Advantage Advisers, Inc.
The India Fund, Inc.
Semi-Annual Report
June 30, 1999
The India Fund, Inc.
<PAGE>
The India Fund, Inc.
July 27, 1999
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, 1999. In the following pages, the Fund's Investment Manager 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.
Fund Outperformed Benchmarks in First Half
Buoyed by the positive forces of the first quarter, the Fund's net asset value
("NAV") closed at $13.01 per share on June 30, 1999, returning 47.01% over the
last six months, and outperforming its benchmarks, the Dollex Index of 200
leading Indian companies, which returned 27.81% and the IFC Index, which
returned 33.61% over the same period.
The Fund outperformed in the first quarter, reflecting overweighting in the
fast-growing Computer Software & Programming, Computer Training and Consumer
Non-Durables sectors. But, as cyclicals came to the fore in the second quarter,
the Fund's performance lagged the benchmarks in the April-June period.
Market Volatility Continued
The Indian stock market remained volatile during the first half of 1999.
Significant gains in the first quarter -- based on the adoption of a pro-growth
Government Budget -- were virtually erased in the second quarter as the
governing coalition broke apart over internal politics and the coalition-leading
Bhartiya Janata Party (BJP) was voted down. Skirmishes with Pakistanis at the
Kashmir border also disquieted the market in the second quarter.
But the Indian economy showed increasing signs of economic recovery, with
agriculture driving first-quarter growth and industrial production showing
increasing strength in the second quarter.
The Outlook
As in the second quarter, the Investment Manager plans to continue to increase
the Fund's holdings in cyclicals as the economic outlook continues to be
positive, but also expects to continue an overweighting in technology sectors,
such as Computer Software & Programming, longer term.
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THE INDIA FUND, INC.
The Investment Manager is optimistic about a return to power in the September
elections of the BJP party. Short term, the manager believes that this political
uncertainty will create a climate for market volatility.
Longer term, the Investment Manager remains positive on the Indian economy and
market, as the current cyclical economic recovery and the restructuring being
undertaken by many Indian companies appear to be laying the foundation for
long-term economic growth and strong market performance.
On behalf of the Board of Directors, thank you for your participation in the
Fund. If you have questions, do not hesitate to call our toll-free number at
(800) 421-4777.
Sincerely,
/s/ Alan Rappaport
Alan Rappaport
Chairman
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THE INDIA FUND, INC.
Report of the Investment Manager
For The Six Months Ended June 30, 1999
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OVERVIEW OF INDIA'S STOCK MARKET
India's stock market remained volatile in the first half of 1999, surging over
20% in the first quarter on the back of a promising, pro-growth Budget, only to
re-trace virtually the entire gain in the second quarter amid a deteriorating
political situation that eventually led to the Government's downfall. However,
immediately following the ouster of the Bhartiya Janata Party (BJP) as the
governing party, the market stormed back with a powerful four-week rally, which
ended only when events in the troubled Kashmir province began heating up again,
effectively capping gains. For the six months ended June 30, 1999, the Dollex
Index of India's 200 leading companies ended up 27.81% to 164.50.
- --------------------------------------------------------------------------------
POLITICS
Politically, India got off to a promising start in 1999. In mid-February, Prime
Minister Vajpayee made a dramatic peace-seeking journey to Pakistan, which
appeared to successfully lay the groundwork for friendlier relations. This was
immediately followed by the approval of a pro-growth, investor-friendly Budget
that sent the stock market soaring 15% in three days. A more stable political
climate seemed to be at hand.
Unfortunately, the fragility of the BJP-led coalition soon reasserted itself.
Following the Government's abrupt dismissal of its naval chief, one of the
smaller coalition partners -- the All India Anna Dravida Munnetra Kazagham
(AIADMK) -- was angry enough to withdraw its political support, sparking a
no-confidence vote against the Government. On April 17, 1999, the Government
lost by one vote.
With the opposition parties unable to agree on an alternative government,
Parliament was dissolved nine days later. India now has a caretaker Government
presiding, with new elections slated for September.
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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 Sundays. The Fund is listed
on the New York Stock Exchange under the ticker symbol IFN.
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THE INDIA FUND, INC.
The other major political event of the second quarter was the clash between
India and Pakistan at the Kashmir border. Increasingly, the situation appears to
be normalizing. However, until the incident blows over, the heightened tensions
and military activity should add to market uncertainty.
Meanwhile, as India awaits new elections, further substantive reform and macro
restructuring have been put on hold. Although it is not a disaster for the
market, it is believed that India needs further de-regulation. Hence, any delay
in progress on this front is not necessarily a positive development.
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ECONOMY
The Indian economy showed increasing signs of recovery during the first half of
1999. The agricultural sector was a major driver, with bumper harvests in the
first quarter. As a result, the Government revised GDP upward for the fiscal
year ended March 1999 from 5.8% to 6.0%.
Since the start of the second quarter, India's industrial production index has
also shown increasing strength, surging 6.8% year-over-year in April (vs. a 3.8%
increase for the fiscal year ended March 1999). Increased industrial activity is
being seen across-the-board in India's economy, from cement and steel
consumption, to motor vehicle sales.
Reflecting the stronger economic activity, indirect tax collections for the
April-June 1999 quarter were up 20.9% year-over-year, while total bank credit
was flat during the period compared to a contraction in the previous year.
Despite the welcome pick-up in economic activity, inflation has been trending
down, with the Wholesale Price Index decelerating to a 3.8% increase from a rate
of 5.5%-6.0% at the start of the year.
