The India Fund, Inc.
July 22, 1998
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 year beginning January
1, 1998. In the following pages, the Fund's Investment Adviser provides a
detailed look at the Fund's sector allocations and investments, as well as the
economic and market conditions in India for the past six months.
As you are probably aware, the Indian markets experienced continued volatility
during this period due to internal political uncertainty as well as the
continuing Asian slowdown. Investor sentiment was negatively impacted by the
testing of nuclear devices by India and Pakistan. Despite these adverse
developments, India fared well in comparison to its neighbors as a result of
foreign investors' monetary outflows slowing and strong growth in certain
sectors of the economy. The Fund's net asset value ("NAV") closed at $8.29 per
share on June 30, 1998, returning 2.2% over the last six months and
outperforming its benchmarks, the Dollex 200 Index which returned -15% and the
IFC Index which returned -16.8% over the same period.
Even though 1997 was a difficult year for the Indian markets, the Investment
Adviser has taken steps to stabilize the Fund's allocation in the wake of the
slowdown in Asian markets. Core positions in technology, consumer non-durables
and pharmaceuticals have been maintained. Exposure to domestic industries has
been increased as consumer demand remains strong. Meanwhile, the Investment
Adviser continues to monitor the Indian economy for signs of a recovery, which
may be stimulated by increased infrastructure spending.
On behalf of the Board of Directors, thank you for your participation in the
Fund.
Sincerely,
/s/ ALAN RAPPAPORT
- -------------------
Alan Rappaport
<PAGE>
Report of the Investment Adviser The India Fund, Inc.
For The Six Months Ended June 30, 1998
Overview of India's stock markets
The Indian market remained volatile in the first half of 1998, falling over 23%
in May and June after rising 5% in the first quarter. The market's 16% decline
in the first six months, however, compares favorably with most Asian markets
which, on average, fell between 15% and 50%. The rupee fell approximately 8%
during the first half of the year, again faring better than several other Asian
currencies, which have been falling since third quarter 1997.
Several events during the first six months influenced the market. The Asian
economic crisis continued to negatively impact the markets. The elections in
India resulted in yet another coalition government, continuing the political
instability in the country. Most significant, however, was the testing of
nuclear weapons by the BJP government, which triggered economic sanctions by the
U.S. and other countries. The budget presented in June announced several
measures to stimulate growth in the economy but failed to meet market
expectations. Finally, Moody's downgraded India's credit rating by two notches
to below investment grade.
Despite these negatives, the market started to stabilize toward the end of June
as domestic institutions demonstrated buying support and foreign investor
capital outflows slowed. Further, sentiment improved as encouraging corporate
results for the year ended March began to appear. On an aggregate basis,
companies in software, telecommunication, consumer and refining sectors of the
economy reported profit growth for the full year 1997-1998 in excess of 15%.
Politics
Politically, it was an eventful six months for India. First, the twelfth general
election in India resulted in yet another coalition government. Second, the
testing of nuclear devices in May evoked a strong response from the
international community. Finally, the ongoing dispute among allies of the ruling
party has led to political instability.
The election results favored the BJP which won over 183 seats, but which did not
give them enough of a majority to form a strong government. The Congress party
and its allies won 168 seats while the incumbent United Front party won only 97
seats. The BJP, with the single largest number of seats, was asked to form the
government but had to rely on support from over 10 allied parties from various
states.
The BJP government tested nuclear devices in May and immediately raised its
popularity within the country. However, the move heightened tensions with
Pakistan, and within a few days,
- --------------------------------------------------------------------------------
Fund Update
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 ticket symbol IFN.
- --------------------------------------------------------------------------------
2
<PAGE>
Pakistan also tested nuclear devices. The U.S. and other countries reacted by
imposing economic sanctions on both countries. Several countries and the United
Nations have also tried to intervene by holding discussions but so far little
progress has been made. Meanwhile, there is disagreement within the U.S. on
whether sanctions are necessarily the best route to reducing nuclear tensions in
the region. Recently, the U.S. Senate has granted President Clinton discretion
as to the timing for lifting various sanctions.
The BJP-led coalition government is going through a period of instability as one
or another member party continually threatens to withdraw support. Furthermore,
media reports indicate that the Congress party and the United Front have been
holding discussions with several regional parties from the ruling coalition so
as to build adequate support to form a government if the opportunity arises.
Given the constant threat to the strength of the coalition, we believe that the
political situation in India will continue to be volatile until a single party
with a strong majority comes to power.
Economy
Economic conditions remain sluggish. While certain areas of the economy are
growing well, cyclical sectors are facing weaker global pricing. Infrastructure
related areas dependent on government outlays have also continued to report slow
growth. GDP growth in 1997/98 was 5%, due to a fall in both industrial growth
and agricultural production. Estimates for 1998-99 GDP growth range from 4.5-7%.
The government is focusing on stimulating the economy, which we believe is
important to sustain growth in the future. In the budget presented in June, the
government announced an increase in spending by 35% for the infrastructure
sector and allocated more resources to the agricultural and small scale sectors.
Other growth areas of the economy, such as information technology, have been
given special incentives as the government is looking to make India one of the
world's largest exporters of software over the next ten years.
In order to achieve its fiscal deficit target of 5.6% of GDP, the government
reduced certain subsidies and raised countervailing import duties. The tax net
was widened while maintaining tax rates and increasing excise duties in certain
areas. Privatization and disinvestment have also been set as key objectives with
the government agreeing to reduce its stake in certain non-core sectors to 26%.
Another first was the announcement of an exit policy for workers in loss-making
public sector companies. This will enable the government to shut down companies
that are a perennial drain on government finances.
The unstable political situation continues to hurt the economy as the BJP is
finding it difficult to obtain a majority on several proposed reform measures.
