<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
General Information
- ---------------------------------------------------------
THE FUND
The India Growth Fund Inc. (the "Fund") is a non-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 investments 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, N.A.
(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 declares 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,
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.
1
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
General Information (continued)
- ----------------------------------------------------------------------
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.
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
2
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------
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, N.A., 400 Bellevue Parkway, Wilmington, Delaware
19809.
ANNUAL SHAREHOLDERS' MEETING
The Fund's annual meeting of shareholders was held on September 30, 1999 and
reconvened on October 21, 1999. Shareholders voted to elect Pierre Dinan, Uday
Kumar Gujadhur, Thomas L. Hansberger, N.R. Narayana Murthy and Antoine W. Van
Agtmael as Directors and ratified the appointment of PricewaterhouseCoopers LLP
as the Fund's independent accountants for the fiscal year ending June 30, 2000.
The shareholders also voted to approve the change of the Fund's sub-
classification under the Investment Company Act of 1940, as amended, from a
diversified investment company to a non-diversified investment company and to
approve the elimination of
3
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
General Information (concluded)
- ----------------------------------------------------------------------
the Fund's corresponding investment restriction regarding diversification. The
resulting vote count for each proposal is listed below:
<TABLE>
<S> <C> <C> <C>
1. Election of Directors:
Pierre Dinan For: 4,774,478
Withheld Authority: 1,499,523
Uday Kumar Gujadhur For: 4,776,662
Withheld Authority: 1,497,339
Thomas L. Hansberger For: 4,768,415
Withheld Authority: 1,505,586
N.R. Narayana Murthy For: 4,776,784
Withheld Authority: 1,497,217
Antoine W. Van Agtmael For: 4,493,415
Withheld Authority: 1,780,586
2. Ratification of appointment of PricewaterhouseCoopers LLP as the
Fund's Independent Accountants:
For: 5,015,969
Against: 88,573
Abstain: 1,169,454
No Vote: 5
3. Approval to change the Fund's sub-classification under the
Investment Company Act of 1940, as amended, from a diversified
investment company to a non-diversified investment company, and
approve the elimination of the Fund's corresponding investment
restriction regarding diversification.
For: 4,293,720
Against: 1,240,442
Abstain: 56,148
No Vote: 683,691
</TABLE>
NEW DIRECTOR
Mr. Ishaat Hussain was elected by the Fund's Board of Directors as a Class I
Director at a meeting held on January 24, 2000.
4
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Chairman's Letter to Shareholders
- ---------------------------------------------------------
February 10, 2000
Dear Shareholders:
The Indian economy grew 5.8% during the 1998-99 fiscal year (year ended March
31, 1999) and is expected to grow 6% in the current fiscal year (year ending
March 31, 2000). With favorable rains during this year's monsoon season, the
agriculture sector continues to experience strong growth. Industrial growth is
anticipated to approximate 6 to 6.5% during the 1999-2000 fiscal year compared
to 4% during the 1998-99 fiscal year. Performance of the cement, steel, and
automobile industries remained strong during the eight month period ended
November 30, 1999.
The balance of payment situation remains stable as the current account deficit
is expected to be approximately 1.2% of gross domestic product ("GDP") for the
1999-2000 fiscal year compared to 1.0% in the 1998-99 fiscal year. Exports are
expected to grow more than 8% during the 1999-2000 fiscal year. Foreign exchange
reserves (excluding gold and special drawing rights) was $32 billion on December
31, 1999. The Indian rupee depreciated 2.81% during the period from April 1,
1999 through January 31, 2000. The annual inflation rate, as measured by the
Wholesale Price Index ("WPI") is expected to be 3.5% for the 1999-2000 fiscal
year. Due to the low rate of inflation, the government recently lowered interest
rates on small savings (the Public Provident Fund, postal savings and time
deposits, National Savings Scheme and National Savings Certificates) by one
hundred basis points.
Indian company surveys indicate an improvement in the level of business
confidence. One survey of 1,620 companies indicates that aggregate sales and
profits-after-tax increased 25% and 23%, respectively, during the fiscal quarter
ended December 31, 1999. The manufacturing sector contributed significantly to
the growth in sales. Computer software and hardware companies experienced a 40%
increase in sales and a 79% increase in profits-after-tax during the third
quarter of the 1999-2000 fiscal year. The National Award for Excellence,
sponsored by Unit Trust of India, was presented to Infosys Technologies Ltd.
The Indian stock market witnessed a bullish trend during the 12 month period
ended December 31, 1999. The Bombay Stock Exchange Sensitive Index ("BSESI")
increased 63.6% from 3,060 points on January 1, 1999 to 5,005 points on December
31, 1999. During this period, the S&P CNX 500 (a broad-based index) and the S&P
CNX Information Technology Index increased 95% and 492%, respectively. Annual
trading volumes increased significantly and stood at 133% of market
capitalization for 1999. The estimated foreign institutional investor ("FII")
investments was approximately $10 billion on January 31, 2000. Dematerialization
(the process of converting shares from physical form to electronic form and
lodging them with a depository) continues with shares of 705 companies
(representing market capitalization of Rs. 7,718 billion) having been
dematerialized as of February 5, 2000. As per the Securities Exchange Board of
India's directives,
5
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Chairman's Letter to Shareholders
- ---------------------------------------------------------
rolling settlements have commenced in 10 scrips since January 10, 2000. It is
anticipated that trading in Index-based derivatives is also likely to begin.
