<PAGE>
THE INDIA
GROWTH
FUND INC.
---------------------------------
---------------------------------
Semi-Annual Report
December 31, 1996
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
General Information
- ------------------------------------------
THE FUND
The India Growth Fund Inc. (the "Fund") is a diversified, closed-end
management investment company whose shares trade on the New York Stock Exchange
("NYSE"). The Fund's investment objective is long-term capital appreciation
through investment primarily in equity securities of Indian companies. The
Fund's investment adviser is Unit Trust of India Investment Advisory Services
Limited and its administrator is Mitchell Hutchins Asset Management Inc.
SHAREHOLDER INFORMATION
The Fund's NYSE trading symbol is "IGF". Daily market prices for the Fund's
shares are published in the NYSE Composite Transactions section of major
newspapers under the designation "IndiaGrFd" or "IndiaG". Net asset value and
market price information about the Fund is published each Monday in THE WALL
STREET JOURNAL, each Sunday in THE NEW YORK TIMES and each Saturday in BARRON'S
as well as other newspapers in a table captioned "Publicly Traded Funds" or
"Closed-End Funds".
DISTRIBUTION POLICY AND CASH PURCHASE OPTION
Under current policies of the Fund's Board of Directors, shareholders may
elect to receive all dividends and other distributions in cash paid by check
mailed directly to the shareholders by the dividend paying agent, PNC Bank,
National Association (the "Plan Agent"). Under the Fund's Dividend Reinvestment
and Cash Purchase Plan (the "Plan"), shareholders not making such election and
whose shares are registered in their own names will receive all distributions in
cash paid by check in U.S. dollars mailed directly to the shareholder by the
Plan Agent. Participants in the Plan will be issued common stock and
non-participants will receive cash. If the market price per share on the
valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants at net asset value or, if the net
asset value is less than 95% of the market price on the valuation date, then at
95% of the market price. If the Fund should declare a dividend or capital gain
distribution payable only in cash, the
1
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
General Information (concluded)
- ------------------------------------------
Plan Agent will, as agent for the participants, buy Fund shares in the open
market, on the NYSE or elsewhere, for the participants' account on, or shortly
after, the payment date.
Participants in the Plan have the option of making additional semi-annual
cash payments to the Plan Agent, in any amount from $100 to $3,000, for
investment in the Fund's common stock. The Plan Agent will use all funds
received from participants to purchase Fund shares in the open market on or
about February 15th and August 15th of each year.
IF YOU WISH TO PARTICIPATE AND YOUR SHARES ARE HELD IN YOUR OWN NAME,
CONTACT THE PLAN AGENT FOR A BROCHURE DESCRIBING THE PLAN AT (800) 852-4750.
HOWEVER, IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK OR OTHER
NOMINEE, YOU SHOULD INSTRUCT YOUR NOMINEE TO PARTICIPATE IN THE PLAN ON YOUR
BEHALF. IF YOUR NOMINEE IS UNABLE TO PARTICIPATE ON YOUR BEHALF, YOU SHOULD
REQUEST IT TO REGISTER YOUR SHARES IN YOUR OWN NAME WHICH WILL ENABLE YOU TO
PARTICIPATE IN THE PLAN.
IF YOU WISH TO OBTAIN ADDITIONAL INFORMATION ON THE FUND, PLEASE
TAKE NOTE OF THE FOLLOWING INTERNET ADDRESSES: WWW.TRUSTNET.CO.UK AND
[email protected].
2
<PAGE>
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Chairman's Letter to Shareholders
- ------------------------------------------
February 12, 1997
Dear Shareholders:
The Indian economy has continued to show buoyant growth during 1996-97. Real
gross domestic product ("GDP") growth is expected to exceed 6.5% for the third
consecutive year. The ninth Five-Year Plan has targeted 7.0% growth for the
years 1997-2002, based on a higher savings rate--26.2%, and a lower incremental
capital output ratio--4.1% and current account deficit--1.9%. Agricultural
production in the current year is expected to grow 4.2% compared to a decline of
0.2% in 1995-96. Industrial growth is expected to decrease to 10.0% versus 12.1%
last year, primarily due to lower growth in the energy and infrastructure
sectors. Manufacturing is likely to grow 12.0% compared to 13.7% last year.
The Reserve Bank of India ("RBI") has taken several measures to support
economic growth, (1) relax monetary policy in an effort to improve liquidity in
the economy and, (2) lower interest rates to promote industrial growth. During
1996-97, inflation (based on movements in the Wholesale Price Index) is expected
to approximate 7.0%. Foreign direct investment in 1996-97 is expected to
increase to US$3 billion. Indian companies have raised US$916 million through
GDR issues and US$300 million through Euro-convertible issues during the period
March to November 1996. Foreign institutional investors ("FII") have invested
US$3 billion in the Indian capital markets since January 1996, and their
cumulative investments in the Indian capital markets have exceeded US$7 billion.
FIIs have been permitted to invest in unlisted companies as well as in debt
instruments, including government securities.
The stock market remained sluggish during the second half of 1996. However,
market sentiment has shown sharp improvement in 1997 due to a number of positive
developments. Reduction in the cash reserve ratio of commercial banks helped
bring down prime lending rates and ease credit availability. Recently, a tax
exemption was announced for realized capital gains that are invested in
specified mutual funds or in new equity issues of infrastructure companies. In
addition, commercial banks have been permitted to invest up to 5% of their
incremental
3
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Chairman's Letter to Shareholders (concluded)
- --------------------------------------------
deposits in the secondary market. With the National Securities Depository
commencing operations, the Indian stock market has started working towards
paperless trading. Furthermore, the Securities Exchange Board of India announced
guidelines for the takeover of companies and is also considering the
introduction of a stock lending scheme. The government is also contemplating
additional measures for the sustained revival of the stock market. The market
anticipates that soon there will be further incentives for investment in capital
markets. The Bombay Stock Exchange Sensitive Index ("BSE Sensex") has already
risen 13.5% during the January 1, 1997 to February 11, 1997 time period.
The Fund continues to pursue its strategy of reallocating its portfolio in
favor of blue chip and large cap stocks in growing sectors. The portfolio's
exposure has been increased to sectors which have experienced sustained growth
such as automobiles, hotels, consumer health care and food and power.
The fundamentals of the Indian market remain strong and we anticipate an
improvement in market sentiment will likely bring a rally to the market. The
Indian stock market will continue to provide long-term growth to investors. The
India Growth Fund is well positioned to gain from the anticipated bull market.
We thank you for your continued interest in the India Growth Fund.
Sincerely,
[SIGNATURE]
G. P. Gupta
Chairman of the Board
& President
4
<PAGE>
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Review of the Indian Economy
- --------------------------------------------
- The Indian economy witnessed real GDP growth of 7.1% in 1995-96 and is
expected to grow 6.0% in 1996-97.
- With normal monsoons in 1996, agricultural production is expected to grow
4.7%.
- Production figures for six infrastructure industries indicate overall
growth of 3.3% during the April-November 1996, time period.
- The Index of Industrial Production grew 12.1% in 1995-96 and is expected
to grow 8.0% in 1996-97.
- An analysis of the semi-annual results of 1,187 non-financial companies,
including 36 public sector enterprises, indicates first-half sales
increased 15.9%, operating profits increased 11.4% and net profits
declined 2.8%.
- The cash reserve ratio of banks was reduced to 10.0% from 14.5% over the
past fifteen months. M3 growth in the current fiscal year averaged 16.0%,
measured year-on-year.
- Auction yields on 91 day and 364 day Treasury Bills declined from 13.0% to
8.2% and 13.2% to 10.4%, respectively during 1996. Yields on ten year
government securities declined from 14.0% to 13.7%.
- In 1995-96, inflation, as measured by movements in the Wholesale Price
Index, declined to 7.8%.
- During 1996-97, import and export growth is expected to average 11.0% and
13.0%, respectively. Imports increased 30.0% and exports 20.9% during
1995-96.
- The 1996-97 fiscal deficit is expected to amount to 5.4% of GDP.
- The rupee remained relatively stable, with marginal depreciation of 2%
during 1996.
5
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Review of the Indian Capital Market
- --------------------------------------------
- During July-December 1996, the BSE Sensex declined from 3,812 points to
3,085 points, a loss of 19.07%.
- During 1997, through February 11, the BSE Sensex rose 13.5%, to 3,502.
- Corporate results for the first half of fiscal year 1996-97 indicate a
slowdown in sales growth and a decline in net profits. Company bottom
lines have been affected by increases in interest costs and the minimum
alternative tax.
