<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 in other newspapers, in a table captioned "Publicly Traded Funds" or
"Closed-End Funds". Inquiries regarding shareholder accounts may be directed to
the Fund's transfer agent, dividend paying agent and registrar, PNC Bank,
National Association (the "Plan Agent"), at (800) 852-4750. In addition,
information on the Fund is now available on the internet at www.indiagrowth.com.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund intends to distribute to shareholders, at least annually, substantially
all of its net investment income and net realized capital gains, if any.
Pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), shareholders may elect to have all cash distributions automatically
reinvested by the Plan Agent in additional shares of Common Stock of the Fund.
Shareholders who do not participate in the Plan will receive all distributions
in cash paid by check in U.S. dollars mailed directly to the shareholder by the
Plan Agent.
The Plan Agent will serve as agent for the shareholders in administering the
Plan. If the Board of Directors of the Fund declare an income dividend or a
capital gain distribution payable either in the Fund's Common Stock or in cash,
as shareholders may have elected, non-participants in the Plan will receive cash
and participants in the Plan will receive Common Stock, to be issued by the Fund
or purchased in the open market, as provided below. If the market price on the
valuation date equals or exceeds net asset value 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. The valuation date will be the dividend or distribution payment
date or, if that date is not a trading day on the NYSE, the next preceding
trading day. If the net asset value exceeds the market price on the valuation
date, or if the Fund should declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will, as agent for the participants,
1
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
General Information (continued)
- ----------------------------------------------------------------------
purchase shares of the Fund 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 cash payments to
the Plan Agent, semiannually, 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. Any voluntary cash payments received more
than thirty days prior to these dates will be returned by the Plan Agent, and
interest will not be paid on any uninvested cash payments. To avoid unnecessary
cash accumulations, and also to allow ample time for receipt and processing by
the Plan Agent, it is suggested that participants send in voluntary cash
payments to be received by the Plan Agent approximately ten days prior to
February 15th or August 15th, as the case may be. A participant may withdraw a
voluntary cash payment by written notice, if the notice is received by the Plan
Agent not less than forty-eight hours before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in the account, including information
required by shareholders for personal and tax records. Shares in the account of
each Plan participant will 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 pursuant to the Plan.
In the case of shareholders, such as banks, brokers or nominees, who hold shares
for others who are the beneficial owners, the Plan Agent will administer the
Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
There is no charge to participants for reinvesting dividends or distributions.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be borne by the Fund. However, each participant's account
will be charged a pro rata share of brokerage commissions incurred with respect
to the Plan Agent's open market purchases in connection with the reinvestment of
dividends or distributions. A participant will also pay a pro rata share of
brokerage commissions incurred in purchases from voluntary cash payments made by
the participant. Brokerage charges for purchasing small amounts of stock of
individual accounts through the Plan are expected to be less than the usual
brokerage charges for such transactions, since the Plan Agent will be purchasing
stock for all participants in blocks and prorating the lower commission thus
attainable.
2
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------
The automatic reinvestment of dividends and distributions will not relieve
participants of any income tax which may be payable on such dividends and
distributions. In addition, since the Fund expects, if eligible, to make an
election to treat the 10% Indian withholding tax (on income and capital gain
distributions from the Unit Trust of India trust fund arrangement to the Fund)
as paid by shareholders, the amount of such withholding tax will be included in
the income of the Fund's shareholders, although the number of shares received
under the Plan will be based on the cash dividend amount distributed to other
Fund shareholders not participating in the Plan. With certain limitations, Fund
shareholders who are Plan participants may be able to credit such withholding
tax against their tax liabilities on foreign source income.
Participants in the Plan may withdraw from the Plan without penalty at any time
by written notice to the Plan Agent. Any shareholder withdrawing from the Plan
will receive, without charge, stock certificates issued in their name for all
full shares owned. The Plan Agent will convert any fractional shares any
shareholder holds at the time of its withdrawal to cash at the current market
price and send a check for the proceeds. Under the rules generally applicable to
sales of securities, a sale of shares (including fractional shares) will be a
taxable event for U.S. federal income tax purposes and may be taxable for state,
local and foreign tax purposes.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payment made and any dividend or distribution paid subsequent to
notice of the change sent to all shareholders at least 90 days prior to the
record date for such dividend or distribution. The Plan may also be amended or
terminated by the Plan Agent by at least 90 days' written notice to all
shareholders. All correspondence concerning the Plan should be directed to the
Plan Agent, c/o PNC Bank, National Association, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
YEAR 2000 PROCESSING ISSUE
Many computer programs employed throughout the world use two digits rather than
four to identify the year. These programs, if not adapted, may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. The Year 2000 issue affects virtually all companies
and organizations.
The Investment Adviser has advised the Fund that it is implementing steps and
will continue to implement steps intended to ensure that its computer systems
are capable of Year 2000 processing. In addition, the Fund is inquiring with
third parties to assess the adequacy of their Year 2000 compliance efforts. The
Fund has developed contingency plans intended to ensure that third-party
noncompliance will not materially affect the Fund's operations.
Companies in which the Fund invests could be adversely affected by the Year 2000
issue, but the Fund cannot predict the consequential effect on its investment
return. To the extent the impact on a portfolio holding is negative, the Fund's
investment return could be adversely affected.
