed Mr. Sawada as President of the Manager, will also
act as Portfolio Manager of the Fund, effective June 1, 1999. Mr. Katayama has
been Marketing Officer of NAM, the parent company of the Manager, since 1997.
Mr. Katayama served as Director and Chief Portfolio Manager of NAM from 1993
to 1997.
NAM provides investment recommendations to the Manager regarding the
Fund's portfolio. As Portfolio Manager for the Fund and President of the
Manager, Mr. Katayama will be primarily responsible for the day-to-day
portfolio management of the Fund.
JAKARTA GROWTH FUND, INC.
FUND HIGHLIGHTS-MARCH 31,1999
KEY STATISTICS:
Net Assets ........................................ $10,034,818
Net Asset Value per Share ......................... $2.00
Closing NYSE Market Price ......................... $2.1875
Percentage Change in Net Asset Value per Share* ... (17.7%)
Percentage Change in NYSE Market Price* ........... (46.2%)
MARKET INDEX:
RUPIAH U.S.$
------ -----
Jakarta Stock Exchange Composite Index* ........... (27.3%) (28.1%)
*From April 1, 1998 through March 31, 1999
ASSET ALLOCATION:
Indonesian Stocks ................................. 63.5%
Cash and Cash Equivalents ......................... 37.3
-----
Total Investments ................................. 100.8
Liabilities in Excess of Other Assets, Net ........ (0.8)
-----
Total ............................................. 100.0%
=====
INDUSTRY DIVERSIFICATION:
% OF % OF
NET ASSETS NET ASSETS
---------- ----------
Telecommunications ............... 15.1 Cement ........................ 2.3
Paper and Pulp ................... 11.2 Commercial Services ........... 0.8
Consumer Goods and Distribution... 11.0 Manufacturing ................. 0.7
Mining ........................... 10.3 Pharmaceuticals ............... 0.3
Agribusiness and Fishing ......... 8.9 Banking ....................... 0.0
Conglomerate ..................... 2.9
TEN LARGEST EQUITY HOLDINGS BY MARKET VALUE
MARKET % OF
SECURITY VALUE NET ASSETS
- -------- -------- ----------
Telekomunikasi Indonesia .......................... $979,769 9.8
Gudang Garam ...................................... 900,682 9.0
Indah Kiat Paper & Pulp ........................... 686,851 6.8
Tambang Timah ..................................... 536,416 5.3
Indonesian Satellite Corporation .................. 534,947 5.3
Cahaya Kalbar ..................................... 534,104 5.3
Aneka Tambang ..................................... 497,694 5.0
Pabrik Kertas Tjiwi Kimia ......................... 437,487 4.4
Astra International ............................... 286,127 2.9
Daya Guna Samudera................................. 241,110 2.4
<PAGE>
JAKARTA GROWTH FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Jakarta Growth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Jakarta Growth
Fund, Inc. (the "Fund") at March 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as financial statements) are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at March 31,1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York New York 10036
May 11, 1999
SCHEDULE OF INVESTMENTS*
MARCH 31,1999
% OF
MARKET NET
SHARES COST VALUE ASSETS
------ ---- ----- ------
INDONESIAN EQUITY SECURITIES
AGRIBUSINESS AND FISHING
Astra Argo Niaga Lestari ........... 520,000 $ 172,012 114,220 1.2
Palm oil
Cahaya Kalbar ...................... 2,200,000 1,879,504 534,104 5.3
Palm oil
Daya Guna Samudera ................. 524,680 409,717 241,110 2.4
Fishing --------- ------- ---
Total Agribusiness and Fishing ..... 2,461,233 889,434 8.9
--------- ------- ---
BANKING
Bank Pan Indonesia (warrants) ...... 480,858 35,048 4,169 0.0
Commercial bank --------- ------- ---
CEMENT
Semen Gresik ....................... 212,000 197,129 234,058 2.3
Cement manufacturer --------- ------- ---
See notes to financial statements