- Banks reduced their prime lending rate by 100 basis points after the busy
season credit policy announced by the RBI; interest costs should decline
in the second half of the current fiscal year.
- There was renewed interest in Indian paper in the Euro-market this year
after a lackluster response last year. Indian companies raised a total of
$1.68 billion in 1996, compared to $304 million during the prior year.
- The government revised its guidelines pertaining to Euro-issues affording
Indian companies greater flexibility in reaching external commercial
markets.
- The National Securities Depository commenced operations; the shift toward
book-entry securities custody has begun. This should encourage greater
portfolio investment in the equity markets.
- The takeover code has been announced by the Securities and Exchange Board
of India. Foreign investment in debt markets has been permitted, and banks
have been allowed to invest 5% of their incremental deposits in the
secondary markets. Investment flows in the capital markets are likely to
increase as a consequence of these developments.
6
<PAGE>
- -------------------------------------------------------------
Investment Adviser's Report
- --------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOMBAY STOCK EXCHANGE SENSITIVE INDEX
<S> <C> <C>
January 1, 1996 to December 31, 1996
Jan-96 3023 FII buying picks up significantly in January '96.
2820
Feb-96 3542
3392
Mar-96 3343
3367
Apr-96 3544 Corporate results for FY '96 show good performance.
3826
May-96 3796
3725 United Front Government, supported by Congress, sworn in.
Jun-96 4066 Technical correction and uncertainty on the eve of the Union Budget.
3813
Jul-96 3712 Adverse market reaction to imposition of minimum tax on corporate profits.
3537
Aug-96 3425 Slowdown in FII investment beginning Aug.'96.
3383
Sep-96 3583
3414 Possibility of a slowdown in the industrial growth.
Oct-96 3003
3342 Corporate results (1st half 1996-97 show lower margins.
Nov-96 3172
2745 BSE Sensex reaches 3 year low.
Dec-96 2959
3085 Govt. promises to take steps to revive the capital market.
</TABLE>
- -------------------------------------------------------------------
1996 witnessed a bull run with the BSE Sensex exceeding the 4,100 level in
June due to a strong surge in FII buying during the first half of 1996,
expectations of liquidity improvement and good corporate results for fiscal year
1995-96. In May 1996, the new government aroused renewed optimism in the Indian
stock market on the general perception that the new United Front government is
pro-reform. This led to some rallying in August-September 1996. However, the
markets could not sustain the buoyant trend, resulting in a fall in both the BSE
Sensex and BSE National indices during the last quarter of 1996. The stock
market remained sluggish in this period, primarily due to a slowdown in the
economy and an erosion in the earnings growth in the corporate sector. This
trend reversed and during January 1997, the market rose on expectations of the
government's capital market package.
7
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Investment Adviser's Report (continued)
- --------------------------------------------
FUND PERFORMANCE
The Fund's rupee net asset value ("NAV") has registered compounded annual
growth of 23% since its inception in August 1988, compared with 23% compounded
annual growth for the BSE Sensex and 22% compounded annual growth for the BSE
National Index. In a declining market, the Fund has endeavoured to minimize its
portfolio losses. During 1996, the rise in NAVs of many country funds has been
more than that of their respective stock prices. Consequently, many country
funds were trading at discounts to net asset value. However, the India Growth
Fund was trading at a premium for most of the year with the exception of a few
weeks in July and August 1996 when the Fund was trading at a minor discount.
The Fund has pursued a strategy of increasing its exposure to blue chip and
large cap companies. At December 31, 1996, the Fund's exposure to its top-20
companies increased to 55% of total net assets from 42% at December 31, 1995.
More than 73% of the Fund's net assets are invested in 40 stocks. During the
second half of 1996, when the BSE Sensex decreased 25%, twenty three of the
Fund's top forty stocks outperformed the index. Notable among these, Punjab
Tractors Ltd. (+22.5%), Smithkline Beecham Ltd. (+4.2%), Bharati Telecom Ltd.
(+10.2%), ITC (-7.5%), Mahindra & Mahindra Ltd. (-3.0%), Credit Rating
Information Services India Ltd. (-4.0%). The Fund has increased its exposure in
auto companies such as TVS Suzuki and Mahindra & Mahindra and Punjab Tractors.
Noteworthy additions to the Fund during the past year include Madras Cement
Ltd., State Bank of India Ltd., Smithkline Beecham Ltd., ABB Ltd., Wartsila
Diesel India Ltd. and Asian Hotels Ltd.
During 1996 the Fund's U.S. dollar NAV ranged from a high of US$14.22 to a
low of US$9.29. The high/low price as quoted on the NYSE were US$16.75 and
US$10.50, respectively. The largest premium to NAV was 28.74%, in February 1996,
and the largest discount was 1.0%, in August 1996.
8
<PAGE>
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- -------------------------------------------------------------
The rally in the Indian market in January 1997 is beginning to have a
positive impact on the Fund's NAV. For the month of January 1997, Lipper
Analytical Services, Inc. indicated that the Fund was the top performing Indian
equity fund, achieving a 8.9% increase in its NAV.
INVESTMENT STRATEGY
The Fund has been increasing its exposure to large cap companies in the A
group. It has also been shifting its allocation to potentially strong sectors
such as automobiles, hotels, petroleum, power, telecommunication and banking.
Simultaneously, in anticipation of a possible slowdown in the economy and
corporate profitability, resulting in a depressed market, we have started to
increase the Fund's exposure to defensive stocks (consisting mainly of
multinationals), in sectors such as healthcare, pharmaceuticals and food & dairy
and have begun to divest holdings in weaker sectors. The Fund is well positioned
to take advantage of what we anticipate to be a pending bull market.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE OF RUPEE NAV VS.
<S> <C> <C>
BOMBAY STOCK EXCHANGE SENSITIVE INDEX
January 1, 1995 to December 31, 1996
ReNAV BSESI
4-Jan-95 890.72 3926.90
11-Jan-95 796.01 3600.79
18-Jan-95 812.93 3600.79
25-Jan-95 780.40 3450.68
1-Feb-95 798.58 3569.66
8-Feb-95 783.90 3548.27
15-Feb-95 760.33 3485.14
22-Feb-95 701.86 3233.31
1-Mar-95 752.90 3459.81
8-Mar-95 757.34 3480.99
15-Mar-95 748.84 3399.19
22-Mar-95 744.07 3387.65
29-Mar-95 731.44 3282.34
31-Mar-95 728.61 3260.96
5-Apr-95 745.59 3438.94
12-Apr-95 752.80 3484.70
19-Apr-95 729.46 3384.50
26-Apr-95 700.07 3264.80
3-May-95 655.59 3069.30
10-May-95 685.89 3187.51
17-May-95 678.94 3229.29
24-May-95 682.57 3229.36
31-May-95 691.24 3351.48
7-Jun-95 698.16 3388.48
14-Jun-95 678.48 3324.86
21-Jun-95 680.20 3375.94
28-Jun-95 659.39 3295.28
30-Jun-95 652.15 3247.36
5-Jul-95 629.10 3164.46
12-Jul-95 640.47 3253.45
19-Jul-95 675.07 3402.25
26-Jul-95 702.67 3554.89
2-Aug-95 678.97 3438.34
9-Aug-95 670.76 3422.79
16-Aug-95 667.46 3425.67
23-Aug-95 666.76 3415.56
30-Aug-95 650.30 3346.76
6-Sep-95 645.86 3348.20
13-Sep-95 650.78 3350.23
20-Sep-95 652.87 3401.01
27-Sep-95 666.02 3466.39
30-Sep-95 665.24 3493.21
4-Oct-95 669.43 3531.49
11-Oct-95 676.67 3572.22
16-Oct-95 673.81 3583.76
18-Oct-95 670.95 3567.45
25-Oct-95 650.53 3486.20
1-Nov-95 682.87 3488.50
8-Nov-95 635.34 3354.71
15-Nov-95 593.23 3158.98
22-Nov-95 566.47 3001.52
29-Nov-95 566.86 2922.18
6-Dec-95 577.97 3069.92
13-Dec-95 580.11 3068.20
20-Dec-95 576.99 3049.26
27-Dec-95 585.11 3110.49
31-Dec-95 585.20 3110.49
3-Jan-96 580.95 3088.40
10-Jan-96 563.54 2987.33
17-Jan-96 560.68 2962.91
24-Jan-96 539.10 2833.57
31-Jan-96 551.16 2931.84
7-Feb-96 592.66 3202.49
14-Feb-96 662.68 3581.00
21-Feb-96 647.22 3453.80
28-Feb-96 653.46 3494.09
6-Mar-96 637.56 3424.66
