Advantage Advisers, Inc.
The India Fund, Inc.
Annual Report
December 31, 1999
The India Fund, Inc.
<PAGE>
The India Fund, Inc.
February 15, 2000
Dear Fund Shareholder,
We are pleased to present you with the audited financial statements of The India
Fund, Inc. (the "Fund") for the fiscal year ended December 31, 1999. The Fund's
common stock closed on the New York Stock Exchange at $16.75 per share on
December 31, 1999, which represents a 28% discount to the $23.21 per share net
asset value ("NAV") as of that date.
The Fund's NAV rose 162.3% during the 12 months ended December 31, 1999. That
was approximately twice the rate of increase of both the Dollex Index of India's
200 leading stocks, which rose 81.8% during the year, and the IFC Index, which
increased 83.9% during the year. The Investment Manager's continued strategy of
overweighting the rapidly-growing information technology (IT)-related sectors --
Computer Software & Programming and Computer Training -- contributed to the
Fund's outperformance. At December 31, 1999, these IT-related sectors
represented in the aggregate 42.8% of the Fund's portfolio, which may make the
Fund more susceptible to adverse economic or regulatory occurrences affecting
these sectors.
However, while continuing to overweight the IT-related sectors, the Investment
Manager during the year trimmed positions in selected outperformers in those
sectors, as well as in Pharmaceuticals and Consumer Non-Durables, as India's
economy showed increasing signs of a broad-based recovery.
In addition, during the year, the Fund increased its weighting in the
Telecommunications and Telecommunications Equipment sectors. This move reflects
a response to the Indian Government's deregulation and reform efforts, which are
expected to spur increased capital expenditure, making the sectors more
fundamentally attractive to investors.
The Fund's Investment Manager believes that the Indian market is today
benefiting from the convergence of a number of positive fundamental trends,
including: a strong demand for India's highly competitive IT-related industry
sectors, the cyclical economic recovery, a stable inflation/interest rate
outlook, a return of political stability, and favorable liquidity conditions in
the Indian equity market. However, some of the key risks to this positive
outlook include: the potential loss of momentum for political and economic
reform, the
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THE INDIA FUND, INC.
continuing tense relationship with Pakistan, and an increasing vulnerability of
the IT-related stocks to a sharp downturn in the Nasdaq market.
Presently, the Investment Manager believes that the overall risk/reward profile
favors a positive view of the Indian market, and plans to continue to focus on
strong companies which it believes have solid management, attractive growth
prospects and reasonable valuations.
On behalf of the Board of Directors, I thank you for your participation in the
Fund. If you have any questions for us, do not hesitate to call our toll-free
number at (800) 421-4777.
Sincerely,
/s/ Bryan McKingney
Bryan McKigney
President and Secretary
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THE INDIA FUND, INC.
Report of the Investment Manager
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
OVERVIEW OF INDIA'S STOCK MARKET
For a market that has experienced many exogenous shocks and extreme volatility,
the investment environment proved remarkably friendly for Indian equities during
1999.
The Dollex Index of India's 200 leading stocks rose 81.8% during the 12 months
ended December 31, 1999, while the IFC Index, the key benchmark against which
the Fund's performance is measured, increased 83.9%.
The Indian stock market reached its low point for the year during the second
quarter, reflecting: (1) reaction to the Indian government's loss of a
no-confidence vote in April (requiring new elections) and (2) renewed fighting
in May between India and Pakistan at the Kashmir border. In hindsight, the
second quarter market pullback turned out to be an excellent buying opportunity
for investors. From its second quarter low of 125 at the end of April 1999, the
Dollex Index went on to surge upward by 79% to 224 by year's end.
The Indian market performed well against most of the markets in the region.
India's dollar-denominated, full-year 1999 performance ranked fifth among the 15
Far East markets using the Morgan Stanley Capital International (MSCI) country
indices for comparison. Only the performances of South Korea, Singapore,
Malaysia and Indonesia ranked ahead of India. Looking ahead, we believe that
India will continue to be a strong performer in the region.