3
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
General Information (concluded)
- ----------------------------------------------------------------------
ANNUAL SHAREHOLDERS' MEETING
The Fund's annual meeting of shareholders was held on October 9, 1998.
Shareholders voted to elect Rahul Bajaj, G.P. Gupta and P.S. Subramanyam as
Directors and ratified the appointment of PricewaterhouseCoopers LLP as the
Fund's independent accountants for the fiscal year ending June 30, 1999. The
resulting vote count for each proposal is listed below:
<TABLE>
<S> <C> <C>
1. Election of Directors:
Rahul Bajaj For: 5,952,887
Withheld Authority: 156,903
G.P. Gupta For: 5,942,786
Withheld Authority: 167,004
P.S. Subramanyam For: 5,965,531
Withheld Authority: 144,259
2. Ratification of appointment of PricewaterhouseCoopers LLP as the
Fund's Independent Accountants:
For: 6,020,041
Against: 67,053
Abstain: 22,696
</TABLE>
NEW DIRECTOR
Effective January 20, 1999, Narayan Murthy was elected by the Fund's Board of
Directors to serve as a director of the Fund.
4
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Chairman's Letter to Shareholders
- ---------------------------------------------------------
February 23, 1999
Dear Shareholders:
The Indian economy is expected to grow 5.8% during the 1998-99 fiscal year (year
ended March 31, 1999) compared to growth of 5.0% in the preceding fiscal year.
The agriculture sector has been buoyant, with growth estimated in excess of 5%
compared to forecasts of -1% earlier in the year. Favorable monsoons have
boosted foodgrains production, estimated at a record level of 202 million tons.
Deregulation of industrial controls and substantial tariff reductions on imports
have exposed Indian industry to greater competition. Together with the large
build-up of capacities during the last few years, industrial growth slowed to
3.6% during the first half of the current fiscal year, compared with growth of
6.0% in the first half of last fiscal year.
The trade deficit for the first nine months of fiscal 1998-99 increased to $7.3
billion from $4.5 billion during the same period last fiscal year. Imports grew
7% while exports declined 3%. The current account deficit of $3.1 billion for
the first half of fiscal year 1998-99 was larger than the deficit of $1.5
billion during the same period last year. Nevertheless, foreign exchange
reserves rose 3% over the year to $27 billion. The Resurgent India Bond issue,
offered to non-resident Indians, raised an impressive $4.1 billion. Money supply
(M3) continued to grow at an annual rate of 19.5%. The annual inflation rate,
however, as measured by the Wholesale Price Index ("WPI"), dropped to 4.7% in
February 1999.
The stock market was relatively stable during the second half of 1998. Although
index stocks did not show much change, there was a rally in stocks in the
software and pharmaceutical sectors. During the six months ended December 31,
1998, the Fund's net asset value ("NAV") increased 11.2%. The Fund's investment
strategy of divesting its investments in commodity, cyclical and declining
sectors, reducing the number stocks in the portfolio, and increasing the
portfolio's concentration in the software, pharmaceutical and consumer goods
sectors has enhanced the Fund's performance.
We believe The India Growth Fund Inc. offers a solid opportunity for capital
growth. Our outlook for the Indian stock markets is positive. On fiscal
1999-2000 prospective earnings, the price/ earnings ratio of 11 for stocks
comprising the Bombay Stock Exchange Sensitive Index ("BSESI") is very
attractive. The Fund will continue to take advantage of the potential for growth
in the Indian stock market.
Sincerely,
/s/ P.S. Subramanyam
P.S. Subramanyam
Chairman of the Board
and President
5
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Review of the Indian Economy
- ---------------------------------------------------------
- The Central Statistical Organization has estimated gross domestic product
("GDP") growth for the fiscal year 1998-99 at 5.8%. GDP growth was 5.0% in
fiscal 1997-98 compared with average growth of 7.8% during the fiscal
1994-95 to 1996-97 period.
- Overall growth in industrial production during the first half of fiscal
1998-99 was 3.6%, compared to 6.0% during the first half of fiscal year
1997-98.
- Agricultural sector growth is estimated at more than 5% for the fiscal
year 1998-99, compared to -1.0% during fiscal year 1997-98. Foodgrains
output is estimated to reach a record 202 million tons during the current
year, compared to 192 million tons last fiscal year.
- Direct tax collections exceeded the target by 10% in the first half of
fiscal 1997-98, representing an increase in growth of 22% compared to the
first half of the last fiscal year. Corporate tax receipts in the first
half of fiscal 1997 increased 38% and income tax collections increased 7%.
On the other hand, indirect tax collections in the first half fell short
of its target by 14%
- The annual growth rate of broad money (M3) rose to an all time high of 20%
in August 1998 due to the inflow of Resurgent India Bonds. M3 growth
exceeded 18% during the period April-December 1998. The Reserve Bank of
India has targeted M3 growth at between 15-15.5%.
- Low agricultural output last year had an impact on prices. However, the
rise in prices was lower during the past few months due to improvement in
supplies. Inflation, as measured by the increase in the WPI, was at the
annual rate of 4.7% in February 1999.
- During April-October 1998, export growth in US$ terms was -5.1%, compared
to an increase of 5.2% during the same period last year. Imports, during
the same period, grew in US$ terms 9.4%, compared to growth of 6.5% during
the same period last year. The current account deficit, as a percentage of
GDP, is estimated at 2-2.5% for fiscal year 1998-99, compared to 1.7% in
the prior fiscal year.