13-Mar-96 624.74 3373.73
20-Mar-96 612.71 3258.08
27-Mar-96 614.89 3309.85
31-Mar-96 623.95 3368.60
3-Apr-96 634.11 3407.60
10-Apr-96 640.65 3469.94
17-Apr-96 672.24 3718.91
24-Apr-96 690.73 3889.87
1-May-96 686.40 3826.72
8-May-96 683.63 3767.25
15-May-96 679.64 3796.30
22-May-96 663.84 3885.85
29-May-96 668.15 3740.45
5-Jun-96 677.67 3813.05
12-Jun-96 693.09 3839.20
19-Jun-96 707.14 3980.04
26-Jun-96 684.41 3792.75
30-Jun-96 686.36 3812.52
3-Jul-96 665.68 3858.03
10-Jul-96 661.17 3671.66
17-Jul-96 660.70 3722.24
24-Jul-96 649.49 3582.06
31-Jul-96 628.08 3536.94
7-Aug-96 629.34 3543.44
14-Aug-96 613.52 3424.63
21-Aug-96 599.54 3405.22
28-Aug-96 609.27 3438.80
4-Sep-96 616.55 3516.90
11-Sep-96 597.74 3382.71
18-Sep-96 593.96 3414.01
25-Sep-96 576.53 3343.92
30-Sep-96 558.87 3239.48
2-Oct-96 557.18 3228.80
9-Oct-96 521.16 3037.63
16-Oct-96 535.23 3104.68
23-Oct-96 583.09 3341.86
30-Oct-96 539.43 3172.98
6-Nov-96 519.12 3044.16
13-Nov-96 530.02 3126.06
20-Nov-96 518.73 3062.50
27-Nov-96 483.81 2883.57
4-Dec-96 462.02 2745.06
11-Dec-96 493.18 2941.36
18-Dec-96 502.38 3001.24
25-Dec-96 518.69 3085.20
</TABLE>
9
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Review of Top Ten Holdings--December 31, 1996
- ------------------------------------------------
TATA ENGINEERING & LOCOMOTIVE CO. LTD ("TELCO")
Telco belongs to the Tata group and is India's largest producer of
commercial vehicles. It dominates with market shares of 73% and 60% in HCVs and
LCVs, respectively. It has three manufacturing plants, one each in Jamshedpur,
Pune and Lucknow. Telco's business strategy, especially in the LCV segment, has
been high volumes and low price. It has launched a new model every year for the
last seven years, including the very successful Sumo. Telco is currently
implementing a project to develop and produce the country's first totally
indigenous car which is expected to be introduced in 1999.
MAHINDRA & MAHINDRA LTD. ("M&M")
M&M is a market leader in tractors and utility vehicles such as jeeps. The
product range primarily caters to the rural market. In the utility vehicles
segment, M&M dominates with a 53% market share. It is expected to introduce four
new upgraded models with engines built in collaboration with Peugeot of France.
Its ongoing internal restructuring program will substantially boost the
productivity of its plants. M&M has six main models in the utility vehicles
segment and has been the market leader in the tractors segment for the past
twelve years.
EIH LTD.
EIH is the second largest hotel company in India, both in terms of revenues
and capacity. EIH enjoys one of the highest occupancy rates in the sector. It is
planning to expand its chain to include new locations and to cater to a new
budget range. Currently, almost 87% of occupancy is derived from business
clientele. EIH owns 14 hotels under the Oberoi brand while another 10 are under
management contracts. Three of EIH's hotels are located in the prime areas of
Mumbai and Delhi. The company's foreign exchange earnings in comparison with
total income is the highest in the industry.
10
<PAGE>
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- -------------------------------------------------------------
ITC LTD.
ITC is one of the leading Indian conglomerates and a significant player in
the cigarette industry. It has a presence in all segments, with a 60% overall
market share. It enjoys very strong brand identification and has developed the
best distribution network in the industry. ITC operates in five principal
businesses, tobacco and cigarettes, oil seeds and edible oils, hotels, paper and
packaging, and international trading. The company is also India's largest
foreign exchange earner. ITC has not been successful in all of its
diversifications and is currently attempting to streamline its operations by
divesting some of its businesses.
TVS SUZUKI LTD.
TVS Suzuki is a joint venture between Suzuki of Japan and the Madras-based
TVS group. Its manufacturing base is situated at Hosur, and it operates in the
two- and three-wheeled vehicle segment. Massive cost reductions and successful
launches of three motorcycles and a scooterette helped the company record 37.5%
compound sales growth during the last three years. This tremendous growth was
fueled only by internal accruals. TVS's largest strength is its product
development unit which has managed to introduce new models to cater to niche
markets at very low capital costs.
BAJAJ AUTO LTD.
Bajaj Auto is India's leading manufacturer of two- and three-wheeled
vehicles, with a market share of 64.6% in scooters, 31% in motorcycles, 11.8% in
mopeds and 84.4% in three-wheeled vehicles. It has two manufacturing plants--one
at Akurdi, in Pune, and the other at Wahaj, near Aurangabad. It has secured
relationships with several foreign partners. Its network includes 370 dealers,
900 service centers and 600 sales and service outlets. The company has
consciously adopted a strategy of high volume, low cost, top quality and
introduction of new models.
11
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Review of Top Ten Holdings--December 31, 1996
(concluded)
- --------------------------------------------------------
RELIANCE INDUSTRIES LTD.
Promoted by Mr. Dhirubhai Ambani, Reliance Industries is one of India's
largest conglomerates. Its activities include polyester, plastics, chemicals and
branded textiles with backward integration into key fibre intermediates. The
company has set up very large plants with a market share of at least 30% in each
of its products. The company has two major complexes that collectively produce a
variety of products in five distinct categories: polyester, polyester
intermediates, plastics, chemicals and textiles. The company has launched
separate joint ventures to mark its entry into oil and gas, refining, power and
telecommunications.
HINDUSTAN PETROLEUM CORP. LTD. ("HPCL")
Hindustan Petroleum is the second largest of India's three major oil
companies with facilities for refining crude and marketing petroleum products.
It has the second largest refining capacity of approximately 202,000 barrels/day
and third largest market share at 19.5%. Aside from Indian Oil Corporation, HPCL
has the best infrastructure in the downstream oil industry. It is aggressively
expanding with planned investments of nearly Rs. 105 billion. Joint venture
investments will account for Rs. 16 billion while the rest will be in its
refining operations and marketing network. The company has a wide network of
regional offices, depots and terminals, spread throughout the country.
HINDUSTAN LEVER LTD. ("HLL")
Hindustan Lever, a 51% subsidiary of the Anglo Dutch giant Unilever, is the
undisputed leader in the fast growing consumer goods sector. It has a very
strong brand portfolio including 10 of the top 60 brands in India. Its products
include detergents, soaps, personal and oral care products and processed foods.
It also has one of the finest distribution networks. It has been able to adapt
its international technology and management skills to suit local needs. HLL has
divested its fertilizer and bulk chemical business and has announced the merger
of a group company--Brooke Bond Lipton India Ltd. to gain access to the growing
food segment.
12
<PAGE>
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- -------------------------------------------------------------
INDIAN HOTELS CO. LTD.
Indian Hotels, belonging to the Tata group, operates the Taj group of
hotels. It is the largest hotel chain in India with four brands including 41
hotels and resorts representing every segment, ranging from five-star deluxe
hotels to heritage palaces to beach and wildlife resorts and are in more than 26
locations all across the country. Indian Hotels has always commanded a premium
over its competitors. More than 70% of its room capacity is located in major
metropolitan cities. The company manages seven hotels for which it receives
management fees and has acquired indirect interests in 13 international hotels.
It also has the largest flight catering unit in India.