The BJP's first budget attempted to balance its pro-rural orientation with the
need to continue the reform process. However, several reform measures had to be
rolled back immediately due to conflicting pressures from various allies and
other parties in Parliament. For example, the announced price hike for urea (a
heavily subsidised area) was reversed after encountering tremendous pressure
from the farm lobby. The government also had to tone down its deregulation of
the power sector due to opposition from one of its allies.
Meanwhile, the Reserve Bank of India announced several measures during this
period to continue to attract foreign investment amidst the rising uncertainty
due to the imposition of economic sanctions. Bank rates were cut from 11% in
March to 9% in May. Several steps were taken to ease foreign investment
restrictions. Key announcements include allowing foreign funds to hedge in
India's forward dollar market, increasing the foreign investment limits by
excluding the investments made
3
<PAGE>
by non-resident Indians from the current allotment to foreign investors and
permitting foreign funds to invest 30% of their funds in government bonds and
treasury notes.
Performance
The Fund's net asset value rose 2.2% during the first six months of 1998,
comparing very favorably to market indices, with the Dollex Index of 200 leading
stocks down 15% and the IFC Index down 16.8%. The Fund's strategy of maintaining
positions in defensive sectors of the economy such as consumer non-durables and
pharmaceuticals as well as its strong overweighting in the technology sector
continued to generate outperformance.
Stocks in the technology sector outperformed the market dramatically throughout
the year with especially strong performance in the month of April. The Fund also
benefited from the strategy that was adopted in late 1997 of increasing exposure
to holdings in selected recovery plays such as cement and two wheelers as they
seemed more insulated from global supply and demand dynamics. Additionally, the
underweighting of several commodity oriented industries such as commercial
vehicles, steel and textiles also helped as stocks in these sectors
underperformed in a weak economic environment.
Portfolio Strategy
The Fund continued its strategy of overweighting the software sector which is
considered to be a long-term secular growth industry for India. This sector
remains an inherent hedge in the case of a weakening currency due to high export
earnings. However, in an ongoing process of portfolio rebalancing, the Fund took
some profits in certain software companies that had outperformed significantly.
Some of these funds were deployed in other software companies that offer strong
growth prospects at lower valuations. Given the recent incentives that the
government has accorded to this sector, we believe that we will continue to see
strong growth in most software companies for at least the next two to three
years. We will continue to monitor valuations of these stocks.
Additionally, the Fund steadily increased its exposure to other areas of the
Indian economy where domestic demand remains strong due to rising middle class
incomes. These are mainly consumer companies in areas of healthcare, food,
detergents and other household goods as people shift to using high quality
branded products. Earnings from these companies remain largely sheltered from
the effects of the economic slowdown in India as well as the emerging slowdown
in Asia. The Fund increased its holdings of both Hindustan Lever and ITC. We
also added a few new pharmaceutical companies taking advantage of stock price
declines in the uncertain market situation.
The Fund further reduced its holdings in commodities such as petrochemicals and
textiles where growth prospects continued to deteriorate due to delayed economic
recovery in India and further pressure in the Asian economies. When we see
clearer signs of an economic pickup and more attractive valuations emerging due
to relative underperformance of these stocks, we may again increase our holdings
in these companies. Meanwhile, we have increased our holdings in attractively
valued infrastructure related stocks as we believe that government spending in
this sector will help earnings growth over the long-term.
4
<PAGE>
Key Sector Holdings
<TABLE>
<CAPTION>
% of total holdings
Sector June 30, 1998 Top holding(s) in sector
------ ------------- ------------------------
<S> <C> <C>
Technology 27.2% NIIT, Infosys
Consumer Non-Durables 12.1% Hindustan Lever, ITC
Pharmaceuticals 11.3% Dr. Reddy's, Ranbaxy
Vehicles & Vehicle Components 10.8% Punjab Tractors
Textiles (synthetic) 5.5% Reliance Industries
Petroleum Related 5.4% Hindustan Petroleum
Telecommunications 5.3% MTNL, VSNL
</TABLE>
Technology is the highest-weighted sector in the Fund. The software services
segment of the technology sector grew over 55% in 1997-98, as Indian software
companies continue to get software outsourcing business from foreign companies,
with an estimated 158 companies in the Fortune 500 outsourcing a portion of
their software requirements from India.
NIIT, the Fund's top holding in the sector, reported 46% growth in sales and 53%
growth in net profits for the fiscal half year ended March 31, 1998. NIIT, a
strong information technology training and software development company,
strengthened its training franchise by securing a contract to provide worldwide
training services to clients of global computer services leader, Computer
Associates. Infosys Technologies, another significant holding, reported 81%
growth in sales and 62% growth in earnings year-on-year for the year ended March
31, 1998, and plans to list its stock on a U.S. exchange in 1998.
The Indian government has accorded top priority to the software sector and is
formulating policies to make India a leading exporter of software services. Some
of the policy measures being contemplated by the government are improved access
to institutional funding, higher depreciation rates on computers, zero duty on
all information technology products and higher government spending on
information technology. The implementation of these policies is expected to help
the sector maintain its high growth rate for the next several years.
The Fund is underweighted in Consumer Non-Durables but this underweighting is
offset by the significant overweighting in the pharmaceutical sector. Hindustan
Lever (HLL), the Fund's largest holding in the sector, posted 19% growth in
sales and 41% growth in net profits for the fiscal year ended December 31, 1997.
HLL continues to show steady double-digit growth by leveraging its distribution
and brand assets to expand into new product categories.
The Fund is significantly overweighted in the Pharmaceuticals sector. While the
Indian pharmaceutical industry recorded only a 10-12% growth in revenues in 1997
compared to 15% the year before, 1998 first quarter figures indicate improving
industry conditions.