There is a strong demand for information technology, media and entertainment
stocks. The software sector's income surpassed Rs. 100 billion in 1998-99 and is
estimated to grow 50% during the 1999-2000 fiscal year. More than 150 of the
Fortune 500 companies source software requirements from India. In dollar terms,
software export earnings may exceed $4 billion in the 2000-01 fiscal year
compared to $2.75 billion in the 1999-2000 fiscal year.
The Fund's investment strategy of continuing to invest in the information
technology sector and increasing its investments in the media and entertainment
sector has enhanced its performance. The Fund will continue to take advantage of
the potential for growth in the Indian stock market by selecting stocks based on
performance and future outlook.
In light of strong economic indicators and the Indian government's current
agenda for further reforms, we believe the India Growth Fund Inc. continues to
be an attractive investment opportunity.
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 gross domestic product ("GDP") of India is estimated to grow 6% or
more during the 1999-2000 fiscal year. GDP grew 5.8% during the 1998-99
fiscal year.
- Industrial production increased 6.4% during the period from April 1 to
November 30, 1999 compared to 3.6% during the corresponding period in
1998. The manufacturing sector was a major contributor to overall growth.
Agriculture output is expected to increase 3% during the 1999-2000 fiscal
year compared to 6.6% in the 1998-99 fiscal year.
- One survey of 1,620 companies indicates an increase in sales and
profits-after-tax of 25% and 23%, respectively, during the third quarter
of the 1999-2000 fiscal year. The profit margin improvement may be
attributable to better working capital management and cost control.
- The Money Supply (M3) growth was 18% during the period from April 1 to
September 30, 1999 compared to 17% during the period from April 1 to
September 30, 1998. The annual inflation rate, as measured by the
Wholesale Price Index ("WPI"), continued its steady decline during 1999
and decreased from 4.63% during the first week of April 1999 to 2.44%
during the first week of December 1999. During the period April 1 to
December 31, 1999, the inflation rate was below 3% for 25 weeks out of the
38 week period.
- Due to a low inflation rate, the government lowered interest rates on
small savings (the Public Provident Fund, postal savings and time
deposits, National Savings Scheme and National Savings Certificates) by
one hundred basis points. The high interest rates on small savings were
impeding a reduction in bank deposit rates.
- Export growth has experienced a resurgence after a two-year slowdown in
global trade and a sharp currency depreciation in the Southeast Asian
countries. Exports grew 12.4% during the period from April to October
1999. Export growth is expected to be 8% for the 1999-2000 fiscal year
compared to a 4.6% increase and a 4.0% decline during the 1997-98 and
1998-99 fiscal years, respectively. Imports increased 6.8% during the
period from April to October 1999 compared to 6.0% and 0.8% during the
1997-98 and 1998-99 fiscal years, respectively.
- Foreign exchange reserves (excluding gold and special drawing rights) were
estimated at $32 billion as of December 31, 1999 having increased $2.43
billion since March 1999. The rupee was fairly stable during 1999. On
January 2, 1999, the currency exchange rate was Rs. 39.32 for 1 US $ and
was Rs. 43.50 for 1 US $ on January 3, 2000.
7
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Review of the Indian Economy*
- ---------------------------------------------------------
- The current account deficit is estimated to be less than 1.2% of the GDP
in 1999-2000 compared to a deficit of 1% in the 1998-99 fiscal year. The
balance of payment situation remained stable during the 1999-2000 fiscal
year with an estimated net capital inflow of more than $8 billion and FII
inflows estimated to be $2.5 billion (net outflow of $0.07 billion in
1998-99).
*Source: Centre for Monitoring Indian Economy ("CMIE"), Government of India
Publication-Economic Survey and Central Statistical Organization
8
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Review of the Capital Markets*
- ---------------------------------------------------------
- The Indian stock market witnessed a bullish trend during 1999 attributable
to continued recovery in the Asian markets, signs of growth in the
industrial sector and the international commodity cycle, India's
commitment to reforms, the continued growth of the Indian information
technology sector and the sustained interest of Foreign Institutional
Investors ("FIIs") in Indian stocks.
- The Bombay Stock Exchange Sensitive Index ("BSESI") increased 63.6% from
3,060 points on January 1, 1999 to 5,005 points on December 31, 1999. The
BSE National Index ("BSENI") (100 stocks) increased 90% and the S&P CNX
500 (a broad-based index) increased 95%. Information technology stocks led
this surge (S&P CNX Information Technology Index) with an increase of
492%.
- Trading volumes on the BSESI and the BSENI increased substantially. The
annual trading volume as a percentage of market capitalization was 133%
during the 1998-99 fiscal year. FII investments in the India markets was
approximately $10 billion on January 31, 2000 (representing more than 5%
of the total market capitalization of the Indian stock market).