<PAGE>
JAKARTA GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS*--(CONTINUED)
MARCH 31,1999
% OF
MARKET NET
SHARES COST VALUE ASSETS
------ ---- ------ ------
COMMERCIAL SERVICES
Citra Munya Nusaphala Persada ...... 2,915,000 $ 786,178 $ 75,824 0.8
Toll road operator and developer ---------- -------- ------
CONGLOMERATE
Astra International ................ 3,000,000 1,836,096 286,127 2.9
Automobile distribution, ---------- -------- ------
agribusiness and electronics
CONSUMER GOODS AND DISTRIBUTION
Gudang Garam ....................... 676,000 486,096 900,682 9.0
Cigarettes
Mayora Indah........................ 4,800,000 451,258 166,474 1.6
Biscuits and candies
Metrodata Electronics............... 419,496 538,120 36,372 0.4
Consumer electronics ---------- -------- ------
Total Consumer Goods and
Distribution....................... 1,475,474 1,103,528 11.0
---------- -------- ------
MANUFACTURING
Asiana Multikreasi.................. 792,500 82,869 4,581 0.0
Toys
Intikeramik Alamasri Industri....... 3,000,000 593,444 69,364 0.7
Porcelain tile ---------- -------- ------
Total Manufacturing................. 676,313 73,945 0.7
---------- -------- ------
MINING
Aneka Tambang....................... 2,969,000 401,927 497,694 5.0
Mining
Tambang Timah....................... 800,000 494,764 536,416 5.3
Tin mining ---------- -------- ------
Total Mining ....................... 896,691 1,034,110 10.3
---------- -------- ------
PAPER AND PULP
Indah Kiat Paper & Pulp............. 2,248,205 984,459 636,775 6.3
Indah Kiat Paper & Pulp (warrants).. 320,856 31,005 50,076 0.5
Pulp and paper products
Pabrik Kertas Tjiwi Kimia........... 1,745,134 1,023,646 388,368 3.9
Pabrik Kertas Tjiwi Kimia (warrants) 480,090 132,726 49,119 0.5
Writing and printing paper ---------- -------- ------
Total Paper and Pulp................ 2,171,836 1,124,338 11.2
---------- -------- ------
See notes to financial statements
<PAGE>
JAKARTA GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS*--(CONTINUED)
MARCH 31,1999
% OF
MARKET NET
SHARES COST VALUE ASSETS
------ ---- ------ ------
PHARMACEUTICALS
Tempo Scan Pacific ................. 530,000 $ 1,553,591 $ 33,699 0.3
Pharmaceuticals ----------- ------------ ------
TELECOMMUNICATIONS
Indonesian Satellite
Corporation (Indosat).............. 401,500 885,151 534,947 5.3
International telecommunications
Telekomunikasi Indonesia............ 3,000,000 3,330,967 979,769 9.8
Domestic telecommunications ----------- ------------ ------
Total Telecommunications ........... 4,216,118 1,514,716 15.1
----------- ------------ ------
TOTAL INVESTMENTS IN
INDONESIAN EQUITY SECURITIES....... 16,305,707 6,373,948 63.5
----------- ------------ ------
INVESTMENTS IN SHORT-TERM SECURITIES
TIME DEPOSIT PRINCIPAL
Royal Bank of Canada, AMOUNT
interest bearing call ---------
account 4.96875%, due 04/01/99..... $ 2,100,000 2,100,000 2,100,000 20.9
COMMERCIAL PAPER
Metropolitan Life Funding Corp.,
4.84%, due 04/28/99................ 400,000 398,548 398,548 4.0
General Electric Capital Corp.,
4.85%, due 04/21/99................ 400,000 398,922 398,922 4.0
Ford Motor Credit Corp.,
4.84%, due 04/16/99................ 450,000 449,093 449,093 4.4
Kitty Hawk Funding Corp.,
4.87%, due 04/15/99................ 400,000 399,242 399,242 4.0
TOTAL INVESTMENTS ----------- ------------ ------
IN SHORT-TERM SECURITIES........... 3,745,805 3,745,805 37.3
----------- ------------ ------
TOTAL INVESTMENTS................... 20,051,512 10,119,753 100.8
LIABILITIES IN EXCESS OF
OTHER ASSETS, NET.................. (84,736) (84,935) (0.8)
----------- ------------ ------
NET ASSETS.......................... $19,966,776 $10,034,818 100.0
=========== ============ ======
* The description following each investment is unaudited and not covered by the
Report of Independent Accountants.