Dr. Reddy's Laboratories, the Fund's top holding in the sector, has successfully
transformed itself from a commodity bulk drug manufacturer to a manufacturer and
marketer of finished formulations. Apart from building significant market share
in the domestic formulations market, the company is emerging as a leading
exporter of formulations to Eastern Europe, Russia, and Latin America. Also,
5
<PAGE>
the company's in-house R&D unit has successfully identified lead compounds that
may develop into drugs for treating diseases such as diabetes and cancer. These
lead compounds are being licensed to Western pharmaceutical companies for
further development and testing. For the fiscal year ended March 31, 1998, Dr.
Reddy's announced 33% growth in sales and 46% growth in net profits.
Ranbaxy Laboratories, another significant holding, is starting to leverage its
investments in marketing infrastructure overseas to distribute off-patent drugs
manufactured in India. It has successfully launched two generic drugs in the
U.S. and UK so far and is expected to launch several more in the next 1 to 2
years. In results for the fiscal year ending March 31, 1998, Ranbaxy showed
sales up 24% and net profits up 21%.
Vehicles is the fourth largest sector in the Fund. The commercial and
agricultural segments of the sector are distinct in terms of their sensitivity
to the economy. The Fund is overweighted in the agricultural segment. Punjab
Tractors, the Fund's largest holding in the sector, outperformed its competitors
by a wide margin and posted sales growth of 28% and net profit growth of 72% for
the fiscal year ended March 31, 1998. The Fund remains underweighted in the
commercial segment.
The Fund is overweight in the Synthetic Textiles/Petrochemicals sector as a
result of its overweight position in Reliance Industries (RIL). While
international prices of polymers have been at multi-year lows due to excess
capacity and poor demand, recent capacity shutdowns promise to lessen price
pressure. Domestic prices (which generally track international prices) are
expected to rise accordingly. Further, the increase in countervailing import
duties by the Indian government and depreciation of the rupee is expected to
help domestic producers increase prices. For the fiscal year ended March 31,
1998, RIL announced 54% growth in sales and 25% growth in net profits.
The Fund is overweighted in the Petroleum sector which is being transformed from
a highly-regulated utility to a deregulated industry. As part of the Indian
government's phased decontrol of the sector, refineries started to enjoy
market-determined prices from April 1998 on about 30% of their production. Also,
refineries have been allowed to source crude oil at market rates. These changes,
along with the cut in import duty on crude announced in the recent government
budget, are expected to improve refining margins and profitability for
refineries. Hindustan Petroleum Corporation (HPCL), India's second largest
integrated refining and marketing company, is the Fund's largest holding in the
sector and is expected to significantly benefit from deregulation. In results
for the fiscal year ending March 31, 1998, HPCL posted 3% growth in sales and
15% growth in net profits.
In the Telecommunications sector, Mahanagar Telephone Nigam Limited (MTNL) and
Videsh Sanchar Nigam Limited (VSNL), the Fund's top holdings in the sector,
fared well in fiscal 1998. MTNL posted 14% growth in revenues and 26% in net
profits for the fiscal year ended March 31, 1998. VSNL posted 18% growth in
revenues and 78% in net profits for the same period
Outlook for India
We would like to reiterate from our previous reports some of the positive
developments that occurred in India over the last year. Savings rates have
increased from 22.8% of GDP in 1991-1992 to 25.6% in 1995-1996. The government's
objective is to increase this savings rate to 30% over the next few years. Both
savings and consumer spending remain strong despite a weak economic environment.
The tax cuts implemented in 1997 have not been reversed which should continue to
stimulate consumer spending. The fiscal deficit decreased from 8.3% of GDP to
6.0% over the last six years and the current government is optimistic that it
can be brought down to 5.6% within this year.
6
<PAGE>
We believe that both privatization and deregulation remain important priorities
for the new government despite the apparently protectionist measure to raise
countervailing import duties. The government also continues to introduce stock
market reforms. The government has recently responded to market disappointment
on the lack of aggressive reform measures (such as share buybacks) in the recent
budget by starting to announce market friendly policies. The concerns over
economic sanctions are forcing the government to be more agile in clearing
Foreign Direct Investment projects. The phased transition to dematerialization
and scripless trading that started in January 1998 has been smooth and will
eventually make it easier for investors to trade in the Indian market, thereby
increasing liquidity. Interest rates are low and there is plenty of liquidity in
the banking system.
While the Indian government is implementing initiatives to stimulate the
economy, the pace may remain slow. Political instability due to coalition
governments could delay significant government spending and, in turn, delay the
economic recovery, which is very dependent on large infrastructure projects
being cleared by the government. Opposition from various lobbies may also slow
the privatization process that the government would like to see implemented.
Therefore, until market conditions improve, any aggressive disinvestment by the
government may be delayed, potentially hurting the fiscal deficit and putting
pressure on interest rates.
Many argue that the government's budget is likely to be inflationary due to the
increase in both excise duties for several companies as well as rise in
countervailing import duties. The government has kept its inflation target at
6.5 to 7% and we believe that there is little risk of sharply rising inflation
as long as the economic environment remains weak in India and the rest of Asia.
Finally, the full impact of economic sanctions on the Indian economy is yet
unclear although we see encouraging signs (especially from the latest U.S.
Senate proposal allowing the President to lift sanctions) that the impact may be
less than earlier anticipated.
Overall, we remain positive on the long-term prospects for the Indian market. We
expect to see continued volatility due to the unstable political situation in
India as well as the ongoing economic problems in Asia. Although the impact of
the Asian economic crisis on the Indian economy cannot be ignored, over the last
year India has demonstrated that it has been sheltered to a large extent from
these problems. There is still strong growth in certain sectors of the economy.
On an aggregated consensus estimate ranging from 15-20% earnings growth for
Indian companies, the market is trading between 9-10 times forward earnings
which makes it one of the more attractively valued markets in the world.