The reduced inflation has also paved the way for lower interest rates. But the
high budget deficit (5.5% of GDP as reported in the March 1999 year-end Budget)
should probably keep rates from falling much further. For the coming fiscal
year, the Government is forecasting a Budget deficit of 4.5% of GDP which, on
the back of a stronger economy and rising tax receipts, initially looked
achievable. However with the recent increase in Government expenditure due to
the Kashmir border conflict, these numbers now may not be achievable.
There is good news on the external front. Buoyed by Asia's recovery, India's
exports are starting to pick up, rising 11.6% year-over-year in May. Together
with shrinking imports, India's January-May 1999 trade deficit contracted by 43%
year-over-year.
Despite the political uncertainty, the rupee has also remained relatively
stable. In fact, the year-to-date depreciation of 2% (to the current Rp 43.4 to
the U.S. dollar) has occurred quite
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THE INDIA FUND, INC.
recently, in the wake of the Kashmir border fighting. Reserves have also
remained stable since the beginning of the year, at $30.5 billion.
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PERFORMANCE
The Fund's Net Asset Value (NAV) rose 47.01% during the first six months of
1999, comparing very favorably to market indices, with the Dollex Index of 200
leading Indian stocks up 27.81% and the IFC Index up 33.61%.
The Fund's strategy of overweighting the fast-growing Computer Software &
Programming, Computer Training and Consumer Non-Durables sectors continued to
generate outperformance during the first quarter, returning 45.2%. Given the
substantial outperformance during the first quarter, together with signs of a
recovery in industrial activity, the Fund reduced positions in selected major
holdings and switched into some of the more economically sensitive cyclical
stocks. However, the overweight stance was maintained.
The second quarter witnessed a sharp reversal of fortunes, with the cyclicals
substantially outperforming the past year's leaders. As we had begun building
positions in selected shares (e.g., Larsen & Toubro, Gujarat Ambuja Cements),
the Fund performed relatively well in the second quarter, up 1.25%, although
performance did trail the Dollex and IFC indexes by 4.21% and 7.56%,
respectively.
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PORTFOLIO STRATEGY
We started 1999 with largely the same defensive portfolio that served
shareholders so well during 1998. However, following the approval of a strong,
pro-market Government Budget and increasing signs that the Indian economy was
recovering, we began to pick up selected infrastructure (Larsen & Toubro) and
cement (Gujarat Ambuja Cements, Associated Cement, Madras Cement) shares. We
also increased our exposure to the Telecommunications sector, adding to
positions in both Mahanagar Telephone Nigam (MTNL) and Videsh Sanchar Nigam
(VSNL).
To make room for these raised infrastructure and Telecommunications weightings,
we trimmed back selected holdings in the Pharmaceutical and Software sectors.
However, because of the continued strong run in these latter two sectors
(especially in the first quarter), they continue to represent a dominant
position in the portfolio. Moreover, looking forward, we don't currently see
this dominant weighting changing significantly. The technology sectors and
Pharmaceuticals are sectors in India that we believe can maintain sustained
growth rates in the range of approximately 20% to 30% per year. And though we
have turned more positive on India's cyclical recovery story, we continue to
monitor these industries very closely for further changes that may lead to new
investment opportunities.
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THE INDIA FUND, INC.
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KEY SECTOR HOLDINGS
% of Total Holdings
Sector June 30, 1999 Top Holdings in Sector
- -------------------------------- -------------------- ------------------------
Computer Software & Programming 17.8% Infosys Technologies
Pharmaceuticals 14.2% Ranbaxy Laboratories
Consumer Non-Durables 13.1% Hindustan Lever
Computer Training 12.2% NIIT
Vehicles & Vehicle Components 11.2% Punjab Tractors
Telecommunications 5.0% Mahanagar Tel. Nigam
Textiles (synthetic & cotton) 4.3% Reliance Industries
Engineering 3.3% Larsen & Toubro
COMPUTER SOFTWARE & PROGRAMMING; COMPUTER TRAINING
Computer Software & Programming continued to be the Fund's highest-weighted
sector in the first half of 1999, actually increasing as a percentage of the
Fund's assets since the end of 1998. Another technology sector, Computer
Training, was also near the top of the list. Both of these sectors continued to
outperform during the first six months of the year, with leaders like Infosys
Technologies and NIIT outperforming major indices by more than 100%. Starting in
the second quarter, however, these two groups began to underperform, largely due
to worries about a slowdown in Y2K business and the deferral of major projects
to calendar year 2000. Although we have trimmed back significantly in some
positions, we expect any growth slowdown to be temporary. We remain very bullish
on both sectors.
Infosys Technologies continues to be the top holding in the Computer Software &
Programming sector, as well as in the entire Fund. Both revenue and net profit
more than doubled for the company's fiscal year ended March 1999. Looking ahead,
we believe that initiatives taken by Infosys to move up the value chain should
help it maintain a robust growth rate as well as high operating margins.
NIIT has earned an ROE of over 40% since fiscal year 1994, which should be
sustainable for the foreseeable future. We expect that earnings per share (EPS)
are on track to grow in the range of approximately 45% to 55% for its fiscal
year ending September 1999.
PHARMACEUTICALS
The Fund remains significantly overweighted in Pharmaceuticals. This sector
underperformed during the second quarter, due in part to a reaction to the
slightly weaker-than-expected first-quarter growth and in part because investors
took profits in order to rotate into cyclicals.
However, many of these stocks now boast much more attractive valuations, while
the long-term secular growth trend remains very much intact. In terms of the
regulatory environment, the
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THE INDIA FUND, INC.
Government has appointed a committee to review the current price control policy,
with a report expected to be submitted before year-end.
Meanwhile, multinational corporations (MNCs) as well as Indian companies are
keenly looking to gain market share via acquisitions of brands and/or companies.
