THE INDIA FUND, INC.
July 10, 1996
DEAR FUND SHAREHOLDER,
We are pleased to present you with the unaudited financial statements of The
India Fund, Inc., (the "Fund") for the first half of the fiscal year beginning
January 1, 1996. On June 30, 1996, the Fund's common stock closed on the New
York Stock Exchange at $9.25 per share, which represents a 4.9% discount to the
net asset value per share.
The first half of 1996 was mixed for stocks in India, as the Fund's Investment
Adviser details on the following pages. Following 1995's difficult market,
international investors found value in the depressed prices of many Indian
stocks in 1996. This demand, however, concentrated on the "blue chip" and
larger-capitalization companies, leaving the mid- and small-cap issues behind in
comparison. While the Dollex index, which tracks 200 leading Indian companies,
rose 28% over the six months ended June 30, 1996, the Crisil index of 200
mid-cap issues advanced 7%. As a consequence, the Fund under-performed broad
market indices due to both its continued emphasis on smaller and
mid-capitalization stocks and its sizable cash position (which was reduced over
the period.
The Investment Adviser continues to believe that the strong fundamentals
underlying India's stock market (such as the 29% corporate earnings growth
reported through March 1996) will lead to growth over the long term, especially
for smaller and mid-cap companies. The largely untapped demand from India's
awakening consumer market and an increasingly open business environment, the
Investment Adviser believes, provide a rich opportunity for India's companies to
continue to grow.
We thank you for your participation in the Fund. If you have questions about the
Fund, please call our toll-free number at (800) 421-4777.
Sincerely,
/s/ ALAN RAPPAPORT
Alan Rappaport
Chairman
<PAGE>
REPORT OF THE INVESTMENT ADVISER THE INDIA FUND, INC.
OVERVIEW OF INDIA'S STOCK MARKET
Equity markets in India rebounded from the disappointments of 1995 to register
sharp gains in the first half of 1996. A surge in foreign demand for Indian
securities drove a market rally that pushed the Bombay Sensex index, which
tracks the 30 largest capitalization Indian companies, to rise just over 25%
during the period. Overseas investors were net buyers of over $2 billion in
Indian stock in the first six months of this year, compared with $1.1 billion
for the whole of 1995. As global investors generally began to favor emerging
markets again, Indian equities, priced on average at 12 times earnings, compared
favorably with regional alternatives. This valuation argument was enhanced by
strong average earnings growth of 28% for the 30 companies tracked by the Sensex
for the fiscal year ended March 1996. Foreign investors were highly selective,
however, and their demand did not filter down far beneath the top layer of blue
chip companies with high market capitalization.
The first half's upsurge in buying interest ignored the continued liquidity
crunch that dominated the Indian market throughout 1995. Hit by the rising cost
of funds, local corporations increased their redemptions of short-term
investments in order to finance their capital expenditure and working capital
needs. As a consequence, the dominant local mutual fund manager, the Unit Trust
of India (UTI), was forced to sell securities. Additionally, many companies with
excess cash could not resist the much higher returns elsewhere; prime yields in
the inter-corporate debt market hovered around 20% over the period. Overall,
though, domestic selling was more than offset by demand from foreign investors
and local speculators.
THE GENERAL ELECTION
Politically, the first half of the year in India was dominated by the general
election. Voting was held over the course of three days at the end of April and
early May. As expected, the ruling Congress Party put up a poor showing. The BJP
and its allies on the Hindu-nationalist right emerged as the largest single
parliamentary grouping, though they fell short of the majority needed to govern.
Eventually, after much bargaining, H.D. Deve Gowda, the leader of a coalition of
center-left and regional parties called the United Front, was sworn in as the
new Prime Minister. The Congress Party did not join the coalition, but pledged
support for the United Front government, contingent on the continuation of
economic reforms.
- --------------------------------------------------------------------------------
FUND UPDATES
The Fund's toll-free phone number, (800) 421-4777, provides callers with a
recorded monthly update of the markets in which the Fund invests. It also offers
details about the Fund, its portfolio and performance. The Fund's net asset
value (NAV) is calculated weekly and published in The Wall Street Journal every
Monday under the heading "Closed End Funds." The Fund's NAV is also published in
Barron's on Saturdays and in The New York Times on Mondays. The Fund is listed
on the New York Stock Exchange under the ticker symbol IFN.
- --------------------------------------------------------------------------------
2
<PAGE>
Concerns regarding the economic direction of the new government were eased by
the appointment to the Finance Ministry of P. Chidambaram, a Harvard-educated
lawyer widely considered one of the architects of India's economic
liberalization since 1991. Although many commentators suggested that such a
diverse coalition would soon be pulled apart by internal tensions, we believe
that the strong vested interest in staying in power will support the government
for some time. At the same time, we have been encouraged by some of the initial
proposals from the Finance Ministry, which have been more aggressive than
expected.
ECONOMICS
On the economic front, the annual March survey revised India's real GDP growth
for fiscal 1995 upwards to 6.3%, and forecast GDP for the year ended March 1996
at 6.2%, driven by continued strong industrial growth. We believe the outlook is
encouraging; liquidity is finally improving and interest rates are loosening.
After 18 months of tight monetary policy, money supply growth began to
accelerate during the first half of 1996, aided by investment inflows from
overseas. Furthermore, in late June, the Reserve Bank of India followed its
November adjustment with another one percentage point cut in the commercial
banks' deposit obligations, releasing an estimated Rs 41 billion in liquidity
into the banking system and leading to an almost immediate drop in Indian T-bill
yields.
The government's budget deficit came in above target and remains a cause for
concern. Within its first month in office, however, the new administration has
already signalled its intention to control the deficit by reducing the subsidies
on government-administered petroleum product prices.
PERFORMANCE
From a low on January 25th, following a corruption scandal involving a number of
leading political figures, the Sensex index appreciated 27% over the next three
weeks alone. The market regained momentum at the end of March, reaching its high
of 4,132 on June 17th. The narrow indices moved ahead smartly, as foreign
investors and speculators targeted highly liquid blue-chip issues, while
mid-capitalization stocks languished. For example, although the Dollex index of
200 leading companies stated in dollars rose 27.7% over the first half of 1996,
the Crisil index of 200 mid-capitalization stocks, re-stated in dollars, rose a
mere 7% over the same period.
Many smaller stocks fell in price despite continued strong profit growth;
average earnings per share growth of the companies in the Fund's portfolio was a
strong 33% for the year ended March 1996. As a consequence of the narrowly based
market revival, the performance of the Fund, which remains two-thirds invested
in smaller-capitalized "B-group" securities, was adversely affected in
comparison to broad indices such as the Sensex. The Fund' s net asset value rose
8.8% to $9.73 per share over the period, while the Sensex gained over 25%.