Punita Kumar-Sinha
July 1998
7
<PAGE>
- --------------------------------------------------------------------------------
The Board of Directors of the Fund recently reviewed and approved various
amendments to the Fund's bylaws. For example, the provisions relating to timely
notice for proposals to be brought before an annual meeting of stockholders
(other than a proposal under Rule 14a-8 of the Securities Exchange Act of 1934
to be included in the Fund's proxy statement) have been amended. As amended, a
stockholder's notice generally must be delivered to the Fund not less than 60
days nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting. The Board believes that the amended timely notice
provisions will provide greater certainty to stockholders because previously,
timely notice keyed off the date of the current year's meeting or the public
disclosure of the current year's meeting is made. In addition, the provisions
provide that any business to be brought before a special meeting of stockholders
must be specified in the notice of meeting or otherwise properly brought before
the meeting by or at the direction of the Board of Directors. Finally, upon
recommendation of the Fund's Maryland counsel, other changes to certain bylaw
provisions were made to conform to the bylaw provisions of more recently
incorporated Maryland corporations.
Finally, at a recent meeting of the Board of Directors of the Fund, the Board
authorized the Fund to repurchase from time to time in the open market up to
1,000,000 shares of the Fund's common stock. The Fund's Board has directed
management to repurchase the Fund's shares at such times and in such amounts as
management believes will enhance shareholder value, subject to review by the
Fund's Board of Directors.
- --------------------------------------------------------------------------------
8
<PAGE>
Schedule of Investments The India Fund, Inc.
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Percent
of Shares Security of Holdings Cost Value
- -----------------------------------------------------------------------------------------------------------
INDIA 100.00%
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS 99.88%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cement 2.14%
102,220 Associated Cement Companies ............................. $ 4,140,012 $ 2,939,503
133,000 Dalmia Cement ........................................... 1,582,861 398,138
267,600 Gujarat Ambuja Cements .................................. 2,352,473 1,647,545
70,000 Gujarat Ambuja Cements GDR .............................. 616,000 337,750
2,001 Jaiprakash Industries+ .................................. 5,579 509
100 Mysore Cements .......................................... 230 23
47,890 Panyam Cements .......................................... 481,772 418,790
443,630 Shree Cement ............................................ 947,396 170,446
----------- -----------
10,126,323 5,912,704
----------- -----------
Chemicals 0.96%
48 Atul Products ........................................... 93 18
515,500 ICI (India) ............................................. 2,743,295 2,418,020
50 Indian Organic Chemicals+ ............................... 140 6
100 JF Laboratories+ ........................................ 174 4
100,000 United Phosphorus ....................................... 381,446 237,124
----------- -----------
3,125,148 2,655,172
----------- -----------
Consumer Miscellaneous 0.03%
210 Surya Roshni ............................................ 554 76
196,800 Timex Watches+ .......................................... 140,800 80,251
----------- -----------
141,354 80,327
----------- -----------
Consumer Non-Durable 12.13%
515,052 Hindustan Lever ......................................... 14,497,061 18,325,775
794,793 ITC ..................................................... 12,509,602 12,214,615
8,000 ITC GDR ................................................. 124,000 141,000
101,050 Ponds India ............................................. 2,616,868 2,524,761
46,482 Reckitt & Colman ........................................ 461,464 314,993
----------- -----------
30,208,995 33,521,144
----------- -----------
Diversified Industries 0.97%
138 DCM Shriram Consolidated ................................ 352 120
124,115 DCM Shriram Consolidated Warrants,
expiration date 11/08/99* ............................. 0 0
454 Grasim Industries ....................................... 10,229 3,828
175 HMG Industries+ ......................................... 359 6
550,975 Indian Rayon ............................................ 3,483,367 2,662,343
820 Kesoram Industries ...................................... 3,879 379
----------- -----------
3,498,186 2,666,676
----------- -----------
</TABLE>
9
<PAGE>
Schedule of Investments (continued) The India Fund, Inc.
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Percent
of Shares Security of Holdings Cost Value
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS (continued)
<S> <C> <C> <C>
Electricity 0.00%
100 CESC Ltd ................................................ $ 819 $ 72
52 CESC Ltd Class B Warrants, expiration date 9/30/99+* .... 302 0
150 Tata Power Co ........................................... 796 324
----------- -----------
1,917 396
----------- -----------
Electronics & Electrical 3.34%
436,983 Asea Brown Boveri ....................................... 6,961,604 4,380,130
350,000 Asian Electronics ....................................... 2,200,052 861,285
462,200 Bharat Heavy Electrical ................................. 4,130,136 2,734,524
996,600 Crompton Greaves ........................................ 5,691,655 798,689
704,000 KEC International ....................................... 1,681,175 463,802
49 Siemens India+ .......................................... 1,083 213
----------- -----------
20,665,705 9,238,643
----------- -----------
Engineering 3.55%
5,450 Advani Oerlikon ......................................... 16,926 2,537
101 Lakshmi Machine Works ................................... 19,870 2,940
1,514,327 Larsen & Toubro ......................................... 9,475,554 8,184,683
179,000 Larsen & Toubro GDR ..................................... 2,134,662 1,633,375
----------- -----------
11,647,012 9,823,535
----------- -----------
Extractive Industries 4.11%
402,075 Hindalco Industries ..................................... 7,963,576 6,326,106
51,900 Hindalco Industries GDR ................................. 787,794 724,005
9,020,100 Hindustan Zinc .......................................... 3,165,243 2,136,759
71,450 Indian Aluminum ......................................... 399,788 126,480
4,106,500 National Aluminum Company ............................... 5,336,725 2,032,681
870 Sesa Goa ................................................ 6,623 3,349
----------- -----------
17,659,749 11,349,380
----------- -----------
Fertilizers 0.00%
8,800 Chambal Fertilizers & Chemicals ......................... 6,831 2,614
1,950 Nagarjuna Fertilizer & Chemicals ........................ 2,130 756
50 Southern Petrochemicals Industrial Corporation+ ......... 195 35
----------- -----------
9,156 3,405
----------- -----------
Finance 3.56%
1,800,100 Bank of Baroda .......................................... 4,955,514 3,515,340
912,500 Corporation Bank ........................................ 2,176,688 2,170,212
240,000 ICICI** ................................................. 503,051 437,855
3,339,300 Oriental Bank of Commerce ............................... 8,178,973 3,707,272
----------- -----------
15,814,226 9,830,679
----------- -----------
</TABLE>
10
<PAGE>
Schedule of Investments (continued) The India Fund, Inc.