13
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Top Twenty Holdings -- December 31, 1996
- --------------------------------------------
The Fund has positions in 217 companies at December 31, 1996. The top 20
holdings (excluding short-term investments) as of this date are as follows:
<TABLE>
<CAPTION>
COMPANY PERCENTAGE OF NET ASSETS
--------------------------------------------------------- -------------------------
<C> <S> <C>
1. Tata Engineering & Locomotive Co. Ltd. .................. 4.64%
2. Mahindra & Mahindra Ltd. ................................ 4.59
3. EIH Ltd. ................................................ 4.50
4. ITC Ltd. ................................................ 4.42
5. TVS Suzuki Ltd. ......................................... 4.34
6. Bajaj Auto Ltd. ......................................... 4.01
7. Reliance Industries Ltd. ................................ 2.89
8. Hindustan Petroleum Corp. Ltd. .......................... 2.81
9. Hindustan Lever Ltd. .................................... 2.51
10. Indian Hotels Co. Ltd. .................................. 2.42
11. Larsen & Toubro Ltd. .................................... 2.27
12. Colgate Palmolive India Ltd. ............................ 2.10
13. Tata Chemicals Ltd. ..................................... 2.08
14. Tata Iron & Steel Co. Ltd. .............................. 2.00
15. Asian Paints India Ltd. ................................. 1.95
16. Indian Aluminum Co. Ltd. ................................ 1.69
17. Brooke Bond Lipton India Ltd. ........................... 1.55
18. Motor Industries Co. Ltd. ............................... 1.46
19. Nestle India Ltd. ....................................... 1.45
20. Siemens India Ltd. ...................................... 1.40
-----
Total.................................................... 55.08%
-----
-----
</TABLE>
14
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Portfolio of Investments
December 31, 1996 (unaudited)
- --------------------------------------------------------
INVESTMENTS IN INDIA--102.33%
- -------------------------------------------------------------------
COMMON STOCKS--99.93%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Aluminum--3.59%
31,571 Hindalco Industries Ltd..................................... $ 578,141
9,000 Hindalco Industries Ltd. GDR................................ 222,750
399,950 Indian Aluminum Co. Ltd..................................... 1,698,532
1,292,800 National Aluminum Ltd....................................... 1,117,902
-----------
3,617,325
-----------
Aquaculture--0.00%
86,900 Aqua Marine Foods Ltd.+..................................... 3,394
400 King International Aqua Ltd.+............................... 17
1,300 MAC Industries Ltd.......................................... 508
4,739 S & S Industries Ltd........................................ 1,057
300 Waterbase Co. Ltd.+......................................... 25
-----------
5,001
-----------
Automobiles & Auto Ancillaries--22.95%
100,000 Amtek Auto Ltd.............................................. 82,287
169,250 Bajaj Auto Ltd.*............................................ 4,032,965
42,750 Carborundom Universal Ltd................................... 159,195
3,300 Clutch Auto Ltd.+........................................... 1,243
107,500 Eicher Ltd.................................................. 230,893
80,000 Gabriel India Ltd........................................... 583,821
92,000 Hero Honda Ltd.............................................. 628,731
3,300 Hindustan Motors Ltd.*...................................... 1,496
550 Kinetic Honda Motor Ltd..................................... 1,281
284,486 LML Ltd.+................................................... 293,612
474,342 Mahindra & Mahindra Ltd..................................... 4,382,867
20,000 Mahindra & Mahindra Ltd. GDR................................ 237,500
9,000 Motor Industries Co. Ltd.................................... 1,465,356
1,425,800 Pal Peugeot Ltd.+........................................... 274,422
94,600 Punjab Tractors Ltd.*....................................... 1,121,478
77,500 Rico Auto Industries Ltd.................................... 162,134
40,700 Sona Steering Systems Ltd................................... 62,441
12,000 Sundaram Fasteners Ltd...................................... 200,753
445,672 Tata Engineering & Locomotive Co. Ltd.*..................... 4,189,441
46,600 Tata Engineering & Locomotive Co. Ltd. GDR*................. 483,475
502,500 TVS Suzuki Ltd.............................................. 4,369,718
60,580 Ucal Fuel Systems Ltd....................................... 130,116
-----------
23,095,225
-----------
Banks/Financial Institutions--1.82%
75,000 Bank of Rajasthan Ltd....................................... 198,745
25,000 Federal Bank Ltd............................................ 63,459
18,800 HDFC Bank Ltd.+............................................. 21,107
2,100 ICICI Ltd.*................................................. 3,441
5,000 Industrial Development Bank of India Ltd.*.................. 12,134
332,700 Industrial Finance Corp. of India Ltd....................... 264,490
58,300 Oriental Bank of Commerce Ltd............................... 125,219
6,700 SCICI Ltd.*................................................. 4,906
135,000 State Bank of India Ltd.*................................... 852,929
55,000 Vysya Bank Ltd.............................................. 288,424
-----------
1,834,854
-----------
</TABLE>
15
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Portfolio of Investments (continued)
December 31, 1996
- --------------------------------------------------------
COMMON STOCKS--(continued)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Cement--3.44%
18,593 Associated Cement Companies Ltd............................. $ 617,303
3,300 Birla Jute & Industries Ltd................................. 10,125
169,038 Gujarat Ambuja Cement Ltd.*................................. 1,143,423
20,000 Gujarat Ambuja Cement Ltd.* GDR............................. 172,500
58,450 India Cement Ltd............................................ 146,736
50,000 India Cement Ltd. GDR....................................... 130,000
144 Jaiprakash Industries Ltd.+................................. 63
5,150 Madras Cements Ltd.......................................... 1,149,233
42,900 Raasi Cements Ltd........................................... 87,056
-----------
3,456,439
-----------
Ceramics/Granites--0.70%
250,000 Bell Ceramics Ltd........................................... 104,602
459,850 Grapco Industries Ltd.+..................................... 38,481
161,197 Kajaria Ceramics Ltd........................................ 539,572
200,000 Pacific Granites Ltd.+...................................... 19,805
-----------
702,460
-----------
Chemicals & Dyes--4.99%
20,000 Apcotex Lattices Ltd........................................ 58,438
238,660 Asian Paints India Ltd...................................... 1,967,197
145,666 BASF India Ltd.............................................. 735,683
1,200 Beta Nepthol Ltd............................................ 420
2,100 Cochin Minerals Rutinery Ltd.+.............................. 387
50,000 Femnor Mineral India Ltd.................................... 45,746
41,300 Ganesh Benzoplast Ltd....................................... 28,109
92,300 Punjab Alkalies & Chemicals Ltd............................. 89,468
7,646 Shree Rayalseema Alkalies & Allied Chemicals Ltd............ 2,325
436,200 Tata Chemicals Ltd.*........................................ 2,095,828
-----------
5,023,601
-----------
Computers/Software/Components--1.21%
132,750 NIIT Ltd.................................................... 902,589
38,816 PCS Data General India Ltd.................................. 8,120
305,700 RS Software Ltd............................................. 76,745
310,000 Square D Software Ltd....................................... 207,531
150,000 Twinstar Software Exports Ltd.+............................. 25,105
-----------
1,220,090
-----------
Consumer Durables--1.06%
215,200 Carrier Aircon Ltd.......................................... 1,068,496
5,700 JCT Electronics Ltd......................................... 1,892
500 SPIC Electronics & Systems Ltd.+............................ 31
-----------
1,070,419
-----------
</TABLE>
16
<PAGE>
- -------------------------------------------------------------
- -------------------------------------------------------------
COMMON STOCKS--(continued)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Consumer Products--10.34%
322,195 Colgate Palmolive India Ltd................................. $2,109,771
112,123 Hindustan Lever Ltd......................................... 2,526,286
39,800 IFB Industries Ltd.......................................... 53,289
521,310 ITC Ltd..................................................... 4,449,675
38,710 Philips India Ltd........................................... 76,394
250,000 Polar Industries Ltd........................................ 341,701
168,800 Polar Latex Ltd.+........................................... 23,543
296,379 Titan Industries Ltd........................................ 694,444
63,898 Tube Investments of India Ltd............................... 112,289
17,600 Videocon Appliances Ltd..................................... 11,709
3,693 Videocon International Ltd.................................. 3,837
-----------
10,402,938
-----------
Diamonds--0.37%
319,925 Shrenuj & Co. Ltd........................................... 143,676
333,450 Su-Raj Diamonds India Ltd................................... 225,555
-----------
369,231
-----------
Diversified--6.00%
12,106 Century Textile & Industries Ltd............................ 629,867
704 Grasim Industries Ltd....................................... 8,213
373,947 Larsen & Toubro Ltd......................................... 2,281,755
61,993 Raymond Ltd................................................. 186,604
512,692 Reliance Industries Ltd..................................... 2,906,685
50,000 Siel Ltd.+.................................................. 21,618
-----------
6,034,742
-----------
Electricals--3.58%
66,667 ABB Ltd..................................................... 1,029,759
100,000 Bharat Heavy Electricals Ltd................................ 580,195
47,000 Crompton Greaves Ltd........................................ 143,884
110,000 Crompton Greaves Ltd. GDR................................... 426,250
129,038 Siemens India Ltd........................................... 1,413,659
92,300 Solarson Industries Ltd.+................................... 8,110
-----------
3,601,857
-----------
Engineering--1.21%