Our top pharmaceutical holding is Ranbaxy, which we believe has significant
earnings upside, as it reports that it may be on the verge of licensing its
unique drug delivery system to a major MNC. While Ranbaxy's recent domestic
growth has been lackluster -- in line with the overall domestic market -- the
company's U.S. operations have picked up quite nicely. Indeed, we expect it will
be the company's international operations that will be the stock's medium-term
growth driver.
CONSUMER NON-DURABLES
The Fund continues to be positive on Consumer Non-Durables, but remains
underweight versus the IFC index. Hindustan Lever (HLL) and ITC continue to
dominate our holdings in the sector, with most positions basically held steady
during the first half of the year.
HLL posted solid 30% EPS growth for the fiscal year ended December 31, 1998,
leveraging off its superior marketing and distribution capabilities, coupled
with rapid product launches.
ITC, India's leading cigarette company, which has an outstanding retail network,
announced 12% sales growth and 19% profit growth for the fiscal year ended March
31, 1999.
VEHICLES & VEHICLE COMPONENTS
Vehicles remains 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 remains heavily overweighted in the agricultural
segment, with Punjab Tractors (PTL) being the largest holding. PTL continues on
a roll, with its recent fiscal year ended March 31, 1999 results very much in
line with expectations: it reported 30% earnings growth on the back of 22%
revenue growth. We expect PTL's current fiscal year to be another period of
excellent growth. The company raised capacity by 15% in June, as well as
increased the number of dealers.
We have gradually raised our exposure to two-wheeler sales via Hero Honda and
Mahindra & Mahindra, as sales appear to be recovering gradually. Although we
remain underweighted in other commercial vehicles, we continue to monitor the
sector closely for signs of sustainable recovery.
TELECOMMUNICATIONs
In the Telecommunications sector, Mahanagar Telephone Nigam (MTNL) continues to
be the Fund's largest holding. For the recent fiscal year ended March 31, 1999,
the company reported 15% revenue growth and 11% net profit growth, in line with
estimates. The allure of the company continues to be an extremely attractive
valuation.
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THE INDIA FUND, INC.
Videsh Sanchar Nigam (VSNL), the international telephone monopoly (until 2004),
is also a significant holding, producing results for the fiscal year ended March
31,1999 that topped analysts' expectations, with both revenue and earnings
surging 39%.
India's new Telecommunications Policy has not yet been finalized, but it seems
increasingly probable that the existing scheme of licensing agreements will be
replaced by a revenue-sharing regime. Such a liberalizing of the competitive
landscape, of course, poses both threats and huge opportunities for MTNL; for
example, allowing it to start offering a cellular service. VSNL's prospects are
also linked with the exciting growth of the Internet.
TEXTILES
The Fund remains underweighted in the Synthetic Textiles/Petrochemicals sector,
being invested mainly in one stock, Reliance Industries (RIL). The stock's
valuation continues to be one of the most compelling arguments for holding it.
It is currently trading on a 7x-8x forward Price-to-Earnings multiple, with most
analysts forecasting high-teens to 20%+ earnings growth. Reliance is a likely
beneficiary of a steadily improving pricing environment for petrochemicals in
Asia.
ENGINEERING
Finally, the Fund's engineering exposure is also largely weighted in one
company, Larsen & Toubro. The company stands to benefit nicely from the budding
recovery in India's industrial activity. The company has also been undergoing an
internal restructuring, including the spin-off of its money-losing operations,
which is expected to put it on a solid footing for future earnings growth.
Although we added to our position in the second quarter as prospects brightened,
most of the stock's rise to the current 3%+ of the Fund's portfolio has been
through price appreciation. The stock has surged 75% since the beginning of the
year.
- --------------------------------------------------------------------------------
OUTLOOK
Looking ahead, India faces two key political issues over the next six months:
(1) new elections, and (2) the ongoing Kashmir border dispute. The September
election, with its unpredictable outcome, could create a lot of volatility for
the market. With that said, the BJP party, although fallen, remains reasonably
popular with the Indian public. A dramatic peace-making trip to Pakistan, the
solid pro-growth Budget, and, most recently, the adept handling of the Kashmir
border crisis all point to a Government that is actually doing a good job.
Clearly, the steadily improving economy is not hurting the party, either. If
positive public sentiment continues, the biggest question may be not whether BJP
wins, but rather whether it wins a majority or is forced to cobble together
another fragile coalition Government. Depending on what happens in Kashmir,
Indian Muslims could be a big swing factor in the election.
As we highlighted earlier, a key development in the first half of 1999,
especially in the second
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THE INDIA FUND, INC.
quarter, was growing signs of a cyclical economic recovery, as evidenced by a
rising industrial production index, and increased sales of cement, steel, and
motor vehicles.
Less apparent, but just as important, Indian companies are continuing and even
accelerating restructuring efforts, including cutting costs, streamlining group
structures via spin-offs and consolidations, and engaging in value-enhancing
merger and acquisition (M&A) activity. Thus, from both macro and micro
perspectives, we believe that the outlook for corporate India is growing
increasingly brighter.
Over the past six months, India has clearly been a beneficiary of the global
economic recovery and the return of liquidity flows to Asia. Hence, if for any
reason these trends were to "correct," we believe that equities would be
negatively impacted.
With that said, we remain positive on the Indian market over the longer term.
Based on current indicators, we believe that the growth of the technology
sectors, which has produced stunning gains for investors over the past 18
months, will continue. We also expect that Infosys's well-received ADR debut
will be followed by a number of other Indian software companies, eager to raise
their investor profile as they develop into world-class companies. Overall, the
consensus earnings-per-share growth forecast for the market is approximately 25%
on a 12-month-forward basis, putting valuations on a price-to-earnings ratio of
approximately 12x. This potential continues to look attractive relative to other
global markets.
