<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
1
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
General Information (continued)
- ----------------------------------------------------------------------
participants, 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
distribution 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 rights 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.
OTHER INFORMATION
Since June 30, 1998, there have been no (i) material changes in the Fund's
investment objectives or policies; (ii) changes to the Fund's charter or
by-laws; or (iii) material changes in the principal risk factors associated with
investment in the Fund.
YEAR 2000 PROCESSING ISSUE
Many computer programs employed throughout the world use two digits rather than
four to indentify 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
3
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
General Information (concluded)
- ----------------------------------------------------------------------
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.
NEW DIRECTORS
Mr. Narayan Murthy was elected by the Fund's Board of Directors as a Class I
director at a meeting held on January 20, 1999. Mr. Thomas L. Hansberger was
elected by the Fund's Board of Directors as a Class I Director at a meeting held
on July 5, 1999. Messrs. Pierre Dinan and Uday Kumar Gujadhur were elected by
the Fund's Board of Directors as Class III directors by unanimous written
consent dated as of February 18, 1999. Mr. Bajaj resigned from the Board of
Directors effective July 10, 1999. Mr. Moreno resigned from the Board of
Directors effective July 5, 1999. Mr. Muthiah resigned from the Board of
Directors effective August 12, 1999.
NEW SECRETARY AND TREASURER
Mr. J.S. Mascarenhas was elected Secretary and Treasurer of the Fund by the
Board of Directors by unamimous written consent dated as of August 27, 1999. He
was also appointed Chief Executive Officer of the Investment Adviser of the Fund
in July 1999. Mr. Mascarenhas serves as the manager of the Fund and is primarily
responsible for the day-to-day management of the Fund's portfolio. Prior to his
promotion to Chief Executive Officer of the Investment Adviser, he served in a
number of other positions with Unit Trust of India ("UTI") over the course of
almost thirty years. From January 1995 to July 1999, he was General Manager and
Executive Assistant to the Chairman of UTI, from June 1994 to December 1994, he
was General Manager of the Department of Accounts and Investment Accounts, and
from May 1989 to May 1994, he was in charge of one of UTI's largest branch
offices in Ahmedabad. Mr. Mascarenhas has replaced Dr. S.S. Nayak as Secretary
and Treasurer of the Fund. Dr. Nayak served as Secretary and Treasurer of the
Fund from January 1995 until July 28, 1999, when he resigned from those
positions due to his promotion to Chief General Manager of UTI.
4
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Chairman's Letter to Shareholders
- ---------------------------------------------------------
August 9, 1999
Dear Shareholders:
The Indian economy grew 5.8% during the 1998-99 fiscal year (year ended March
31, 1999) and is expected to grow 5.9% in the current fiscal year (year ending
March 31, 2000). The agriculture sector grew 6.6% in the 1998-99 fiscal year due
to the favorable monsoon season rains, compared to a fall of 1% in the 1997-98
fiscal year.
Weak commodity prices and competition from the East Asian markets adversely
impacted India's exports which declined 4% during the 1998-99 fiscal year.
Receipts under the invisible account (inward remittances and other external
inflows), including software exports, grew significantly during the 1998-99
fiscal year. The balance of payment situation remains stable as the current
account deficit is expected to be approximately 1.0% of gross domestic product
("GDP") for 1998-99 compared to 1.3% in 1997-98. Foreign exchange reserves
(excluding gold and statutory deposit receipts) remained relatively stable at
$29.5 billion at March 31, 1999. The Indian rupee depreciated approximately 13%
in the fiscal year 1998-99 but currently remains stable. The annual inflation
rate, as measured by the Wholesale Price Index ("WPI") declined in the period
from April through August 1999, to a 17 year low of 1.2% in August 1999.
Leading indicators point toward a resurgence in industrial growth. Recovery in
industrial growth, particularly in the cement, automobile and steel industries,
is expected to translate into improved earnings for the corporate sector. Indian
company surveys indicate an improvement in the level of business confidence.
Several Indian corporations have placed shareholder wealth creation and improved
corporate governance high on their agendas.
An increased level of automation and the rapid dematerialization (the process of
converting shares from physical form to electronic form and lodging them with a
depository) of shares have led to a quadrupling of trading volumes on the Indian
stock exchanges. Stock prices have rallied since January 1999. The Bombay Stock
Exchange Sensitive Index ("BSESI") increased 27.4% from 3,251 on June 30, 1998,
to 4,141 on June 30, 1999, reflecting the expectation of increased industrial
growth. Investor interest in growth sectors such as consumer goods and
information technology remains strong and stocks in the cyclical sectors such as
cement, aluminum, paper and petrochemical have also seen improvement.
The Fund's investment strategy of increasing its investments in the information
technology, pharmaceuticals, and consumer products sectors and in selected
automobile companies has enhanced its performance.
5
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Chairman's Letter to Shareholders
- ---------------------------------------------------------
We believe The India Growth Fund Inc. offers a solid opportunity for capital
growth and our outlook for the Indian stock markets is positive. On fiscal
1999-2000 prospective earnings, the price/earnings ratio of 15 times for stocks
comprising the 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
& President
6
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Review of the Indian Economy*
- ---------------------------------------------------------
- The Centre for Monitoring Indian Economy ("CMIE") has estimated that the
gross domestic product ("GDP") of India will grow 5.9% during fiscal year
1999-2000. GDP grew 5.8% during fiscal year 1998-99.
- CMIE estimates that agricultural production will grow 6% during fiscal
year 1999-2000. Agricultural output increased 6.6% during fiscal year
1998-99 with foodgrain production estimated at 201 million tons.
- CMIE estimates that industrial growth will be 6% during fiscal year
1999-2000. Industrial growth (as measured by the Index of Industrial
Production) was at a low of 3.9% during fiscal year 1998-99 compared to
6.6% in the preceding fiscal year. The global commodity prices of crude,
petrochemicals, aluminum, steel and paper grew in the first two quarters
of 1999 leading to estimates of increased exports. Both domestic and
global demand for commodities such as steel, aluminum and petrochemicals
are expected to increase. The recent trends in production in the
automobile, cement, steel, aluminum and petrochemical industries indicates
a recovery.
- CMIE estimates that the services sector will grow 8% during fiscal year
1999-2000.
- The automobile, fertilizer, steel and cement industries have shown higher
growth in the recent months. During June 1999, cement, fertilizer and
steel production increased 21.3%, 14.7% and 8.4%, respectively.
Additionally, capital goods production increased 19.5% in May 1999. The
machinery and equipment segment of the capital goods industry showed an
impressive growth of 30% during May 1999 compared to -1.7% last year,
indicating a revival of investment interest in the industrial economy.
- According to the CMIE, private companies improved performance during the
1998-99 fiscal year with sales growth of 11.9% as compared to 6.6% sales
growth in the 1997-98 fiscal year.
- After a prolonged period of negative growth in profits, manufacturing
companies increased profits in the first quarter of 1999-2000.
- The profits-after-tax increased 4% during the first quarter of fiscal
1999-2000 compared to -21.4% in the first half and -17.3% in the second
half of fiscal 1998-99.