PORTFOLIO STRATEGY
A substantial degree of portfolio restructuring took place over the period.
Capitalizing on the buoyant market conditions, a number of smaller positions
have been sold or reduced. Shares sold were in companies where the fundamental
operating environment had not fulfilled expectations,
3
<PAGE>
such as some of the telecom equipment and fertilizer firms. Proceeds were used
to consolidate the Fund's positions in some core holdings, particularly where
recent management contact had reinforced our confidence in the company.
Reflecting a more positive outlook, the Fund's position in cash and short-term
securities was reduced over the period from 18% to 11%. The Fund's weighting in
the vehicles sector rose significantly over the period, through a combination of
the sector's relative outperformance and further purchases of certain core
holdings. We remain very bullish on the outlook for the Indian technology and
pharmaceuticals industries and have continued to increase the Fund's portfolio
weightings in these sectors as well.
Some of the Fund's industry allocation changes reflect our reservations about
cyclical sectors in the Indian stock market. Though demand growth seems assured,
concerns persist in a number of industries regarding oversupply. Additionally,
"globalization" is beginning to affect some of India's once highly-protected
industries, as trade barriers continue to fall. We have therefore reduced
weightings in steel and synthetic textiles.
KEY SECTOR HOLDINGS
VEHICLES -- 13.6% OF THE FUND'S TOTAL INVESTMENTS AS OF JUNE 30, 1996
Fiscal 1996 was another strong year for India's automobile industry. Growth in
excess of 25% was driven by increasing consumer affluence and healthy industrial
demand. The Fund's largest holding, BAJAJ AUTO, is India's dominant scooter and
"three-wheeler" mini-taxi manufacturer. For the year ending March 1996, the
company's turnover increased 27% on 15% volume growth, and its net profits grew
37%. Given our positive outlook for this sector, the Fund has increased its
holding of south India based TVS SUZUKI, the country's leading moped
manufacturer, which enjoyed a market share of 41% and sales growth of 25% in
fiscal 1996.
The vehicle sector in India is generally characterized by quality management. A
prime example of this and India's largest producer of commercial vehicles,
TELCO, is now the Fund's third largest holding, aided by strong outperformance.
Telco announced fiscal 1996 results, with profits growing 66% on the back of a
32% increase in vehicle sales, as Telco's share of the Indian commercial vehicle
segment increased to 71%. With the country's railways likely to remain
overcrowded, we expect demand for trucks and vans to remain high in the
foreseeable future.
With prosperity growing in rural areas and continued budgetary support by the
government for agriculture, we estimate demand for tractors will grow at least
10% per annum for the rest of this decade. Following strong share price
performance, PUNJAB TRACTORS, India's third largest tractor manufacturer, has
become the Fund's tenth largest holding. The shares' appreciation was helped by
fiscal 1996 net profits that were ahead 42%, based on a 14% increase in sales
volume.
PHARMACEUTICALS -- 7.8% OF THE FUND'S TOTAL INVESTMENTS AS OF JUNE 30, 1996
While multinational pharmaceutical companies were initially dominant in
post-independence India, government incentives have helped stimulate sharp
growth in local industry over the past decade. Some of the larger players that
have emerged in India are beginning to use their low cost base in terms of
production and basic research to build an overseas presence, particularly in the
fast-growing global generics market.
4
<PAGE>
RANBAXY LABORATORIES is the leading example of this strategy and is the Fund's
largest holding in this sector. Exports comprised 46% of sales for Ranbaxy in
fiscal 1996, and are sold as far afield as South Africa. Ranbaxy has entered a
consolidation phase while it invests to build its R&D base to world standards
and develops its export business in developed markets. Consequently, Ranbaxy has
recently acquired two companies, one in the U.S. and one in Europe, to
strengthen its international marketing foothold in these major markets. Despite
these investments, fiscal 1996 exports grew at an impressive 34%.
TECHNOLOGY -- 7.1% OF THE FUND'S TOTAL INVESTMENTS AS OF JUNE 30, 1996
India's information technology industry is attracting international interest for
its cost-competitiveness and high quality standards. The software industry has
its beginnings in the practice of "body-shopping", providing low-cost but highly
trained programmers for on-site work with western companies. Through satellite
technology, it has developed the capability to provide off-site software
maintenance, and now companies at the leading edge are providing customized
software solutions for their overseas clients. This trend towards value-addition
is one reason software exports have shown an average annual growth rate in
excess of 50% between fiscal 1990 and 1996.
The Fund's largest holding in the technology sector is NIIT, the market leader
in computer-based training. NIIT is growing rapidly in software exports; its new
clients include Sony, Sun Microsystems and the government of Singapore. In
semiannual results through March 1996, NIIT enjoyed a 59% increase in sales
revenue, and we estimate annual numbers will at least match this rate of growth.
EXTRACTIVE INDUSTRIES -- 6.7% OF THE FUND'S TOTAL INVESTMENTS AS OF JUNE 30,
1996
With extensive bauxite deposits, India is rich in the basic raw material
for aluminum production. Indicators suggest that industrial production is
picking up in the major metal-consuming nations, the U.S., Germany and Japan,
and growth is forecast to accelerate into 1997. Supplemented by continued strong
demand growth in the emerging markets, this should mean global base metals
demand is accelerating. International aluminum inventories are still low, and a
recovery in demand could quickly move the market into deficit and drive prices
higher. Domestically, aluminum is finding increasing use in a variety of
applications, supporting robust demand for the white metal in India.
HINDALCO is the largest private sector aluminum producer in India and the Fund's
largest holding in this sector. We have increased the Fund's position in the
past six months. Hindalco's key competitive advantage lies in its low-cost
captive power for its smelters. We believe that fully-funded incremental volume
growth over the next two years forms the basis for profit growth, even in the
context of a flat aluminum price. Hindalco has outperformed despite a weak metal
price so far this year.
ELECTRONICS & ELECTRICAL -- 6.1% OF THE FUND'S TOTAL INVESTMENTS AS OF JUNE 30,
1996
The latest government figures indicate the peak energy shortfall in India is
29%. Capacity buildup has been well below the country's expanding needs and
periodic blackouts are a fact of life for
5
<PAGE>
many Indians. In an attempt to meet this demand, a number of both public and
private-sector power generation projects are currently being developed. The new
Government's avowed focus on infrastructure development should serve to smooth
the often tortuous approval process.