Portfolio securities and foreign currency holdings were translated
at the following exchange rate as of March 31, 1999.
Indonesia rupiah IDR 8,650= $1.00
See notes to financial statements
<PAGE>
JAKARTA GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31,1999
ASSETS:
Investments in securities,
at market value (cost-$16,305,707) ..................... $6,373,948
Investments in short-term securities,
at market value (cost-$3,745,805) ...................... 3,745,805
Cash ...................................................... 41,122
Receivable for investments sold ........................... 8,541
Receivable for dividends and interest ..................... 291
-----------
Total Assets .................................... 10,169,707
-----------
LIABILITIES:
Accrued management fee .................................... 9,089
Other accrued expenses .................................... 125,800
-----------
Total Liabilities ............................... 134,889
-----------
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........................... (33,639,114)
Unrealized net depreciation on investments and
foreign exchange........................................ (9,931,562)
Accumulated undistributed net investment loss ............. (13,299)
-----------
Net Assets ...................................... $10,034,818
===========
Net asset value per share ................................. $2.00
=====
See notes to financial statements
<PAGE>
JAKARTA GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31,1999
INCOME:
Dividend income (less $6,672 withholding taxes) ..... $ 37,806
Interest income ..................................... 223,696
--------
Total Income................................ $ 261,502
EXPENSES:
Custodian fees ...................................... 110,200
Management fee ...................................... 104,629
Auditing and tax reporting fees ..................... 56,575
Legal fees .......................................... 54,860
Directors' fees and expenses......................... 31,075
Shareholder reports ................................. 30,005
Registration fees ................................... 16,418
Annual meeting expenses ............................. 16,075
Transfer agency fees ................................ 15,160
Insurance fees ...................................... 3,650
Miscellaneous ....................................... 9,866
--------
Total Expenses ...................................... 448,513
----------
INVESTMENT INCOME (LOSS)-NET ........................ (187,011)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Realized gain (loss) on investments and
foreign currency transactions:
Net realized loss on investments .................... (1,766,648)
Net realized loss on foreign exchange ............... (7,017,983)
----------
Net realized loss on investments and
foreign exchange ................................... (8,784,631)
Change in net unrealized appreciation on
translation of foreign currency and
other assets and liabilities
denominated in foreign currency .................... 6,717,285
Change in net unrealized appreciation
on investments ..................................... 81,520
----------
Net realized and unrealized loss on investments and
foreign exchange ................................... (1,985,826)
----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... ($2,172,837)
==========
See notes to financial statements
<PAGE>
JAKARTA GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED
MARCH 31,
1999 1998
---- ----
FROM INVESTMENT ACTIVITIES:
Net investment income (loss)................... ($187,011) $ 168,740
Net realized loss on investments .............. (1,766,648) (2,103,579)
Net realized loss on foreign exchange ......... (7,017,983) (13,177,401)
Change in net unrealized appreciation
(depreciation) on investments
and foreign exchange ........................ 6,798,805 (23,370,864)
----------- ----------
Decrease in net assets derived from
investment activities ....................... (2,172,837) (38,483,104)
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS:
Net asset value of shares issued to shareholders
on reinvestment of dividends from net
investment income (824 shares) -- 2,937
----------- ----------
Increase in net assets derived from
capital share transactions -- 2,937
----------- ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ......................... -- (100,335)
----------- ----------
Net decrease in net assets..................... (2,172,837) (38,580,502)
----------- ----------
NET ASSETS:
Beginning of year ............................. 12,207,655 50,788,157
----------- ----------
End of year (including accumulated
net investment loss of $13,299 in 1999)...... $10,034,818 12,207,655
----------- ----------
See notes to financial statements
<PAGE>
JAKARTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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 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 March 31, 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 re-
<PAGE>
JAKARTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ported 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 1984 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.