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Percent
of Shares Security of Holdings Cost Value
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS (continued)
<S> <C> <C> <C>
Food 1.24%
600 American Dry Fruits+ .................................... $ 1,197 $ 60
350 Nestle India ............................................ 3,100 3,038
250,000 Rahul Dairy & Allied Products+* ......................... 79,643 7,366
100 Rank Aqua Estates+* ..................................... 254 1
180,700 Smithkline Beecham Consumer Healthcare .................. 1,827,686 1,652,601
248,475 Tata Tea ................................................ 2,702,456 1,775,784
----------- -----------
4,614,336 3,438,850
----------- -----------
Hotels & Leisure 0.00%
121 Indian Hotels+ .......................................... 1,976 1,226
----------- -----------
Household Appliances 0.11%
600,000 IFB Industries+ ......................................... 3,271,110 190,925
300 Kalyani Sharp+ .......................................... 410 64
500 Phil Corporation ........................................ 1,366 274
20 Phillips India .......................................... 19 42
645,100 Samtel Colour ........................................... 1,557,877 113,282
1,150 Videocon Appliances ..................................... 6,719 493
269 Videocon International .................................. 878 323
73 Voltas+ ................................................. 339 74
150 Whirlpool of India+ ..................................... 887 91
----------- -----------
4,839,605 305,568
----------- -----------
Packaging 0.07%
660,320 Flex Industries ........................................ 4,118,949 193,777
77,310 Flex Industries Warrants, expiration date 11/30/99+* ... 0 10,090
100 Polyplex Corporation .................................... 339 20
500 Universal Prime Aluminum+* .............................. 789 20
----------- -----------
4,120,077 203,907
----------- -----------
Petroleum Related 5.39%
1,203,000 Hindustan Petroleum Corporation ......................... 14,918,377 11,072,987
928,740 Indian Petrochemicals ................................... 3,385,748 1,127,404
2,385,950 Madras Refineries ....................................... 6,582,958 2,699,484
----------- -----------
24,887,083 14,899,875
----------- -----------
</TABLE>
11
<PAGE>
Schedule of Investments (continued) The India Fund, Inc.
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Percent
of Shares Security of Holdings Cost Value
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS (continued)
<S> <C> <C> <C>
Pharmaceuticals 11.28%
50,850 Cipla ................................................... $ 922,483 $ 828,223
280,400 Dabur India ............................................. 2,126,180 1,643,075
1,136,800 Dr. Reddy's Laboratories ................................ 9,826,330 10,751,703
600,000 E. Merck (India) ........................................ 3,952,219 2,866,706
90,050 Glaxo (India) ........................................... 614,749 779,514
63,800 Hoechst Marion .......................................... 697,788 595,517
400 Orchid Chemicals & Pharmaceuticals ...................... 1,355 1,046
122,132 Pfizer India ............................................ 1,602,233 1,584,765
738,900 Ranbaxy Laboratories .................................... 14,342,891 9,535,598
224,800 Rhone-Poulenc India+ .................................... 3,109,285 1,919,477
100,000 Sun Pharmaceuticals ..................................... 582,052 664,702
----------- -----------
37,777,565 31,170,326
----------- -----------
Pulp & Paper 0.45%
1,300,000 Andhra Pradesh Rayons ................................... 3,399,420 1,198,114
100 Pudumjee Pulp & Paper Mills ............................. 818 83
835,000 Rama Newsprint & Papers ................................. 671,275 59,045
200 Seshasayee Papers & Boards .............................. 219 98
----------- -----------
4,071,732 1,257,340
----------- -----------
Steel 1.37%
6,385 Essar Steel ............................................. 24,593 2,446
500 Jindal Strips ........................................... 6,596 673
1,273,194 Tata Iron & Steel ....................................... 7,012,134 3,778,317
----------- -----------
7,043,323 3,781,436
----------- -----------
Steel Products 0.00%
100 Choksi Tubes ............................................ 237 57
100 Super Forging Steel+ .................................... 179 5
----------- -----------
416 62
----------- -----------
Technology 27.24%
100 BFL Software ............................................ 270 691
657,200 DSQ Software ............................................ 1,092,347 3,971,858
388,800 Infosys Technologies .................................... 3,059,117 20,370,187
72,700 Leading Edge Systems .................................... 1,454,120 1,088,144
145,000 Mastek .................................................. 784,892 713,294
1,032,400 NIIT .................................................... 5,923,935 34,567,453
164,800 Pentafour Software & Exports ............................ 674,715 2,457,919
20,000 Pentafour Software & Exports GDR ........................ 373,000 270,000
1,043,280 Satyam Computer ......................................... 2,356,230 10,205,332
400 Silverline Industries ................................... 547 685
36,700 Wipro ................................................... 473,336 1,617,006
----------- -----------
16,192,509 75,262,569
----------- -----------
</TABLE>
12
<PAGE>
Schedule of Investments (continued) The India Fund, Inc.