We expect suppliers of power equipment to be the prime beneficiaries of the
implementation of these projects and, consequently, have increased the Fund's
exposure to the electrical equipment industry in the first half of 1996. The
Fund's sixth largest holding, CROMPTON GREAVES, is a leading player in this fast
growing sector, heading the domestic market in components integral to power
generation, transformation and distribution, such as transformers, motors and
switch-gears. During fiscal 1996 the company showed a net profit growth of 50%
on a 37% increase in sales.
OTHER SIGNIFICANT HOLDINGS
Finally, there are two new entrants in the Fund's top ten holdings. As of June
30, 1996, the Fund's second largest position is in HINDUSTAN PETROLEUM
CORPORATION (HPCL), a leading downstream oil company with 20% of India's
refining capacity and an extensive product distribution network. During fiscal
1996 the company reported a profit increase of 31% on the back of record sales
and refinery output. With an aggressive capacity expansion program including a
new joint venture greenfield refinery, HPCL is well placed to help meet the
strong demand growth forecast in India for refined petroleum products.
The Fund's fourth largest holding, HINDUSTAN LEVER, is a 51%-owned subsidiary of
Unilever, the U.K. consumer nondurable multinational company. Following its
impending merger with fellow Unilever subsidiary Brooke Bond Lipton, Hindustan
Lever will become India's largest company in terms of market capitalization. The
merged entity will manufacture and market a vast range of consumer products,
with dominant positions in soaps, detergents, beverages, processed foods and ice
cream. Against a background of growing consumer affluence, we expect healthy
returns on investment in Hindustan Lever to be generated through the unique
combination of the quality of its management, a strong product portfolio and
extensive distribution network.
OUR OUTLOOK FOR INDIA
In general, we are positive about the outlook for India over the coming months.
Increased monetary liquidity is already driving down interest rates and should
feed into the equity markets eventually. The new government has been more
proactive than expected, and we believe the coalition may prove more
long-lasting than initially thought. Already, the move towards a centralized
share depository has been speeded up. This depository should help alleviate
settlement delays associated with India's arcane and cumbersome paper-based
securities settlement, registration and custody system. Foreign investors should
therefore find it easier to invest in India by this time next year.
Valuations continue to look attractive. While the Sensex index is trading at an
average P/E of 14 times estimated fiscal 1996 earnings, the broader market is
closer to 11 times '96 earnings. Although earnings growth is slowing, we still
anticipate 20% or higher growth in the coming year,
6
<PAGE>
and firmness in the global economy should help sustain India's growth. Because
we believe that inflation will pick up and the rupee will depreciate further, we
have invested the Fund accordingly. For example, some of the Fund's key
industries, such as technology and pharmaceuticals, derive a high proportion of
their earnings from exports, and so will likely benefit from a drop in the value
of the rupee.
While we have consolidated selected portfolio holdings and are reviewing the
recently released earnings numbers, we believe that valuation differentials
between the very largest Indian stocks and their smaller counterparts have
widened to unsustainable levels. Consequently, we continue to focus the Fund on
small and mid-cap stocks.
Respectfully,
/s/ Laurel Grassin-Drake
Laurel Grassin-Drake
Portfolio Manager
BZW Investment Management, London
July 5, 1996
7
<PAGE>
SCHEDULE OF INVESTMENTS THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
INDIA 94.71%
- -------------------------------------------------------------------------------------------------------------
COMMON STOCKS 92.86%
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CEMENT 5.03%
72,120 Associated Cement Companies....................... $ 5,801,413 $ 4,967,638
400 Birla Jute ........................................ 4,270 2,202
156,000 Chettinad Cement*.................................. 885,375 850,100
133,000 Dalmia Cement .................................... 1,583,260 1,257,903
267,800 Gujarat Ambuja Cements*............................ 2,643,151 2,857,552
210,001 Gujarat Ambuja Cements GDR*........................ 1,766,931 2,651,263
160,000 India Cement GDR .................................. 676,000 880,000
206,600 Jaiprakash Industries ............................. 600,308 184,201
1,273,700 Mysore Cements..................................... 2,749,262 1,181,034
369,700 Shree Cement....................................... 906,336 456,192
----------- ------------
17,616,306 15,288,085
----------- ------------
CHEMICALS 1.38%
519,750 Atul Products ..................................... 2,238,153 696,954
4,300 Caprihans India.................................... 25,571 12,636
515,500 ICI (India)........................................ 2,743,332 3,029,758
324,800 India Glycols ..................................... 748,105 301,170
25,900 Indian Organic Chemicals........................... 72,580 15,148
195,100 JF Laboratories *.................................. 291,274 38,129
500 Pidilite Industries ............................... 5,154 5,471
500 Punjab Alkalies.................................... 1,121 595
226,800 Tuticorin Alkali Chemicals & Fertilizers........... 394,560 101,914
----------- ------------
6,519,850 4,201,775
----------- ------------
CONSTRUCTION & BUILDING MATERIALS 0.08%
205,500 Novopan Industries +............................... 580,683 255,043
----------- ------------
580,683 255,043
----------- ------------
CONSUMER MISCELLANEOUS 1.99%
450,000 Hytaisun Magnetics*................................ 522,853 71,897
715,300 Mideast (India)*................................... 1,810,776 461,221
95,800 Nahar Spinning Mills............................... 2,495,760 674,426
199,300 Namaste Exports.................................... 737,340 111,449
494,650 Premier Vinyl Flooring............................. 834,034 225,803
25,975 Surya Roshni....................................... 68,907 29,273
951,900 Timex Watches * ................................... 2,267,835 1,615,922
770,800 Titan Industries................................... 3,811,716 2,858,887
----------- ------------
12,549,221 6,048,878
----------- ------------
</TABLE>
8
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER NON-DURABLE 4.10%
376,750 Hindustan Lever.................................. $ 8,353,152 $ 8,830,246
406,100 ITC ............................................. 3,615,302 3,612,031
----------- ------------
11,968,454 12,442,277