Punita Kumar-Sinha
Senior Portfolio Manager
July 26, 1999
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THE INDIA FUND, INC.
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Share Repurchases
During July 1998, the Board of Directors of the Fund 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 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.
For the six months ended June 30, 1999, the Fund repurchased a total of 329,800
shares of its common stock. (For details regarding shares repurchased by the
Fund see Note E to the Financial Statements.)
In accordance with the Board's directions, the Fund may from time to time
repurchase additional shares of its common stock in the open market.
Year 2000 Processing Issues
Many computer programs employed throughout the world use two digits rather than
four to identify the year. These programs, if not adapted, may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. The Year 2000 issue affects virtually all companies
and organizations.
Both the Investment Manager and the Country Adviser have advised the Fund that
they are implementing steps intended to ensure that their computer systems are
capable of Year 2000 processing. In addition, the Fund is inquiring with third
parties to assess the adequacy of their Year 2000 compliance efforts. The Fund
intends to develop contingency plans intended to ensure that third-party
non-compliance will not materially affect the Fund's operations. The Fund does
not currently anticipate that the Year 2000 issue will have an adverse effect on
the Investment Manager's or the Country Adviser's ability to continue to provide
the services currently provided to the Fund.
Companies in which the Fund invests could be adversely affected by the Year 2000
issue, but the Fund cannot predict the consequential effect on its investment
return. To the extent the impact on a portfolio holding is negative, the Fund's
investment return could be adversely affected.
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THE INDIA FUND, INC.
Schedule of Investments June 30, 1999
(Unaudited)
INDIA (100% of holdings)
COMMON STOCKS (99.8% of holdings)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Cement 2.13%
1,173,215 Associated Cement Cos. Ltd.................. $ 3,484,120 $ 4,629,545
368,933 Gujarat Ambuja Cements...................... 3,108,934 2,722,753
70,000 Gujarat Ambuja Cements GDR.................. 616,000 579,250
2,301 Jaiprakash Industries+...................... 5,663 600
6,395 Madras Cement Ltd........................... 678,504 671,652
47,860 Panyam Cements+............................. 481,285 236,485
443,630 Shree Cement+............................... 947,396 338,145
------------ ------------
9,321,902 9,178,430
------------ ------------
Chemicals 1.76%
48 Atul Products............................... 93 22
27,500 Bayer India................................. 1,006,193 1,078,183
752,600 BOC Ltd.+................................... 965,064 789,744
285,000 Hind Lever Chemicals........................ 3,104,549 3,089,253
515,500 ICI (India)................................. 2,743,294 2,373,012
50 Indian Organic Chemicals+................... 140 13
100 JF Laboratories+............................ 174 4
100,000 United Phorsphorus.......................... 380,857 262,915
------------ ------------
8,200,364 7,593,146
------------ ------------
Computer Hardware 0.34%
150,000 Digital Equipment (India)................... 834,167 1,478,898
------------ ------------
834,167 1,478,898
------------ ------------
Computer Software & Programming 17.80%
558,700 DSQ Software+............................... 1,180,241 3,504,760
553,523 Infosys Technologies........................ 2,217,018 46,293,084
195,400 Leading Edge Systems........................ 1,868,593 1,320,392
69,300 Mastek Limited.............................. 362,078 955,752
52,800 Pentafour Software.......................... 513,460 1,388,192
205,500 Rolta India Limited......................... 601,308 554,509
774,780 Satyam Computers............................ 1,832,851 22,656,418
500 Silverline Industries....................... 712 2,267
------------ ------------
8,576,261 76,675,374
------------ ------------
</TABLE>
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THE INDIA FUND, INC.
Schedule of Investments (continued) June 30, 1999
(Unaudited)
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Computer Training 12.22%
1,063,300 NIIT........................................ $ 4,305,198 $ 49,854,449
279,000 Software Solutions Integrated............... 1,651,638 2,785,817
------------ ------------
5,956,836 52,640,266
------------ ------------
Consumer Miscellaneous 1.83%
598,588 Bata India.................................. 3,150,073 2,967,401
135 Surya Roshni................................ 356 49
196,800 Timex Watches+.............................. 140,800 78,520
144,100 Zee Telefilms+.............................. 2,329,805 4,835,459
------------ ------------
5,621,034 7,881,429
------------ ------------
Consumer Non-Durables 13.15%
126,700 Godfrey Philips India....................... 2,320,324 1,341,220
682,711 Hindustan Lever............................. 21,046,608 37,473,528
706,281 ITC......................................... 11,319,607 17,844,346
------------ ------------
34,686,539 56,659,094
------------ ------------
Diversified Industries 0.00%
124,115 DCM Shriram Consolidated Warrants,
expiration date 11/08/99*................ 0 0
454 Grasim Industries........................... 10,229 2,320
175 HMG Industries+............................. 359 4
1,744 Indian Rayon+............................... 11,545 5,671
120 Kesoram Industries.......................... 568 79
------------ ------------
22,701 8,074
------------ ------------
Electricity 0.30%
369,300 Bombay Suburban Electric Supply Co.......... 1,400,098 1,270,320
54 CESC+....................................... 342 38
150 Tata Power.................................. 796 266
------------ ------------
1,401,236 1,270,624
------------ ------------
Electronics & Electrical 3.04%
352,983 Asea Brown Boveri........................... 5,753,833 2,881,826
350,000 Asian Electronics+.......................... 2,200,052 606,204
1,403,505 Bharat Heavy Electricals.................... 9,436,670 7,962,690
1,096,600 Crompton Greaves............................ 5,785,946 1,141,870
</TABLE>
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THE INDIA FUND, INC.