- The industrial sector is expected to benefit from lower interest costs as
well as improvement in productivity, cost control and restructuring
efforts undertaken during the last two years.
7
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Review of the Indian Economy*
- ---------------------------------------------------------
- Credit growth remained low during fiscal 1998-99 due to low demand for
funds from the corporate sector. During the same period non-food credit
(credit given to all sectors except the farm sector) expanded by 12.1%
compared to 15.1% during the preceding fiscal year.
- The annual inflation rate (as measured by the Wholesale Price Index - year
on year rise) was 6.9% during the 1998-99 fiscal year. The inflation rate
has been contained to single digit percentages during the last four years
and continued its steady decline during the first four months of the
current fiscal year reaching a 17 year low of 1.2% in August 1999.
- Money Supply (M3) growth was 17.8% during the fiscal year 1998-99,
marginally higher than 16.9% growth in the preceding fiscal year.
- Exports declined 4% in fiscal 1998-99 as world trade weakened and prices
of manufactured exports fell due to substantial depreciation of East Asian
currencies.
- Imports increased 0.8% in fiscal 1998-99, the receipts under the invisible
account (which includes software exports which rose by 50%) were $9.2
billion in fiscal 1998-99 compared to $10 billion in fiscal 1997-98.
- The current account deficit declined to 1% of GDP in the fiscal year
1998-99 compared to 1.3% in fiscal 1997-98.
- The foreign exchange reserves (excluding gold and statutory deposit
receipts) increased $3.5 billion during the 1998-99 fiscal year, reaching
$29.5 billion in March 1999.
*Source: Centre for Monitoring Indian Economy ("CMIE")
8
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Review of the Capital Markets*
- ---------------------------------------------------------
- After a period of declining prices from May 1998 through December 1998,
stock prices recovered since January 1999. The Bombay Stock Exchange
Sensitive Index ("BSESI") increased 27.4% from 3,251 on June 30, 1998 to
4,141 on June 30, 1999. The expectation of an industrial growth
acceleration favorably improved stock prices in recent months as the BSESI
rose from 3,245 on April 26, 1999 to 4,705 on August 18, 1999.
- The increasing automation and rapid dematerialization of shares has
facilitated trading volume growth on the Bombay Stock Exchange ("BSE") and
the National Stock Exchange ("NSE"). The trading volume on the BSE was Rs.
3,100 billion during the fiscal year 1998-99 compared to Rs. 2,070 billion
during fiscal 1997-98. The trading volume on the NSE was Rs. 4,140 billion
during fiscal 1998-99 compared to Rs. 3,700 billion during fiscal year
1997-98.
- At March 31, 1999, the total value of physical shares dematerialized for
365 companies represents Rs. 1,143 billion which constitutes approximately
28% of the total market capitalization of the Indian markets. The
Securities and Exchange Board of India has granted the certificate of
commencement of business to the second depository, the Central Securities
Depositary Services Ltd.
- The primary issue market remained subdued with Rs. 424 billion raised
during the fiscal year 1998-99 as compared to Rs. 486 billion in the
preceding fiscal year. A major part of this capital was raised in the form
of bond/debt instruments. Equity issues accounted for Rs. 111 billion as
compared to Rs. 173 billion in the preceding year. Recent trends indicate
a revival of retail investor interest particularly in the information
technology sector.
- Foreign Institutional Investor ("FII") outflow from the Asian region and
the general downgrade in sentiment towards the emerging markets negatively
impacted India last year. The net FII outflow from India markets was $0.1
billion during fiscal 1998-99 compared to $1.8 billion inflow during
fiscal 1997-98. Recently, however, the net FII inflow in the Asian markets
has increased and the net FII portfolio investment in the Indian markets
during the period January 1999 through July 1999 was $1.2 billion.
- The revival of investor interest in cyclical stocks in the cement,
aluminum, petrochemical, paper, engineering and capital goods sectors has
led to improvement in their valuations. Indian stocks are currently
trading at very attractive valuations. With respect to prospective
earnings, the price/earnings ratio for BSESI stocks is 15 times earnings.
Corporate earnings are expected to grow 12% during fiscal year 1999-2000.
*Source: Centre for Monitoring Indian Economy ("CMIE") and the Bombay Stock
Exchange ("BSE")
9
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Investment Adviser's Report
- ---------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BOMBAY STOCK EXCHANGE
SENSITIVE INDEX
JULY 1, 1998 THROUGH JUNE 30, 1999
<S> <C> <C>
01-Jul-98 3230.60
02-Jul-98 3180.73
03-Jul-98 3089.02
06-Jul-98 3178.31
07-Jul-98 3195.94
08-Jul-98 3245.88
09-Jul-98 3331.98
10-Jul-98 3401.74
13-Jul-98 3322.17
14-Jul-98 3371.50
15-Jul-98 3365.72
16-Jul-98 3488.77
17-Jul-98 3470.80
20-Jul-98 3384.75
21-Jul-98 3353.30
22-Jul-98 3344.33
23-Jul-98 3227.52
24-Jul-98 3171.30
27-Jul-98 3085.17
28-Jul-98 3166.84
29-Jul-98 3219.93
30-Jul-98 3212.10
31-Jul-98 3211.31
03-Aug-98 3112.95
04-Aug-98 3119.54
05-Aug-98 3133.42
06-Aug-98 3096.33
07-Aug-98 3062.25
10-Aug-98 3020.71
11-Aug-98 2970.64
12-Aug-98 2950.80
13-Aug-98 2990.22
14-Aug-98 2968.75
17-Aug-98 2917.07 Russian Crisis and FII selling
18-Aug-98 2867.99
19-Aug-98 2884.59
20-Aug-98 2989.60
21-Aug-98 2922.61
24-Aug-98 2950.44
25-Aug-98 2993.36