- The balance of payments situation was at a comfortable level in fiscal
1997-98, with net capital inflows of more than US$11 billion. The balance
of payments may become strained as expected net foreign capital inflows
may not exceed US$4 billion in fiscal 1998-99. Foreign exchange reserves
of US$26 billion are equal to seven months' imports.
6
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Review of the Stock Markets
- ---------------------------------------------------------
- The stock markets remained lackluster during 1998. The BSESI stood at
3,694 at the beginning of 1998, reached a high of 4,280 on April 21 and
closed the year at 3,055, a negative return of 17.3%.
- The markets rallied during the January - April 1998 period on expectations
of an industrial revival and an end to a long phase of political
instability. The sanctions imposed following the nuclear testing in May
changed the course of the markets.
- Compared to record collections of Rs480 billion in fiscal year 1994-95,
net mobilization from the primary market is estimated at only Rs.300
billion for fiscal year 1998-99.
- The government has set a target of Rs.50 billion of Public Sector
Enterprise ("PSE") disinvestment for fiscal year 1998-99. The government
was able to successfully sell the shares of a few PSE's.
- The Securities and Exchange Board of India has set a target of
approximately three years to achieve full dematerialization and transition
to a complete depository system. Two years since the commencement of the
National Securities Depositary Ltd, approximately US$13 billion of
securities (15% of the market capitalization) representing more than 600
companies are now in electronic form.
- Outstanding foreign institutional investment ("FII") is estimated at US$8
billion. FII inflows were US$1.8 billion in fiscal 1997-98. During the
April - December 1998 period, FII outflows are estimated at US$0.75
billion.
- The government's commitment to reforms and initiatives on insurance sector
privatization and the product patent bill are expected to improve
sentiment and subsequently, valuations.
- The Indian markets are currently trading at very low valuations of 9.2
times fiscal 1999 earnings.
7
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Report on Fund Performance
- ---------------------------------------------------------
THE INDIA GROWTH FUND, INC.
RUPEE NAV, $ NAV, BOMBAY STOCK EXCHANGE SENSITIVE INDEX ("BSESI")
AS OF DECEMBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RS NAV BSESI $ NAV
<S> <C> <C> <C>
1 Month 9.1% 8.5% 6.0%
3 Month 2.1% -2.3% 1.3%
6 Month 14.6% -5.4% 11.2%
1 Year 11.8% -16.5% 1.4%
</TABLE>
During the six months ended December 31, 1998, the Fund outperformed each of its
benchmark indices. The rupee NAV appreciated 14.6% compared to a decline of 5.4%
in the BSESI, outperformance of 20%. During the twelve month period ended
February 17, 1999, the Fund's rupee NAV outperformed the BSESI by 50.3%, while
the Fund's NAV increased 30.1%
The Fund's rupee NAV outperformed the BSESI for the 1 month, 3 month, 6 month, 9
month and one year periods ended December 31, 1998. On a one year basis, the
BSESI posted a negative return of 16.5%, while the Fund's NAV returned 11.8%, an
outperformance of 28.3%. For the same period, the Fund's $NAV also outperformed
the BSESI for the 3 month, 6 month, 9 month and one year periods. During that
same one year period, the Fund's $NAV increased marginally (+1.4%), while the
BSESI decreased by 16.5%.
8
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Top Twenty Holdings -- December 31, 1998
- ---------------------------------------------------------
The Fund had positions in 164 companies at December 31, 1998. The top 20
holdings (excluding short-term investments) as of that date were as follows:
<TABLE>
<CAPTION>
COMPANY PERCENTAGE OF NET ASSETS
------------------------------------------------------------------------------------ -------------------------
<C> <S> <C>
1. ITC Ltd............................................................................. 10.20%
2. Hindustan Lever Ltd................................................................. 7.44
3. NIIT Ltd............................................................................ 5.94
4. SmithKline Beecham Consumer Healthcare Ltd.......................................... 5.61
5. Satyam Computer Ltd................................................................. 5.33
6. TVS Suzuki Ltd...................................................................... 4.15
7. Hero Honda Motor Ltd................................................................ 4.13
8. Bajaj Auto Ltd...................................................................... 3.85
9. Punjab Tractors Ltd................................................................. 3.46
10. Reliance Industries Ltd............................................................. 2.76
11. Nestle India Ltd.................................................................... 2.53
12. DSQ Software Ltd.................................................................... 2.43
13. Mahanagar Telephone Nigam Ltd....................................................... 2.14
14. EIH Ltd............................................................................. 1.95
15. Novartis India Ltd.................................................................. 1.87
16. Vashisthi Detergents Ltd............................................................ 1.85
17. Hindustan Petroleum Corp. Ltd....................................................... 1.83
18. Software Solutions Integrated Ltd................................................... 1.59
19. Mahindra & Mahindra Ltd............................................................. 1.40
20. Castrol India Ltd................................................................... 1.35
------