Schedule of Investments (continued) June 30, 1999
(Unaudited)
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Electronics & Electrical (continued)
704,000 KEC International........................... $ 1,681,175 $ 500,074
49 Siemens India+.............................. 1,083 260
------------ ------------
24,858,759 13,092,924
------------ ------------
Engineering 3.26%
2 Lakshmi Machine Works....................... 393 61
1,476,331 Larsen & Toubro............................. 9,104,338 9,754,816
277,300 Larsen & Toubro GDR......................... 2,960,851 4,270,420
------------ ------------
12,065,582 14,025,297
------------ ------------
Extractive Industries 2.32%
332,950 Hindalco Industries......................... 6,295,643 4,826,086
39,400 Hindalco Industries GDR..................... 415,950 771,255
9,020,100 Hindustan Zinc.............................. 3,165,243 2,184,295
200 Indian Aluminum............................. 1,143 283
2,223,250 National Aluminum Company .................. 2,800,274 2,217,610
606 Sesa Goa.................................... 4,614 1,684
------------ ------------
12,682,867 10,001,213
------------ ------------
Fertilizers 0.58%
135,400 Agrevo India................................ 2,073,732 2,498,155
7,700 Chambal Fertilizers & Chemicals+............ 5,977 2,708
1,950 Nagarjuna Fertilizers & Chemicals........... 2,130 877
400 Southern Petrochemicals Industrial
Corporation.............................. 492 252
------------ ------------
2,082,331 2,501,992
------------ ------------
Finance 0.96%
795,400 Bank of Baroda+............................. 2,196,561 1,197,869
912,500 Corporation Bank............................ 2,176,678 1,753,027
50 ICICI++..................................... 105 85
1,426,729 Oriental Bank of Commerce................... 2,835,554 1,166,456
------------ ------------
7,208,898 4,117,437
------------ ------------
Food 1.59%
72,700 International Bestfoods+.................... 738,065 526,471
260,388 Nestle India................................ 2,795,674 3,233,832
250,000 Rahul Dairy & Allied Products+*............. 79,643 7,207
100 Rank Industries Ltd.+....................... 253 5
</TABLE>
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THE INDIA FUND, INC.
Schedule of Investments (continued) June 30, 1999
(Unaudited)
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Food (continued)
180,693 Smithkline Beecham Consumer Healthcare...... $ 1,827,616 $ 2,439,105
72,871 Tata Tea.................................... 799,038 638,630
------------ ------------
6,240,289 6,845,250
------------ ------------
Hotel & Leisure 0.05%
121 Indian Hotels............................... 1975 971
30,000 Indian Hotels GDR........................... 225,625 228,750
------------ ------------
227,600 229,721
------------ ------------
Household Appliances 0.21%
600,000 IFB Industries+............................. 3,271,110 82,334
200 Kalyani Sharp+.............................. 274 70
500 Phil Corporation............................ 1,366 161
20 Phillips India.............................. 19 69
1,700 Samtel Colour+.............................. 3,366 765
450 Videocon Appliances......................... 2,629 171
519 Videocon International...................... 951 748
377,323 Voltas...................................... 833,094 834,531
------------ ------------
4,112,809 918,849
------------ ------------
Packaging 0.04%
660,320 Flex Industries+............................ 4,118,949 153,049
77,310 Flex Industries Warrants,
expiration date 11/30/99+*............... 0 5,706
500 Universal Prime Aluminum+*.................. 789 24
------------ ------------
4,119,738 158,779
------------ ------------
Petroleum Related 2.51%
1,541,900 Hindustan Petroleum Corporation............. 17,045,112 8,836,765
45,620 Indian Petrochemicals....................... 96,828 107,948
1,911,950 Madras Refineries........................... 4,093,279 1,887,257
------------ ------------
21,235,219 10,831,970
------------ ------------
Pharmaceuticals 14.15%
142,050 Cipla....................................... 2,830,999 4,689,681
184,000 Dabur India................................. 1,409,963 2,495,203
661,800 Dr. Reddy's Laboratories.................... 5,502,772 12,715,535
574,000 E. Merck (India)............................ 3,768,588 7,934,200
</TABLE>
14
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (continued) June 30, 1999
(Unaudited)
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Pharmaceuticals (continued)
64,550 Glaxo India................................. $ 573,330 $ 1,083,773
183,300 Hoechst Marion.............................. 1,791,671 2,325,069
479,600 IPCA Laboratories........................... 1,719,788 1,411,922
200 Orchid Chemicals & Pharmaceuticals.......... 677 580
183,100 Parke Davis (India)......................... 1,569,669 1,329,333
121,132 Pfizer India................................ 1,636,512 2,752,289
980,397 Ranbaxy Laboratories........................ 9,043,403 14,787,353
212,800 Rhone-Poulenc India......................... 2,958,132 5,636,059
161,100 Sun Pharmaceuticals......................... 1,083,452 1,699,055
175,000 Wyeth Lederle............................... 1,810,382 2,118,485
------------ ------------
35,699,338 60,978,537
------------ ------------
Pulp & Paper 0.00%
6,000 Andhra Pradesh Rayons....................... 5,820 2,214
------------ ------------
5,820 2,214
------------ ------------
Steel 1.05%
6,010 Essar Steel+................................ 23,144 1,913
1,393,926 Tata Iron & Steel........................... 7,317,502 4,500,683
------------ ------------
7,340,646 4,502,596
------------ ------------
Steel Products 0.00%
100 Choksi Tubes................................ 237 27
20 Super Forging+.............................. 36 1
------------ ------------
273 28
------------ ------------
Telecommunications 4.97%
3,101,000 Mahanagar Telephone Nigam................... 17,241,149 13,302,260
228,511 Videsh Sanchar Nigam........................ 4,030,816 4,816,860
257,500 Videsh Sanchar Nigam GDR.................... 4,391,010 3,276,688
------------ ------------
25,662,975 21,395,808
------------ ------------
Telecommunications Equipment 0.00%
300 Bhagyanagar Metals.......................... 724 159
------------ ------------
724 159
------------ ------------
Textiles - Cotton 0.14%
390,700 Arvind Mills................................ 1,382,087 331,140
</TABLE>
15