We believe that India is today benefiting from a convergence during 1999 of
several positive fundamental trends which we believe should continue to
strengthen over the next 12 months. These include: (1) India's competitive
information technology (IT)-related sectors, which are experiencing strong
demand due to the continuing global technology boom; (2) a cyclical Indian
economic
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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.
recovery; (3) stable inflation/interest rate outlook; (4) a return of political
stability in the country; and (5) favorable liquidity conditions in the equity
market.
However, there are a number of key risks to the positive Indian market outlook,
some of which include: (1) loss of momentum for political and economic reform;
(2) the continuing tense relationship with Pakistan; and (3) an increasing
vulnerability of Indian IT-related stocks to a sharp downturn in the Nasdaq
market. Nevertheless, in the final analysis, we believe the risk/reward profile
continues to favor a bullish stance on the Indian market.
- --------------------------------------------------------------------------------
POLITICS
1999 was another turbulent year in Indian politics. The year got off to a
promising start, with Prime Minister Vajpayee's dramatic peace-seeking journey
to Pakistan, followed by an inspiring, investor-friendly Government budget.
However, a sharp reversal of this positive momentum occurred during the second
quarter. First, the Government's dismissal of its naval chief -- which appeared
at the time to be a minor issue -- angered one of the smaller coalition partners
sufficiently that it withdrew its political support, sparking a no-confidence
vote in the Indian legislature. The Government -- with the Bhartiya Janata Party
(BJP) in control -- ultimately lost by one vote. In addition, on May 26th,
hostilities between India and Pakistan at the Kashmir border flared up again.
After several skirmishes, however, the Kashmir militants withdrew and the
situation normalized.
The political uncertainty prevailing at mid-year 1999 was not particularly
encouraging for investors. In fact, little in the way of substantive structural
reform was tackled during the second and third quarters of 1999. However, by the
time the September elections arrived, the BJP had built up a far more stable
support base. The BJP not only won the elections, but did it with a far more
stable coalition.
The hope is that the recent elections have paved the way for a new era of
political stability in India, which, in turn, would give the Government the
necessary muscle to move ahead with a tough reform agenda. In fact, some
movement in this direction has already taken place. Key achievements in just the
past few months include: (1) the removal of an unsustainable Government subsidy
on diesel fuel oil and the successful handling of a truckers' strike; (2) the
quick start to the divestment of Government-owned properties with the US$250
million issue of shares of GAIL, a state-owned oil and gas company; and (3) the
passage of an important bill to open up the insurance industry to private and
foreign investment.
There are many more items on the Government's reform agenda, including: (1)
telecommunications sector reforms; (2) financial sector reforms; (3) further
deregulation in various other sectors; (4) widening of the tax net; and (5)
further liberalization of the inward investment environment. If the Government
can accomplish even some of these reforms during the year, we believe that
should have a meaningful positive impact on the investment climate in 2000.
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THE INDIA FUND, INC.
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ECONOMY
The Indian economy began a cyclical recovery during the first half of fiscal
1999. We believe that this was evidenced by India's Index of Industrial
Production (IIP), which increased 6.9% between April-October 1999 (versus a 3.5%
increase in April-October 1998), powered largely by electricity (up 8.1%) and
manufacturing (up 7.5%). Moreover, momentum continued to pick up during the
third fiscal quarter, beginning October 1999.
There was also considerable buoyancy in most other economic indicators,
including commercial vehicle sales (up 28%) and cement consumption (up 18.3%),
for the period April 1999 to October 1999; and tax collections, which during
April 1999 to December 1999 were running 17% higher year-over-year versus the
comparable period a year earlier.
Given this robust activity, it is expected that real GDP growth for the
Government's fiscal year ending March 2000 will reach the lower end of the
Government's 6-7% growth forecast. Looking ahead, we believe it is reasonable to
expect that GDP growth should accelerate further in the fiscal year ending March
2001.
Despite the rising economic activity, the rate of inflation has fallen sharply
during the Government's current fiscal year (which ends March 2000), with the
result that India's Consumer Price Index (CPI) has been hovering near a 1-2%
annual rate for the quarter ended December 31, 1999. Also, the Wholesale Price
Index (WPI), which has fallen less drastically than the CPI, has been averaging
a 3-4% annual rate for the past six months.