- The net capital from the primary market was estimated to be Rs. 429
billion in the 1998-99 fiscal year, of which Rs. 115 billion was in the
form of equity issues. During the period from April to October 1999, Rs.
290 billion was raised from the domestic primary markets, of which Rs. 179
billion was raised by private placements. In recent months, information
technology issues and media companies with initial public offerings have
received substantial subscriptions from retail and institutional
investors.
- Market sentiment received a boost from the passage of the Insurance
Regulatory and Development Authority ("IRDA") bill. The IRDA determines
the guidelines for entry of private sector insurance companies. The Indian
Parliament also passed the Foreign Exchange Management Bill ("FEMA") and
the Prevention of Money Laundering Bill to replace the Foreign Exchange
Regulation Act of 1973. Rolling Settlement in 10 scrips began January 10,
2000 in the Indian markets and 140 scrips will be added to the list
shortly. Scrips are selected based upon a number of criteria including a
daily turnover of at least Rs. 10 million as well as whether they are on
the government's list indicating conversion to dematerialized form to be
necessary. The Securities Exchange Board of India has prescribed the
rolling settlement to be on a T+5 basis (trade date plus five days).
- The Indian economy is expected to grow 6% or more over the next few years.
Government commitment to public sector undertakings and financial sector
reforms, initiatives for infrastructure development and a push towards the
information technology sector are expected to accelerate growth.
*Source: Centre for Monitoring Indian Economy ("CMIE") and the Bombay Stock
Exchange ("BSE")
9
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Report on Fund Performance
- ---------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RUPEE NAV, $ NAV VS BOMBAY STOCK EXCHANGE SENSITIVE INDEX RENAV BSESI NAV($)
DECEMBER 31, 1998 - DECEMBER 31, 1999
<S> <C> <C> <C>
12/31/1998 100.000 100.000 100.000
1/6/1999 104.389 103.066 102.692
1/13/1999 108.242 106.434 106.079
1/20/1999 109.086 103.491 105.568
1/27/1999 116.860 107.834 110.341
2/3/1999 114.632 105.377 108.995
2/10/1999 116.530 106.339 110.218
2/17/1999 120.718 107.269 112.727
2/24/1999 114.858 105.697 108.933
3/3/1999 129.243 117.043 117.867
3/10/1999 133.660 120.353 120.743
3/17/1999 135.699 118.081 122.028
3/24/1999 135.104 118.402 121.661
3/31/1999 138.037 120.243 123.374
4/7/1999 131.870 115.319 117.867
4/14/1999 125.859 111.388 115.297
4/21/1999 125.051 111.388 114.563
4/28/1999 114.763 105.221 108.383
5/5/1999 123.135 114.363 113.645
5/12/1999 130.437 124.646 113.051
5/19/1999 132.236 132.577 119.152
5/26/1999 131.237 127.745 118.295
6/2/1999 129.715 126.540 117.194
6/9/1999 130.300 129.951 117.316
6/16/1999 125.160 129.292 114.012
6/23/1999 131.546 133.656 115.052
6/30/1999 132.068 133.128 117.622
7/7/1999 135.068 138.941 119.458
7/14/1999 141.704 151.439 119.458
7/21/1999 145.292 149.810 123.680
7/28/1999 146.607 147.836 126.495
8/4/1999 148.887 149.311 127.718
8/11/1999 147.076 146.403 126.433
8/18/1999 155.985 151.274 131.818
8/25/1999 153.949 151.712 130.288
9/1/1999 157.549 155.110 132.491
9/8/1999 157.782 153.477 132.675
9/15/1999 157.110 149.857 132.185
9/22/1999 163.179 150.699 135.734
9/29/1999 167.473 154.241 138.120
10/6/1999 166.904 151.035 137.787
10/13/1999 185.491 161.815 149.221
10/20/1999 182.185 158.927 147.386
10/27/1999 169.580 152.916 139.772
11/3/1999 160.738 143.270 134.633
11/10/1999 175.004 143.600 143.199
11/17/1999 170.204 146.013 141.363
11/24/1999 178.816 150.663 146.625
12/1/1999 183.998 148.375 149.746
12/8/1999 195.067 154.299 156.265
12/15/1999 198.706 150.002 158.251
12/22/1999 216.019 159.100 168.470
12/31/1999 220.288 156.316 170.734
</TABLE>
During the six months ended December 31, 1999, the Fund outperformed each of its
benchmark indices. 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, 1999. During
the twelve month period ended December 31, 1999, the Fund's rupee NAV
outperformed the BSESI by 62.8%, while the Fund's rupee NAV increased 123.7%.
For the recent twelve month period ended February 2, 2000, the Fund's rupee NAV
outperformed the BSESI by 63.7% with the rupee NAV increasing 1.53% since
December 31, 1999.