27-Aug-98 2974.83
28-Aug-98 2908.10
31-Aug-98 2933.85
01-Sep-98 2862.55
02-Sep-98 2886.91
03-Sep-98 2918.89
04-Sep-98 2975.10
07-Sep-98 3051.93
08-Sep-98 3096.10
09-Sep-98 3097.12
10-Sep-98 3108.67
11-Sep-98 3083.56
14-Sep-98 3167.22
15-Sep-98 3162.18
16-Sep-98 3138.66
17-Sep-98 3121.30
18-Sep-98 3090.72
21-Sep-98 3080.91
22-Sep-98 3095.25
23-Sep-98 3135.42
24-Sep-98 3225.30
25-Sep-98 3223.57
28-Sep-98 3206.92
29-Sep-98 3146.83
30-Sep-98 3102.29
05-Oct-98 2878.07
06-Oct-98 2919.74
07-Oct-98 3008.63
08-Oct-98 2896.14
09-Oct-98 2916.66
12-Oct-98 2872.48
13-Oct-98 2832.03
14-Oct-98 2890.72
15-Oct-98 2857.27
16-Oct-98 2848.11
19-Oct-98 2853.27
20-Oct-98 2764.16
23-Oct-98 2784.46
26-Oct-98 2889.71
27-Oct-98 2895.84 Nod for Buy-back
28-Oct-98 2833.04
29-Oct-98 2845.16
30-Oct-98 2812.49
02-Nov-98 2811.44
03-Nov-98 2812.06
05-Nov-98 2842.51
06-Nov-98 2884.37
09-Nov-98 2983.67 Easing of U.S. Sanctions
10-Nov-98 3004.67
11-Nov-98 2976.17
12-Nov-98 3009.57
13-Nov-98 2976.12
16-Nov-98 2945.40
17-Nov-98 2968.60
18-Nov-98 3003.25
19-Nov-98 2964.87
20-Nov-98 2941.39
23-Nov-98 2919.57
24-Nov-98 2903.56
25-Nov-98 2881.69
26-Nov-98 2825.08
27-Nov-98 2783.10
30-Nov-98 2810.86
01-Dec-98 2804.03
02-Dec-98 2816.59
03-Dec-98 2804.46
04-Dec-98 2849.82
07-Dec-98 2921.80
08-Dec-98 2945.64
09-Dec-98 2950.21
10-Dec-98 2979.60
11-Dec-98 3002.54
14-Dec-98 2990.44
15-Dec-98 2927.48
16-Dec-98 2936.92
17-Dec-98 2864.44
18-Dec-98 2875.09
21-Dec-98 2973.37
22-Dec-98 2976.58
23-Dec-98 2962.50
24-Dec-98 2963.45
28-Dec-98 3054.73
29-Dec-98 3046.29
30-Dec-98 3110.33
31-Dec-98 3055.41
01-Jan-99 3060.34
04-Jan-99 3122.04
05-Jan-99 3149.06
06-Jan-99 3205.68
07-Jan-99 3299.09
08-Jan-99 3397.84
11-Jan-99 3433.21
12-Jan-99 3353.22
13-Jan-99 3310.46
14-Jan-99 3292.28
15-Jan-99 3207.85
18-Jan-99 3278.58
19-Jan-99 3218.91
21-Jan-99 3329.93
22-Jan-99 3297.86
25-Jan-99 3309.15
27-Jan-99 3353.98
28-Jan-99 3292.95
29-Jan-99 3315.57
01-Feb-99 3265.91
02-Feb-99 3236.76
03-Feb-99 3277.57
04-Feb-99 3236.42
05-Feb-99 3215.35
08-Feb-99 3183.64
09-Feb-99 3207.71
10-Feb-99 3307.49
11-Feb-99 3313.40
12-Feb-99 3337.49
15-Feb-99 3315.08
16-Feb-99 3344.68
17-Feb-99 3336.42
18-Feb-99 3351.05
19-Feb-99 3354.92
22-Feb-99 3303.89
23-Feb-99 3283.97
24-Feb-99 3287.53
25-Feb-99 3281.29
26-Feb-99 3233.86
01-Mar-99 3523.98 Central Budget '99
03-Mar-99 3640.42
04-Mar-99 3601.96
05-Mar-99 3649.06
08-Mar-99 3732.10
09-Mar-99 3784.11
10-Mar-99 3743.37
11-Mar-99 3673.51
12-Mar-99 3702.81
15-Mar-99 3783.71
16-Mar-99 3744.18
17-Mar-99 3672.71
19-Mar-99 3672.63
22-Mar-99 3713.18
23-Mar-99 3757.50
24-Mar-99 3682.69
26-Mar-99 3597.58
30-Mar-99 3683.49
31-Mar-99 3739.96
01-Apr-99 3686.29
05-Apr-99 3519.39
06-Apr-99 3569.47
07-Apr-99 3586.80
08-Apr-99 3538.17
09-Apr-99 3441.19
12-Apr-99 3463.77
13-Apr-99 3464.52
15-Apr-99 3357.12
16-Apr-99 3572.91
19-Apr-99 3451.43 Sensex Crashes 246 Points as BJP Govt Falls
20-Apr-99 3443.99
21-Apr-99 3464.54
22-Apr-99 3408.74
23-Apr-99 3406.59
26-Apr-99 3245.27
28-Apr-99 3272.71
29-Apr-99 3326.69 Renewed FII Buying Fuels a Rally
03-May-99 3378.40
04-May-99 3502.95
05-May-99 3557.07
06-May-99 3648.86
07-May-99 3707.75
10-May-99 3820.25
11-May-99 3900.49
12-May-99 3876.89
13-May-99 4014.68
14-May-99 4075.47
17-May-99 4039.39
18-May-99 4085.11
19-May-99 4123.58
20-May-99 4079.45
21-May-99 4015.75
24-May-99 4028.98
25-May-99 4060.08
26-May-99 3973.30
27-May-99 3862.45 Kargil Conflict Begins
28-May-99 3773.32
31-May-99 3966.07
01-Jun-99 3912.00
02-Jun-99 3935.82
03-Jun-99 3976.88
04-Jun-99 4042.52
07-Jun-99 4035.32
08-Jun-99 4066.82
09-Jun-99 4041.89
10-Jun-99 4056.47
11-Jun-99 3969.36
14-Jun-99 3950.96
15-Jun-99 3901.73
16-Jun-99 4021.40
17-Jun-99 4125.25
18-Jun-99 4109.89
21-Jun-99 4210.36
22-Jun-99 4254.86
23-Jun-99 4157.13
24-Jun-99 4119.73
25-Jun-99 4111.77
28-Jun-99 4158.67
29-Jun-99 4170.83
30-Jun-99 4140.73
</TABLE>
The second half of 1998 witnessed a decline in share prices on the stock market.
The BSESI stood at 3,251 at June 30, 1998 and declined to 2,764 at October 20,
1998. The end of the year saw a rally in the BSESI following the grant of
approval for share buy backs and the easing of sanctions imposed by the U.S.
government. The BSESI remained buoyant during the first quarter of 1999. In May
1999, the BSESI rose to 4,124 based on renewed FII buying. News of a conflict on
the border with Pakistan at the end of May led to a decline of over 500 points.
The BSESI closed at 4,141 at June 30, 1999.
FUND PERFORMANCE
The Fund has achieved a compound annual growth rate ("CAGR") of 21.5% in rupee
terms from August 19, 1988 through June 30, 1999 compared to a CAGR of 18.9%
registered by the BSESI during the same period.
10
<PAGE>
The performance of the Fund's rupee net asset value ("NAV") through June 30,
1999 was superior to the one year performance in terms of investment returns of
both the BSESI and CRISIL 500 indices. For the year ended June 30, 1999 the
BSESI and CRISIL 500 index increased 27.4% and 30.7%, respectively, while the
Fund's rupee NAV increased 52.5%.
The Fund's rupee NAV underperformed the BSESI for the three month, six month and
nine month periods ended June 30, 1999. The Fund's underperformance is
attributable in part to a 38.49% allocation to BSESI based stocks at June 30,
1999 as compared to a 49.67% allocation to BSESI based stocks at June 30, 1998.
The Fund's dollar NAV increased 41.7% from US $9.56 at June 30, 1998 to US
$13.55 at June 30, 1999. The market price of the Fund was US $9.56 at June 30,
1999.
The beta (a measure of risk) of the Fund was 0.94 at June 30, 1998 and 0.82 at
June 30, 1999. The strategy of maintaining a defensive beta was a conscious
decision undertaken in view of market volatility.