Total............................................................................... 71.81%
------
------
</TABLE>
9
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1998 (unaudited)
- ----------------------------------------------------------------------------
INVESTMENTS IN INDIA--103.69%
- --------------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--102.69%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Aluminum--1.93%
65,721 Hindalco Industries Ltd..................................... $ 793,078
50 Indian Aluminum Co. Ltd..................................... 107
2,752,500 National Aluminum Ltd....................................... 1,221,677
-----------
2,014,862
-----------
Aquaculture--0.00%
89,900 Aqua Marine Foods Ltd.* #................................... 0
100 King International Aqua Ltd.* #............................. 0
120 MAC Industries Ltd.......................................... 64
-----------
64
-----------
Automobiles & Auto Ancillaries--17.66%
328,050 Bajaj Auto Ltd.+............................................ 4,026,279
56,650 Exide Industries Ltd........................................ 188,611
18,675 Exide Industries Ltd.- Rights*#............................. 60,770
336,978 Hero Honda Motors Ltd....................................... 4,314,382
1,880 LML Ltd..................................................... 3,271
377,311 Mahindra & Mahindra Ltd..................................... 1,465,889
815,400 Pal Peugeot Ltd.* #......................................... 37,439
193,250 Punjab Tractors Ltd.+....................................... 3,612,915
90,432 Tata Engineering & Locomotive Co. Ltd....................... 347,078
11,600 Tata Engineering & Locomotive Co. Ltd. GDR.................. 46,400
350,000 TVS Suzuki Ltd.............................................. 4,338,945
16,660 Ucal Fuel Systems Ltd....................................... 17,221
-----------
18,459,200
-----------
Banks/Financial Institutions--0.77%
200 Bank of Baroda Ltd. (new shares)............................ 234
15,740 Housing Development Finance Corporation Ltd.+............... 807,384
60 ICICI Banking Corporation Ltd.+............................. 66
50 State Bank of India Ltd.+................................... 185
-----------
807,869
-----------
Cement--0.77%
93 Associated Cement Companies Ltd............................. 2,261
200 Gujarat Ambuja Cement Ltd.+................................. 1,225
3,800 India Cements Ltd........................................... 2,894
3,800 India Cements Ltd.- Rights.................................. 2,626
8,350 Madras Cements Ltd.......................................... 798,381
-----------
807,387
-----------
Ceramics/Granites--0.17%
454,850 Grapco Industries Ltd.*..................................... 21,420
191,197 Kajaria Ceramics Ltd........................................ 148,564
175,000 Pacific Industries Ltd* #................................... 2,678
-----------
172,662
-----------
Chemicals & Dyes--0.74%
218,499 BASF India Ltd.............................................. 768,631
17,300 Gujarat Heavy Chemicals Ltd................................. 5,825
646 Sree Rayalseema Alkalies & Allied Chemicals Ltd.*........... 84
199 Tata Chemicals Ltd.#........................................ 475
-----------
775,015
-----------
Computer Hardware--0.35%
46,000 Digital Equipment Ltd....................................... 163,009
29,650 HCL Infosystems Ltd......................................... 204,904
50 PCS Data General India Industries Ltd....................... 21
-----------
367,934
-----------
</TABLE>
10
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Computer Software--11.43%
40,200 BFL Software Ltd............................................ $ 606,975
306,700 DSQ Software Ltd............................................ 2,538,381
2,000 Infosys Technologies........................................ 139,322
88,800 InfoTech Enterprises Ltd.................................... 427,377
21,600 Leading Edge Systems Ltd.................................... 194,029
55,700 Mastek Ltd.................................................. 677,725
37,800 Pentafour Software Ltd...................................... 628,813
248,700 R S Software India Ltd...................................... 806,943
325,090 Satyam Computer Ltd......................................... 5,568,707
5,000 Sierra Optima Ltd........................................... 29,527
990 Tata Infotech Ltd........................................... 32,751
40,900 Twinstar Software Exports Ltd.* #........................... 16,949
6,550 Wilpro Ltd.................................................. 283,584
-----------
11,951,083
-----------
Computer Training--7.89%
12,600 Aptech Ltd.................................................. 170,517
162,350 NIIT Ltd.................................................... 6,207,106
100,000 Pentafour Communications.................................... 213,680
117,000 Software Solutions Integrated Ltd........................... 1,658,441
-----------
8,249,744
-----------
Consumer Durables--1.02%
231,700 Carrier Aircon Ltd.......................................... 1,070,937
-----------
Consumer Products--13.20%
24,100 Archies Greetings & Gifts Ltd............................... 273,374
59,800 Bata India Ltd.*............................................ 274,852
107,093 Colgate Palmolive India Ltd................................. 494,237
198,586 Hindustan Lever Ltd......................................... 7,778,380
6,800 Indian Shaving Products Ltd................................. 143,621
60,000 Marico Industries Ltd....................................... 498,705
250,000 Polar Industries Ltd.#...................................... 88,298
168,800 Polar Latex Ltd............................................. 18,084
11,350 Ponds (India) Ltd........................................... 332,723