(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
Indonesian 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 Adviser"), to act as investment adviser for the Fund. Pursuant
to the investment advisory agreement, the Investment Adviser has retained its
subsidiary, Nomura Asset Management Singapore Limited (the "Sub-Adviser"), to
act as investment sub-adviser 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 Adviser 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-Adviser receives a monthly fee from the Investment Adviser 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 $104,629 for the
year ended March 31, 1999. Under the Investment Advisory Agreement, the
Manager informed the Fund that the Investment Adviser earned fees of $47,521
for the year ended
<PAGE>
JAKARTA GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999 of which $23,761 were paid to the Sub-Adviser. At March 31,
1999, the fee payable to the Manager, by the Fund, was $9,089.
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
transactions for the year ended March 31, 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 attendance
at meetings. Such fees and expenses for unaffiliated Directors aggregated
$31,075 for the year ended March 31, 1999.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, exclusive of investments in foreign
currencies and short-term securities, for the year ended March 31, 1999 were
$2,137,034 and $591,036, respectively.
As of March 31, 1999, net unrealized depreciation on investments,
exclusive of investments in foreign currency and short-term securities, for
Federal income tax purposes was $9,931,759 of which $608,005 related to
appreciated securities and $10,539,764 related to depreciated securities. The
aggregate cost of investments, exclusive of investments in foreign currencies
and short-term securities, of $3,745,805 at March 31, 1999 for Federal income
tax purposes was $16,305,707.
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 in 2006 and $17,301,899 expires in 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.
<PAGE>
JAKARTA GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share of common stock outstanding
throughout the period.
For the Year Ended March 31,
----------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net asset value, beginning of year... $2.43 $10.12 $9.11 $7.69 $9.30
----- ------ ----- ----- -----
Net investment income (loss)...... (0.04) 0.03 0.01 0.06 0.01
Net realized and unrealized gain
(loss) on investments and
foreign currency................ (0.39) (7.70) 1.00 1.47 (1.60)
----- ------ ----- ----- -----
Total from investment operations.. (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 year......... $2.00 $2.43 $10.12 $9.11 $7.69
===== ====== ====== ===== =====
Market value, end of year............ $2.1875 $4.0625 $8.875 $9.250 $8.125
Total investment return*............. (46.2%) (54.0%) (4.1%) 15.3% (13.1%)
Net asset value total return**....... (17.7%) (75.3%) 11.1% 20.0% (17.1%)
Ratio to average net assets/
supplemental data:
Net assets, end of year (in 000).. $10,035 $12,208 $50,788 $45,693 $38,552
Operating expenses................ 4.66% 2.60% 2.07% 1.94% 1.91%
Net investment income (loss)...... (1.94%) 0.53% 0.12% 0.70% 0.15%
Portfolio turnover................ 11% 68% 35% 44% 37%
______________
* 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.
<PAGE>
JAKARTA GROWTH FUND, INC.
REVIEW OF THE FUND'S MARKET PRICE COMPARED TO NET ASSET VALUE
Shares of closed-end investment companies, including funds focusing on a
single country, have at various times traded at both premiums and discounts to
their net asset value. Although the shares of the Fund frequently have traded
at such a premium, they also have traded at a discount from NAV.
Since the Fund was established, the Board of Directors on a quarterly
basis has reviewed the trading price of the Fund's shares. The purpose of such
review has been to determine whether a discount exists and, if so, whether it
would be in shareholders' overall best interests for the Fund to conduct share
repurchases, make an issuer tender offer for shares or consider another means
of possibly reducing the discount. For example, the Board of Directors has
also considered whether it would be in the best interests of the Fund to
convert to an open-end fund or to an interval fund, which is a form of
investment company that makes periodic share repurchases at prices based on
NAV.