Following the commencement of operations of the National Securities Depository
Limited, an increasing number of stocks are now dematerialized. From the Fund's
portfolio of 153 companies, 90 companies, representing 93% of the Fund's
invested stock (in market value terms) are held in dematerialized form.
INVESTMENT STRATEGY
The strategy of divesting non-core, marginal holdings and concentrating the
Fund's investments in a smaller number of stocks having good potential for
appreciation will, we anticipate, benefit the Fund and continue to help the Fund
outperform its benchmark indices.
The Fund held positions in 153 companies at June 30, 1999 compared to 176
positions at June 30, 1998. However, 99% of the Fund's investments are in 150
companies, 50% of which were in 11 companies. During the twelve months ended
June 30, 1999, the BSESI increased 27%. During this period, 29 of the Fund's top
fifty stocks outperformed the BSESI. These superior performers have a 59.8%
weighting in the Fund.
At June 30, 1999 the Fund had investments in 27 sectors. The largest investment,
in terms of market value was in consumer healthcare (22.7%) followed by
information technology (19.5%), automobiles (17.1%) and pharmaceuticals (10.5%).
The Fund has divested its holdings in sectors perceived to have limited growth
potential such as telecommunications, hotels, petrochemicals, consumer durables,
shipping and electricals.
11
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Investment Adviser's Report (concluded)
- ---------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUPEE NAV VS. BOMBAY
STOCK EXCHANGE SENSETIVE INDEX
(JULY 1, 1997 THROUGH JUNE 30, 1998)
<S> <C> <C>
ReNAV BSESI
7/01/98 100.00 100.00
7/08/98 103.44 100.47
7/15/98 107.05 104.18
7/22/98 107.38 103.52
7/29/98 105.20 99.67
8/05/98 102.81 96.99
8/12/98 100.80 91.34
8/19/98 100.08 89.29
8/26/98 107.26 91.33
9/02/98 103.37 89.36
9/09/98 107.23 95.87
9/16/98 107.37 97.15
9/23/98 110.59 97.05
9/30/98 112.25 97.41
10/07/98 110.82 93.13
10/14/98 107.42 89.48
10/21/98 104.34 85.56
10/28/98 108.34 87.69
11/04/98 106.57 87.04
11/11/98 109.43 92.12
11/18/98 110.99 92.96
11/25/98 107.45 89.20
12/02.98 105.07 87.18
12/09/98 109.63 91.32
12/16/98 111.22 91.70
12/30/98 115.48 96.28
1/06/99 120.55 99.23
1/13/99 125.00 102.47
1/20/99 125.98 99.64
1/27/99 134.96 103.82
2/03/99 132.38 101.45
2/10/99 134.57 102.38
2/17/99 139.41 103.28
2/24/99 132.64 101.76
3/03/99 149.26 112.69
3/10/99 154.36 115.87
3/17/99 156.71 113.69
3/24/99 156.02 113.99
3/31/99 159.41 115.77
4/07/99 152.29 111.03
4/14/99 145.35 107.24
4/21/99 144.42 107.24
4/28/99 132.53 101.30
5/05/99 142.20 110.11
5/12/99 150.63 120.01
5/19/99 152.71 127.64
5/26/99 151.56 122.99
6/02/99 149.80 121.83
6/09/99 150.48 125.11
6/16/99 144.54 124.48
6/23/99 151.92 128.68
6/30/99 152.52 128.17
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RELATIVE PERFORMANCE OF NORMALISED RUPEE NAV
V/S. BOMBAY STOCK EXCHANGE SENSITIVE INDEX
JULY 1, 1997 THROUGH JUNE 30, 1998
<S> <C> <C>
BSESI ReNAV
7/01/98 100.00 100.00
7/08/98 100.00 102.96
7/15/98 100.00 102.75
7/22/98 100.00 103.73
7/29/98 100.00 105.55
8/05/98 100.00 106.00
8/12/98 100.00 110.36
8/19/98 100.00 112.08
8/26/98 100.00 117.44
9/02/98 100.00 116.67
9/09/98 100.00 111.86
9/16/98 100.00 110.51
9/23/98 100.00 113.95
9/30/98 100.00 115.24
10/07/98 100.00 118.99
10/14/98 100.00 120.05
10/21/98 100.00 121.94
10/28/98 100.00 123.55
11/04/98 100.00 122.43
11/11/98 100.00 118.78
11/18/98 100.00 119.39
11/25/98 100.00 120.46
12/02.98 100.00 120.52
12/09/98 100.00 120.04
12/16/98 100.00 120.51
12/23/98 100.00 121.28
12/30/99 100.00 119.95
1/6/99 100.00 121.49
1/13/99 100.00 121.99
1/20/99 100.00 126.44
1/27/99 100.00 129.99
2/03/99 100.00 130.49
2/10/99 100.00 131.45
2/17/99 100.00 134.99
2/24/99 100.00 130.35
3/3/99 100.00 132.45
3/10/99 100.00 133.21
3/17/99 100.00 137.85
3/24/99 100.00 136.87
3/31/99 100.00 137.70
4/07/99 100.00 137.17
4/14/99 100.00 135.53
4/21/99 100.00 134.66
4/28/99 100.00 130.83
5/05/99 100.00 129.15
5/12/99 100.00 125.52
5/19/99 100.00 119.64
5/26/99 100.00 123.23
6/2/99 100.00 122.96
6/9/99 100.00 120.27
6/16/99 100.00 116.12
6/23/99 100.00 118.06
6/30/99 100.00 119.00
</TABLE>
12
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Top 20 Holdings -- June 30, 1999
- ---------------------------------------------------------
The Fund had positions in 153 companies at June 30, 1999. 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. ........................................................................... 11.44%
2. Hindustan Lever Ltd. ............................................................... 8.53%
3. Hero Honda Motors Ltd. ............................................................. 7.35%
4. Punjab Tractors Ltd. ............................................................... 5.22%
5. NIIT Ltd............................................................................ 4.92%
6. SmithKline Beecham Consumer Healthcare Ltd.......................................... 4.70%
7. Satyam Computer Services Ltd. ...................................................... 3.37%
8. Reliance Industries Ltd............................................................. 2.54%
9. Software Solutions Integrated Ltd. ................................................. 2.46%
10. Nestle India Ltd.................................................................... 2.29%
11. Mahindra & Mahindra Ltd. ........................................................... 2.07%
12. TVS Suzuki Ltd. .................................................................... 2.05%
13. DSQ Software Ltd. .................................................................. 1.91%
14. Morepan Laboratories Ltd............................................................ 1.79%
15. Novartis India Ltd. ................................................................ 1.73%
16. Mahanagar Telephone Nigam Ltd....................................................... 1.67%
17. BFL Software Ltd. .................................................................. 1.62%
18. Vashisthi Detergents Ltd............................................................ 1.57%
19. Hindustan Petroleum Corp. Ltd....................................................... 1.49%
20. Burroughs Wellcome India Ltd........................................................ 1.36%
------
Total............................................................................... 70.08%
------
------
</TABLE>
13
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments
June 30, 1999
- ----------------------------------------------------------------------------
INVESTMENTS IN INDIA--106.73%
- --------------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--106.32%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------
<C> <S> <C>
Aluminum--1.16%
1,321 Hindalco Industries Ltd................................................................... $ 19,139
50 Indian Aluminum Co. Ltd................................................................... 71
1,532,600 National Aluminum Ltd..................................................................... 1,528,007
------------
1,547,217
------------
Aquaculture--0.00%
89,900 Aqua Marine Foods Ltd.* #................................................................. 21
100 King International Aqua Ltd.* #........................................................... 0
------------
21
------------
Automobiles & Auto Ancilliaries--18.38%
115,611 Bajaj Auto Ltd.+.......................................................................... 1,441,806
75,325 Exide Industries Ltd...................................................................... 343,633
393,338 Hero Honda Motors Ltd..................................................................... 9,792,648
472,311 Mahindra & Mahindra Ltd................................................................... 2,753,515
815,400 Pal Peugeot Ltd.*......................................................................... 48,871
227,900 Punjab Tractors Ltd....................................................................... 6,960,985
75,432 Tata Engineering & Locomotive Co. Ltd..................................................... 356,989
11,600 Tata Engineering & Locomotive Co. Ltd. GDR................................................ 66,700
237,918 TVS Suzuki Ltd............................................................................ 2,727,173
20 Ucal Fuel Systems Ltd..................................................................... 19
------------
24,492,339
------------
Banks/Financial Institutions--0.09%
2,386 Housing Development Finance Corporation Ltd.+............................................. 122,215
------------
Cement--0.95%
3,800 India Cements Ltd......................................................................... 3,670
5,538 India Cements Ltd.- new shares #.......................................................... 4,966
12,015 Madras Cements Ltd........................................................................ 1,261,326