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Percent
of Shares Security of Holdings Cost Value
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS (continued)
<S> <C> <C> <C>
Telecommunication 5.32%
2,180,500 Mahanagar Telephone Nigam ............................... $13,240,579 $ 9,169,150
70,000 Mahanagar Telephone Nigam GDR+ .......................... 967,050 714,000
464,500 Videsh Sanchar Nigam GDR+ ............................... 7,394,379 4,807,575
----------- -----------
21,602,008 14,690,725
----------- -----------
Telecommunication Equipment 0.00%
300 Bhagyanagar Metals ...................................... 724 106
100 Telephone Cables+ ....................................... 444 4
----------- -----------
1,168 110
----------- -----------
Textiles-Cotton 0.25%
390,700 Arvind Mills ............................................ 1,382,087 390,470
100 HP Cotton Textile Mills ................................. 233 23
200,000 Vardhaman Spinning & General Mills ...................... 455,739 295,816
----------- -----------
1,838,059 686,309
----------- -----------
Textiles - Synthetic 5.49%
131,000 Bombay Dyeing GDR ....................................... 379,550 170,300
650 DCL Polyesters+ ......................................... 1,282 61
100 Ester Industries ........................................ 104 11
372 Haryana Petrochemicals+ ................................. 425 17
4,439,894 Reliance Industries ..................................... 17,792,080 14,996,743
100 Sanghi Polyesters+ ...................................... 103 9
5,800 SRF ..................................................... 15,613 1,914
----------- -----------
18,189,157 15,169,055
----------- -----------
Transportation 0.04%
1,281,000 NEPC (India) ............................................ 3,641,748 111,720
----------- -----------
Vehicles 10.35%
131,675 Bajaj Auto .............................................. 2,008,838 1,775,324
173,700 Bajaj Auto GDR .......................................... 2,813,162 2,318,895
700 Hindustan Motors ........................................ 916 162
125,000 LML Limited ............................................. 247,910 275,781
190,937 Mahindra & Mahindra ..................................... 1,992,470 968,524
39,000 Mahindra & Mahindra GDR ................................. 175,500 168,675
1,000,000 Punjab Tractors+ ........................................ 6,988,502 19,015,910
62,935 Tata Engineering & Locomotive ........................... 721,065 246,993
50,000 Tata Engineering & Locomotive GDR+ ...................... 172,500 160,000
350,650 TVS Suzuki .............................................. 2,430,258 3,682,135
----------- -----------
17,551,121 28,612,399
----------- -----------
</TABLE>
13
<PAGE>
Schedule of Investments (continued) The India Fund, Inc.
June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Number Percent
of Shares Security of Holdings Cost Value
- -----------------------------------------------------------------------------------------------------------
COMMON STOCKS (continued)
<S> <C> <C> <C>
Vehicle Components 0.49%
25 Antifriction Bearings Corporation ....................... $ 100 $ 14
125 FAG Precision Bearings .................................. 334 91
100 Gleitlager+* ............................................ 95 7
348,500 Kirloskar Oil Engines ................................... 1,651,947 303,937
85 Motor Industries Company ................................ 10,622 7,684
4 SKF Bearings India ...................................... 444 74
93,500 Swaraj Engines+ ......................................... 1,040,449 1,035,827
----------- -----------
2,703,991 1,347,634
----------- -----------
TOTAL COMMON STOCKS 281,973,645 276,021,172
----------- -----------
<CAPTION>
Par Value Percent
(000) Security of Holdings Cost Value
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
BONDS 0.12%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diversified Industries 0.12%
4,220 DCM Shriram Consolidated NCD 13.00%, 11/6/01* ........... $ 134,584 $ 108,767
4,096 DCM Shriram Consolidated NCD 13.00%, 11/6/02* ........... 130,627 105,569
4,096 DCM Shriram Consolidated NCD 13.00%, 11/6/03* ........... 130,627 105,569
----------- -----------
395,838 319,905
----------- -----------
TOTAL BONDS 395,838 319,905
----------- -----------
TOTAL INDIA 282,369,483 276,341,077
----------- -----------
TOTAL INVESTMENTS*** 100.00% $282,369,483 $276,341,077
============ ============
</TABLE>
- ----------
Footnotes and Abbreviations
GDR - Global Depository Receipt
INR - Indian Rupee
NCD - Non Convertible Debenture
+ Non-income producing security.
* At fair value as determined under the supervision of the Board of Directors.
** Passive Foreign Investment Company.
*** Aggregate cost for Federal income tax purposes is $282,645,217
The aggregate gross unrealized appreciation (depreciation) for all
securities is as follows:
Excess of value over tax cost $77,951,528
Excess of tax cost over value (84,255,668)
-----------
($6,304,140)
===========
14
<PAGE>
Statement of Assets and Liabilities The India Fund, Inc.
June 30, 1998 (Unaudited)
<TABLE>
Assets
<S> <C>
Investments, at value (Cost $282,369,483) ....................................... $ 276,341,077
Cash (including Indian Rupees of $1,048,119 with a cost of $1,043,894) ........... 1,060,568
Receivables:
Dividends and reclaims of excess taxes withheld ................................ 3,201,980
Interest (net of withholding tax of $2,329) ................................... 59,550
Securities sold ................................................................ 3,315,678
Unamortized organization costs ................................................... 42,069
Prepaid expenses ................................................................. 243,687
-------------
Total Assets ............................................................... 284,264,609
-------------
Liabilities
Payable for securities purchased ................................................. 1,376,591
Due to Investment Manager ........................................................ 259,230
Due to Administrator ............................................................. 51,274
Accrued expenses ................................................................. 691,057
-------------
Total Liabilities .......................................................... 2,378,152
-------------
Net Assets ....................................................................... $ 281,886,457
=============
NET ASSET VALUE PER SHARE ($281,886,457/34,007,133) .............................. $ 8.29
=============
Net assets consist of:
Capital stock, $0.001 par value; 34,007,133 shares issued
and outstanding (100,000,000 shares authorized) ................................ $ 34,007
Paid-in capital .................................................................. 471,424,988
Accumulated net investment loss .................................................. (1,012,403)
Accumulated net realized loss on investments ..................................... (182,151,114)
Net unrealized depreciation in value of investments, foreign currency holdings and
on translation of other assets and liabilities denominated in foreign currency . (6,409,021)
-------------
Net Assets ....................................................................... $ 281,886,457
=============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Statement of Operations The India Fund, Inc.