To date, the Board of Directors has not authorized open-market share
repurchases or a tender offer for shares of the Fund. The Board of Directors
also has not felt that it would be in the best interests of the Fund or its
shareholders to convert to an open-end fund or to have interval fund status.
As a "country fund" emphasizing a particular segment of the market, the Fund's
NAV is more volatile than might be the case for a fund with a broader in-
vestment focus. The Board of Directors believes that converting the Fund to
either an open-end or interval fund would subject the Fund to redemptions or
repurchases at times when liquidation of portfolio securities could
disadvantage remaining shareholders, and the Directors believe that the recent
sometime extreme volatility of the financial market in Indonesia supports
their view. Additionally, since an open-end fund has a limited ability to
invest in illiquid securities, such a conversion could hinder the Fund's
ability to pursue its investment objectives. The Board of Directors intends to
continue to review, on a quarterly basis, the trading market for the Fund's
shares.
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.
<PAGE>
JAKARTA GROWTH FUND, INC.
SUPPLEMENTAL PROXY INFORMATION (UNAUDITED)
The 1998 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 10, 1998.
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, 1999; 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,
Haruo Sawada, 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, 1999.
No other business was transacted at the meeting. The results of the voting at
the Annual Meeting are as follows:
<TABLE>
1. To elect the Fund's Board of Directors:
<CAPTION>
% OF % OF
SHARES VOTED OUTSTANDING SHARES VOTED OUTSTANDING
FOR SHARES WITHHOLD AUTHORITY SHARES
------------ ----------- ------------------ -----------
<S> <C> <C> <C> <C>
William G. Barker, Jr....... 2,647,150 52.8 347,578 6.9
George H. Chittenden ....... 2,652,800 52.9 341,927 6.8
Haruo Sawada ............... 2,651,250 52.8 343,478 6.8
Chor Weng Tan .............. 2,650,248 52.8 344,480 6.9
Arthur R. Taylor ........... 2,650,150 52.8 344,578 6.9
John F. Wallace ............ 2,647,296 52.8 347,432 6.9
</TABLE>
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants of the Fund:
% OF % OF % OF
SHARES VOTED OUTSTANDING SHARES VOTED OUTSTANDING SHARES OUTSTANDING
FOR SHARES AGAINST SHARES ABSTAINED SHARES
------------ ----------- ------------ ----------- --------- -----------
2,723,460 54.3 256,824 5.1 14,443 0.3
<PAGE>
JAKARTA GROWTH FUND, INC.
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan (the "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. If a shareholder holds shares in his/her own
name, communications regarding the Plan should be addressed to the Plan Agent,
State Street Bank and Trust Company, P.O. Box 8209, Boston, Massachusetts
02266-8209. Under the Plan, shareholders appoint the Plan Agent to reinvest
dividends and distributions in shares of the Fund. Such shares will be
acquired by the Plan Agent for shareholders either through open market
purchases if the Fund is trading at a discount or through the issuance of
authorized but unissued shares if the 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 Fund's net asset value per share on such date,
the number of shares to be issued by the Fund to each shareholder receiving
shares in lieu of cash dividends or distributions will be determined by
dividing the amount of the cash dividends or distributions to which such
shareholder would be entitled by the greater of the net asset value per share
on such date or 95% of the market price of a share on such date. If the market
price of a share on such distribution date is below the net asset value per
share, the number of shares to be issued to such shareholders will be
determined by dividing such amount, less brokerage commission, by the per
share market price.
Purchases will be made by the Plan Agent from time to time on the New
York Stock Exchange (the "Exchange") 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 Exchange on
the preceding trading day was higher than the net asset value per share. If on
the dividend payable date, purchases by the 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 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
Exchange or elsewhere is insufficient to satisfy dividend investments, the
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 Fund to satisfy the dividend investment requirements. However,
each participant will pay a pro rata share of brokerage commissions incurred
with respect to the 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 Fund. For the fiscal
year ended March 31, 1999, the Fund did not purchase any shares in the open
market for dividend reinvestment purposes or issue any new shares.