10
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Top 20 Holdings -- December 31, 1999
- ---------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY PERCENTAGE OF NET ASSETS
------- ------------------------
<C> <S> <C>
1 Software Solutions Integrated Ltd. ............... 7.46%
2 Mastek Ltd........................................ 6.93
3 Zee Telefilms Ltd. ............................... 6.22
4 Satyam Computer Services Ltd. .................... 5.13
5 Hero Honda Motors Ltd. ........................... 4.81
6 Hindustan Lever Ltd. ............................. 4.27
7 NIIT Ltd. ........................................ 4.15
8 Infosys Technologies.............................. 3.53
9 ITC Ltd. ......................................... 2.85
10 DSQ Software Ltd. ................................ 2.71
11 Mahindra & Mahindra Ltd. ......................... 2.62
12 Sonata Software Ltd............................... 2.44
13 Punjab Tractors Ltd. ............................. 2.40
14 InfoTech Enterprises Ltd. ........................ 2.20
15 SmithKline Beecham Consumer Healthcare Ltd........ 2.15
16 Silverline Industries Ltd. ....................... 1.83
17 Reliance Industries Ltd. ......................... 1.76
18 Cybertech Systems Ltd. ........................... 1.72
19 Sun Pharmaceuticals Industries Ltd. .............. 1.68
20 Goldstone Engineering Ltd. ....................... 1.61
-----
Total............................................. 68.47%
=====
</TABLE>
11
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1999 (unaudited)
- ----------------------------------------------------------------------------
INVESTMENTS IN INDIA--107.41%
- --------------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--107.31%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------
<C> <S> <C>
ALUMINUM--1.04%
50 Indian Aluminum Co. Ltd. ......................... $ 102
1,583,270 National Aluminum Ltd. ........................... 2,302,111
------------
2,302,213
------------
AQUACULTURE--0.00%
89,900 Aqua Marine Foods Ltd.* #......................... 21
100 King International Aqua Ltd.* #................... 0
------------
21
------------
AUTOMOBILES & AUTO ANCILLARIES--10.28%
75,325 Exide Industries Ltd. ............................ 396,971
411,579 Hero Honda Motors Ltd. ........................... 10,682,131
601,596 Mahindra & Mahindra Ltd. ......................... 5,808,513
222,900 Punjab Tractors Ltd. ............................. 5,324,492
130,432 Tata Engineering & Locomotive Co. Ltd. ........... 602,686
------------
22,814,793
------------
BANKS/FINANCIAL INSTITUTIONS--0.00%
100 Industrial Finance Corp.+......................... 25
100 Industrial Finance Corp. - Rights+................ 0
------------
25
------------
CEMENT--0.94%
9,338 India Cements Ltd. ............................... 16,744
12,940 Madras Cements Ltd. .............................. 2,075,383
------------
2,092,127
------------
CERAMICS/GRANITES--0.00%
454,850 Grapco Industries Ltd.* #......................... 105
------------
CHEMICALS & DYES--0.25%
4,665 Colour Chemicals Ltd. ............................ 225,207
10,000 Gujarat Gas Co. Ltd............................... 128,713
150,450 Tata Chemicals Ltd................................ 198,871
------------
552,791
------------
COMPUTER HARDWARE--0.76%
25,000 HCL Technology Ltd. #............................. 333,333
115,300 Moser Baer India Ltd.............................. 925,051
12,900 PSI Data Systems Ltd.............................. 439,757
------------
1,698,141
------------
</TABLE>
12
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------
<C> <S> <C>
COMPUTER SOFTWARE--32.48%
17,970 BFL Software Ltd.................................. $ 458,958
13,488 Cybertech Systems and Software Ltd................ 359,060
129,800 Cybertech Systems Ltd. ........................... 3,455,365
20,000 Digital Equipment................................. 514,943
314,100 DSQ Software Ltd. ................................ 6,014,834
683,600 Goldstone Engineering Ltd......................... 3,584,578
6,000 Hughes Software System............................ 573,331
23,500 Infosys Technologies+............................. 7,842,112
131,800 InfoTech Enterprises Ltd.......................... 4,877,509
3,550 Kale Consultants.................................. 57,694
1,700 Leading Edge Systems Ltd.......................... 72,283
73,500 Mastek Ltd. ...................................... 7,782,045
73,500 Mastek Ltd. (new shares) #........................ 7,598,464
7,800 Pentafour Software and Exports Ltd. .............. 239,559
17,800 Pentafour Software and Exports Ltd. (new shares)
#............................................... 552,823
13,450 Polaris Software Lab Ltd. ........................ 545,421
168,500 R. S. Software (India) Ltd........................ 2,011,735
80,356 Satyam Computer Services Ltd. .................... 4,062,134
143,578 Satyam Computer Services Ltd. (new shares) #...... 7,318,187
330,000 Shonkh Technologies #............................. 986,207
218,000 Silverline Industries Ltd. ....................... 4,059,561
110,300 Sonata Software Ltd............................... 5,427,014
4,000 Visualsoft India Ltd.............................. 719,352
50,250 Wilpro Ltd. ...................................... 3,004,373
------------
72,117,542