For the Six Months Ended June 30, 1998 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Dividends .............................................................................. $ 2,151,933
Interest (net of Indian taxes withheld of $4,046) ...................................... 219,214
------------
Total investment income .............................................................. 2,371,147
------------
Expenses
Management fees ....................................................... $ 1,605,433
Custodian fees ........................................................ 668,502
Administration fees ................................................... 304,448
Insurance ............................................................. 76,642
Legal fees ............................................................ 72,896
Audit fees ............................................................ 68,432
Transfer agent fees ................................................... 48,476
Amortization of organizational costs .................................. 31,997
Directors' fees ....................................................... 19,340
NYSE fees ............................................................. 16,037
Printing .............................................................. 12,397
Miscellaneous expenses ................................................ 14,060
------------
Total expenses ....................................................................... 2,938,660
------------
Net investment loss .................................................................. (567,513)
------------
Net Realized and Unrealized Gain (Loss) On Investments,
Foreign Currency Holdings and Translation of Other Assets
and Liabilities Denominated in Foreign Currency:
Net realized loss on:
Security transactions ................................................................ (14,694,884)
Foreign currency related transactions ................................................ (112,441)
------------
(14,807,325)
Net change in unrealized appreciation in value of investments, foreign currency holdings
and translation of other assets and liabilities denominated in foreign currency ...... 21,446,836
------------
Net realized and unrealized gain on investments, foreign currency holdings and
translation of other assets and liabilities denominated in foreign currency .......... 6,639,511
------------
Net increase in net assets resulting from operations ................................... $ 6,071,998
============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Statement of Changes in Net Assets The India Fund, Inc.
<TABLE>
<CAPTION>
For the Six Months
Ended For the Year
June 30, 1998 Ended
(Unaudited) December 31, 1997
------------------ -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment loss ............................................................ $ (567,513) $ (1,115,626)
Net realized loss on investments and foreign currency related transactions ..... (14,807,325) (70,986,340)
Netchange in unrealized appreciation in value of investments, foreign currency
holdings and translation of other assets and liabilities denominated
in foreign currency .......................................................... 21,446,836 90,760,270
------------- -------------
Net increase in net assets resulting from operations ........................... 6,071,998 18,658,304
------------- -------------
Total increase in net assets ................................................... 6,071,998 18,658,304
------------- -------------
Net Assets
Beginning of period ............................................................ 275,814,459 257,156,155
------------- -------------
End of period .................................................................. $ 281,886,457 $ 275,814,459
============= =============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
Financial Highlights The India Fund, Inc.
For a Share Outstanding throughout Each Period
<TABLE>
<CAPTION>
For the Period
February 23,1994
(Commencement
For the For the For the For the of Operations)
Period Ended Year Ended Year Ended Year Ended Through
June 30,1998 December 31, December 31, December 31, December 31,
(Unaudited) 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ............. $ 8.11 $ 7.56 $ 8.94 $ 13.92 $ 13.98(1)
-------- -------- -------- -------- --------
Net investment income (loss) ..................... (0.02) (0.03) 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 currency ................ 0.20 0.58 (1.39) (4.93) 0.08
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations 0.18 0.55 (1.37) (4.98) 0.07
-------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment income ........... -- -- (0.01) -- --
Distributions from net realized gains ............ -- -- -- -- (0.13)
-------- -------- -------- -------- --------
Total dividends and distributions ................ -- -- (0.01) -- (0.13)
-------- -------- -------- -------- --------
Net asset value, end of period .................. $ 8.29 $ 8.11 $ 7.56 $ 8.94 $ 13.92
======== ======== ======== ======== ========
Per share market value, end of period ............ $ 6.375 $ 7.375 $ 7.625 $ 8.875 $ 10.75
Total Investment Return Based on
Market Value(2) .................................. (13.56)% (3.28)% (14.08)% (17.44)% (23.32)%
Ratios/Supplemental Data
Net assets, end of period (in 000s) .............. $281,886 $275,814 $257,156 $303,940 $473,241
Ratios of expenses to average net assets ......... 2.01%(3) 1.98% 2.03%(4) 2.03% 1.98%(3)
Ratios of net investment income (loss)
to average net assets .......................... (0.39)%(3) (0.37)% 0.22%(4) (0.38)% (0.06)%(3)
Portfolio turnover ............................... 14.59% 42.61% 33.57% 25.28% 20.93%
Average commission rate paid(5) .................. $ 0.0264 $ 0.0139 $ 0.0176 N/A N/A
</TABLE>
(1) Initial public offering price $15.00 per share less underwriting discount of
$0.98 per share and offering costs 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 each 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 underwriting discount 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.
(4) Includes expense waivers by the Custodian. If such expenses had not been
waived, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 2.12% and 0.13%,
respectively, for the year ended December 31, 1996.
(5) Computed by dividing the total amount of brokerage commissions paid by the
total number of shares of investment securities purchased and sold during the
period for which commissions were charged as required by the SEC for fiscal
years beginning on or after September 1, 1995.
See accompanying notes to financial statements.
18
<PAGE>
Notes to Financial Statements The India Fund, Inc.
June 30, 1998 (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
CIBC Oppenheimer Corp. ("CIBC Oppenheimer"), formerly known as Oppenheimer &
Co., Inc. At June 30, 1998, CIBC Oppenheimer owned 7,133 shares of the Fund's
capital stock.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
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.