------------
1,269,962
------------
Ceramics/Granites--0.10%
454,850 Grapco Industries Ltd.* #................................................................. 7,549
191,197 Kajaria Ceramics Ltd...................................................................... 114,815
175,000 Pacific Industries Ltd*................................................................... 7,665
------------
130,029
------------
Chemicals & Dyes--1.06%
218,499 BASF India Ltd............................................................................ 1,133,797
4,665 Colour Chemicals Ltd...................................................................... 271,641
477 Tata Chemicals Ltd........................................................................ 853
------------
1,406,291
------------
Computer Hardware--0.36%
21,125 HCL Infosystems Ltd....................................................................... 174,362
50,000 Moser Baer India Ltd...................................................................... 68,868
20,800 PSI Data Systems Ltd...................................................................... 230,440
------------
473,670
------------
</TABLE>
14
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------
<C> <S> <C>
Computer Software--12.34%
103,500 BFL Software Ltd.......................................................................... $ 2,158,636
104,800 Cybertech Systems and Software Ltd........................................................ 527,624
406,700 DSQ Software Ltd.......................................................................... 2,550,078
500,000 Goldstone Engineering Ltd. - new shares #................................................. 365,952
500,000 Goldstone Engineering Ltd................................................................. 377,478
11,000 Infosys Technologies Ltd.+................................................................ 919,545
131,800 InfoTech Enterprises Ltd.................................................................. 971,941
21,600 Leading Edge Systems Ltd.................................................................. 145,892
59,700 Mastek Ltd................................................................................ 822,974
37,800 Pentafour Software & Exports Ltd.......................................................... 993,361
168,500 R.S. Software (India) Ltd................................................................. 674,893
153,618 Satyam Computer Services Ltd.............................................................. 4,490,086
19,200 Silverline Industries Ltd................................................................. 87,015
80,300 Sonata Software Ltd....................................................................... 644,270
4,000 Visualsoft India Ltd...................................................................... 87,321
6,550 Wilpro Ltd................................................................................ 621,631
------------
16,438,697
------------
Computer Training--8.16%
27,600 Aptech Ltd................................................................................ 454,910
70,175 NIIT Ltd. - new shares #.................................................................. 3,282,679
69,759 NIIT Ltd.................................................................................. 3,269,250
121,700 Pentafour Communications.................................................................. 481,834
328,900 Software Solutions Integrated Ltd......................................................... 3,282,555
109,600 VJIL Consulting Ltd....................................................................... 100,176
------------
10,871,404
------------
Consumer Durables--0.21%
25,000 Mirc Electronics Ltd...................................................................... 111,226
250,000 Polar Industries Ltd...................................................................... 161,365
100 Titan Industries Ltd...................................................................... 202
500 VideoCon International Ltd................................................................ 720
------------
273,513
------------
Consumer Products--12.79%
29,900 Archies Greetings & Gifts Ltd............................................................. 659,620
59,800 Bata India Ltd............................................................................ 296,312
207,098 Hindustan Lever Ltd....................................................................... 11,362,223
6,800 Indian Shaving Products Ltd............................................................... 233,219
60,000 Marico Industries Ltd..................................................................... 892,116
52,457 Procter & Gamble India Ltd................................................................ 1,378,538
12,550 Reckitt & Coleman of India Ltd............................................................ 129,984
1,538,200 Vashisti Detergents Ltd................................................................... 2,093,838
------------
17,045,850
------------
Diversified--14.75%
603,763 ITC Ltd................................................................................... 15,247,173
80,010 Larsen & Toubro Ltd....................................................................... 528,420
258,993 Raymond Ltd............................................................................... 485,388
832,533 Reliance Industries Ltd................................................................... 3,391,161
216 Sterlite Industries (India) Ltd........................................................... 1,200
------------
19,653,342
------------
Electricals--0.20%
50,638 Siemens India Ltd......................................................................... 269,182
92,300 Solarson Industries Ltd.*................................................................. 1,596
------------
270,778
------------
</TABLE>
15
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
June 30, 1999
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------
<C> <S> <C>
Engineering--2.70%
90,000 Cummins India Ltd......................................................................... $ 868,983
145,000 Growel Times Ltd.* #...................................................................... 33
25,400 Ingersoll Rand India Ltd.................................................................. 263,778
44,425 Thermax Ltd............................................................................... 193,553
168,600 Wartsila Diesel India Ltd................................................................. 1,108,065
5,000,000 Welspun Syntex Ltd.*...................................................................... 1,164,131
1,650 Western Paques (India) Ltd.* #............................................................ 0
------------
3,598,543
------------
Fertilizers--0.84%
95,000 Hindustan Lever Chemicals Ltd.#........................................................... 999,712
100,000 Indo Gulf Corp. Ltd....................................................................... 121,946
------------
1,121,658
------------
Finance & Leasing--1.06%
120,000 Credit Rating Information Services of India Ltd.+......................................... 1,413,555
------------
Food & Agro Products--7.06%
727,000 Agritech Hatcheries & Foods Ltd.* #....................................................... 22,624
71,200 American Dry Fruits Co. Ltd.*............................................................. 11,571
2,057 Cadbury India Ltd......................................................................... 36,374
49,900 Entex Foods Ltd........................................................................... 21,798
1,000 FDC Ltd................................................................................... 8,033
245,425 Nestle India Ltd.......................................................................... 3,046,597
464,340 SmithKline Beecham Consumer Healthcare Ltd................................................ 6,265,058
------------
9,412,055
------------
Hotels--1.90%
368,525 EIH Ltd................................................................................... 1,784,008
48,220 Hotel Leela Venture Ltd.- Warrants expire 9/30/00*........................................ 5,002
93,358 Indian Hotels Co. Ltd..................................................................... 748,930
------------
2,537,940
------------
Housing & Construction--0.02%
150,200 Lok Housing & Construction Ltd.*.......................................................... 20,775
27,950 NCL Seccolor Ltd.* #...................................................................... 6
------------
20,781
------------
Iron & Steel--0.12%
300,000 Asian Alloys Ltd.* #...................................................................... 24,896
19,740 Grand Foundry Ltd.*....................................................................... 910