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (continued) June 30, 1999
(Unaudited)
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Textiles - Cotton (continued)
100 HP Cotton Textile Mills+* .................. $ 233 $ 12
200,000 Vardhaman Spinning & General Mills.......... 455,739 276,753
------------ ------------
1,838,059 607,905
------------ ------------
Textiles - Synthetic 4.25%
131,000 Bombay Dyeing GDR........................... 379,550 150,650
150 DCL Polysters+.............................. 296 20
100 Ester Industries+........................... 105 6
300 Haryana Petrochemicals+..................... 343 4
4,457,784 Reliance Industries......................... 17,924,159 18,166,293
5,800 SRF+........................................ 15,613 2,742
------------ ------------
18,320,066 18,319,715
------------ ------------
Transportation 0.00%
100 NEPC Micon+................................. 194 6
------------ ------------
194 6
------------ ------------
Vehicle Components 0.49%
25 Antifriction Bearings Corporation........... 101 7
125 FAG Precision Bearing....................... 334 116
100 Gleitlager (India)+*........................ 96 6
118,000 Swaraj Engines.............................. 1,298,970 2,103,644
------------ ------------
1,299,501 2,103,773
------------ ------------
Vehicles 10.69%
357,125 Bajaj Auto.................................. 5,107,074 4,455,826
214,915 Hero Honda 'B'.............................. 2,810,386 5,353,049
600 Hindustan Motors............................ 467 156
313,037 Mahindra & Mahindra......................... 2,744,217 1,825,809
985,700 Punjab Tractors............................. 6,892,757 30,121,137
62,935 Tata Engineering & Locomotive............... 721,065 297,983
350,650 TVS Suzuki.................................. 2,430,258 4,021,234
------------ ------------
20,706,224 46,075,194
------------ ------------
TOTAL COMMON STOCKS....................................... 280,328,952 430,094,702
------------ ------------
</TABLE>
16
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (continued) June 30, 1999
(Unaudited)
BONDS (0.17% OF Holdings)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Diversified Industries 0.07%
INR 4,220 DCM Shriram Consolidated NCD 13.00%,
11/6/01*................................. $ 134,585 $ 108,291
INR 4,096 DCM Shriram Consolidated NCD 13.00%,
11/6/02*................................. 130,627 105,106
INR 4,096 DCM Shriram Consolidated NCD 13.00%,
11/6/03*................................. 130,627 105,106
------------ ------------
395,839 318,503
------------ ------------
Extractive Industries 0.10%
INR 64,708 National Aluminum Co. NCD 14.50%,
3/25/03*................................. 852,563 141,773
INR 62,806 National Aluminum Co. NCD 14.50%,
3/25/04*................................. 827,487 137,605
INR 62,806 National Aluminum Co. NCD 14.50%,
3/25/05*................................. 827,487 137,605
------------ ------------
$ 2,507,537 $ 416,983
------------ ------------
TOTAL BONDS................................. 2,903,376 735,486
------------ ------------
TOTAL INDIA................................. 283,232,328 430,830,188
------------ ------------
TOTAL INVESTMENTS**..................100.00% $283,232,328 $430,830,188
============ ============
</TABLE>
See page 18 for Footnotes and Abbreviations.
17
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (concluded) June 30, 1999
(Unaudited)
Footnotes and Abbreviations
GDR - Global Depository Receipt
INR - Indian Rupee
NCD - Non Convertible Debenture
+ Non-income producing security.
++Passive Foreign Investment Company.
* At fair value as determined under the supervision of the
Board of Directors.
** Aggregate cost for Federal income tax purposes is
$283,549,769.
The aggregate gross unrealized appreciation (depreciation)
for all securities is as follows:
Excess of value over tax cost $201,298,129
Excess of tax cost over value (54,017,710)
------------
$147,280,419
============
See accompanying notes to financial statements.
18
<PAGE>
THE INDIA FUND, INC.
<TABLE>
<CAPTION>
Statement of Assets and Liabilities June 30, 1999
(Unaudited)
<S> <C>
ASSETS
Investments, at value (Cost $283,232,328) ................................ $ 430,830,188
Cash (including Indian Rupees of $4,912,646 with a cost of $5,128,524) .... 5,484,473
Receivables:
Dividends and reclaims of excess taxes withheld ....................... 3,141,914
Interest (net of withholding tax of $5,718) .......................... 33,333
Securities sold ....................................................... 2,662,082
Prepaid expenses .......................................................... 149,028
-------------
Total Assets ...................................................... 442,301,018
-------------
LIABILITIES
Payable for securities purchased .......................................... 3,238,323
Due to Investment Manager ................................................. 381,583
Due to Administrator ...................................................... 69,379
Accrued expenses .......................................................... 857,116
-------------
Total Liabilities ............................................. 4,546,401
-------------
Net Assets .................................................... $ 437,754,617
=============
NET ASSET VALUE PER SHARE $437,754,617 /33,635,633
shares issued and outstanding ................................. $ 13.01
=============
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value; 34,007,133 shares issued
(100,000,000 shares authorized) ....................................... $ 34,007
Paid-in capital ........................................................... 469,857,129
Cost of 371,500 shares held in treasury stock ............................. (2,950,641)
Accumulated net investment loss ........................................... (1,508,642)
Accumulated net realized loss on investments and foreign currency
related transactions .................................................. (175,007,085)
Net unrealized appreciation in value of investments, foreign currency
holdings and on translation of other assets and liabilities denominated
in foreign currency ................................................... 147,329,849
-------------
Net Assets .................................................... $ 437,754,617
=============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
THE INDIA FUND, INC.