145,000 Growell Times Ltd.+......................................... 2,872
53,070 Ion Exchange India Ltd...................................... 194,294
56,800 Praj Industries Ltd......................................... 102,985
23,000 Saw Pipes Ltd............................................... 34,003
123,600 Wartsila Diesel India Ltd................................... 838,653
115,900 Western Paques India Ltd.................................... 45,261
-----------
1,218,068
-----------
Fertilizers--0.07%
150 Gujarat Narmada Valley Fertilizers Co. Ltd.*................ 101
7,450 Gujarat State Fertilizers Co. Ltd........................... 18,079
60,910 SPIC Ltd.*.................................................. 51,820
-----------
70,000
-----------
Finance & Leasing--0.73%
120,000 Credit Rating Information Services of India Ltd.*........... 736,402
-----------
</TABLE>
17
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Portfolio of Investments (continued)
December 31, 1996
- --------------------------------------------------------
COMMON STOCKS--(continued)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Food & Agro Products--2.77%
727,000 Agritech Hatcheries & Foods Ltd.+........................... $ 52,725
302,100 American Dryfruits Co. Ltd.+................................ 92,695
5,900 Cadbury India Ltd.+......................................... 48,138
58,800 Enkay Texofood Industries Ltd............................... 24,766
9,800 ITC Agro Tech Ltd.+......................................... 12,165
129,000 Nath Seeds Ltd.+............................................ 73,766
247,675 Nestle India Ltd............................................ 1,455,997
104,850 Smithkline Beecham Ltd...................................... 1,023,640
484 Tristar Soya Products Ltd................................... 81
-----------
2,783,973
-----------
Hotels--9.11%
150,000 Asian Hotels Ltd............................................ 841,004
412,830 EIH Ltd..................................................... 4,524,840
487,300 Hotel Leela Venture Ltd..................................... 1,274,320
123,358 Indian Hotels Co. Ltd.*..................................... 2,437,912
23,070 ITC Hotels Ltd.............................................. 83,657
-----------
9,161,733
-----------
Housing & Construction--0.57%
333,600 Lok Housing & Construction Ltd.+............................ 183,782
55,900 NCL Seccolour Ltd.+......................................... 2,183
261,800 Unitech Ltd................................................. 383,389
100 VM Jog Engineering Ltd...................................... 33
-----------
569,387
-----------
Iron & Steel/Steel Products--3.19%
300,000 Asian Alloys Ltd............................................ 71,130
1,695 Essar Steel Ltd............................................. 931
32,940 Grand Foundry Ltd........................................... 12,083
1,700 Jindal Iron & Steel Co. Ltd................................. 1,826
421,000 Kanakdhara Steel Ltd.+...................................... 16,441
450 Ispat Industries Ltd........................................ 218
88,000 Sesa Goa Ltd................................................ 601,395
500,000 Steel Authority of India Ltd................................ 258,019
20,000 Steel Authority of India Ltd. GDR........................... 192,500
45,600 Sunflag Iron & Steel Co. Ltd.+.............................. 4,706
440,060 Tata Iron & Steel Co. Ltd.*................................. 2,010,037
121,500 Uttam Steels Ltd............................................ 35,755
-----------
3,205,041
-----------
Office Equipment--0.25%
64,412 Modi Xerox Ltd.............................................. 249,742
-----------
Packaging--0.65%
231,714 Essel Packaging Ltd......................................... 609,178
101,100 Pearl Polymer Ltd........................................... 25,663
160,300 Ras Extrusion Ltd.+......................................... 9,837
52,000 Sharp Industries Ltd.+...................................... 13,780
-----------
658,458
-----------
Paints/Dyes/Rubber--0.93%
2,200 Berger Paints India Ltd..................................... 3,007
47,267 Clariant India Ltd.......................................... 217,547
200,000 Dewan Rubber India Ltd...................................... 192,469
89,208 Goodlass Nerolac Paints Ltd................................. 519,272
-----------
932,295
-----------
</TABLE>
18
<PAGE>
- -------------------------------------------------------------
- -------------------------------------------------------------
COMMON STOCKS--(continued)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Paper--0.72%
9,800 Ballarpur Industries Ltd.................................... $ 15,787
171,392 ITC Bhadrachalam Paper Boards Ltd........................... 270,116
110,300 Orient Paper Mills & Industries Ltd......................... 265,366
1,000,000 Rama Newsprint & Paper Ltd.+................................ 152,022
25,000 Shreyans Industries Ltd..................................... 20,920
-----------
724,211
-----------
Pesticides/Agrochemicals--1.29%
1,200 Aimco Pesticides Ltd........................................ 536
23,750 Cyanamid India Ltd.......................................... 245,119
67,500 Excel Industries Ltd........................................ 410,460
5,485 Hindustan Ciba-Geigy Ltd.................................... 436,046
40,000 United Phosphorous Ltd...................................... 207,531
-----------
1,299,692
-----------
Petrochemicals--0.70%
44,262 Castrol India Ltd........................................... 512,069
4,900 IG Petrochemical Ltd........................................ 3,725
50,000 Indian Petrochemical Corp. Ltd.............................. 167,713
1,440 NOCIL Ltd................................................... 1,105
500,000 Sree Rayalaseema Petrochemicals Ltd.+....................... 15,342
-----------
699,954
-----------
Petroleum--3.58%
56,500 Bharat Petrol Corp.......................................... 469,651
100,000 Cochin Refineries Ltd....................................... 276,151
305,000 Hindustan Petroleum Corp. Ltd............................... 2,824,547
36,700 Madras Refineries Ltd....................................... 31,479
-----------
3,601,828
-----------
Pharmaceuticals--3.77%
1,250 Astra IDL Ltd............................................... 4,690
400 Burroughs Welcome India Ltd.+............................... 2,137
37,800 E. Merck India Ltd.......................................... 154,469
30,100 Knoll Pharma Ltd............................................ 373,626
50,000 Kopran Ltd.................................................. 299,512
2,900 Lupin Laboratories Ltd...................................... 9,100
72,500 Lyka Laboratories Ltd....................................... 84,937
75,000 Morepan Laboratories Ltd.................................... 290,272
185,633 Nicholas Piramal India Ltd.................................. 833,666
223,900 Orchid Chemicals & Pharmaceuticals Ltd...................... 749,456
69,000 PAAM Pharmaceuticals Delhi Ltd.............................. 33,008
214,430 Pharmasia Ltd.+............................................. 11,963
25,000 Rhone Poulenc Ltd........................................... 435,844
47,267 Sandoz India Ltd............................................ 253,145
200 TTK Pharma Ltd.............................................. 137
46,000 Wockhardt Ltd............................................... 261,437
-----------
3,797,399
-----------
Plastics/Pipes--0.14%
219,000 Finolex Industries Ltd...................................... 91,021
100,000 Peacock Industries Ltd.+.................................... 47,838
3,800 Uniplas India Ltd.+......................................... 360
-----------
139,219
-----------
</TABLE>
19
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Portfolio of Investments (continued)
December 31, 1996
- --------------------------------------------------------
COMMON STOCKS--(continued)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Power & Energy--1.86%
162,698 BSES Ltd.................................................... $ 937,159
131,360 Nepc Micon Ltd.............................................. 62,657
145,000 Tata Hydro Electric Ltd.+................................... 390,307
141,200 Tata Power Co. Ltd.*+....................................... 484,452
-----------
1,874,575
-----------
Shipping--0.00%
1,950 Chowgule Steamships Ltd..................................... 1,140
1,000 Varun Shipping Co. Ltd...................................... 508
-----------
1,648
-----------
Sugar--0.00%
1,900 Balrampur Chini Mill Ltd.................................... 3,551
830 Rajshree Sugars & Chemicals Ltd............................. 341
-----------
3,892
-----------
Tea & Plantation--2.48%
164,855 Brooke Bond Lipton India Ltd................................ 1,555,431
47,010 Goodrick Group Ltd.......................................... 68,187
80,250 Harisons Malayalam Ltd...................................... 71,632
38 McLeod Russel India Ltd..................................... 64
147,625 Tata Tea Ltd.*.............................................. 801,952
-----------
2,497,266
-----------
Telecommunications & Cable--3.21%
255,600 Bharati Telecom Ltd......................................... 679,105
148,350 Finolex Cables Ltd.......................................... 604,159
1,000 Krone Communication Ltd..................................... 1,953
210,000 Mahanagar Telephone Nigam Ltd............................... 1,388,284
99,000 Repl Engineering Ltd........................................ 69,038
16,825 Tata Telecom Ltd............................................ 17,834
290,900 Usha Beltron Ltd............................................ 466,576
-----------
3,226,949
-----------
Textiles--1.69%
114,469 Arvind Mills Ltd............................................ 387,949
185,000 Ginni Filament Ltd.......................................... 54,184
193,500 Hanil Era Textiles Ltd.+.................................... 24,289
20,000 Indian Rayon & Industries Ltd. GDR.......................... 170,100
122,606 Indo Count Industries Ltd................................... 29,241
239,000 K.G. Denim Ltd.............................................. 56,000
20,700 Maxwell Apparel Industries Ltd.............................. 26,185
70,000 Morarjee Goculdas SPG. & WVG. Co. Ltd....................... 103,487
493,900 Patspin India Ltd........................................... 154,990
86,500 Shamken Multifab Ltd........................................ 41,018
7,500 Viral Filaments Ltd......................................... 7,322
445,800 Welspun India Ltd........................................... 646,628