----------- ------------
DIVERSIFIED INDUSTRIES 3.81%
8 Century Textiles................................. 2,509 1,238
400,000 DCM Shriram Consolidated......................... 2,646,993 1,506,419
125,000 DCM Shriram Consolidated Warrants,
(expiration date 3/15/97)+*.................. 0 178,317
150 EID Parry (India)................................ 1,328 411
200,000 EID Parry (India) GDS ........................... 1,751,825 493,000
170,600 Grasim Industries ............................... 3,580,508 2,785,331
317,600 HMG Industries................................... 641,784 90,613
376,000 Indian Rayon..................................... 7,936,463 5,288,673
75,000 Indian Rayon GDR ................................ 1,153,625 1,100,625
38,100 J K Corp......................................... 338,970 116,855
10,300 Kesoram Industries............................... 48,972 22,569
300 Prakash Industries............................... 346 488
----------- ------------
18,103,323 11,584,539
----------- ------------
ELECTRICITY 1.24%
439,000 CESC Ltd......................................... 3,612,317 1,409,059
439,000 CESC Class B Warrants (INR),
(expiration date 9/30/98) +*................. 2,982,038 1,327,646
185,450 Tata Power Co.................................... 1,045,814 1,034,393
----------- ------------
7,640,169 3,771,098
----------- ------------
ELECTRONICS & ELECTRICAL 6.09%
299,800 Asea Brown Boveri ............................... 6,323,500 6,415,121
459,500 Asian Cables & Industries........................ 1,029,813 180,916
125,000 Asian Electronics................................ 1,884,571 1,943,652
1,226,600 Crompton Greaves ................................ 7,977,610 8,775,177
300,000 KEC International................................ 1,616,740 1,125,535
100 Modern Malleables................................ 486 98
3,850 Siemens India.................................... 85,667 66,977
----------- ------------
18,918,387 18,507,476
----------- ------------
ENGINEERING 3.13%
438,100 Advani Oerlikon.................................. 1,796,760 2,287,369
164,600 Artson Engineering............................... 131,811 84,531
108,100 Kabra Extrusiontechnik........................... 522,090 326,922
7,500 Lakshmi Machine Works*........................... 3,028,735 1,872,218
</TABLE>
9
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ENGINEERING (CONTINUED)
139,500 Larsen & Toubro.................................. $ 1,109,281 $ 1,152,218
100,000 Larsen & Toubro GDR (New)*....................... 1,587,500 1,887,500
100,000 Larsen & Toubro GDR *............................ 1,593,750 1,887,500
----------- ------------
9,769,927 9,498,258
----------- ------------
EXTRACTIVE INDUSTRIES 6.66%
244,350 Hindalco Industries * ........................... 7,313,111 8,750,937
1,810,200 Hindustan Zinc*.................................. 1,978,516 490,639
520,950 Indian Aluminium................................. 3,365,570 3,091,515
450,000 Indian Aluminium GDR ............................ 3,694,906 3,123,000
407,330 Sesa Goa ........................................ 7,404,012 4,767,678
----------- ------------
23,756,115 20,223,769
----------- ------------
FERTILIZERS 2.14%
10,160,500 Chambal Fertilizers & Chemicals.................. 8,809,054 4,072,897
4,811,900 Nagarjuna Fertilizer & Chemicals................. 4,769,235 2,409,382
6,200 Southern Petrochemicals Industrial Corp.......... 24,273 9,508
----------- ------------
13,602,562 6,491,787
----------- ------------
FINANCE 1.45%
450,000 Autoriders Finance .............................. 2,427,962 449,358
1,410,600 Oriental Bank of Commerce........................ 3,793,021 3,944,046
----------- ------------
6,220,983 4,393,404
----------- ------------
FOOD 0.25%
302,400 American Dry Fruits.............................. 613,142 136,317
450 Brooke Bond Lipton India......................... 7,355 4,747
900 Nestle India..................................... 12,016 10,457
124,000 Praj Industries ................................. 962,734 336,091
250,000 Rahul Dairy & Allied Products *.................. 80,041 21,398
226,700 Rank Aqua Estates................................ 545,161 71,147
123,800 S & S Industries................................. 120,756 34,615
200,000 Unified Agro Industries.......................... 160,261 51,355
73,166 Western Hatcheries .............................. 346,546 91,849
----------- ------------
2,848,012 757,976
----------- ------------
HEALTHCARE 0.01%
200,000 Trans Plastics +*................................ 163,258 28,531
100 TTK Biomedical................................... 453 115
----------- ------------
163,711 28,646
----------- ------------
</TABLE>
10
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
HOTELS & LEISURE 0.69%
70,250 Indian Hotels ................................... $ 1,184,614 $ 1,655,535
25,870 Indian Resort Hotels +........................... 418,276 442,484
----------- ------------
1,602,890 2,098,019
----------- ------------
HOUSEHOLD APPLIANCES 2.02%
1,100 Atco Industries.................................. 1,957 2,015
146,700 BPL Refrigeration................................ 224,268 83,709
381,700 IFB Industries................................... 3,069,891 1,143,467
19,800 JCT Electronics.................................. 39,502 13,021
2,700 Kalyani Sharp* .................................. 3,711 2,041
519,400 Kelvinator of India *............................ 2,810,701 1,311,467
450 MIRC Electronics................................. 4,184 812
114,200 Phil Corporation................................. 293,909 124,626
30 Phillips India................................... 29 111
1,128,400 Samtel Colour ................................... 2,701,005 998,014
23,500 Videocon Appliances.............................. 140,114 21,287
1,095,900 Videocon International........................... 6,085,605 2,313,740
70,450 Voltas .......................................... 339,950 120,599
----------- ------------
15,714,826 6,134,909
----------- ------------
PACKAGING 1.77%
541,720 Flex Industries................................. 3,773,752 2,256,523
77,160 Flex Industries Warrants (expiration date 11/30/97) +* 0 299,394
443,300 Peacock Industries............................... 720,028 1,176,231
548,400 Pearl Polymers................................... 1,655,614 439,659
588,100 Polyplex Corporation............................. 2,042,135 1,097,339
700 Sharp Industries *............................... 1,131 309
62,900 Tainwala Chemicals & Plastics*................... 110,814 25,124
390,000 Universal Cans & Containers...................... 618,003 89,016
----------- ------------
8,921,477 5,383,595
----------- ------------
PETROLEUM RELATED 4.70%
986,800 Hindustan Petroleum.............................. 13,260,058 11,050,471
242,700 Indian Petrochemicals............................ 1,051,864 1,078,474