Statement of Operations June 30, 1999
(Unaudited)
Investment Income
Dividends ....................................................... $ 1,997,830
Interest (net of Indian taxes withheld of $7,159) ............... 63,272
-------------
Total investment income ....................... 2,061,102
-------------
Expenses
Management fees ................................... $ 2,128,333
Custodian fees .................................... 701,428
Administration fees ............................... 401,118
Legal fees ........................................ 87,644
Insurance ......................................... 54,622
Audit fees ........................................ 49,920
Directors' fees ................................... 21,122
Printing .......................................... 18,905
NYSE fees ......................................... 16,037
Transfer agent fees ............................... 11,539
Amortization of organizational costs .............. 9,542
Miscellaneous expenses ............................ 9,494
-------------
Total expenses ................................ 3,509,704
-------------
Net investment loss ........................... (1,448,602)
-------------
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 ....................................... 7,162,991
Foreign currency related transactions ....................... (75,896)
-------------
7,087,095
Net change in unrealized appreciation in value of investments,
foreign currency holdings and translation of other assets
and liabilities denominated in foreign currency ............ 134,294,385
-------------
Net realized and unrealized gain on investments, foreign
currency holdings and translation of other assets and
liabilities denominated in foreign currency ................ 141,381,480
-------------
Net increase in net assets resulting from operations ............ $ 139,932,878
=============
See accompanying notes to financial statements.
20
<PAGE>
THE INDIA FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six Months
Ended For the Year
June 30, 1999 Ended
(Unaudited) December 31, 1998
- ---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations
Net investment loss .................................................. $ (1,448,602) $ (968,843)
Net realized loss on investments and foreign currency
related transactions ............................................. 7,087,095 (14,964,557)
Net change in unrealized appreciation in value of investments,
foreign currency holdings and translation of other assets
and liabilities denominated in foreign currency .................. 134,294,385 40,891,321
------------ ------------
Net increase in net assets resulting from operations ................. 139,932,878 24,957,921
------------ ------------
Capital Share Transactions
Shares repurchased under Stock Repurchase Plan
(329,800 shares and 41,700 shares respectively) .................. (2,701,444) (249,197)
------------ ------------
Net decrease in net assets resulting from capital share transactions . (2,701,444) (249,197)
------------ ------------
Total increase in net assets ......................................... 137,231,434 24,708,724
NET ASSETS
Beginning of period .................................................. 300,523,183 275,814,459
------------ ------------
End of period ........................................................ $437,754,617 $300,523,183
============ ============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
THE INDIA FUND, INC.
Financial Highlights
For a Share Outstanding throughout Each Period
<TABLE>
<CAPTION>
For the Period
February 23, 1994
For the Six For the Year For the Year For the Year For the Year (Commencement
Months Ended Ended Ended Ended Ended of Operations)
June 30, 1999 December 31, December 31, December 31, December 31, Through
(Unaudited) 1998 1997 1996 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period.. $ 8.85 $ 8.11 $ 7.56 $ 8.94 $13.92 $13.98*
---------- --------- ---------- ---------- --------- ----------
Net investment income (loss).......... (0.04) (0.03) (0.03) 0.02 (0.05) (0.01)
Net realized and unrealized gains
(losses) on investments, foreign
currency holdings, and translation
of other assets and liabilities
denominated in foreign currency..... 4.20 0.77 0.58 (1.39) (4.93) 0.08
---------- --------- ---------- ---------- --------- ----------
Net increase (decrease) from
investment operations.............. 4.16 0.74 0.55 (1.37) (4.98) 0.07
---------- --------- ---------- ---------- --------- ----------
Less: Dividends and Distributions
Dividends from net investment
income........................... -- -- -- (0.01) -- --
Distributions from net realized gains -- -- -- -- -- (1.13)
---------- --------- ---------- ---------- --------- ----------
Total dividends and distributions..... -- -- -- (0.01) -- (1.13)
---------- --------- ---------- ---------- --------- ----------
Net asset value, end of period........ $13.01 $ 8.85 $ 8.11 $ 7.56 $ 8.94 $13.92
========== ========= ========== ========== ========= ==========
Per share market value, end of period. $ 9.9375 $ 6.3125 $ 7.375 $ 7.625 $ 8.875 $10.75
Total Investment Return Based
on Market Value**................... 57.43% (14.41)% (3.28)% (14.08)% (17.44)% (23.32)%
Ratios/Supplemental Data
Net assets, end of period (in 000s)... $437,755 $300,523 $275,814 $257,156 $303,940 $473,241
Ratios of expenses to average
net assets.......................... 1.81%*** 2.03% 1.98% 2.03%+ 2.03% 1.98%***
Ratios of net investment income
to average net assets............... (0.75)%*** (0.34)% (0.37)% 0.22%+ (0.38)% (0.06)%***
Portfolio turnover.................... 9.43% 28.85% 42.61% 33.57% 25.28% 20.93%
</TABLE>
See page 23 for footnotes.
22
<PAGE>
THE INDIA FUND, INC.
Financial Highlights (concluded)
For a Share Outstanding throughout Each Period
* Initial public offering price $15.00 per share less underwriting discount
of $0.98 per share and offering costs of $0.04 per share.