52,457 Procter & Gambel India Ltd.................................. 978,242
32,950 Reckitt & Coleman of India Ltd.............................. 291,135
252,079 Titan Industries Ltd.#...................................... 563,869
1,538,400 Vashisthi Detergents Ltd.................................... 1,930,697
25 Videocon Appliances Ltd..................................... 11
120,900 Videocon International Ltd.................................. 131,661
-----------
13,797,889
-----------
Diamonds--0.02%
80,150 Su-Raj Diamonds India Ltd................................... 25,477
-----------
Diversified--13.44%
603,763 ITC Ltd..................................................... 10,662,167
150 Larsen & Toubro Ltd......................................... 567
183,993 Raymond Ltd................................................. 376,044
1,023,283 Reliance Industries Ltd..................................... 2,886,492
35,000 Sterlite Industries Ltd..................................... 119,579
-----------
14,044,849
-----------
Electricals--0.47%
91,538 Siemens India Ltd.*......................................... 485,171
92,300 Solarson Industries Ltd.*................................... 1,195
-----------
486,366
-----------
</TABLE>
11
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
December 31, 1998 (unaudited)
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Engineering--1.27%
6,200 Blue Star Ltd............................................... $ 9,635
145,000 Growel Times Ltd.*.......................................... 3,141
25,400 Ingersoll Rand India Ltd.................................... 259,712
150,000 KEC International Ltd.#..................................... 105,957
35,400 Praj Industries Ltd.#....................................... 12,961
57,500 Thermax Ltd................................................. 193,607
168,600 Wartsila Diesel India Ltd................................... 746,334
1,650 Western Paques India Ltd.* #................................ 0
-----------
1,331,347
-----------
Finance & Leasing--1.14%
120,000 Credit Rating Information Services of India Ltd.+........... 1,194,490
-----------
Food & Agro Products--8.23%
727,000 Agritech Hatcheries & Foods Ltd.* #......................... 0
71,200 American Dryfruits Co. Ltd.................................. 8,718
6,960 Cadbury India Ltd........................................... 78,335
82,100 Nath Seeds Ltd.*............................................ 9,859
245,425 Nestle India Ltd............................................ 2,640,905
474,340 SmithKline Beecham Consumer Healthcare Ltd.................. 5,869,218
-----------
8,607,035
-----------
Hotels--2.71%
368,525 EIH Ltd..................................................... 2,038,298
48,220 Hotel Leela Venture Ltd.- Warrants expire 4/8/99*........... 4,542
93,358 Indian Hotels Co. Ltd....................................... 788,058
-----------
2,830,898
-----------
Housing & Construction--0.01%
164,900 Lok Housing & Construction Ltd.............................. 12,425
55,900 NCL Seccolour Ltd.* #....................................... 0
-----------
12,425
-----------
Iron & Steel--0.10%
300,000 Asian Alloys Ltd.*.......................................... 7,064
19,740 Grand Foundry Ltd.* #....................................... 837
25,875 Jindal Iron & Steel Co. Ltd.- Warrants* #................... 0
421,000 Kanakdhara Steel Ltd.* #.................................... 0
200 Sesa Goa Ltd................................................ 603
1,000,000 Welspun Stahl Rohren Ltd.................................... 94,184
-----------
102,688
-----------
Office Equipment--0.12%
64,412 Modi Xerox Ltd.............................................. 130,356
-----------
Packaging--0.01%
160,300 Ras Extrusion Ltd.*......................................... 3,774
52,000 Sharp Industries Ltd.*...................................... 6,000
-----------
9,774
-----------
Paints/Dyes/ Rubber--0.84%
50 Asian Paints India Ltd...................................... 335
77,850 Ciba Specialty Chemicals Ltd................................ 251,129
47,267 Clariant India Industries Ltd............................... 305,950
97,400 Dewan Rubber India Ltd...................................... 8,944
89,141 Goodlass Nerolac Paints Ltd................................. 306,652
-----------
873,010
-----------
</TABLE>
12
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Paper--0.22%
210,000 Ballarpur Industries Ltd.#.................................. $ 136,226
97,600 Orient Paper Mills & Industries Ltd.#....................... 46,307
775,000 Rama Newsprint & Paper Ltd. (new shares)* #................. 46,533
25,000 Shreyans Industries Ltd.#................................... 4,415
-----------
233,481
-----------
Pesticides/Agrochemicals--2.04%
23,750 Cyanamid India Ltd.......................................... 177,272
102,211 Novartis India Ltd.......................................... 1,956,016
-----------
2,133,288
-----------
Petrochemicals--1.36%
79,262 Castrol India Ltd........................................... 1,415,593
60 Natural Organic Chemical Ltd................................ 33
500,000 Sree Rayalaseema Petrochemicals Ltd.*....................... 4,709
-----------
1,420,335
-----------
Petroleum--2.39%
76,700 Bharat Petroleum Corporation Ltd............................ 421,155
51,200 COCHIN Refineries Ltd....................................... 159,736
346,000 Hindustan Petroleum Corp. Ltd............................... 1,915,343
-----------
2,496,234
-----------
Pharmaceuticals--7.94%
102,000 Burroughs Wellcome India Ltd................................ 1,411,596
150 CIPLA Ltd................................................... 3,033
23,700 Dr. Reddy's Laboratories.................................... 270,929
75,100 E. Merck India Ltd.......................................... 654,716