Trends in bank credit continued to look encouraging, with credit growth for the
April-October 1999 period up 6.8% year-over-year versus the same period in 1998.
Liquidity trends were also favorable during the year. With inflation stable, the
Indian Central Bank cut the Cash Reserve Ratio (reserve requirement) in November
by 1%, which, together with other moves, injected approximately Rs 80 billion in
the financial system. The currency, the Indian Rupee (Rs), remained relatively
stable during calendar year 1999 depreciating by only 2% for the year (all of
that during the second quarter) to Rs 43.5 to the U.S. dollar (US$) from Rs 42.5
to the U.S. dollar at the end of 1998. The country's foreign exchange reserve
position strengthened during 1999. Foreign exchange reserves rose to nearly
US$35.0 billion at December 31, 1999, from US$29.7 billion at March 31, 1999.
There has also been increasingly good news on the trade front. For the period
April-September 1999, India's total exports rose 7.4% year-over-year versus
April-September 1998 from US$16.3 billion to US$17.5 billion, while imports were
up 5.6% to US$22.5 billion from US$21.3 billion.
These export figures do not include India's software exports, which are
classified as services or "invisibles" in India's Balance of Payments. For the
April-September 1999 period, it is estimated that software exports totaled
US$1.87 billion, having registered a compounded annual growth rate of over
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THE INDIA FUND, INC.
60% over the past five years, from US$175 million in the April-September 1994
period. Looking ahead, export growth is expected to continue to accelerate.
We believe that the major weakness in the Indian economy continues to be the
high Government budget deficit, which is starting to be matched by deteriorating
state (as opposed to federal Government) finances. It is now estimated that the
deficit will overshoot the March 2000 fiscal year target of 5.2% of GDP, coming
in closer to 6% of GDP. A major reason that the overall indebtedness of the
country is rising is that a substantial portion of the debt is owed by the
states to the federal Government. Hence, if the states reach the point where
they are unable to service this debt in a timely fashion, the federal
Government's financial condition would be further jeopardized.
The key hope is that the current more stable political environment will provide
the opportunity to tackle tough fiscal management measures, such as the
reduction of subsidies, downsizing the Government, and reducing the public debt.
The encouraging news is that all the political parties, even the weakened
opposition, appear now to be reform-oriented. The challenge will be to seize the
current opportunity to create as much change as possible.
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PERFORMANCE
The Fund's net asset value (NAV) rose 162.3% during the 12 months ended December
31, 1999, approximately twice the percentage gain recorded by the Dollex Index
of India's 200 leading stocks (up 81.8%) and the IFC Index (up 83.9%).
- --------------------------------------------------------------------------------
PORTFOLIO STRATEGY
During 1999, the Fund maintained its strategy of overweighting the Information
Technology (IT)-related sectors -- Computer Software & Programming and Computer
Training. Given the continued growth of the global IT market and India's
competitive software industry, that strategy continued to enhance the Fund's
performance.
However, during the year, as India's economy showed increasing signs of a
broad-based recovery, the Fund responded by trimming positions in selected
outperformers in the IT-related sectors as well as in Pharmaceuticals and
Consumer Non-Durables. Proceeds were used to add to positions in economically
sensitive, cyclical companies.
In addition, one notable strategic shift during 1999 was the Fund's increased
weighting in the Telecommunications and Telecommunications Equipment sectors.
The main catalyst for this shift was the Government's deregulation and reform
efforts, which are expected to spur increased capital expenditure, making these
sectors more fundamentally attractive to investors.
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THE INDIA FUND, INC.
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KEY SECTOR HOLDINGS
% of Total Holdings
Sector December 31, 1999 Top Holdings in Sector
- ------------------------ ----------------- -------------------------
Computer Software & Programming 32.7% Infosys Technologies,
Satyam Computers
Services
Pharmaceuticals 11.9% Dr. Reddy's Laboratories
Computer Training 10.1% NIIT
Telecommunications & 6.7% Videsh Sanchar Nigam
Telecommunications Equipment
Consumer Non-Durables 6.4% Hindustan Lever
Vehicles 6.0% Punjab Tractors
Media 5.2% Zee Telefilms
Engineering 3.7% Larsen & Toubro
COMPUTER SOFTWARE & PROGRAMMING; COMPUTER TRAINING
Computer Software & Programming remains the highest-weighted sector in the Fund,
while Computer Training also remains near the top of the list. Industry
fundamentals remain robust for Indian software companies as their huge cost
advantage over U.S.-based counterparts is expected to continue for the
foreseeable future. It is estimated that new engineers at Infosys Technologies
earn only US$7,500 per year (in addition to US$7,500 training costs) vs.
comparable U.S. starting salaries of US$40,000-US$60,000 per year.