-----------
1,701,393
-----------
Tires & Tubes--0.12%
50,000 Goodyear India Ltd.......................................... 118,549
-----------
Tobacco--0.14%
45,960 VST Industries Ltd.......................................... 144,226
-----------
Transportation--0.01%
21,800 Skyline Nepc Ltd.+.......................................... 5,382
-----------
</TABLE>
20
<PAGE>
- -------------------------------------------------------------
- -------------------------------------------------------------
COMMON STOCKS--(continued)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Miscellaneous--0.69%
100,000 Elegant Floriculture Ltd.+.................................. $ 3,766
178,500 Navneet Publications Ltd.................................... 639,812
152,000 Tamil Nadu Hospitals Ltd.+.................................. 14,840
173,100 Techtron Poly Ltd.+......................................... 14,485
400,000 Tejoomal Industries Ltd..................................... 17,294
-----------
690,197
-----------
Total Common Stocks (cost--$103,864,858)................................ 100,545,661
-----------
</TABLE>
- --------------------------------------------------------------------------------
RIGHTS AND WARRANTS#--0.35%
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
Hotels--0.06%
48,220 Hotel Leela Venture Ltd..................................... 61,872
Iron & Steel/Steel Products--0.00%
25,875 Jindal Iron & Steel Co. Ltd................................. 0
Pharmaceuticals--0.29%
75,000 Morepan Laboratories Ltd.................................... 285,669
Textiles--0.00%
50,000 Shree Krishna Poly Ltd.+.................................... 0
-----------
Total Rights and Warrants (cost--$210,379).............................. 347,541
-----------
</TABLE>
- --------------------------------------------------------------------------------
NON-CONVERTIBLE DEBENTURES#--0.59%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000)
- ----------
<C> <S> <C>
Rs. 2 15.5% GNFC Ltd. of Rs. 40 each; redeemable starting
10/15/98.................................................. 58
12,938 10.5% Jindal Iron & Steel Co. Ltd. of Rs. 500 each;
redeemable starting 1/14/01............................... 258,122
4 12.5% Nicholas Piramal India Ltd. of Rs. 50 each; redeemable
starting 4/20/00.......................................... 99
15,000 16.0% Rama Newsprint & Paper Ltd. of Rs. 60 each; redeemable
starting 1/02/00.......................................... 334,728
68 12.5% Reliance Industries Ltd. of Rs. 95 each; redeemable
starting 3/01/02.......................................... 1,480
-----------
Total Non-Convertible Debentures (cost--$893,415)....................... 594,487
-----------
</TABLE>
21
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Portfolio of Investments (concluded)
December 31, 1996
- --------------------------------------------------------
BANK DEPOSIT--1.46%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Value
----------- -----------
<C> <S> <C>
Rs. 52,600 Banque Nationale De Paris, 10.90%, due 1/01/97
(cost--$1,467,225)........................................ $ 1,467,225
-----------
Total Investments in India (cost--$106,435,877)........................ 102,954,914
-----------
</TABLE>
- --------------------------------------------------------------------------------
OTHER INVESTMENTS--1.48%
- --------------------------------------------------------------------------------
TIME DEPOSITS--1.48%
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
US$ 1,400 Bank of Tokyo-Mitsubishi Ltd. Grand Cayman, 4.75% @......... 1,400,000
93 Brown Brothers Harriman & Co. Grand Cayman, 4.75% @......... 93,000
-----------
Total Time Deposits (cost--$1,493,000)................................. 1,493,000
-----------
TOTAL INVESTMENTS (cost--$107,928,877)--103.81%........................ 104,447,914
Liabilities in excess of other assets--(3.81)%......................... (3,832,981)
-----------
NET ASSETS (equivalent to $10.24 per share; applicable to 9,828,506
shares outstanding)--100%............................................ $100,614,933
-----------
-----------
</TABLE>
- ------------------------------
<TABLE>
<S> <C>
GDR--Global Depositary Receipt
Rs--Indian Rupees
* Affiliated security.
+ Non-income producing security.
# Fair valued securities, aggregating $942,028 or 0.94% of net assets.
@ Variable rate account--rate resets on a monthly basis; amount available
upon 48 hours' notice.
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
- -------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1996 (unaudited)
- --------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments in unaffiliated securities, at
value
(cost--$91,468,540)....................... $83,811,222
Investments in affiliated securities, at
value
(cost--$16,460,337)....................... 20,636,692 $104,447,914
-----------
Cash (including Indian rupees of $371,830
with a cost of $375,621).................. 373,357
Dividends and interest receivable........... 451,795
Receivable for investments sold............. 114,151
Prepaid expenses and other assets........... 73,729
-----------
Total assets............................ 105,460,946
-----------
LIABILITIES
Deferred Indian withholding taxes........... 2,828,116
Dividend payable............................ 786,618
Payable for investments purchased........... 604,757
Investment advisory fee payable............. 125,190
Trust administration fee payable............ 83,444
Administration fee payable.................. 14,820
Accrued expenses and other liabilities...... 403,068
-----------
Total liabilities....................... 4,846,013
-----------
NET ASSETS
Common stock, $0.01 par value; 9,828,506
shares issued and outstanding (50,000,000
shares authorized)........................ 98,285
Additional paid-in capital.................. 117,580,798
Undistributed net investment income......... 1,516,498
Accumulated net realized loss............... (13,446,512)
Net unrealized depreciation of investments
and other assets and liabilities
denominated in Indian rupees (net of
deferred Indian withholding tax of
$1,247,015)............................... (5,134,136)
-----------
$100,614,933
-----------
-----------
NET ASSET VALUE PER SHARE....................... $10.24
======
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Statement of Operations
For the Six Months Ended December 31, 1996 (unaudited)
- --------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends from unaffiliated securities.......... $ 970,248
Dividends from affiliated securities............ 119,108
Interest from unaffiliated securities........... 182,268 $ 1,271,624
---------- -----------
EXPENSES
Advisory fees................................... 367,865
Custodian and accounting fees................... 353,949
Legal and audit fees............................ 195,955
Trust administration fees....................... 180,944
Administration fees............................. 96,983
Insurance....................................... 65,609
Reports to shareholders......................... 61,170
Directors' fees and expenses.................... 42,820
Transfer agent fees............................. 16,435
Miscellaneous................................... 20,215 1,401,945
---------- -----------
Net investment loss before taxes................ (130,321)
Deferred Indian withholding tax benefit......... 68,579
-----------
Net investment loss............................. (61,742)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments--unaffiliated
securities.................................... (3,720,933)
Net realized loss on investments--affiliated
securities.................................... (228,745)
Deferred Indian withholding tax benefit......... 160,904
----------
Net realized loss on investments................ (3,788,774)
Net realized loss on foreign currency
transactions.................................. (116,284)
Net change in unrealized appreciation/depreciation of:
Investments (net of change in deferred
Indian withholding taxes of $3,353,888)... (28,786,972)
Other assets and liabilities denominated in
Indian rupees............................. (173,990)
-----------
Net realized and unrealized loss on investments
and foreign currency transactions............. (32,866,020)
-----------
NET DECREASE IN NET ASSETS FROM INVESTMENT
OPERATIONS......................................... $(32,927,762)
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
24
<PAGE>
- -------------------------------------------------------------
Statement of Changes in Net Assets
- ------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
DECEMBER 31, 1996 ENDED
(UNAUDITED) JUNE 30, 1996
------------------- --------------
<S> <C> <C>
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss).................. $ (61,742) $ 840,822
Net realized loss on investments and foreign
currency transactions....................... (3,905,058) (5,870,719)
Net change in unrealized appreciation/
depreciation of investments and other assets
and liabilities denominated in Indian
rupees...................................... (28,960,962) 728,393
------------------- --------------
Total from investment operations.............. (32,927,762) (4,301,504)
------------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income.................... (786,618) --
In excess of net realized gain on
investments................................. -- (3,417,509)
------------------- --------------
Total dividends and distributions to
shareholders................................ (786,618) (3,417,509)
------------------- --------------
CAPITAL SHARE TRANSACTIONS
Proceeds from the sale of shares in
rights offering............................. -- 31,581,117
Offering costs charged to additional paid-in
capital..................................... -- (895,843)
Reinvestment of distributions resulting in the
issuance of common stock.................... -- 108,416
------------------- --------------
Total capital share transactions.............. -- 30,793,690
------------------- --------------
Net increase (decrease) in net assets......... (33,714,380) 23,074,677
NET ASSETS
Beginning of period........................... 134,329,313 111,254,636
------------------- --------------
End of period................................. $ 100,614,933 $134,329,313
------------------- --------------
------------------- --------------
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The India Growth Fund Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, closed-end
management investment company. The Fund invests through an Indian unit
investment trust (the "Trust") organized through a trust fund agreement (the
"Trust Agreement") between the Fund and Unit Trust of India ("UTI").