53,450 German Remedies Ltd......................................... 789,102
75,000 Hoechst Marion Roussel Ltd.................................. 725,365
60,200 Knoll Pharmaceuticals Ltd................................... 707,672
58,500 Lyka Laboratories Ltd....................................... 27,549
150,000 Morepan Laboratories Ltd.................................... 441,488
323,900 Orchid Chemicals & Pharmaceuticals Ltd...................... 783,248
1,200 Pfizer Ltd.................................................. 23,876
214,330 Pharmasia Ltd.* #........................................... 5,299
31,250 Rhone Poulenc Ltd........................................... 532,913
130,650 SmithKline Beecham Pharmaceuticals Ltd...................... 1,359,720
44,500 Sun Pharmaceuticals......................................... 286,782
18,750 Wyeth Lederle Ltd.#......................................... 271,626
-----------
8,294,914
-----------
Plastics/Pipes--0.00%
300 Uniplas India Ltd.* #....................................... 3
-----------
Power & Energy--0.28%
57,298 BSES Ltd.................................................... 190,768
50,000 Gas Authority of India Ltd.#................................ 100,306
200 Nepc Micon India Ltd.* #.................................... 12
-----------
291,086
-----------
</TABLE>
13
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments (concluded)
December 31, 1998 (unaudited)
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Shipping--0.07%
157,500 Shipping Corporation of India Ltd........................... $ 77,878
-----------
Tea & Plantation--1.07%
132,625 Tata Tea Ltd................................................ 1,114,056
-----------
Telecommunications & Cable--2.23%
100 Finolex Cables Ltd.......................................... 488
519,700 Mahanagar Telephone Nigam Ltd............................... 2,241,795
99,000 Repl Engineering Ltd.* #.................................... 3,497
49,700 Usha Beltron Ltd............................................ 83,848
-----------
2,329,628
-----------
Textiles--0.28%
29,100 Ginni Filament Ltd.......................................... 3,494
193,500 Hanil Era Textiles Ltd.*.................................... 7,062
122,606 Indo Count Industries Ltd................................... 19,631
239,000 K.G. Denim Ltd.* #.......................................... 23,917
20,700 Maxwell Apparel Industries Ltd.............................. 244
66,500 Morarjee Goculdas Spinning & Weaving Co. Ltd................ 25,053
331,300 Patspin India Ltd........................................... 62,406
56,800 Shamken Multifab Ltd........................................ 12,639
446,200 Welspun India Ltd. #........................................ 133,955
-----------
288,401
-----------
Miscellaneous--0.52%
70,000 Gujarat Mineral Development Corp............................ 87,026
297,700 Hindustan Zinc Ltd.......................................... 60,984
163,000 Navneet Publications Ltd. #................................. 372,286
26,800 Skyline Nepc Ltd.*.......................................... 757
152,000 Tamil Nadu Hospitals Ltd.* #................................ 0
173,100 Techtron Poly Ltd.* #....................................... 20,990
400,000 Tejoomal Industries Ltd.* #................................. 0
-----------
542,043
-----------
Total Equities & Equity Equivalents (cost--$91,582,141)................. 107,344,708
-----------
</TABLE>
14
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NON-CONVERTIBLE DEBENTURES --0.20%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Value
- ---------- -------------
<C> <S> <C>
Rs. 12,938 10.5% Jindal Iron & Steel Co. Ltd of Rs. 500 each;
redeemable starting 1/14/01# ............................ $ 211,269
15,000 16.0% Rama Newsprint & Paper Ltd. of Rs. 60 each; redeemable
starting 1/02/00 # ...................................... 0
68 12.5% Reliance Industries Ltd. of Rs. 95 each; redeemable
starting 3/01/02 # ...................................... 1,476
-------------
Total Non-Convertible Debentures (cost--$893,159)....................... 212,745
-------------
- ---------------------------------------------------------------------------------------
BANK DEPOSIT--0.80%
- ---------------------------------------------------------------------------------------
35,400 Bank Nationale de Paris, 8.40%, due 1/2/99
(cost--$833,530).......................................... 833,530
-------------
Total Investments in India (cost--$93,308,830).......................... 108,390,983
-------------
- ---------------------------------------------------------------------------------------
OTHER INVESTMENTS--0.72%
- ---------------------------------------------------------------------------------------
TIME DEPOSITS--0.72%
- ---------------------------------------------------------------------------------------
US$ 748 Brown Brothers Harriman & Co. Grand Cayman, 3.75%@
(cost--$748,000).......................................... 748,000
-------------
TOTAL INVESTMENTS (cost--$94,056,830)--104.41%.......................... 109,138,983
Liabilities in excess of other assets--(4.41)%.......................... (4,605,126)
-------------
NET ASSETS (equivalent to $10.63 per share; applicable to 9,830,611
shares outstanding)--100%............................................. $104,533,857
-------------
-------------
</TABLE>
- ------------------------------
GDR -- Global Depositary Receipt.
Rs -- Indian Rupees.
+ Affiliated security. Deemed as such because a Director of
the Fund or an employee of the Investment Adviser or Trustee
is an officer or director of the company.
* Non-income producing security.
# Fair valued security, aggregating $2,268,350 or 2.17% of net
assets.
@ Variable rate account--rate resets on a monthly basis;
amount available upon 48 hours' notice.
See accompanying notes to financial statements.