25,875 Jindal Iron & Steel Co. Ltd.- Warrants* #................................................. 0
421,000 Kanakdhara Steel Ltd.* #.................................................................. 97
1,000,000 Welspun Stahl Rohren Ltd.................................................................. 126,787
------------
152,690
------------
Packaging--0.01%
157,800 Ras Extrusions Ltd.*...................................................................... 9,094
6,200 Sharp Industries Ltd...................................................................... 4,266
------------
13,360
------------
Paints/Dyes/Rubber--0.88%
20 Asian Paints India Ltd.................................................................... 143
100,550 Ciba Specialty Chemicals Ltd.............................................................. 417,220
53,517 Clariant India Ltd........................................................................ 484,219
97,400 Dewan Rubber Industries Ltd.*............................................................. 5,613
79,091 Goodlass Nerolac Paints Ltd............................................................... 258,896
------------
1,166,091
------------
</TABLE>
16
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------
<C> <S> <C>
Paper--0.20%
100,300 Ballarpur Industries Ltd.................................................................. $ 140,693
97,600 Orient Paper & Industries Ltd............................................................. 65,697
775,000 Rama Newsprint & Papers Ltd.*............................................................. 60,742
------------
267,132
------------
Pesticides/Agrochemicals--1.85%
23,750 Cynamid Agro Ltd.......................................................................... 156,664
112,211 Novartis India Ltd........................................................................ 2,304,749
------------
2,461,413
------------
Petrochemicals--1.00%
138,524 Castrol India Ltd......................................................................... 1,326,005
500,000 Sree Rayalaseema Petrochemicals Ltd.*..................................................... 8,068
------------
1,334,073
------------
Petroleum--2.57%
76,700 Bharat Petroleum Corporation Ltd.......................................................... 465,009
346,000 Hindustan Petroleum Corp. Ltd............................................................. 1,982,042
1,575,000 Reliance Petroleum Ltd.................................................................... 982,106
------------
3,429,157
------------
Pharmaceuticals--11.23%
60,000 Aurobindo Pharmaceuticals Ltd............................................................. 644,191
6,215 Bayer India Ltd........................................................................... 243,557
112,000 Burroughs Wellcome India Ltd.............................................................. 1,808,059
32,741 Dr. Reddys Laboratories................................................................... 628,781
75,100 E. Merck India Ltd........................................................................ 1,037,602
3,400 Fulford India Ltd......................................................................... 36,128
59,624 German Remedies Ltd....................................................................... 1,051,323
75,000 Hoechst Marion Roussel Ltd................................................................ 950,899
60,200 Knoll Pharmaceuticals Ltd................................................................. 763,949
210,000 Morepan Laboratories Ltd.................................................................. 2,382,469
323,800 Orchid Chemicals & Pharmaceuticals Ltd.................................................... 939,378
56,200 Pfizer Ltd................................................................................ 1,276,354
214,330 Pharmasia Ltd.*........................................................................... 14,822
36,050 Rhone Poulenc Ltd......................................................................... 954,353
130,650 SmithKline Beecham Pharmaceuticals Ltd.................................................... 1,190,547
54,500 Sun Pharmaceuticals Industries Ltd........................................................ 574,524
10,000 Wockhart Ltd.............................................................................. 60,927
33,750 Wyeth Lederle Ltd......................................................................... 408,377
------------
14,966,240
------------
Plastics/Pipes--0.00%
300 Uniplas India Ltd.*....................................................................... 3
------------
Power & Energy--0.06%
17,298 BSES Ltd.................................................................................. 59,474
18,043 Gas Authority of India Ltd................................................................ 25,496
------------
84,970
------------
Shipping--0.06%
157,500 Shipping Corporation of India Ltd......................................................... 75,156
------------
Tea & Plantation--0.87%
132,625 Tata Tea Ltd.............................................................................. 1,161,768
------------
Telecommunications & Cable--1.85%
50,000 Himachal Futuristics Ltd.................................................................. 101,429
519,700 Mahanagar Telephone Nigam Ltd............................................................. 2,228,313
99,000 Repl Engineering Ltd.*.................................................................... 2,396
49,700 Usha Beltron Ltd.......................................................................... 132,728
------------
2,464,866
------------
</TABLE>
17
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments (concluded)
June 30, 1999
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------- -----------
<C> <S> <C>
Textiles--0.62%
29,100 Ginni Filament Ltd.*........................................ $ 2,717
114,697 Grasim Industries Ltd....................................... 585,647
193,500 Hanil Era Textiles Ltd.*.................................... 7,806
122,606 Indo Count Industries Ltd................................... 23,741
239,000 K.G. Denim Ltd.*............................................ 27,547
20,700 Maxwell Apparel Industries Ltd.*............................ 5,798
66,500 Morarjee Goculdas Spinning & Weaving Co. Ltd................ 20,312
331,300 Patspin India Ltd........................................... 49,642
45,000 Shamken Multifab Ltd........................................ 9,336
446,200 Welspun India Ltd........................................... 97,716
-----------
830,262
-----------
Miscellaneous--0.87%
17,400 Gujarat Mineral Development Corp............................ 22,663
232,600 Hindustan Zinc Ltd.......................................... 56,300
119,000 Navneet Publications Ltd.................................... 1,070,945
26,800 Skyline Nepc Ltd.* #........................................ 612
152,000 TamilNadu Hospitals Ltd.* #................................. 35
173,100 Techtran Polylenses Ltd.*................................... 11,971
400,000 Tejoomals Industries Ltd.* #................................ 92
-----------
1,162,618
-----------
Total Equities & Equity Equivalents (cost--$99,082,669)................. 141,669,659
-----------
</TABLE>
18
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NON-CONVERTIBLE DEBENTURES --0.41%
- --------------------------------------------------------------------------------
<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 ......... $ 206,923
15,000 16.0% Rama Newsprint & Papers Ltd. of Rs. 60 each; redeemable starting 1/02/00 * # ..... 0
13,393 14.5% National Aluminum Ltd. of Rs. 1,000 each; redeemable starting 3/25/05 # .......... 335,890
------------
Total Non-Convertible Debentures (cost--$2,342,509)................................................... 542,813
------------
Total Investments in India (cost--$101,425,178)....................................................... 142,212,472
------------
- ------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS--0.12%
- ------------------------------------------------------------------------------------------------------------------
TIME DEPOSITS--0.12%
- ------------------------------------------------------------------------------------------------------------------
US$ 163 Brown Brothers Harriman & Co. Grand Cayman, 4.00% @ (cost--$163,000)..................... 163,000
------------
TOTAL INVESTMENTS (cost--$101,588,178)--106.85%....................................................... 142,375,472
Liabilities in excess of other assets--(6.85)%........................................................ (9,133,499)
------------
NET ASSETS (equivalent to $13.55 per share; applicable to 9,830,611 shares outstanding)--100%......... $133,241,973
------------
------------
</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 $5,045,164 or 3.79% of net
assets.