1,316,350 Madras Refineries................................ 4,899,545 1,952,930
162,200 Reliance Industrial Infrastructure............... 624,727 189,735
----------- ------------
19,836,194 14,271,610
----------- ------------
PHARMACEUTICALS 7.77%
314,200 Dr. Reddy's Laboratories......................... 2,796,161 2,702,747
125,000 Dr. Reddy's Laboratories-GDR..................... 1,206,250 1,235,000
</TABLE>
11
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
394,200 E. Merck (India)................................. $ 2,854,565 $ 2,519,281
169,950 German Remedies.................................. 1,611,294 830,355
318,550 Glaxo (India) ................................... 2,261,477 2,156,234
127,000 Merind........................................... 1,566,109 731,926
291,000 Orchid Chemicals & Pharmaceuticals............... 848,693 958,930
3,700 Pfizer India..................................... 46,094 28,449
482,050 Ranbaxy Laboratories............................. 10,318,842 8,386,020
177,800 Rhone-Poulenc India.............................. 2,237,613 3,157,789
3,900 SOL Pharmaceuticals.............................. 23,357 6,148
125,000 Unichem Laboratories ............................ 1,091,886 891,583
----------- ------------
26,862,341 23,604,462
----------- ------------
PULP & PAPER 2.52%
1,098,100 Andhra Pradesh Rayons............................ 3,215,731 2,663,010
524,700 Ballarpur Industries............................. 4,327,056 2,428,889
250,000 Orient Paper Industries.......................... 1,863,347 1,084,166
111,200 Pudumjee Pulp & Paper............................ 791,003 263,327
1,575,000 Rama Newsprint*.................................. 1,176,129 267,368
458,200 Seshasayee Papers................................ 1,281,758 960,847
----------- ------------
12,655,024 7,667,607
----------- ------------
RUBBER 0.06%
80,000 Dewan Rubber Industries.......................... 105,789 167,760
7,900 India Rubber +................................... 17,786 2,367
----------- ------------
123,575 170,127
----------- ------------
STEEL 3.74%
17,800 Essar Steels..................................... 68,931 14,220
300,000 Isibars.......................................... 951,953 402,282
275,000 Jindal Iron & Steel ............................. 2,502,255 547,254
647,500 Jindal Strips.................................... 8,591,032 2,752,568
1,217,400 Kirloskar Ferrous Industries *................... 1,132,832 444,585
300,000 Mukand .......................................... 3,125,100 1,198,288
1,054,100 Steel Authority of India......................... 2,150,336 992,448
722,800 Tata Iron & Steel................................ 5,220,968 4,995,672
----------- ------------
23,743,407 11,347,317
----------- ------------
STEEL PRODUCTS 0.54%
800 Choksi Tubes..................................... 1,906 1,415
222,200 Rajinder Pipes................................... 320,286 136,300
310,000 SAW Pipes........................................ 2,383,953 1,191,797
</TABLE>
12
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
STEEL PRODUCTS (CONTINUED)
649,100 Super Forging.................................... $ 991,359 $ 250,010
110,500 Tata Metaliks*................................... 145,690 50,442
----------- ------------
3,843,194 1,629,964
----------- ------------
TECHNOLOGY 7.13%
1,617,800 Digital Equipment (India)* ...................... 3,460,579 4,269,515
200,000 Infosys Technologies ............................ 3,133,989 4,079,886
100,000 Mastek Limited*.................................. 558,204 613,409
1,072,700 NIIT ............................................ 5,418,492 8,324,519
323,300 Pentafour Software and Exports .................. 1,316,324 1,402,043
847,240 Satyam Computer ................................. 1,773,576 1,244,875
966,500 Silverline Industries............................ 1,365,216 778,991
705,200 Square D Software ............................... 1,160,741 945,632
----------- ------------
18,187,121 21,658,870
----------- ------------
TELECOM 0.23%
17,900 Videsh Sanchar Nigam+ 662,356 689,444
----------- ------------
TELECOM EQUIPMENT 0.58%
600 Bhagyanagar Metals............................... 1,455 462
8,200 Himachal Futuristic Communications............... 21,935 7,136
175,000 MSL Industries................................... 728,724 449,358
200,000 Punjab Wireless ................................. 2,306,295 874,465
398,900 Telephone Cables................................. 1,858,397 182,094
95,900 Vindhya Tele-Links............................... 1,090,879 239,408
----------- ------------
6,007,685 1,752,923
----------- ------------
TEXTILES - COTTON 2.14%
612,700 Arvind Mills .................................... 1,947,182 2,447,304
300,000 Arvind Mills GDR *............................... 1,207,000 1,477,500
187,550 Coats Viyella India.............................. 1,163,471 552,483
196,800 Delta Industries................................. 945,580 195,116
133,350 HP Cotton Textile Mills +........................ 323,524 79,896
235,600 Midland Industries .............................. 205,402 46,044
385,650 Morarjee Goculdas Spinning & Weaving............. 2,270,227 1,331,345
122,700 Vardhaman Spinning & General Mills............... 758,519 376,327
----------- ------------
8,820,905 6,506,015
----------- ------------
TEXTILES - SYNTHETIC 3.84%
300,000 Bombay Dyeing GDR ............................... 3,949,483 2,418,000
1,932,000 DCL Polyesters .................................. 3,838,801 909,501
48,800 Ester Industries *............................... 53,205 32,441
</TABLE>
13
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TEXTILES - SYNTHETIC (CONTINUED)
366,300 Haryana Petrochemicals*.......................... $ 433,857 $ 60,615
942,500 JCT * .......................................... 1,830,861 411,419
1,164,700 Reliance Industries ............................ 11,857,134 7,044,690
667,300 Sanghi Polyesters................................ 1,689,623 331,270
100,000 Sanghi Polyesters GDR*........................... 485,000 300,000
228,700 Shree Rajasthan Syntex ......................... 972,237 163,124
5,800 SRF.............................................. 15,691 7,033
----------- ------------
25,125,892 11,678,093
----------- ------------
TRANSPORT 0.61%
1,521,800 Modiluft *...................................... 2,707,661 356,027
118,700 NEPC Micon ..................................... 249,602 135,464
1,374,000 NEPC Micon GDR .................................. 4,062,820 1,339,650
80,600 Skypak Couriers *................................ 134,188 39,093
----------- ------------
7,154,271 1,870,234
----------- ------------
VEHICLES 13.62%
422,700 Bajaj Auto....................................... 8,607,316 11,936,300
19,900 Hindustan Motors *............................... 25,890 17,459
368,500 Mahindra & Mahindra.............................. 2,273,856 3,790,135