------------
COMPUTER TRAINING--12.14%
27,600 Aptech Ltd........................................ 1,121,131
120,934 NIIT Ltd.......................................... 9,217,534
326,400 Software Solutions Integrated Ltd................. 16,563,112
14,300 VJIL Consulting Ltd. ............................. 60,487
------------
26,962,264
------------
CONSUMER DURABLES--0.24%
37,550 Mirc Electronics Ltd. ............................ 342,007
250,000 Polar Industries Ltd.*............................ 179,023
100 Titan Industries Ltd.............................. 333
400 VideoCon International Ltd. ...................... 560
------------
521,923
------------
CONSUMER PRODUCTS--5.82%
29,900 Archies Greetings & Gifts Ltd. ................... 398,289
29,900 Archies Greetings & Gifts Ltd. (new shares) #..... 398,289
50 Colgate Palmolive India........................... 246
183,218 Hindustan Lever Ltd............................... 9,476,793
6,800 Indian Shaving Products Ltd....................... 262,574
59,000 Marico Industries Ltd. ........................... 453,011
52,457 Procter & Gamble India Ltd. ...................... 826,047
1,152,100 Vashisti Detergents Ltd. ......................... 1,111,048
------------
12,926,297
------------
DIVERSIFIED--5.67%
414,202 ITC Ltd. ......................................... 6,332,054
166,079 Larsen & Toubro Ltd............................... 2,122,375
146,093 Raymond Ltd. ..................................... 217,292
727,533 Reliance Industries Ltd. ......................... 3,908,608
216 Sterlite Industries (India) Ltd. ................. 1,654
------------
12,581,983
------------
</TABLE>
13
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments (continued)
December 31, 1999 (unaudited)
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------
<C> <S> <C>
ELECTRICALS--0.34%
63,297 Siemens India Ltd. #.............................. $ 743,267
25,000 Solarson Industries Ltd.*......................... 2,816
------------
746,083
------------
ENGINEERING--2.15%
125,000 Bharat Heavy Electric Ltd......................... 603,448
90,000 Cummins India Ltd................................. 1,183,448
145,000 Growel Times Ltd.* #.............................. 33
25,400 Ingersoll Rand India Ltd.......................... 228,892
174,425 Thermax Ltd....................................... 549,940
168,600 Wartsila Diesel India Ltd......................... 833,310
5,000,000 Welspun Syntex Ltd.*.............................. 1,379,310
1,650 Western Paques (India) Ltd.* #.................... 0
------------
4,778,381
------------
FERTILIZERS--1.15%
112,850 Gujarat Narmada .................................. 127,378
95,000 Hindustan Lever Chemicals Ltd. #.................. 1,053,080
940,950 Indo Gulf Corp. Ltd. ............................. 1,362,755
------------
2,543,213
------------
FINANCE & LEASING--0.85%
120,000 Credit Rating Information Services of India
Ltd............................................. 1,889,655
------------
FOOD & AGRO PRODUCTS--3.25%
727,000 Agritech Hatcheries & Foods Ltd.* #............... 22,562
244,850 Nestle India Ltd.................................. 2,420,356
400,717 SmithKline Beecham Consumer Healthcare Ltd. ...... 4,767,150
------------
7,210,068
------------
HOTELS--1.07%
368,525 EIH Ltd........................................... 1,694,368
48,220 Hotel Leela Venture Ltd.- Warrants expire
9/30/00*........................................ 10,531
93,358 Indian Hotels Co. Ltd. ........................... 680,333
------------
2,385,232
------------
HOUSING & CONSTRUCTION--0.00%
27,950 NCL Seccolor Ltd.* #.............................. 6
------------
IRON & STEEL--0.48%
300,000 Asian Alloys Ltd.* ............................... 20,690
421,000 Kanakdhara Steel Ltd.* #.......................... 97
251,464 Tata Iron & Steel................................. 818,559
1,000,000 Welspun Stahl Rohren Ltd.*........................ 234,483
------------
1,073,829
------------
MEDIA--8.01%
118,700 Crest Communications Ltd.......................... 1,390,291
86,900 SRI Adhikari Bros. Telecommunications Network..... 2,574,637
550,000 Zee Telefilms Ltd. ............................... 13,817,011
------------
17,781,939
------------
PACKAGING--0.01%
147,800 Ras Extrusions Ltd.*.............................. 13,591
------------
PAINTS/DYES/RUBBER--0.14%
77,650 Ciba Specialty Chemicals Ltd. .................... 237,859
23,441 Goodlass Nerolac Paints Ltd. ..................... 70,134
------------
307,993
------------
</TABLE>
14
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------
<C> <S> <C>
PAPER--0.05%
74,014 Ballarpur Industries Ltd. ........................ $ 99,111
15,800 Orient Paper & Industries Ltd. ................... 10,170
------------
109,281
------------
PESTICIDES/AGROCHEMICALS--1.50%
5,750 Cyanamid Agro Ltd. ............................... 27,058
112,211 Novartis India Ltd. .............................. 3,301,196
------------
3,328,254
------------
PETROCHEMICALS--0.30%
89,177 Castrol India Ltd. ............................... 625,571
500,000 Sree Rayalaseema Petrochemicals Ltd.*............. 34,483
------------
660,054
------------
PETROLEUM--2.37%
76,700 Bharat Petroleum Corporation Ltd.................. 692,239
346,000 Hindustan Petroleum Corp. Ltd. ................... 1,455,586