The corporate outsourcing trend should remain intact, as more global
multinationals look to reduce their products' time to market. That said, as
technology stock valuations continue to climb more steeply, there is growing
concern about the potential for a "bubble" and subsequent sharp sell-off.
Although we expect to maintain the Fund's overweight position in the
technology-related sectors, we are likely to continue to trim large positions
occasionally when stocks either become, in our opinion, overvalued or the Fund
becomes too heavily concentrated in technology-related sectors.
Infosys Technologies, the Fund's top holding, reported a 96% rise in net income
for its third fiscal quarter ended December 31, 1999, to Rs 737.9 million from
Rs 377.4 million in the comparable year-earlier period. Revenues rose 66% to Rs
2.33 billion in the three months ended December 31, 1999, from Rs 1.4 billion in
the comparable year-earlier period. The company continues to add new customers,
while also rapidly moving up the value-added chain into new products, such as
e-commerce-related software.
Satyam Computers Services, benefiting from the same key trends as Infosys, also
reported a stellar third fiscal quarter (three months ended December 31, 1999),
with net profit rising 83% year-over-year to Rs 361.8 million, from Rs 198.1
million 12 months earlier.
NIIT reported that net income in its first fiscal quarter ended December 31,
1999 increased 116% to Rs 185.2 million from Rs 85.8 million in the year-earlier
period. An increasing part of NIIT's
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THE INDIA FUND, INC.
sales are coming from higher-margin business software services, with a dwindling
portion from its computer education business, which is positively impacting
margins.
PHARMACEUTICALS
Although the Fund trimmed its overweight position in Pharmaceuticals from 14.2%
of the portfolio at mid-year 1999, the Fund remained relatively overweighted in
the sector at 11.9% of the Fund's holdings at December 31, 1999. Our reasons for
reducing exposure largely hinged on perceived expensive valuations for
moderately declining (though still high) growth rates. At 11.9% of the
portfolio, we still remain optimistic on the pharmaceutical industry's
prospects. We believe that the prospective introduction of product patent laws
in 2005 has been a catalyst for the pharmaceutical companies, pushing them to
increasingly focus on new drug discoveries, and less on reverse engineering.
This new environment is also expected to drive increased M&A (merger and
acquisition) activity.
Dr. Reddy's Laboratories remains a key holding. The company currently has three
drugs in either Phase I or Phase II clinical trials. It continues to alter its
business mix in favor of formulations and exports to non-Russian markets.
Revenues for its third fiscal quarter ended December 31, 1999 showed strong 35%
growth to Rs 1,206.7 million versus Rs 896.5 million in the year-earlier period.
TELECOMMUNICATIONS/TELECOMMUNICATIONS EQUIPMENT
Including Telecommunications Equipment companies the Fund increased its
weighting in the overall Telecommunications sector to 6.7% at December 31, 1999
from 5% at June 30, 1999. The increase was influenced in part by the Indian
Government's progress in finally approving the National Telecom Policy (NTP),
which is expected to pave the way for key restructuring/reform measures of the
Department of Telecom (DoT). We expect it to lead to exciting new opportunities
for industry participants, as well as sharply increased spending on
telecommunications equipment.
Videsh Sanchar Nigam (VSNL), the international telephone monopoly, remains a
significant Fund holding. With roughly 90% of revenue coming from international
calls, traffic volumes should continue to be the company's main growth driver in
the near term. However, VSNL is also focusing on its market leading position as
an Internet service provider (ISP), where, as of December 1999, it had over
300,000 subscribers, much higher than its nearest competitor Satyam Infoway,
which had 100,000 subscribers at that time. In its most recent earnings
announcement, VSNL reported a 17.6% decline in net income for its second fiscal
quarter ended September 30, 1999, to Rs 3.46 billion from Rs 4.2 billion,
largely due to a March 1999 reduction in tariffs. However, call traffic is
expected to build in subsequent quarters.