The preparation of the financial statements in accordance with generally
accepted accounting principles requires Fund management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by
the Fund:
VALUATION OF INVESTMENTS--All securities for which market quotations are
readily available are valued at the last sale price on the day of determination
or, if there was no sale on such day, at the mean between the highest current
bid and lowest current asked prices. Securities which are traded
over-the-counter, if bid and asked quotations are available, are valued at the
mean between the current bid and asked prices of two reputable dealers or, if
such quotations are not available, are valued at their fair value as determined
in good faith in accordance with guidelines established by the Fund's Board of
Directors. Short-term investments that mature in 60 days or less are valued at
amortized cost if their term to maturity from date of purchase was less than 60
days, or by amortizing their value on the 61st day prior to maturity if their
term to maturity from date of purchase was greater than 60 days. All other
securities and assets are valued at fair value as determined in good faith in
accordance with guidelines established by the Fund's Board of Directors.
26
<PAGE>
- -------------------------------------------------------------
- ------------------------------------------
FOREIGN CURRENCY TRANSLATION--The books and records of the Fund are
maintained in U.S. dollars. Indian rupee amounts are translated into U.S.
dollars on the following basis: (1) the foreign currency market value of
investments and other assets and liabilities stated in foreign currency at the
closing rate of exchange on the valuation date; and (2) purchases and sales of
investments, income and expenses at the rate of exchange prevailing on the
respective dates of such transactions. The resulting foreign currency gains and
losses are included in the Statement of Operations.
The Fund does not generally isolate that portion of the results of
operations arising as a result of changes in the foreign currency exchange rates
from the fluctuations arising from changes in the market prices of securities.
Accordingly, such foreign currency gain (loss) on investments is included in net
realized and unrealized gain (loss) on investments. However, the Fund does
isolate the effect of fluctuations in foreign currency rates when determining
the gain or loss upon the sale or maturity of Indian rupee denominated debt
obligations pursuant to U.S. federal income tax regulations; such amount is
categorized as foreign currency gain or loss for both financial reporting and
income tax reporting purposes.
Net foreign currency gain (loss) from valuing Indian rupee denominated
assets and liabilities at the period end exchange rate is reflected as a
component of net unrealized depreciation of investments and other assets and
liabilities denominated in Indian rupees. Net realized foreign currency gain
(loss) is treated as ordinary income for income tax reporting purposes.
Net realized foreign currency loss of $116,284 represents foreign currency
gains and losses from sales and maturities of debt securities, transactions in
Indian rupees, currency gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of dividends, interest, expenses, application money and deferred foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid.
27
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are
recorded on the trade date (the date on which the buy or sell order is
executed). Realized gains and losses from investments and foreign currency
transactions are calculated on the identified cost basis. Interest income is
recorded on an accrual basis. Dividend income and other distributions are
recorded on the ex-dividend date ("ex-date") except for certain dividends which
are recorded as soon after the ex-date as the Fund, using reasonable diligence,
becomes aware of such dividends.
DIVIDENDS AND DISTRIBUTIONS--Dividends and distributions to shareholders are
recorded on the ex-date. Dividends and distributions from net investment income
and net realized capital gain, respectively, are determined in accordance with
federal income tax regulations, which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts 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 investment income
and net realized capital gain for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income and
distributions in excess of net realized gain. To the extent they exceed net
investment income and net realized capital gain for tax purposes, they are
reported as distributions of additional paid-in capital.
NOTE 2 INVESTMENT ADVISORY, ADMINISTRATION AND OTHER FEES
The Fund has an Investment Advisory Agreement with Unit Trust of India
Investment Advisory Services Limited (the "Investment Adviser"), an indirect,
wholly-owned subsidiary of UTI. Under the Investment Advisory Agreement, the
Investment Adviser receives a monthly fee, computed weekly, at an annual rate of
0.75% of the first $50 million of the value of the Fund's average weekly net
assets, 0.60%
28
<PAGE>
- -------------------------------------------------------------
- ------------------------------------------
of such net assets in excess of $50 million but not in excess of $100 million,
and 0.45% of such net assets in excess of $100 million.
Pursuant to the Trust Agreement, the Fund pays UTI a monthly fee for
administration of the Trust, including accounting and valuation services, based
on the value of the Fund's average weekly net assets held in the Trust at the
following annual rates: 0.35% of the first $50 million of the value of the
Fund's average weekly net assets, 0.30% of the next $50 million of such net
assets, and 0.25% of such net assets in excess of $100 million. In addition, UTI
is entitled to reimbursement for all out-of-pocket expenses incurred by UTI
directly in the performance of its duties under the Trust Agreement other than
employee costs and overhead.
Mitchell Hutchins Asset Management Inc. ("MHAM") serves as the Fund's
administrator. MHAM receives a monthly fee, computed weekly, at an annual rate
of 0.20% of the first $62.5 million of the value of the Fund's average weekly
net assets, 0.15% of such net assets in excess of $62.5 million but not in
excess of $100 million, and 0.10% of such net assets in excess of $100 million,
with a minimum annual fee of $125,000.
NOTE 3 INVESTMENTS IN SECURITIES
For the six months ended December 31, 1996, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $13,400,877 and
$11,444,525, respectively.
For U.S. federal income tax purposes, the cost of securities owned at
December 31, 1996 was substantially the same as the cost of securities for
financial statement purposes. Accordingly, net unrealized depreciation of
$3,480,963 was composed of gross appreciation of $24,553,839 for those
investments having an excess of value over cost, and gross depreciation of
$28,034,802 for those investments having an excess of cost over value.
29
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------
At December 31, 1996, the Fund owned securities valued at approximately
$6,255,273 which were in the process of being registered in the name of the
Fund. Indian securities regulations normally preclude the Fund from selling such
securities until the completion of the registration process.
NOTE 4 TRANSACTIONS WITH AFFILIATES
The Fund paid or accrued approximately $125,000 for the six months ended
December 31, 1996 for legal services to a law firm of which the Fund's assistant
secretary is a partner.
NOTE 5 FEDERAL INCOME TAXES
The Fund intends to distribute all of its taxable income and to comply with
the other requirements of the Internal Revenue Code applicable to regulated
investment companies. Accordingly, no provision for U.S. federal income tax is
required. In addition, by distributing during each calendar year substantially
all of its net investment income, capital gains and certain other amounts, if
any, the Fund intends not to be subject to U.S. federal excise tax.
In accordance with U.S. Treasury regulations, the Fund elected to defer
realized capital losses occurring after October 31, 1995 in the amount of
$5,267,320. Such losses are treated for tax purposes as arising on July 1, 1996.
At June 30, 1996, the Fund had a capital loss carryforward of $1,266,714
available as a reduction, to the extent provided in the regulations, of any
future net capital gains realized prior to the end of fiscal 2004.
The Fund's taxable net income and capital gains are different than the
Fund's net investment income and realized gains primarily due to Indian
withholding taxes as described in Note 6, which are recognized for U.S. federal
income tax purposes when they are actually paid.