138,800 Majestic Auto .................................. 1,399,718 190,083
423,050 Punjab Tractors.................................. 5,482,406 7,531,618
614,510 Tata Engineering & Locomotive.................... 7,155,197 9,116,839
853,450 TVS Suzuki ...................................... 5,100,513 8,777,995
----------- ------------
30,044,896 41,360,429
----------- ------------
VEHICLE COMPONENTS 3.53%
11,900 Amtek Auto ...................................... 39,211 21,695
137,825 Antifriction Bearings Corp....................... 550,678 231,609
231,650 Auto Corp of Goa................................. 1,194,182 528,730
224,025 FAG Precision Bearings........................... 621,197 741,424
100 Gleitlager (India)............................... 96 34
676,500 Goetze India .................................... 1,951,924 1,119,458
348,500 Kirloskar Oil Engines +.......................... 1,652,136 894,864
600 Laser Lamps (Haryana) *.......................... 845 565
151,000 Lumax Industries................................. 608,136 491,127
4,390 Motor Industries Co.............................. 615,662 958,035
30,000 Munjal Showa*.................................... 142,520 325,250
950,000 Patheja Forgings & Auto Parts.................... 2,747,362 2,141,227
15,995 SKF Bearings India............................... 1,606,946 1,337,556
187,500 Wartsila Diesel India............................ 668,315 1,943,206
----------- ------------
12,399,210 10,734,780
----------- ------------
</TABLE>
14
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
WATER 0.01%
700 EPC Irrigation*................................. $ 2,082 $ 453
837 ION Exchange (India)............................. 1,341 3,409
81,900 Pasumai Irrigation *............................. 52,443 26,989
----------- ------------
55,866 30,851
----------- ------------
TOTAL COMMON STOCKS 372,018,833 282,082,260
=========== ============
<CAPTION>
PAR VALUE PERCENT
($000) SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
BONDS 1.85%
- -------------------------------------------------------------------------------------------------------------
CONSTRUCTION & BUILDING MATERIALS 0.02%
3,000 INR Bharat Earth Movers NCD 12.5%, 02/26/02 +........ 96,065 53,324
----------- ------------
DIVERSIFIED INDUSTRIALS 0.07%
4,250 INR DCM Shriram NCD 13%, 11/6/01 +................... 136,222 74,171
4,125 INR DCM Shriram NCD 13%, 11/6/02 +................... 132,216 71,991
4,125 INR DCM Shriram NCD 13%, 11/6/03 +................... 132,216 71,991
----------- ------------
400,654 218,153
----------- ------------
FINANCE & BANKING 0.19%
20,000 INR GE Capital NCD 20%, 09/27/97 +................... 587,719 570,613
----------- ------------
PACKAGING 0.00%
57 INR Flex Inds NCD 13.5%, 11/23/99 +.................. 1,826 1,108
----------- ------------
PULP & PAPER 0.76%
$2,500 Ballarpur Industries FCD 4%, 04/01/99........... 2,749,673 2,306,250
----------- ------------
STEEL 0.76%
$2,500 Jindal Strips FCD 4.25%, 03/31/99 .............. 2,795,794 2,318,750
----------- ------------
TECHNOLOGY 0.05%
6,872 INR Satyam Computer FCD 12%, 08/24/96 +.............. 219,960 152,840
----------- ------------
TOTAL BONDS 6,851,691 5,621,038
=========== ============
TOTAL INDIA 378,870,524 287,703,298
=========== ============
</TABLE>
15
<PAGE>
SCHEDULE OF INVESTMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PAR VALUE PERCENT
($000) SECURITY OF HOLDINGS COST VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS 5.29%
- -------------------------------------------------------------------------------------------------------------
$8,144 Bank of Montreal Fixed Deposit 5.28%, 07/22/96... $ 8,144,242 $ 8,144,242
$7,931 The Bank of New York Call Deposit 5.4%, 07/01/96. 7,931,030 7,931,030
----------- ------------
TOTAL SHORT TERM OBLIGATIONS .................... 16,075,272 16,075,272
=========== ============
TOTAL INVESTMENTS **.......................... 100.00% 394,945,796 303,778,570
=========== ============
</TABLE>
- ----------
Footnotes and Abbreviations
FCD: Fully Convertible Debenture INR: Indian Rupee
GDR : Global Depository Receipt NCD: Non Convertible Debenture
GDS : Global Depository Security
+ At fair value as determined under the direction of the Board of Directors
* Non-income producing security
** Aggregate cost for Federal income tax purposes is substantially the same as
for book purposes.
The aggregate gross unrealized appreciation (depreciation) for all securities
is as follows:
Excess of value over tax cost $ 28,864,115
Excess of tax cost over value (120,031,341)
------------
($91,167,226)
============
See accompanying notes to financial statements.
16
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (Cost $394,945,796) ...................................... $ 303,778,570
Cash (including Indian rupees of $2,423,547 with a cost of $2,427,861) .......... 20,697,552
Receivables:
Dividends and reclaims ....................................................... 7,863,437
Interest (net of witholding tax of $10,641) .................................. 540,284
Securities sold .............................................................. 6,078,403
Unamortized organization costs .................................................. 171,119
Prepaid expenses ................................................................ 56,225
-------------
Total assets .............................................................. 339,185,590
-------------
LIABILITIES
Payable for securities purchased ................................................ 7,259,491
Due to investment manager ....................................................... 303,644
Due to administrator ............................................................ 61,960
Accrued expenses ................................................................ 766,944
-------------
Total liabilities ......................................................... 8,392,039
-------------
NET ASSETS (applicable to 34,007,133 shares of common stock issued and
outstanding, 100,000,000 shares authorized, $0.001 per share) ................ $ 330,793,551
=============
NET ASSET VALUE PER SHARE ($330,793,551/34,007,133) ............................. $ 9.73
=============
Net assets consist of:
Capital stock ................................................................ $ 34,007
Paid-in capital .............................................................. 473,163,884
Accumulated net investment loss .............................................. (665,663)
Accumulated net realized loss on investments and foreign currency transactions (49,959,006)
Net unrealized depreciation in value of investments and
translation of other assets and liabilities denominated in foreign currency (91,779,671)
-------------
$ 330,793,551
=============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
STATEMENT OF OPERATIONS THE INDIA FUND, INC.