@ Variable rate account--rate resets on a monthly basis;
amount available upon 48 hours' notice.
See accompanying notes to financial statements
19
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 1999
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments in unaffiliated securities, at
value (cost--$97,780,872).................... $138,478,351
Investments in affiliated securities, at value
(cost--$3,807,306).......................... 3,897,121 $142,375,472
-------------
Cash (including Indian Rupees with a cost of
$29,837 and value of $20,174)................ 21,585
Receivable for investments sold............... 4,236,244
Dividends and interest receivable............. 739,221
Prepaid expenses and other assets............. 86,020
-------------
Total assets.............................. 147,458,542
-------------
LIABILITIES
Deferred Indian withholding taxes............. 8,192,284
Loan payable (including accrued interest of
$151,025).................................... 2,721,518
Payable for investments purchased............. 2,494,840
Investment advisory fee payable............... 72,929
Trust administrator fee payable............... 33,076
Administrator fee payable..................... 17,585
Accrued expenses and other liabilities........ 684,337
-------------
Total liabilities......................... 14,216,569
-------------
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.................... 115,086,252
Undistributed net investment income........... 2,244,102
Accumulated net realized loss................. (17,922,823)
Net unrealized appreciation of investments and
other assets and liabilities denominated in
Indian rupees (net of deferred Indian
withholding tax of $6,167,784)............... 33,736,136
-------------
$133,241,973
-------------
-------------
NET ASSET VALUE PER SHARE......................... $13.55
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended June 30, 1999
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends from unaffiliated securities................................. $ 1,312,829
Dividends from affiliated securities................................... 242,744
Interest............................................................... 146,566 $ 1,702,139
------------
EXPENSES
Advisory fees.......................................................... 730,001
Custodian and accounting fees.......................................... 680,150
Trust administration fees.............................................. 350,786
Legal and audit fees................................................... 297,800
Administration fees.................................................... 193,301
Interest expense....................................................... 153,641
Directors' fees and expenses........................................... 147,150
Insurance expense...................................................... 105,962
Reports to shareholders................................................ 96,940
Transfer agent fees.................................................... 28,105
Mauritius administration fees and other expenses....................... 14,000
Miscellaneous.......................................................... 30,409 2,828,245
------------ --------------
Net investment loss before taxes....................................... (1,126,106)
Deferred Indian withholding tax benefit................................ 336,660
--------------
Net investment loss.................................................... (789,446)
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments--unaffiliated securities.............. 6,488,533
Net realized loss on investments--affiliated securities................ (494,028)
Deferred Indian withholding tax........................................ (905,933)
------------
Net realized gain on investments....................................... 5,088,572
Net realized gain on foreign currency transactions..................... 21,856
Net change in unrealized appreciation/depreciation of:
Investments (net of change in deferred Indian withholding tax of
$3,836,866)........................................................ 34,720,506
Other assets and liabilities denominated in Indian rupees.......... (193,444)
--------------
Net realized and unrealized gain on investments and foreign currency
transactions.......................................................... 39,637,490
--------------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS...................... $ 38,848,044
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 1999 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment loss........................... $ (789,446) $ (509,752)
Net realized gain on investments and foreign
currency transactions....................... 5,110,428 622,307
Net change in unrealized
appreciation/depreciation of investments and
other assets and liabilities denominated in
Indian rupees............................... 34,527,062 (29,241,621)
----------------- -------------
Total from investment operations.............. 38,848,044 (29,129,066)
----------------- -------------
CAPITAL SHARE TRANSACTIONS
Capital contributions from Investment
Adviser..................................... 437,275 --
----------------- -------------
Net increase (decrease) in net assets............. 39,285,319 (29,129,066)
NET ASSETS
Beginning of year............................. 93,956,654 123,085,720
----------------- -------------
End of year................................... $ 133,241,973 $ 93,956,654
----------------- -------------
----------------- -------------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
June 30, 1999
- ----------------------------------------------------------------------------
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"). In March
1999, the Fund established a branch (the "Mauritius Branch") in the Republic of
Mauritius. The Fund is in the process of tranferring the units held in the Trust
to the Mauritius Branch.
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) purchases and sales of investments,
income and expenses are translated at the rate of exchange prevailing on the
23
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
respective dates of such transactions. The resulting net foreign currency gain
and 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 the foreign currency exchange rates from the
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 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. Dividends and distributions which exceed net investment income
or net realized capital gains for financial reporting purposes, but not for tax
purposes, are reported as dividends in excess of net investment income or
distributions in excess of net realized gain on investments. To the extent they
exceed net investment income or net realized capital gain for tax purposes, they
are reported as distributions of additional paid-in capital. As a result of
permanent book/tax differences relating to a net operating loss for the year,
$1,229,942 has been reclassified from undistributed net investment income to
additional paid-in capital. In addition, $437,275 relating to capital
contributions by the Investment Adviser has been reclassified from additional
paid-in capital to accumulated net realized loss.
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
24
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
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.
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.
Multiconsult Ltd. (the "Mauritius Administrator") provides certain
administrative services relating to the operation and maintenance of the Fund in
Mauritius. The Mauritius Administrator receives a monthly fee of $1,000 for
administration services and a quaterly fee of $800 for certain other services
and is reimbursed for certain expenses incurred in the performance of its duties
under the agreement. In addition, the Mauritius Administrator received from the
Fund $11,000 for services rendered in connection with the establishment of the
Mauritius branch. Two officers of the Mauritius Administrator are also directors
of the Fund.
NOTE 3 INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
1999 was $103,013,636. Accordingly, net unrealized appreciation of investments
of $39,361,836 was composed of gross appreciation of $60,561,005 for those
investments having an excess of value over cost and gross depreciation of
$21,199,169 for those investments having an excess of cost over value.
For the year ended June 30, 1999, aggregate purchases and sales of portfolio
securities, excluding short term securities, were $34,905,092 and $34,807,821,
respectively.
At June 30, 1999, the Fund owned securities valued at approximately $5,539,000
which were in the process of being registered in the name of the Fund or being
dematerialized. Significant delays are common in registering the transfer of
securities in India, and such transfers can take a year or longer. Indian
securities regulations normally preclude the Fund from selling such securities
until the completion of the registration or the dematerialization process.
25
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
NOTE 4 TRANSACTIONS WITH AFFILIATES
The Fund paid or accrued approximately $191,500 for the year ended June 30, 1999
for legal services to a law firm of which the Fund's assistant secretary is a
partner.