Shareholders who elect to hold their shares in the name of a broker or
other nominee should contact such broker or other nominee to determine whether
they may participate in the Plan. To the extent such participation is
permitted, the Plan Agent will administer the Plan on the basis of the number
of shares certified from time to time by the broker as representing the total
amount registered in the shareholder's name and held for the account of
beneficial owners who are
<PAGE>
participating in such Plan. Shareholders that participate in the Plan holding
shares in a brokerage account may not be able to transfer the shares to
another broker and continue to participate in the Plan. Shareholders who are
participating in the Plan may withdraw from the Plan at any time. There will
be no penalty for withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin it at any time. Changes in
participation in the Plan should be made by contacting the Plan Agent if the
shares are held in the shareholder's own name and must be in writing and
should include the shareholder's name and address as they appear on the
account registration. If the shares are held in the name of a broker or other
nominee, such person should be contacted regarding changes in participation in
the Plan. Upon withdrawal from the Plan, the Plan Agent will deliver to the
shareholder a certificate or certificates for the appropriate number of full
shares and a cash payment for any fractional shares. In lieu of receiving a
certificate, the shareholder may request the Plan Agent to sell part or all of
the shareholder's shares at the market price and remit the proceeds to the
shareholder, net of any brokerage commissions. A $2.50 fee will be charged by
the Plan Agent upon any cash withdrawal or termination. An election to
withdraw from the Plan will, until such election is changed, be deemed to be
an election by a shareholder to take all subsequent distributions in cash. An
election will be effective only for a dividend or distribution if it is
received by the Plan Agent not less than 10 days prior to such record date.
The Plan Agent will maintain all shareholders' accounts in the Plan, and
furnish written confirmation of all transactions in such accounts, including
information needed by shareholders for tax records. Shares in the account of
each Plan participant may be held by the Plan Agent in non-certificated form
in the name of the participant, and each shareholder's proxy will include
those shares purchased or received pursuant to the Plan.
The automatic reinvestment of dividends will not relieve participants of
any income taxes that may be payable (or required to be withheld) on such
dividends. Shareholders receiving dividends or distributions in the form of
additional shares pursuant to the Plan should be treated for Federal income
tax purposes as receiving a distribution in an amount equal to the amount of
money that the shareholders receiving cash dividends or distributions will
receive and should have a cost basis in the shares received equal to such
amount.
The Fund reserves the right to amend or terminate the Plan as applied to
any dividend paid subsequent to written notice of the change sent to
participants in the Plan at least 90 days before the record date for such
dividend. There is no service charge to participants in the Plan; however, the
Fund reserves the right to amend the Plan to include a service charge payable
by the participants. All correspondence concerning the Plan, including
requests for additional information about the Plan, should be directed to the
Plan Agent.
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.
<PAGE>
BOARD OF DIRECTORS --------------------------------------
William G. Barker, Jr. ======================================
George H. Chittenden --------------------------------------
Haruo Sawada
Chor Weng Tan
Arthur R. Taylor
John F. Wallace
OFFICERS
Haruo Sawada, President
Mitsutoyo Kohno, Vice President
John F. Wallace, Vice President
John J. Boretti, Secretary and Treasurer
Terence P. Brennan, Assistant Secretary and
Assistant Treasurer
MANAGER JAKARTA
Nomura Asset Management U.S.A. Inc.
180 Maiden Lane GROWTH
New York, New York 10038-4936
INTERNET ADDRESS FUND, INC.
www.nomura-asset.com
INVESTMENT ADVISER
Nomura Asset Management Co., Ltd.
2-1-14 Nihonbashi, Chuo-ku,
Tokyo 103-8260, Japan
INVESTMENT SUB-ADVISER
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 ANNUAL REPORT
P.O. Box 8209
Boston, Massachusetts 02266-8209 MARCH 31, 1999
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. --------------------------------------