CONSUMER NON-DURABLES
The Fund maintained an overweight position in Consumer Non-Durables, though one
stock, Hindustan Lever (HLL), accounts for the majority of the Fund's holdings
in this sector. HLL, a 51% subsidiary of Unilever Plc, is the leading consumer
products company in India, with dominance in home care, personal care, and food
& beverages. According to management, HLL's three
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THE INDIA FUND, INC.
key growth drivers are vision, technology, and understanding of the consumer.
These attributes, combined with efficient supply chain management, have led to
continued strong earnings growth. For the first nine months of 1999, revenues
rose a reported 7% to Rs 24,516 million versus Rs 22,912 million in the
comparable year-earlier period; net profit increased 25% to Rs 7,248 million in
the nine months ended September 30, 1999, from Rs 5,798 million in the first
nine months of 1998.
VEHICLES
Although still significant, the Fund's sector weighting in Vehicles has been cut
back considerably, from over 11% at June 30, 1999 to 6.0% at December 31, 1999.
We believe that there are now better opportunities elsewhere in India (i.e., in
telecommunications). With that said, we do retain significant exposure, in view
of the recent encouraging signs of India's cyclical upturn and the cyclically
sensitive nature of the sector.
Although we have trimmed back on the position, Punjab Tractors continues as the
Fund's top holding in the sector. We view Punjab Tractors as extremely well
managed. Its return on equity has exceeded 40% for its past three fiscal years.
MEDIA
The Fund's overweight position in the Media sector consists almost entirely of
one stock, Zee Telefilms, the only integrated participant in India's cable and
satellite market, with a presence in content creation, broadcasting, and
distribution. Electronic media is still in its early stages of evolution in
India, with enormous growth potential. We believe Zee Telefilms is in an
excellent competitive position, with its current highly popular Hindi channels,
and the ability to leverage its massive content library to launch new channels
in the future. Moreover, the company's wide range of businesses gives it
tremendous scope for cross promotion and other synergies. For the six months
ended September 30, 1999, the company reported net profit growth of 33.7% to Rs
370 million from Rs 277 million in the comparable period a year earlier.
ENGINEERING
The Fund's engineering industry exposure is largely weighted in one company,
Larsen & Toubro. The company is a key beneficiary of India's cyclical upturn in
the industrial sectors, rising infrastructure investment, and the improving
outlook for the cement sector. Company-specific factors, such as further
restructuring potential and better management add to its appeal. The
restructuring involves divesting non-core businesses -- switchgear, construction
equipment, and electrical equipment -- to focus more intensely on the core
businesses: engineering and construction, cement, and software. Larsen & Toubro
reported that net income for the three months ended September 30, 1999 fell 31%
to Rs 876 million from Rs 1,266 million in the three months ended September 30,
1998. However, this steep decline was largely due to a change in inventory
accounting policy, which added Rs 305 million in additional charges in the three
months ended September 30, 1999.
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THE INDIA FUND, INC.
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OUTLOOK
We believe that 2000 should be another exciting year for investors in Indian
equities. Several positive fundamental factors converged in 1999: (1) the boom
in India's IT-related sectors; (2) the Indian economy's cyclical recovery (3) a
stable inflation/interest rate environment; and (4) the Government's new-found
political stability. Taken together, we expect that these trends will add up to
create a continuing favorable investment environment.
In India, as deposit account interest rates have fallen, and confidence in
equities as an asset class has been restored through substantial gains in the
past 12 months, domestic savings are increasingly being invested in shares of
Indian companies and mutual funds. Foreign investors are also realizing that
with the new paperless trading system, the growing IT sectors, and the sharply
rising overall market capitalization, India is one of the largest, most liquid
and most promising markets in Asia. Moreover, at a collective price-to-earnings
ratio of 17-19 times -- using data published by Institutional Brokers Estimate
System (I/B/E/S) -- and with 18-20% predicted earnings growth in 2000, India
also measures up as having one of the more attractive growth/valuation profiles
in the Asian region.