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of Indian taxes withheld of $260,734)................................. $ 1,416,877
Interest (net of Indian taxes withheld of $10,369)................................... 1,121,198
------------
Total investment income........................................................... 2,538,075
------------
EXPENSES
Management fees ............................................ 1,746,763
Custodian fees ............................................. 655,636
Administration fees ........................................ 332,135
Directors' fees ............................................ 19,394
Transfer agent fees ........................................ 4,475
Insurance................................................... 111,135
Audit fees.................................................. 67,131
Legal fees ................................................. 99,540
Printing.................................................... 59,672
Amortization of organizational costs ....................... 32,174
NYSE fees .................................................. 16,094
Miscellaneous expenses...................................... 14,919
Interest expense............................................ 2,098
----------
Total expenses........................................ 3,161,166
------------
Net investment loss............................................................... (623,091)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY HOLDINGS AND TRANSLATION OF OTHER ASSETS
AND LIABILITIES DENOMINATED IN FOREIGN CURRENCY
Net realized gain (loss) on:
Security transactions............................................................ (22,365,922)
Foreign currency related transactions............................................ (277,608)
------------
(22,643,530)
Net change in unrealized appreciation in value of investments and translation
of other assets and liabilities denominated in foreign currency.................... 50,120,147
------------
Net realized and unrealized gain on investments, foreign currency holdings
and translation of other assets and liabilities denominated in foreign currency.... 27,476,617
------------
Net increase in net assets resulting from operations................................. $ 26,853,526
============
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS THE INDIA FUND, INC.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30,1996 YEAR ENDED
(UNAUDITED) DECEMBER 31,1995
------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment loss ...................................................... $ (623,091) $ (1,438,232)
Net realized loss on investments and foreign currency related transactions (22,643,530) (25,489,363)
Net change in unrealized appreciation (depreciation) in value
of investments and translation of other assets and liabilities
denominated in foreign currency ....................................... 50,120,147 (142,373,403)
Net increase (decrease) in net assets resulting from operations .... 26,853,526 (169,300,998)
------------- -------------
Total increase (decrease) in net assets .................................. 26,853,526 (169,300,998)
------------- -------------
NET ASSETS
Beginning of period ...................................................... 303,940,025 473,241,023
------------- -------------
End of period ............................................................ $ 330,793,551 $ 303,940,025
============= =============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
FINANCIAL HIGHLIGHTS THE INDIA FUND, INC.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 23, 1994
FOR THE SIX (COMMENCEMENT
MONTHS ENDED FOR THE OF OPERATIONS)
JUNE 30, 1996 YEAR ENDED THROUGH
(UNAUDITED) DECEMBER 31, 1995 DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period.............. $8.94 $13.92 $13.98(1)
----- ----- ------
Net investment loss............................... (0.02) (0.05) (0.01)
Net realized and unrealized gain (loss) on investments,
foreign currency holdings, and translation of other assets
and liabilities denominated in foreign currencies 0.81 (4.93) 0.08
----- ----- ------
Net increase (decrease) from investment operations 0.79 (4.98) 0.07
----- ----- ------
Less distributions:
Dividends from net realized capital gains..... -- -- (0.13)
Total distributions............................... -- -- (0.13)
Net asset value, end of period.................... $9.73 $8.94 $13.92
===== ===== ======
Per share market value, end of period............... $9.25 $8.875 $10.75
TOTAL INVESTMENT RETURN BASED ON MARKET VALUE(2).... 4.23% (17.44)% (23.32)%
===== ===== ======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) ............. $330,794 $303,940 $473,241
Ratios of expenses to average net assets......... 1.99%(3) 2.03% 1.98%(3)
Ratios of net investment loss to average net assets 0.39%(3) 0.38% 0.06%(3)
Portfolio turnover............................... 8.79% 25.28% 20.93%
Average commission rate paid .................... $0.018 -- --
</TABLE>
1 Initial public offering price of $15.00 per share less underwriting discount
of $0.98 per share and offering expense of $0.04 per share.
2 Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day and a sale at the current market
price on the last day of the period reported, except that for the period ended
December 31, 1994, total investment return is based on a beginning of period
price of $14.02 (initial offering price of $15.00 less sales load of $0.98).
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 brokerage
commissions or sales charges and is not annualized.
3 Annualized.
See accompanying notes to financial statements.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The India Fund, Inc., (the "Fund") was incorporated in Maryland on December 27,
1993, and commenced operations on February 23, 1994. The Fund has established a
branch in the Republic of Mauritius. The Fund is registered under the Investment
Company Act of 1940, as amended, as a closed-end non-diversified management
investment company. Prior to commencing its operations on February 23, 1994, the
Fund had no activities other than the sale of 7,133 shares of capital stock to
Oppenheimer & Co., Inc. ("Oppenheimer"). At June 30, 1996, Oppenheimer owned
7,133 shares of the Fund's Capital Stock.
SIGNIFICANT ACCOUNTING POLICIES ARE AS FOLLOWS:
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at
(i) the last sales price prior to the time of determination, if there was a
sale on the date of determination,
(ii) at the mean between the last current bid and asked prices if there was no
sales price on such date and bid and asked quotations are available, and
(iii) at the bid price if there was no sales price on such date and only bid
quotations are available.
Securities that are traded over-the-counter are valued, if bid and asked
quotations are available, at the mean between the current bid and asked prices.
Investments in short-term debt securities having a maturity of 60 days or less
are valued at amortized cost which approximates market value. Securities for
which market values are not readily ascertainable, which totaled $5,194,024
(1.57% of net assets), are carried at fair value as determined in good faith by
or under the supervision of the Board of Directors. The net asset value per
share of the Fund is calculated weekly and at the end of each month.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on the accrual basis; dividend
income is recorded on the ex-dividend date or when known. The collectibility of
income receivable from Indian securities is evaluated periodically, and any
resulting allowances for uncollectible amounts are reflected currently in the
determination of investment income.
TAX STATUS: No provision is made for U.S. Federal income or excise taxes as it
is the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders which will be
sufficient to relieve it from all or substantially all Federal income and excise
taxes. At December 31, 1995, the Fund had a capital loss carryover of
approximately $24,622,097 which will expire in the year ended 2003. To the
extent that these capital loss carryovers are used to offset future net realized
gains on securities transactions, the gains so offset will not be distributed to
the shareholders, to the extent provided by the regulations. The Fund's capital
losses and foreign exchange losses incurred after October 31, 1995, but before
December 31, 1995, are deemed to arise on the first business day of the
following year. The Fund incurred and elected to defer such capital losses and
foreign exchange losses of approximately $2,693,379 and $42,573, respectively.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis: (i) market value of investment securities, assets and
liabilities at the prevailing rates of exchange on the valuation date; and (ii)
purchases and sales of investment securities and investment income at the
relevant rates of exchange prevailing on the respective dates of such
transactions. Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in foreign exchange. The Fund
generally does not isolate the effect of fluctuations in foreign exchange rates
from the effect of fluctuations in the market prices of securities. However, the
Fund does isolate the effect of fluctuations in foreign currency rates when
determining the gain or loss upon the sale of foreign currency denominated debt
obligations pursuant to U.S. Federal income tax regulations; such amounts are
categorized as foreign currency gains or losses for both financial reporting and
federal income tax purposes. The Fund reports certain foreign exchange realized
gains and losses on foreign currency related transactions as components of
realized gains and losses for financial reporting purposes, whereas such
components are treated as ordinary income for Federal income tax purposes.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the level of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability, and the fact that foreign securities markets may be smaller and
have less developed and less reliable settlement and share registration
procedures.