15
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1998 (unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments in unaffiliated securities, at
value
(cost--$85,042,778)......................... $ 99,496,205
Investments in affiliated securities, at value
(cost--$9,014,052).......................... 9,642,778 $109,138,983
-------------
Receivable for investments sold............... 455,496
Dividends and interest receivable............. 163,361
Prepaid expenses and other assets............. 198,318
-------------
Total assets.............................. 109,956,158
-------------
LIABILITIES
Due to custodian.............................. 108,192
Deferred Indian withholding taxes............. 4,682,752
Payable for investments purchased............. 210,399
Investment advisory fee payable............... 57,145
Trust administration fee payable.............. 27,526
Administration fee payable.................... 15,148
Accrued expenses and other liabilities........ 321,139
-------------
Total liabilities......................... 5,422,301
-------------
NET ASSETS
Common stock, $0.01 par value; 9,830,611
shares issued
and outstanding (50,000,000 shares
authorized).................................. 98,306
Additional paid-in capital.................... 116,752,996
Undistributed net investment income........... 1,525,083
Accumulated net realized loss................. (24,651,845)
Net unrealized appreciation of investments and
other assets and liabilities denominated in
Indian rupees (net of deferred Indian
withholding tax of $3,553,515)............... 10,809,317
-------------
$104,533,857
-------------
-------------
NET ASSET VALUE PER SHARE......................... $10.63
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended December 31, 1998 (unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends from unaffiliated securities................................. $ 558,089
Dividends from affiliated securities................................... 62,964
Interest............................................................... 84,355 $ 705,408
------------ --------------
EXPENSES
Advisory fees.......................................................... 334,167
Custodian and accounting fees.......................................... 229,903
Trust administration fees.............................................. 160,782
Legal and audit fees................................................... 114,080
Administration fees.................................................... 89,843
Directors' fees and expenses........................................... 65,320
Insurance expense...................................................... 61,337
Reports to shareholders................................................ 46,000
Transfer agent fees.................................................... 14,168
Miscellaneous expenses................................................. 19,717 1,135,317
------------ --------------
Net investment loss before taxes....................................... (429,909)
Deferred Indian withholding tax benefit................................ 173,242
--------------
Net investment loss.................................................... (256,667)
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investments--unaffiliated securities.............. (149,067)
Net realized loss on investments--affiliated securities................ (973,944)
Deferred Indian withholding tax........................................ (54,121)
------------
Net realized loss on investments....................................... (1,177,132)
Net realized loss on foreign currency transactions..................... (26,043)
Net change in unrealized appreciation/depreciation of:
Investments (net of change in deferred Indian withholding
(tax)/tax benefit of $1,132,719)................................. 11,719,512
Other assets and liabilities denominated in Indian rupees.......... (119,269)
--------------
Net realized and unrealized gain on investments
and foreign currency transactions.................................... 10,397,068
--------------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS...................... $ 10,140,401
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
DECEMBER 31, 1998 ENDED
(unaudited) JUNE 30, 1998
----------------- -------------
<S> <C> <C>
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment loss........................... $ (256,667) $ (509,752)
Net realized gain (loss) on investments and
foreign currency
transactions................................ (1,203,175) 622,307
Net change in unrealized
appreciation/depreciation of investments
and other assets and liabilities denominated
in Indian rupees............................ 11,600,243 (29,241,621)
----------------- -------------
Total from investment operations.............. 10,140,401 (29,129,066)
----------------- -------------
CAPITAL SHARE TRANSACTIONS
Capital contribution from Investment
Adviser..................................... 436,802 --
----------------- -------------
Net increase (decrease) in net assets............. 10,577,203 (29,129,066)
NET ASSETS
Beginning of period........................... 93,956,654 123,085,720
----------------- -------------
End of period................................. $ 104,533,857 $ 93,956,654
----------------- -------------
----------------- -------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1998 (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 having a maturity of 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.
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.
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 denominated in Indian rupees at the closing rate of
exchange on the valuation date; and (2) purchase and sales of investments,
income and expenses are translated at the rate of exchange prevailing on the
19
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
respective dates of such transactions. The resulting net foreign currency gain
or loss is 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 foreign currency exchange rates from
fluctuations arising from changes in the market prices of securities.
Accordingly, such foreign currency gain (loss) is included in net realized and
unrealized gain (loss) on investments. However, the Fund does isolate the effect
of fluctuations in foreign currency exchange 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 appreciation of investments and other assets and liabilities
denominated in Indian rupees. Net realized foreign currency gain (loss) is
treated as ordinary income (loss) for income tax reporting purposes.
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 considered either
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.
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% 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.
20
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
Mitchell Hutchins Asset Management Inc. ("MHAM") serves as the Fund's
administrator. MHAM receives a monthly fee, computed weekly, at the 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,
subject to a minimum annual fee of $125,000.
NOTE 3. INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at December
31, 1998 was substantially the same as the cost of securities for financial
statement purposes. Accordingly, net unrealized appreciation of investments of
$15,082,153 was composed of gross appreciation of $31,029,335 for those
investments having an excess of value over cost and gross depreciation of
$15,947,182 for those investments having an excess of cost over value.
For the six months ended December 31, 1998, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $7,485,765 and
$6,978,668, respectively.
At December 31, 1998, the Fund owned securities valued at approximately
$1,109,000 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 $66,000 for the six months ended December
31, 1998 for legal services to a law firm in which the Fund's assistant
secretary is a partner.
For the six months ended December 31, 1998, the Fund paid approximately $9,093,
$739 and $417 in brokerage commissions to UTI Securities, DSP Merrill Lynch, and
IDBI Capital Markets, respectively, affiliates of the Investment Adviser or the
Fund's directors.