** 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.
*** Annualized.
+ 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.
See accompanying notes to financial statements.
23
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements June 30, 1999
(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.
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, as of June 30, 1999, which totaled
$748,441 (0.17% 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 reporting purposes. Interest income
24
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (continued) June 30, 1999
(Unaudited)
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 that will be
sufficient to relieve it from all or substantially all Federal income and excise
taxes.
At December 31, 1998, the Fund had a capital loss carryover of $181,806,196
which is available to offset future net realized 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, $56,935,932 will expire in 2005 and $34,828,858
will expire in 2006.
The Fund's foreign exchange losses incurred after October 31, 1998, but before
December 31, 1998, are deemed to arise on the first business day of the
following year. The Fund incurred and elected to defer such foreign exchange
losses of approximately $60,040.
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 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 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.
25
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (continued) June 30, 1999
(Unaudited)
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
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, 1998, the Fund reclassified $214,166 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 $1,567,859 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, 1998. Net investment loss and net
assets were not affected by the reclassifications.
Other. Cost 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.
26
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (continued) June 30, 1999
(Unaudited)
NOTE B: MANAGEMENT, INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
Effective May 3, 1999, CIBC Oppenheimer Corp. changed its name to CIBC World
Markets Corp. CIBC Oppenheimer is a division of CIBC World Markets Corp.
Advantage Advisers, Inc., a subsidiary of CIBC World Markets 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,
1999, fees earned by the Investment Manager amounted to $2,128,333, of which the
Investment Manager informed the Fund it paid $386,970 to ILFS.
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. At June 30, 1999, CIBC World Markets Corp. owned 7,133 shares
of the Fund's common stock.
CIBC World Markets Corp., an indirect wholly-owned subsidiary of Canadian
Imperial Bank of Commerce, serves as the Fund's Administrator (the
"Administrator"). The Administrator provides certain administrative services to
the Fund. 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, 1999, these fees amounted to $386,970. 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, 1999, fees and
expenses of the Mauritius Administrator amounted to $14,148.
The Fund pays each of its directors who is not a director, officer or employee
of the Investment Manager, the Country Adviser or the 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
27
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (continued) June 30, 1999
(Unaudited)
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
$35,437,663 and $40,189,099, respectively, for the six months ended June 30,
1999.
At June 30,1999, the Fund owned securities valued at approximately $11,347,825
which were in the process of being registered in the name of the Fund or being
dematerialized. Significant delays are common in registering the transfer of
securities in India, and such transfers can take a year or longer. Indian
securities regulations normally preclude the Fund from selling such securities
until the completion of the registration or the dematerialization process, as
applicable.
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 resident of
Mauritius under the double taxation treaty between Mauritius and India. A fund
which is a tax resident in Mauritius under the treaty, but has no branch or
permanent establishment in India, will not be subject to capital gains tax in
India on the sale of securities but was subject to a 15% withholding tax on
dividends declared, distributed or paid by an Indian company prior to June 1,
1997, which has been provided for by the Fund. Effective June 1, 1997, there is
no withholding tax on Indian dividends. The Fund is subject to and accrues
Indian withholding tax on interest earned on Indian securities at the rate of
20%.
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 year ended December 31, 1998, no
provision for Mauritius taxes has been made.
Moreover, to the extent that it is later determined 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%.
28
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (concluded) June 30, 1999
(Unaudited)
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: CAPITAL STOCK
During the six months ended June 30, 1999, the Fund purchased 329,800 shares of
capital stock on the open market at a total cost of $2,701,444. The weighted
average discount of these purchases, comparing the purchase price to the net
asset value at the time of purchase, was 26.47%. These shares were purchased
pursuant to the approval of a share repurchase program by the Fund's Board of
Directors at their meeting held on July 14, 1998, authorizing the Fund to
purchase up to 1,000,000 shares of its capital stock. During the year ended
December 31, 1998, the Fund purchased 41,700 shares of capital stock on the open
market at a total cost of $249,197. The weighted average discount of these
purchases, comparing the purchase price to the net asset value at the time of
purchase, was 27.93%. The shares purchased are held in treasury.
NOTE F: OTHER
At June 30, 1999, substantially all of the Fund's net assets were invested in
Indian securities. The Indian securities markets are among other things
substantially smaller, less developed, less liquid, subject to less 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.
29
<PAGE>
THE INDIA FUND, INC.
Results of the Annual Shareholders Meeting
The Fund held its annual shareholders meeting on April 23, 1999. 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
PricewaterhouseCoopers LLP as the independent accountants of the Fund for the
fiscal year ending December 31, 1999. 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
------- --------- --------------- -------------------
Leslie H. Gelb 22,005,536 1,608,670 23,614,206
Gabriel Seeyave 22,001,523 1,612,683 23,614,206
At June 30, 1999, in addition to Leslie H. Gelb and Gabriel Seeyave the other
directors of the Fund were as follows:
Charles F. Barber
Sir Rene Maingard
Alan H. Rappaport
Jeswald W. Salacuse
II. Ratification of PricewaterhouseCoopers LLP as the Independent Accountants of
the Fund
Votes For Votes Against Votes Abstained Total Voting Shares
--------- ------------- --------------- -------------------
22,642,961 929,714 41,531 23,614,206
30
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<PAGE>
The India Fund, Inc.
Investment Manager:
Advantage Advisers, Inc., a wholly
owned subsidiary of CIBC World
Markets Corp.
Administrator:
CIBC World Markets Corp.
Sub-Administrator:
PFPC, Inc.
Transfer Agent:
The Bank of New York
Custodian:
The Bank of New York