For the year ended June 30, 1999, the Fund paid approximately $10,622, $6,518,
$5,162, $2,110, $1,313 and $483 in brokerage commisions to UTI Securities
Exchange Ltd., IDBI Capital Markets, ABN Amro Asia Equities, ICICI Brokerage,
DSP Merrill Lynch, and Investment India Ltd., 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
the calendar year, the Fund intends not to be subject to U.S. federal excise
tax.
At June 30, 1999, the Fund had a capital loss carryforward of $13,134,959,
($1,424,381 of which expires at the end of fiscal year 2005 and $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 a 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. At June 30, 1999, $8,192,284 in aggregate net
deferred Indian withholding taxes payable were accrued by the Fund. 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 the Trust 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,
26
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
if any, realized upon redemption of units representing the Fund's interest in
the Trust described above would be subject to 10% withholding tax.
Upon completion of the transfer of units in the Trust to the Mauritius Branch
and certain other formalities, the Fund intends to conduct its investment
activities in India as a tax resident of Mauritius and expects to obtain
benefits under the double taxation treaty between Mauritius and India. To obtain
benefits under the double taxation treaty, the Fund must meet certain tests and
conditions, including the establishment of Mauritius tax residence and related
requirements. The Fund has obtained a certificate from the Mauritian authorities
that it is a resident of Mauritius under the double taxation treaty between
Mauritius and India. A fund which is a tax resident in Mauritius under the
treaty, but has no branch or permanent establishment in India, will not be
subject to capital gains tax in India on the sale or redemption of securities
(units of the Trust).
The Fund will be liable for tax in Mauritius at a fixed rate of 15% on
dividends, if any, received by it from the Trust in India. It will, however, be
entitled to a tax credit equivalent to 90% of the Mauritius tax which will
result in an effective tax rate of 1.5%. There is no capital gains tax in
Mauritius. However, income taxes may be payable on gains from sale of securities
or redemption of units of the Trust where such sales or redemptions are deemed
by Mauritian authorities to be trading activities. For the year ended June 30,
1999, no provision for Mauritius taxes has been made as the Mauritius Branch had
no operations.
The foregoing is based on current interpretation and practice and is subject to
any future changes in Indian or Mauritius tax laws or in the tax treaty between
India and Mauritius.
NOTE 7 CAPITAL STOCK
There were no transactions in shares of common stock for the year ended June 30,
1999 or for the year ended June 30, 1998.
NOTE 8 CAPITAL CONTRIBUTIONS FROM INVESTMENT ADVISER
On October 20, 1998, March 16, 1999 and March 17, 1999, the Fund recorded
capital contributions from the Investment Adviser in the amount of $436,802,
$237 and $236 respectively. These amounts were paid by the Investment Adviser in
connection with losses incurred by the Fund on sales of certain unpermitted
investments.
NOTE 9 LOAN PAYABLE
On March 22, 1999, the Fund entered into a credit facility (the "Credit
Facility") of Indian Rupees 210,000,000 ($4,840,941) from UTI Bank Ltd. ("UTI
Bank"), an affiliate of the Investment Adviser, for a period of one year at an
interest rate of 16.32% per annum. On April 6, 1999, the Credit
27
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
Facility was increased to Indian Rupees 310,000,000 ($7,146,150). During the
period ended June 30, 1999 the maximum and average amount of the loan
outstanding under the Credit Facility during the borrowing period was
approximately $5,598,000 and approximately $3,652,000, respectively. During the
period ended June 30, 1999, the Fund incurred $153,641 in interest expense under
the Credit Facility. At June 30, 1999, $2,721,518, including accrued interest of
$151,025, is payable to UTI Bank under the Credit Facility.
NOTE 10 CONCENTRATION OF RISK
At June 30, 1999, substantially all of the Fund's net assets were invested in
Indian securities. The Indian securities markets are among other things
substantially smaller, less developed, less liquid, subject to less regulations
and more volatile than the securities markets in the United States. 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.
28
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Financial Highlights
- ---------------------------------------------------------
Selected data for a share of common stock outstanding throughout each year is
presented below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $9.56 $12.52 $13.67 $15.86 $21.87
-------- ------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) before tax...... (0.11) (0.07) (0.05) 0.11* (0.09)
Net deferred Indian withholding (tax)/tax
benefit on net investment income (loss).... 0.03 0.02 0.02 (0.01)* 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions............................... 4.51 (3.06) (1.16) (1.47)* (5.59)
Deferred Indian withholding (tax)/tax benefit
on net realized and unrealized gain (loss)
on investments............................. (0.48) 0.15 0.12 0.03* 0.54
-------- ------- -------- -------- --------
Total from investment operations............. 3.95 (2.96) (1.07) (1.34) (5.13)
-------- ------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income................... -- -- (0.08) -- --
From net realized gain on investments........ -- -- -- -- (0.92)
In excess of net realized gain on
investments................................ -- -- -- (0.35) --
-------- ------- -------- -------- --------
Total dividends and distributions to
shareholders............................... -- -- (0.08) (0.35) (0.92)
-------- ------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS
Capital contibutions from Investment
Adviser.................................... 0.04 -- -- -- --
Dilutive effect of rights offering........... -- -- -- (0.37) --
Offering costs charged and adjustments to
additional paid-in capital................. -- -- -- (0.13) 0.04
-------- ------- -------- -------- --------
Total capital share transactions............. 0.04 -- -- (0.50) 0.04
-------- ------- -------- -------- --------
Net asset value, end of year................. $13.55 $9.56 $12.52 $13.67 $15.86
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Market value, end of year.................... $9.56 $7.25 $13.38 $14.63 $18.38
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
TOTAL INVESTMENT RETURN (a).................. 31.90% (45.79)% (7.98)% (15.88)% (9.42)%
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted)........ $133,242 $93,957 $123,086 $134,329 $111,255
Ratio of expenses, excluding (tax)/tax
benefit, to
average net assets......................... 2.51%(b) 2.32% 2.37% 2.17% 1.99%
Ratio of expenses, including (tax)/tax
benefit, to average net assets............. 2.21%(c) 1.87% 2.23% 2.24% 1.94%
Ratio of net investment income (loss) to
average net assets......................... (0.70)%(c) (0.18)% (0.26)% 0.72% (0.40)%
Portfolio turnover........................... 30% 23% 31% 10% 15%
</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 year and a sale at the
current market price on the last day of each year 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) Includes interest expense of $153,641, or 0.14% of average net assets.
(c) Includes net interest expense of $138,277 net of deferred Indian
withholding tax benefit, or 0.12% of average net assets.
29
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Report of Independent Accountants
- ---------------------------------------------------------
To the Shareholders and Board of Directors of
The India Growth Fund Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The India Growth Fund Inc. (the
"Fund") at June 30, 1999, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
August 20, 1999
<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
Pierre Dinan
Uday Kumar Gujadhur
G.P. Gupta
Thomas L. Hansberger
Narayan Murthy
Peter J. Pearson
Christopher Reeves
P.S. Subramanyam
Antoine W. van Agtmael
OFFICERS
P.S. Subramanyam, CHAIRMAN OF THE BOARD & PRESIDENT
J.S. Mascarenhas, 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.
- ----------------------
- ----------------------
ANNUAL REPORT
JUNE 30, 1999