173,000 Hindustan Petroleum Corp. Ltd. (new shares) #..... 726,202
1,575,000 Reliance Petroleum Ltd. .......................... 2,378,793
------------
5,252,820
------------
PHARMACEUTICALS--11.29%
63,900 Aurobindo Pharmaceuticals Ltd. ................... 1,836,941
25,000 Aurobindo Pharmaceuticals Ltd. (new shares) #..... 718,678
6,215 Bayer India Ltd. ................................. 209,267
78,790 Burroughs Wellcome India Ltd...................... 1,059,590
33,256 Cipla Ltd. ....................................... 1,062,663
20,000 Cipla Ltd. (new shares) #......................... 617,701
52,741 Dr. Reddys Laboratories........................... 1,748,334
75,100 E. Merck India Ltd. .............................. 1,104,920
24,250 Fulford India Ltd. ............................... 284,589
59,624 German Remedies Ltd. ............................. 1,255,942
75,000 Hoechst Marion Roussel Ltd........................ 1,786,638
60,200 Knoll Pharmaceuticals Ltd. ....................... 738,868
152,655 Morepan Laboratories Ltd. ........................ 2,820,608
248,200 Orchid Chemicals & Pharmaceuticals Ltd............ 2,002,717
56,200 Pfizer Ltd........................................ 1,259,655
148,030 Pharmasia Ltd.*................................... 53,257
36,050 Rhone Poulenc Ltd................................. 1,180,948
94,500 Sun Pharmaceuticals Industries Ltd................ 3,720,259
55,500 Wockhart Ltd. .................................... 1,224,955
33,750 Wyeth Lederle Ltd. ............................... 382,733
------------
25,069,263
------------
PLASTICS/PIPES--0.00%
300 Uniplas India Ltd.*............................... 32
------------
POWER & ENERGY--0.20%
102,298 BSES Ltd.......................................... 449,171
------------
TEA & PLANTATION--0.56%
103,032 Tata Tea Ltd. .................................... 1,243,490
------------
</TABLE>
15
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Portfolio of Investments (concluded)
December 31, 1999 (unaudited)
- ----------------------------------------------------------------------------
EQUITIES & EQUITY EQUIVALENTS--(concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- ------------
<C> <S> <C>
TELECOMMUNICATIONS & CABLE--2.16%
82,000 Global Tele Systems Ltd..................................... $ 1,805,885
70,000 Himachal Futuristics Ltd.................................... 1,090,230
425,790 Mahanagar Telephone Nigam Ltd............................... 1,889,137
98,000 Repl Engineering Ltd.*...................................... 14,531
------------
4,799,783
------------
TEXTILES--1.00%
400 Ginni Filament Ltd.*........................................ 77
244,697 Grasim Industries Ltd. ..................................... 2,107,503
153,800 Hanil Era Textiles Ltd.* #.................................. 9,546
104,900 K.G. Denim Ltd.*............................................ 17,845
446,200 Welspun India Ltd.*......................................... 92,317
------------
2,227,288
------------
MISCELLANEOUS--0.81%
220,746 Hindustan Zinc Ltd.*........................................ 83,731
150,500 Modiluft Ltd. .............................................. 89,262
103,800 Navneet Publications Ltd. .................................. 1,613,076
26,800 Skyline Nepc Ltd.* ......................................... 2,033
152,000 TamilNadu Hospitals Ltd.* #................................. 35
50,000 Techtran Polylenses Ltd.*................................... 6,897
400,000 Tejoomal Industries Ltd.* #................................. 92
------------
1,795,126
------------
TOTAL EQUITIES & EQUITY EQUIVALENTS (cost--$104,361,948)................ 238,234,777
------------
</TABLE>
16
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
NON-CONVERTIBLE DEBENTURES --0.10%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) VALUE
- --------------------- ------------
<C> <S> <C>
Rs. 26 10.5% Jindal Iron & Steel Co. Ltd of Rs. 500 each;
redeemable starting 1/14/01............................... $ 218,163
250 16.0% Rama Newsprint & Papers Ltd. of Rs. 60 each;
redeemable starting 1/02/00* #............................ 0
------------
TOTAL NON-CONVERTIBLE DEBENTURES (cost--$890,509)................................... 218,163
------------
TOTAL INVESTMENTS IN INDIA (cost--$105,252,457)--107.41%............................ 238,452,940
Liabilities in excess of other assets--(7.41)%...................................... (16,447,242)
------------
NET ASSETS (equivalent to $22.58 per share; applicable to 9,830,611 shares
outstanding)--100%................................................................ $222,005,698
============
</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 $21,078,728 or 9.50% of
net assets.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1999 (unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
INVESTMENTS IN UNAFFILIATED SECURITIES, AT
VALUE (COST--$103,092,260)................... $230,610,803
INVESTMENTS IN AFFILIATED SECURITIES, AT VALUE
(COST--$2,160,197)........................... 7,842,137 $238,452,940
------------
CASH (INCLUDING INDIAN RUPEES WITH A COST OF
$1,282,806 AND VALUE OF $1,273,428).......... 2,248,501
RECEIVABLE FOR INVESTMENTS SOLD............... 818,031
DIVIDENDS AND INTEREST RECEIVABLE............. 217,585
PREPAID EXPENSES AND OTHER ASSETS............. 102,840
------------