There are, however, some significant risks to the positive outlook: (1) a
possible breakup of the coalition Government; (2) a slowdown in the momentum for
reform; (3) India's tense and volatile relationship with Pakistan may erupt in
violence once more; and (4) the increased vulnerability of Indian IT-related
stocks to a Nasdaq "correction" or even prolonged bear market.
Although there is clearly a chance that one or more of these risks may
materialize, we believe that the overall risk/reward profile remains favorable.
We will continue to actively manage risk in the Fund's portfolio as best we can
by focusing on strong companies which we consider to have solid management,
attractive growth prospects, and reasonable valuations.
Punita Kumar-Sinha
Portfolio Manager
January 15, 2000
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THE INDIA FUND, INC.
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Share Repurchase Program
The Board of Directors of the Fund previously 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. During the year ended
December 31, 1999, the Fund repurchased a total of 830,700 shares of its common
stock. Supplementally, during December 1999, the Board of Directors authorized
the Fund to repurchase up to an additional 1,000,000 shares of the Fund's common
stock (beyond the initial 1,000,000 shares previously authorized for
repurchase). (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.
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THE INDIA FUND, INC.
Schedule of Investments December 31, 1999
INDIA (100% of holdings)
COMMON STOCKS (99.96% of holdings)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cement 2.32%
1,017,127 Associated Cement Companies Ltd ............ $ 2,948,751 $ 5,804,639
985,266 Gujarat Ambuja Cements Ltd ................. 4,340,433 7,383,832
90,000 Gujarat Ambuja Cements Ltd GDR ............. 396,000 686,250
812,700 India Cements Ltd .......................... 1,444,165 1,457,255
2,301 Jaiprakash Industries Ltd+ ................. 5,663 4,047
8,895 Madras Cement Ltd .......................... 1,089,442 1,426,625
47,860 Panyam Cements and Mineral Industries Ltd+ . 481,285 310,265
443,630 Shree Cement Ltd+ ......................... 947,396 632,300
------------ ------------
11,653,135 17,705,213
------------ ------------
Chemicals 1.15%
48 Atul Products Ltd .......................... 93 26
27,500 Bayer (India) Ltd .......................... 1,006,193 925,960
846,600 BOC Ltd+ ................................... 1,072,264 1,226,110
285,000 Hind Lever Chemicals Ltd ................... 3,089,431 3,247,690
515,500 ICI (India) Ltd ............................ 2,743,295 2,657,491
50 Indian Organic Chemicals Ltd+ .............. 140 13
100 JF Laboratories Ltd+ ....................... 174 25
225,800 United Phosphorous Ltd ..................... 835,908 706,209
------------ ------------
8,747,498 8,763,524
------------ ------------
Computer Hardware 0.34%
101,400 Digital Equipment (India) Ltd .............. 590,032 2,610,759
------------ ------------
590,032 2,610,759
------------ ------------
Computer Software & Programming 32.70%
558,700 DSQ Software Ltd .......................... 1,180,241 10,698,784
456,644 Infosys Technologies Ltd .................. 1,845,756 152,385,252
195,400 Leading Edge Systems Ltd .................. 1,868,593 8,308,318
800 Mastek Ltd ................................ 2,012 84,702
91,100 Pentafour Software & Exports Ltd .......... 484,389 2,797,922
205,500 Rolta India Ltd ........................... 599,760 1,927,448
1,453,360 Satyam Computers Services Ltd ............. 1,731,262 73,469,854
500 Silverline Technologies Ltd ............... 712 9,311
------------ ------------
7,712,725 249,681,591
------------ ------------
</TABLE>
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THE INDIA FUND, INC.