30
<PAGE>
- -------------------------------------------------------------
- ------------------------------------------
NOTE 6 FOREIGN INCOME TAXES
Net investment income of the Fund derived in India and realized and
unrealized gains on assets of the Fund held in the Trust by UTI under the Trust
Agreement are not subject to taxation in India. However, remittances to the Fund
from the Trust of distributions representing net investment income and gains
realized on such assets are subject to 10% Indian withholding tax. The Fund
accrues for such withholding taxes on net investment income and net realized and
unrealized gains derived in India. With certain limitations, U.S. shareholders
will be able to credit such withholding taxes against their U.S. federal income
tax liabilities on foreign source income in the year when such tax is actually
paid by the Fund if so elected by the Fund. Should the Fund require funds from
UTI in excess of net investment income or net realized gains earned by the
Trust, the Fund would have to redeem units representing interest in the Trust.
Gains, if any, realized upon redemption of units representing the Fund's
interest in the Trust described above would be subject to 10% withholding tax.
NOTE 7 CAPITAL STOCK
There were no transactions in shares of common stock for the six months
ended December 31, 1996. Transactions in shares of common stock for the year
ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
JUNE 30, 1996
-------------
<S> <C>
Shares outstanding, beginning of year................................ 7,016,021
Shares issued in connection with rights offering..................... 2,804,406
Shares issued resulting from dividend reinvestment................... 8,079
-------------
Shares outstanding, end of year...................................... 9,828,506
-------------
-------------
</TABLE>
31
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Notes to Financial Statements (concluded)
- ------------------------------------------
NOTE 8 CONCENTRATION OF RISK
Investments in India may involve certain considerations and risks not
typically associated with investments in the U.S. as a result of, among others,
the possibility of future political and economic developments and the level of
Indian governmental supervision and regulation of its securities markets.
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic and political developments in a
specific industry or region.
NOTE 9 RIGHTS OFFERING
During the year ended June 30, 1996, the Fund issued 2,804,406 shares in
connection with a rights offering of the Fund's shares. Shareholders of record
on October 20, 1995 were issued one-third of a non-transferable right for each
share of common stock owned, entitling shareholders the opportunity to acquire
one newly issued share for each whole right held at a subscription price of
$11.55 per share. Offering costs of $895,843 were charged to additional paid-in
capital, including $350,000 payable to Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), an affiliate of the Fund, for financial advisory
services and as partial reimbursement for its expenses in connection with the
rights offering. Soliciting fees of $809,772 were netted against the proceeds of
the subscription. Merrill Lynch and PaineWebber Incorporated, an affiliate of
the Administrator, earned approximately $66,000 and $3,500, respectively, of the
aforementioned soliciting fees with respect to their participation in the rights
offering. Rogers & Wells, a law firm of which the Fund's assistant secretary is
a partner, earned $261,755 for legal services provided to the Fund in connection
with the rights offering.
32
<PAGE>
- -------------------------------------------------------------
Financial Highlights
- ------------------------------------------
Selected data for a share of common stock outstanding throughout each period
is presented below:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED JUNE 30,
DECEMBER 31, 1996 -----------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
-------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 13.67 $ 15.86 $ 21.87 $ 12.49 $ 18.57 $ 14.12
---------- --------- --------- --------- --------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) before tax...... (0.01) 0.11* (0.09) (0.10)* (0.04) (0.04)
Net deferred Indian withholding (tax)/tax
benefit on net investment income (loss).... 0.01 (0.01)* 0.01 0.01* (0.01) 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions............................... (3.70) (1.47)* (5.59) 11.79* (4.93) 6.54
Deferred Indian withholding (tax)/tax benefit
on net realized and unrealized gain (loss)
on investments............................. 0.35 0.03* 0.54 (1.16)* 0.46 (1.18)
---------- --------- --------- --------- --------- ---------
Total from investment operations............. (3.35) (1.34) (5.13) 10.54 (4.52) 5.38
---------- --------- --------- --------- --------- ---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................... (0.08) -- -- -- -- --
From net realized gain on investments........ -- -- (0.92) (0.25) (1.56) (0.93)
In excess of net realized gain on
investments................................ -- (0.35) -- -- -- --
---------- --------- --------- --------- --------- ---------
Total dividends and distributions to
shareholders............................... (0.08) (0.35) (0.92) (0.25) (1.56) (0.93)
---------- --------- --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights offering........... -- (0.37) -- (0.76) -- --
Offering costs charged and adjustments to
additional paid-in capital................. -- (0.13) 0.04 (0.15) -- --
---------- --------- --------- --------- --------- ---------
Total capital share transactions............. -- (0.50) 0.04 (0.91) -- --
---------- --------- --------- --------- --------- ---------
Net asset value, end of period............... $10.24 $13.67 $15.86 $21.87 $12.49 $18.57
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
Market value, end of period.................. $11.25 $14.63 $18.38 $21.25 $15.00 $16.00
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN (a)(b)............... (22.53)% (15.88)% (9.42)% 50.02% 4.75% 44.27%
---------- --------- --------- --------- --------- ---------
---------- --------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted)...... $ 100,615 $ 134,329 $ 111,255 $ 153,425 $ 62,899 $ 93,314
Ratio of expenses, excluding taxes, to
average net assets......................... 2.47%(c) 2.17% 1.99% 2.26% 2.31% 2.30%
Ratio of expenses, including tax/tax benefit,
to average net assets...................... 2.35%(c) 2.24% 1.94% 2.22% 2.79% 2.00%
Ratio of net investment income (loss) to
average net assets......................... (0.11)%(c) 0.72% (0.40)% (0.51)% (0.34)% 0.11%
Portfolio turnover........................... 10% 10% 15% 19% 19% 27%
Average commission rate paid per share of
common stock investments purchased/ sold
(d)........................................ $ 0.0410 -- -- -- -- --
</TABLE>
- ----------------------------------------
* Based on average shares outstanding.
(a) Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day, the purchase of common stock
pursuant to any rights offering occurring in the period and a sale at the
current market price on the last day of each period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at prices obtained under the Fund's dividend reinvestment plan.
Total investment return does not reflect sales charges or brokerage
commissions.
(b) Total investment return for a period of less than one year is not
annualized.
(c) Annualized.
(d) Disclosure effective for fiscal years beginning on or after September 1,
1995.
33
<PAGE>
THE INDIA GROWTH FUND INC.
- -------------------------------------------------------------
Other Information
- ------------------------------------------
ANNUAL SHAREHOLDERS' MEETING
The Fund's annual meeting of shareholders was held on September 27, 1996.
Shareholders voted to elect Antoine W. van Agtmael, Jagdish Capoor and Ratan N.
Tata as Directors and ratified the appointment of Price Waterhouse LLP as the
Fund's independent accountants for the fiscal year ending June 30, 1997. The
resulting vote count for each proposal is listed below:
<TABLE>
<S> <C> <C> <C>
1. Election of Directors:
Antoine W. van Agtmael For: 6,418,451
Withheld Authority: 436,765
Jagdish Capoor* For: 6,765,319
Withheld Authority: 89,897
Ratan N. Tata For: 6,420,186
Withheld Authority: 435,030
2. Ratification of Appointment of Price Waterhouse LLP as the
Fund's Independent Accountants:
For: 6,789,749
Against: 38,349
Abstain: 27,118
</TABLE>
* Resigned his positions with the Fund, effective January 1, 1997.
34
<PAGE>
THE INDIA GROWTH FUND INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(800) 852-4750
INVESTMENT ADVISER
Unit Trust of India Investment
Advisory Services Limited
Commerce Centre 1,
World Trade Center, 8th Floor
G.D. Somani Marg
Cuffe Parade, Colaba
Bombay, 400-005, India
Telephone Number 9122-218-0087
Fax Number 9122-218-0084
Internet [email protected]
ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
Telephone Number (212) 713-2848
Fax Number (212) 713-4058
CUSTODIAN
Brown Brothers Harriman & Company
40 Water Street
Boston, Massachusetts 02109
INDIAN CUSTODIAN
Citibank, N.A.
Custody Services
81, Annie Besant Road
Barodawale Mansion
Bombay, 400-018, India
SHAREHOLDER SERVICING AGENT
PNC Bank, National Association
400 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
TRUSTEE
Unit Trust of India
13, Sir V. Thackersey Marg
Bombay, 400-020, India
DIRECTORS
G.P. Gupta
Antoine W. van Agtmael
Rahul Bajaj
S.H. Khan
A.C. Muthiah
Peter J. Pearson
Christopher Reeves
Ratan N. Tata
OFFICERS
G.P. Gupta
CHAIRMAN OF THE BOARD & PRESIDENT
Dr. S.S. Nayak
TREASURER & SECRETARY
Laurence E. Cranch
ASSISTANT SECRETARY
- --------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without examination by
independent accountants who do not express an opinion thereon. It is not a
prospectus, circular or representation intended for use in the purchase or sale
of shares of the Fund or of any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
<PAGE>
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