DISTRIBUTION OF INCOME AND GAINS: The Fund intends to distribute annually to
shareholders, substantially all of its net investment income, including foreign
currency gains, and to distribute annually any net realized gains after the
utilization of available capital loss carryovers. An additional distribution may
be made to the extent necessary to avoid payment of a 4% Federal excise tax.
Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and net realized gains
are determined in accordance with Federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their Federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income and net realized capital gains. To
the extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of additional paid-in capital.
During the period ended December 31, 1995, the Fund reclassified $831,533 and
$1,395,660 from accumulated net realized loss on investments and foreign
currency transactions and accumulated net investment loss, respectively, to
additional paid-in capital as a result of permanent book and tax differences
relating to net investment loss and realized foreign currency losses during the
year ended December 31, 1995. Net investment income and net assets were not
affected by the reclassifications.
OTHER: Costs of $322,971 incurred by the Fund in connection with its
organization are being amortized on a straight-line basis over a five-year
period beginning with the commencement of operations of the Fund.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
NOTE B: MANAGEMENT, INVESTMENT ADVISORY, AND ADMINISTRATIVE SERVICES
Advantage Advisers, Inc., a subsidiary of Oppenheimer, serves as the Fund's
Investment Manager under the terms of a management agreement (the "Management
Agreement"). BZW Investment Management Inc. serves as the Fund's Investment
Adviser under the terms of an investment advisory agreement (the "Advisory
Agreement"), and Infrastructure Leasing & Financial Services Limited serves as
the Fund's Country Adviser under the terms of an advisory agreement (the
"Country Advisory Agreement").
Pursuant to the Management Agreement, the Investment Manager supervises the
Fund's investment program, including advising and consulting with the Fund's
Investment Adviser. Pursuant to the Advisory Agreement, the Investment Adviser
is responsible on a day-to-day basis for investing the Fund's portfolio in
accordance with its investment objective and policies. Pursuant to the Country
Advisory Agreement, the Country Adviser furnishes advice and makes
recommendations to the Investment Adviser regarding the purchase, sale or
holding of particular Indian securities, provides research and statistical data
to the Fund and assists in the implementation and execution of investment
decisions. For its services, the Investment Manager receives monthly fees at an
annual rate of 1.10% of the Fund's average weekly net assets and the Investment
Adviser and Country Adviser each receive from the Investment Manager monthly
fees at an annual rate of 0.30% of the Fund's average weekly net assets. For the
six months ended June 30, 1996, fees paid to the Investment Manager amounted to
$1,746,763.
Oppenheimer serves as the Fund's Administrator (the "Administrator") pursuant to
the terms of an Administration Agreement. For its services, the Administrator
receives a monthly fee at an annual rate of 0.20% of the Fund's average weekly
net assets. For the six months ended June 30, 1996, these fees amounted to
$317,593. The Administrator subcontracts certain of these services to PFPC Inc.
In addition, 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 $1,500 and is
reimbursed for certain additional expenses. For the six months ended June 30,
1996, fees and expenses of the Mauritius Administrator amounted to $14,542.
The Fund pays each of its directors who is not a director, officer or employee
of the Investment Manager, the Investment Adviser, the Country Adviser or
Administrator or any affiliate thereof an annual fee of $5,000 plus up to $700
for each Board of Directors meeting attended. In addition, the Fund reimburses
all directors for travel and out-of-pocket expenses incurred in connection with
Board of Directors meetings.
NOTE C: PORTFOLIO ACTIVITY
Purchases and sales of securities, other than short-term obligations, aggregated
$31,947,626 and $23,673,439, respectively, for the six months ended June 30,
1996.
At June 30, 1996, the Fund owned securities valued at approximately $34,964,369,
which were in the process of being registered in the name of the Fund.
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 process.
23
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NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) THE INDIA FUND, INC.
JUNE 30, 1996 (UNAUDITED)
NOTE D: FOREIGN INCOME TAX
The Fund invests in India through a registered branch office established in
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 tax
residence certification from the Mauritian authorities and believes such
certification is determinative of its resident status for treaty purposes. 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 of securities but is subject to a 15% withholding tax on
dividends which has been provided for by the Fund. The Fund is subject to and
accrues Indian withholding tax on interest earned on Indian securities at the
rate of 20%.
In Mauritius, the Fund is liable for income tax under the current Mauritian
legislation at the rate of 0%. However, the Fund may, in any year, elect to pay
tax on its net investment income at any rate between 0% and 35%. For the year
ended December 31, 1995, no provision for Mauritius taxes is considered
necessary as a result of net investment losses 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 E: OTHER
At June 30, 1996, 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 regulation
and more volatile than the major securities markets in the United States.
Consequently, and as further discussed above, acquisitions and dispositions of
securities by the Fund involve special risks and considerations not present with
respect to U.S. securities.
24
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RESULTS OF THE THE INDIA FUND, INC.
ANNUAL SHAREHOLDERS MEETING
The Fund held its annual shareholder meeting on April 19, 1996. At the meeting,
shareholders elected each of the nominees proposed for election to the Fund's
Board of Directors and ratified the selection of Price Waterhouse LLP as the
independent accountants of the Fund for the year ending December 31, 1996. The
following tables provide information concerning the matters voted on at the
meeting.
I. ELECTION OF DIRECTORS
NOMINEE VOTES FOR VOTES ABSTAINED
- ------- --------- ---------------
Robert A. Blum 25,531,113 341,903
Leslie H. Gelb 25,533,791 339,225
Gabriel Seeyave 25,533,361 339,655
II. RATIFICATION OF PRICE WATERHOUSE LLP AS THE INDEPENDENT ACCOUNTANTS OF THE
FUND
VOTES FOR VOTES AGAINST VOTES ABSTAINED
- --------- ------------- ---------------
25,679,154 95,189 98,673
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26
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THE INDIA FUND, INC.
INVESTMENT MANAGER:
ADVANTAGE ADVISERS, INC.
INVESTMENT ADVISER:
BZW INVESTMENT MANAGEMENT, INC.
COUNTRY ADVISER:
INFRASTRUCTURE LEASING & FINANCIAL SERVICES LIMITED
ADMINISTRATOR:
OPPENHEIMER & CO., INC.
SUB-ADMINISTRATOR:
PFPC INC.
TRANSFER AGENT:
THE BANK OF NEW YORK
CUSTODIAN:
THE BANK OF NEW YORK
THE INDIA FUND, INC.
Semiannual Report
June 30, 1996
ADVANTAGE ADVISERS, INC.