TOTAL ASSETS.............................. 241,839,897
------------
LIABILITIES
DEFERRED INDIAN WITHHOLDING TAXES............. 17,773,321
PAYABLE FOR INVESTMENTS PURCHASED............. 1,401,016
INVESTMENT ADVISORY FEE PAYABLE............... 95,044
TRUST ADMINISTRATOR FEE PAYABLE............... 48,567
ADMINISTRATOR FEE PAYABLE..................... 23,597
ACCRUED EXPENSES AND OTHER LIABILITIES........ 492,654
------------
TOTAL LIABILITIES......................... 19,834,199
------------
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........... 1,324,926
ACCUMULATED NET REALIZED LOSS................. (11,905,840)
NET UNREALIZED APPRECIATION OF INVESTMENTS AND
OTHER ASSETS AND LIABILITIES DENOMINATED IN
INDIAN RUPEES (NET OF DEFERRED INDIAN
WITHHOLDING TAX OF $14,897,836).............. 117,402,054
------------
$222,005,698
============
NET ASSET VALUE PER SHARE......................... $22.58
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Operations
For the six months ended December 31, 1999 (unaudited)
- ----------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
DIVIDENDS FROM UNAFFILIATED SECURITIES................................. $ 665,366
DIVIDENDS FROM AFFILIATED SECURITIES................................... 1,624
INTEREST............................................................... 40,220 $ 707,210
-----------
EXPENSES
ADVISORY FEES.......................................................... 462,047
CUSTODIAN AND ACCOUNTING FEES.......................................... 460,365
TRUST ADMINISTRATION FEES.............................................. 251,159
LEGAL AND AUDIT FEES................................................... 173,080
INTEREST EXPENSE....................................................... 135,351
ADMINISTRATION FEES.................................................... 123,946
DIRECTORS' FEES AND EXPENSES........................................... 72,575
REPORTS TO SHAREHOLDERS................................................ 53,500
INSURANCE EXPENSE...................................................... 44,899
TRANSFER AGENT FEES.................................................... 14,168
MAURITIUS ADMINISTRATION FEES AND OTHER EXPENSES....................... 9,960
MISCELLANEOUS.......................................................... 38,781 1,839,831
----------- -------------
NET INVESTMENT LOSS BEFORE TAXES....................................... (1,132,621)
DEFERRED INDIAN WITHHOLDING TAX BENEFIT................................ 213,445
-------------
NET INVESTMENT LOSS.................................................... (919,176)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
NET REALIZED GAIN ON INVESTMENTS--UNAFFILIATED SECURITIES.............. 8,186,164
NET REALIZED LOSS ON INVESTMENTS--AFFILIATED SECURITIES................ (882,101)
DEFERRED INDIAN WITHHOLDING TAX........................................ (1,044,490)
-----------
NET REALIZED GAIN ON INVESTMENTS....................................... 6,259,573
NET REALIZED LOSS ON FOREIGN CURRENCY TRANSACTIONS..................... (242,590)
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION OF:
INVESTMENTS (NET OF CHANGE IN DEFERRED INDIAN WITHHOLDING TAX OF
$8,730,052)........................................................ 83,683,137
OTHER ASSETS AND LIABILITIES DENOMINATED IN INDIAN RUPEES.......... (17,219)
-------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS.......................................................... 89,682,901
-------------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS...................... $ 88,763,725
=============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- ---------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
DECEMBER 31, 1999 ENDED
(UNAUDITED) JUNE 30, 1999
------------------ --------------
<S> <C> <C>
INCOME (LOSS) FROM INVESTMENT OPERATIONS
NET INVESTMENT LOSS........................... $ (919,176) $ (789,446)
NET REALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS....................... 6,016,983 5,110,428
NET CHANGE IN UNREALIZED
APPRECIATION/DEPRECIATION OF INVESTMENTS AND
OTHER ASSETS AND LIABILITIES DENOMINATED IN
INDIAN RUPEES............................... 83,665,918 34,527,062
--------------- ------------
TOTAL INCOME FROM INVESTMENT OPERATIONS....... 88,763,725 38,848,044
--------------- ------------
CAPITAL SHARE TRANSACTIONS
CAPITAL CONTRIBUTIONS FROM INVESTMENT
ADVISER..................................... -- 437,275
--------------- ------------
NET INCREASE IN NET ASSETS........................ 88,763,725 39,285,319
NET ASSETS
BEGINNING OF PERIOD........................... 133,241,973 93,956,654
--------------- ------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET
INVESTMENT INCOME OF $1,324,926 AND
$2,244,102, RESPECTIVELY)................... $ 222,005,698 $133,241,973
=============== ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1999 (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 non-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 transferring 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
21
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
investments, income and expenses are translated at the rate of exchange
prevailing on the 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.
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.