Securities for which sales prices and bid and asked quotations are not available
on the date of determination may be valued at the most recently available prices
or quotations under policies adopted by the Board of Directors. 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 $337,389 (0.12% of net
assets) at June 30,1998, 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 reporting purposes. Interest income is recorded on the accrual basis;
dividend income is recorded on the ex-dividend date or, using reasonable
diligence, 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
19
<PAGE>
Notes to Financial Statements (continued) The India Fund, Inc.
June 30, 1998 (unaudited)
that will be sufficient to relieve it from all or substantially all Federal
income and excise taxes.
At December 31, 1997, the Fund had a capital loss carryover of $146,977,338
which is available to offset future net capital gains on securities transactions
to the extent provided for in the Internal Revenue Code. Of the aggregate
capital losses, $24,657,681 will expire in the year 2003, $65,383,725 will
expire in the year 2004, and $56,935,932 will expire in 2005.
The Fund's capital losses and foreign exchange losses incurred after October 31,
1997, but before December 31, 1997, are deemed to have arisen 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 $20,366,451 and
$444,890, respectively.
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.
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
foreigncurrency 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 realized foreign exchange gains and losses as components of realized
gains and losses for financial reporting purposes, whereas such amounts are
treated as ordinary income for Federal income tax reporting purposes.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in foreign exchange. 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
20
<PAGE>
Notes to Financial Statements (continued) The India Fund, Inc.
June 30, 1998 (unaudited)
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, 1997, the Fund reclassified $922,972 from
accumulated net realized loss on investments to accumulated net investment loss
as a result of permanent book and tax differences relating to realized foreign
currency losses and reclassified $1,774,480 from accumulated net investment loss
to paid in capital as a result of permanent tax differences relating to net
operating loss for the year ended December 31, 1997. Net investment loss 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.
NOTE B: Management, Investment Advisory and Administrative Services
Advantage Advisers, Inc., a subsidiary of CIBC Oppenheimer Corp., serves as the
Fund's Investment Manager under the terms of a management agreement (the
"Management Agreement"). Infrastructure Leasing & Financial Services Limited
("ILFS") 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 and
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 Manager 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 received monthly fees at an
annual rate of 1.10% of the Fund's average weekly net assets and the Country
Adviser received from the Investment Manager monthly fees at an annual rate of
0.20% of the Fund's average weekly net assets. For the six months ended June 30,
1998, fees earned by the Investment Manager amounted to $1,605,433, of which the
Investment Manager informed the Fund it paid $291,897 to ILFS.
CIBC 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, 1998, these fees
amounted to $291,897. 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, 1998, fees and expenses of the Mauritius Administrator
amounted to $12,551.
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.
21
<PAGE>
Notes to Financial Statements (continued) The India Fund, Inc.
June 30, 1998 (unaudited)
NOTE C: Portfolio Activity
Purchases and sales of securities, other than short-term obligations, aggregated
$48,726,397 and $41,319,415, respectively, for the six months ended June 30,
1998.
At June 30, 1998, the Fund owned securities valued at approximately $18,801,501
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.
NOTE D: Foreign Income 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 resdent 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 of securities. The Fund was subject to a 15% withholding tax
on dividends declared, distributed or paid to the Fund by an Indian company
prior to June 1, 1997. Effective June 1, 1997, the Indian government repealed
the 15% withholding tax on dividends declared, distributed or paid to by an
Indian company after June 1, 1997. Instead, the Indian company distributing the
dividend is liable for tax at the rate of 10% of the dividend amount. The Fund
is subject to and accrues a 20% withholding tax on interest paid by an Indian
borrower.Under current Mauritian Law the Fund is not liable for Mauritian income
tax. 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 six months ended June 30, 1998,
no provision for Mauritius taxes has been made. Moreover, to the extent that it
is later determined that the Fund would be unable to obtain the benefits of the
treaty, the Fund would be subject to tax on capital gains in India on the sale
of securities and would be subject to the applicable tax on dividends declared,
distributed or paid prior to June 1, 1997, which was at the rate of 20%.
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, 1998, 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 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.
The Fund maintains cash at The Bank of New York, its custodian, in interest
bearing accounts and at State Bank of India, its sub-castodian in India in a
non-interest bearing account. Total cash of the Fund at June 30, 1998,
represents 0.4% of net assets
22
<PAGE>
Results of the Annual Shareholders Meeting The India Fund, Inc.
The Fund held its annual shareholders meeting on April 24, 1998. At this
meeting, shareholders elected each of the nominees proposed for election to the
Fund's Board of Directors and ratified the selection and approval of Price
Waterhouse LLP as the independent accountants of the Fund for the fiscal year
ending December 31, 1998. The following tables provide information concerning
the matters voted on at the meeting:
I. Election of Directors
Nominee Votes For Votes Abstained Total Voting Shares
------- --------- --------------- -------------------
Sir Rene Maingard 23,966,985 1,084,152 25,051,137
Alan H. Rappaport 24,051,457 999,680 25,051,137
At June 30, 1998, in addition to Sir Rene Maingard and Alan H. Rappaport, the
directors of the Fund were as follows:
Charles F. Barber
Leslie H. Gelb
Jeswald W. Salacuse
Gabriel Seeyave
II. Ratification of Price Waterhouse LLP as the Independent Accountants of the
Fund
Votes For Votes Against Votes Abstained Total Voting Shares
--------- ------------- --------------- -------------------
24,406,260 569,249 75,628 25,051,137
23
<PAGE>
THE INDIA FUND, INC.
INVESTMENT MANAGER:
ADVANTAGE ADVISERS, INC.
THE INDIA FUND, INC.
ADMINISTRATOR: Semiannual Report
CIBC OPPENHEIMER CORP. June 30, 1998
SUB-ADMINISTRATOR:
PFPC, INC.
TRANSFER AGENT:
THE BANK OF NEW YORK
CUSTODIAN:
THE BANK OF NEW YORK
ADVANTAGE ADVISERS, INC.