NOTE 5. U.S. 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 of 1986, as amended, applicable
to regulated investment companies. Accordingly, no provision for U.S. federal
income tax is required. In addition, by distributing substantially all of its
net investment income, capital gains and certain other amounts, if any, during
each calendar year, 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
foreign currency losses occurring after October 31, 1997 in the amount of
$125,692. Such losses are treated for tax purposes as arising on July 1, 1998.
At June 30, 1998, the Fund had a capital loss carryforward of $19,566,739
($1,266,714 of which expires at the end of fiscal year 2004, $6,589,447 of which
expires at the end of fiscal year 2005 and
21
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
$11,710,578 of which expires at the end of fiscal year 2006) available as a
reduction, to the extent provided in the regulations, of any future net realized
capital gains. To the extent that these losses are used to offset future
realized capital gains, such gains will not be distributed.
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.
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 the 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 the 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, 1998 or for the year ended June 30, 1998.
NOTE 8. CAPITAL CONTRIBUTION FROM INVESTMENT ADVISER
On October 20, 1998, the Fund recorded a capital contribution from the
Investment Adviser in the amount of $436,802 or $0.04 per share. This amount was
paid by the Investment Adviser in connection with losses incurred by the Fund by
reason of certain unpermitted investments.
NOTE 9. 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 other factors,
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.
22
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Financial Highlights
- ---------------------------------------------------------
Selected data for a share of common stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED
DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
1998 ------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------ -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $9.56 $12.52 $13.67 $15.86 $21.87 $12.49
------------ -------- --------- --------- --------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) before tax...... (0.04) (0.07) (0.05) 0.11* (0.09) (0.10)*
Net deferred Indian withholding (tax)/tax
benefit on net investment income (loss).... 0.01 0.02 0.02 (0.01)* 0.01 0.01*
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions............................... 1.18 (3.06) (1.16) (1.47)* (5.59) 11.79*
Deferred Indian withholding (tax)/tax benefit
on net realized and unrealized gain (loss)
on investments............................. (0.12) 0.15 0.12 0.03* 0.54 (1.16)*
------------ -------- --------- --------- --------- ---------
Total from investment operations............. 1.03 (2.96) (1.07) (1.34) (5.13) 10.54
------------ -------- --------- --------- --------- ---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................... -- -- (0.08) -- -- --
From net realized gain on investments........ -- -- -- -- (0.92) (0.25)
In excess of net realized gain on
investments................................ -- -- -- (0.35) -- --
------------ -------- --------- --------- --------- ---------
Total dividends and distributions to
shareholders............................... -- -- (0.08) (0.35) (0.92) (0.25)
------------ -------- --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS
Capital contribution from Investment
Adviser.................................... 0.04 -- -- -- -- --
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............. 0.04 -- -- (0.50) 0.04 (0.91)
------------ -------- --------- --------- --------- ---------
Net asset value, end of period............... $10.63 $9.56 $12.52 $13.67 $15.86 $21.87
------------ -------- --------- --------- --------- ---------
------------ -------- --------- --------- --------- ---------
Market value, end of period.................. $7.75 $7.25 $13.38 $14.63 $18.38 $21.25
------------ -------- --------- --------- --------- ---------
------------ -------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN (a)(b)............... 6.90% (45.79)% (7.98)% (15.88)% (9.42)% 50.02%
------------ -------- --------- --------- --------- ---------
------------ -------- --------- --------- --------- ---------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted)........ $104,534 $93,957 $123,086 $134,329 $111,255 $153,425
Ratio of expenses, excluding (tax)/tax
benefit, to
average net assets......................... 2.30%(c) 2.32% 2.37% 2.17% 1.99% 2.26%
Ratio of expenses, including (tax)/tax
benefit, to
average net assets......................... 1.95%(c) 1.87% 2.23% 2.24% 1.94% 2.22%
Ratio of net investment income (loss) to
average
net assets................................. (0.52)%(c) (0.18)% (0.26)% 0.72% (0.40)% (0.51)%
Portfolio turnover........................... 7% 23% 31% 10% 15% 19%
</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.
23
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Unit Trust of India Investment Advisory Services Ltd.
Commerce Centre 1,
World Trade Center, 8th Floor
G.D. Somani Marg
Cuffe Parade, Colaba
Mumbai, 400-005, India
Telephone Number 9122-218-0087
Fax Number 9122-218-8859
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 & Co.
40 Water Street
Boston, Massachusetts 02109
INDIAN CUSTODIAN
Citibank, N.A.
Custody Services
81, Annie Besant Road
Barodawale Mansion
Mumbai, 400-018, India
SHAREHOLDER SERVICING AGENT
PNC Bank, National Association
400 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
TRUSTEE
Unit Trust of India
13, Sir V. Thackersey Marg
Mumbai, 400-020, India
DIRECTORS
P.S. Subramanyam
Antoine W. van Agtmael
Rahul Bajaj
G.P. Gupta
Glen Moreno
Narayan Murthy
A.C. Muthiah
Peter J. Pearson
Christopher Reeves
OFFICERS
P.S. Subramanyam, 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 STATEMENTS
INCLUDED HEREIN ARE 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 OF 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.
[LOGO]
THE INDIA
GROWTH
FUND INC.
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SEMI-ANNUAL REPORT
DECEMBER 31, 1998