22
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
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 quarterly fee of $800 for certain other services
and is reimbursed for certain expenses incurred in the performance of its duties
under the agreement. 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 December
31, 1999 was substantially the same as the cost of securities for financial
statement purposes. Accordingly, net unrealized appreciation of investments of
$133,200,483 was composed of gross appreciation of $143,736,929 for those
investments having an excess of value over cost and gross depreciation of
$10,536,446 for those investments having an excess of cost over value.
For the six months ended December 31, 1999, aggregate purchases and sales of
portfolio securities, excluding short term securities, were $25,359,913 and
$30,003,057, respectively.
At December 31, 1999, the Fund owned securities valued at approximately
$1,285,354 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.
23
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- ----------------------------------------------------------------------
NOTE 4 TRANSACTIONS WITH AFFILIATES
The Fund paid or accrued approximately $108,149 for the six months ended
December 31, 1999 for legal services to a law firm of which the Fund's assistant
secretary is a partner.
For the six months ended December 31, 1999, the Fund paid approximately $9,257,
$3,387, $2,656, $861, $607 and $359 in brokerage commissions to UTI Securities
Exchange Ltd., IDBI Capital Markets, ICICI Brokerage, ABN Amro Asia Equities,
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, $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 December 31, 1999, $17,773,321 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
24
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
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.
The Fund conducts 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 the 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 six months
ended December 31, 1999, no provision for Mauritius taxes is considered
necessary as a result of a net investment loss incurred by the Fund.
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 six months ended
December 31, 1999 or for the year ended June 30, 1999.
NOTE 8 CREDIT FACILITY
On March 22, 1999, the Fund entered into a credit facility (the "Credit
Facility") of Indian Rupees 210,000,000 ($4,827,586) 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 Facility was increased to Indian Rupees 310,000,000
($7,126,437). During the period ended December 31, 1999 the maximum and average
amount of the loan outstanding under the Credit Facility during the borrowing
period was approximately $7,118,107 and approximately $2,672,553, respectively.
During the six months ended December 31, 1999, the
25
<PAGE>
THE INDIA GROWTH FUND INC.
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
- ----------------------------------------------------------------------
Fund incurred $135,351 in interest expense under the Credit Facility. At
December 31, 1999, the Fund did not have an outstanding loan balance to UTI Bank
under the Credit Facility.
NOTE 9 CONCENTRATION OF RISK
At December 31, 1999, all of the Fund's portfolio assets were invested in Indian
securities. The Indian securities markets are 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.
26
<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 FOR THE YEARS ENDED JUNE 30,
DECEMBER 31, 1999 -----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $13.55 $9.56 $12.52 $13.67 $15.86 $21.87
-------- ------- --------- --------- --------- ---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) before
tax................................... (0.12) (0.11) (0.07) (0.05) 0.11 * (0.09)
Net deferred Indian withholding
(tax)/tax benefit on net investment
income (loss)......................... 0.02 0.03 0.02 0.02 (0.01)* 0.01
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions.......................... 10.12 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............ (0.99) (0.48) 0.15 0.12 0.03 * 0.54
-------- ------- --------- --------- --------- ---------
Total income (loss) from investment
operations............................ 9.03 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........ -- -- -- -- (0.50) 0.04
-------- ------- --------- --------- --------- ---------
Net asset value, end of period.......... $22.58 $13.55 $9.56 $12.52 $13.67 $15.86
======== ======= ========= ========= ========= =========
Market value, end of period............. $15.25 $9.56 $7.25 $13.38 $14.63 $18.38
======== ======= ========= ========= ========= =========
TOTAL INVESTMENT RETURN (a)............. 59.48% 31.90% (45.79)% (7.98)% (15.88)% (9.42)%
======== ======= ========= ========= ========= =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted).............................. $222,006 $133,242 $93,957 $123,086 $134,329 $111,255
Ratio of expenses, excluding (tax)/tax
benefit, to average net assets (c).... 2.21%(b) 2.51% 2.32% 2.37% 2.17% 1.99%
Ratio of expenses, including (tax)/tax
benefit, to average net assets (d).... 1.95%(b) 2.21% 1.87% 2.23% 2.24% 1.94%
Ratio of net investment income (loss) to
average net assets.................... (1.10)%(b) (0.70)% (0.18)% (0.26)% 0.72% (0.40)%
Portfolio turnover...................... 14% 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 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. Total investment return for a period of less than one year is
not annualized.
(b) Annualized.
(c) Includes interest expense of $135,351 (or 0.08% of average net assets) and
$153,641 (or 0.14% of average net assets) for the six months ended December
31, 1999 and the year ended June 30, 1999, respectively.
(d) Includes interest expense net of deferred Indian withholding tax benefit of
$121,816 (or 0.07% of average net assets) and $138,277 (or 0.12% of average
net assets), for the six months ended December 31, 1999 and the year ended
June 30, 1999, repectively.
27
<PAGE>
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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.
51 West 52nd Street
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, N.A.
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
Ishaat Hussain (appointed January 24, 2000)
N.R. Narayana 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.
- ----------------------
- ----------------------
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