Schedule of Investments (continued) December 31, 1999
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer Training 10.13%
838,800 NIIT Ltd .................................. $ 3,475,202 $ 63,932,950
263,500 Software Solutions Integrated Ltd ......... 1,565,002 13,371,262
------------ ------------
5,040,204 77,304,212
------------ ------------
Consumer Miscellaneous 5.52%
660,088 Bata India Ltd ........................... 3,439,774 2,094,072
135 Surya Roshni Ltd ......................... 356 90
196,800 Timex Watches Ltd+ ....................... 140,800 101,341
1,591,000 Zee Telefilms Ltd ........................ 3,104,337 39,968,846
------------ ------------
6,685,267 42,164,349
------------ ------------
Consumer Non-Durables 6.41%
143,600 Godfrey Philips India Ltd ................ 2,701,945 1,865,150
694,611 Hindustan Lever Ltd ...................... 21,733,277 35,928,155
729,781 ITC Ltd .................................. 11,900,932 11,156,422
------------ ------------
36,336,154 48,949,727
------------ ------------
Diversified Industries 0.53%
428,502 Grasim Industries Ltd .................... 3,816,903 4,019,053
175 HMG Industries Ltd+ ...................... 359 17
1,744 Indian Rayon and Industries Ltd .......... 6,451 4,637
------------ ------------
3,823,713 4,023,707
------------ ------------
Electricity 0.45%
777,300 BSES Ltd ................................. 3,350,943 3,412,972
54 CESC Ltd+ ................................ 342 42
150 Tata Power Company Ltd ................... 797 250
------------ ------------
3,352,082 3,413,264
------------ ------------
Electronics & Electrical Equipment 1.63%
352,983 Asea Brown Boveri Ltd .................... 5,753,833 2,028,638
352,983 Asea Brown Boveri Manangement Ltd* ....... 0 0
350,000 Asian Electronics Ltd .................... 2,200,052 538,678
1,588,505 Bharat Heavy Electricals Ltd ............. 10,641,355 7,668,645
1,096,600 Crompton Greaves Ltd ..................... 5,785,173 1,260,460
</TABLE>
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THE INDIA FUND, INC.
Schedule of Investments (continued) December 31, 1999
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Electronics & Electrical Equipment (continued)
704,000 KEC International Ltd .................... $ 1,681,175 $ 945,949
49 Siemens India Ltd+ ....................... 1,083 575
------------ ------------
26,062,671 12,442,945
------------ ------------
Engineering 3.66%
2 Lakshmi Machine Works Ltd ................ 394 70
1,656,631 Larsen & Toubro Ltd ...................... 10,665,957 21,170,602
202,800 Larsen & Toubro Ltd GDR .................. 2,067,189 6,793,800
------------ ------------
12,733,540 27,964,472
------------ ------------
Extractive Industries 1.93%
405,655 Hindalco Industries Ltd .................. 7,801,988 7,506,949
8,520,100 Hindustan Zinc Ltd ....................... 3,095,106 3,231,762
200 Indian Aluminium Ltd ..................... 1,143 409
2,773,250 National Aluminium Company Ltd ........... 3,515,396 4,032,369
606 Sesa Goa Ltd ............................. 4,614 1,499
------------ ------------
14,418,247 14,772,988
------------ ------------
Fertilizers 0.21%
135,400 Agrevo India Ltd ......................... 2,074,205 1,603,011
7,700 Chambal Fertilizers & Chemicals Ltd ...... 5,977 2,726
1,950 Nagarjuna Fertilizer & Chemicals Ltd ..... 2,130 677
50 Southern Petrochemicals Industries
Corporation Ltd ........................ 43 28
------------ ------------
2,082,355 1,606,442
------------ ------------
Finance 0.00%
100 Bank of Baroda ........................... 190 147
50 ICICI Ltd++ .............................. 105 106
2,300 Oriental Bank of Commerce ................ 2,099 2,432
------------ ------------
2,394 2,685
------------ ------------
Food 1.12%
71,578 Cadbury India Ltd ........................ 1,442,594 1,235,749
123,590 International Bestfoods Ltd+ ............. 966,508 894,962
260,388 Nestle India Ltd ......................... 2,795,674 2,573,950
250,000 Rahul Dairy & Allied Products+* .......... 79,643 7,184
100 Rank Industries Ltd+ ..................... 253 14
134,693 Smithkline Beecham Consumer Healthcare Ltd 1,373,515 1,602,382
</TABLE>
14
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (continued) December 31, 1999
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Food (continued)
50 Tata Tea Ltd ............................. $539 $603
366,600 United Breweries Ltd ..................... 1,936,263 2,229,097
------------ ------------
8,594,989 8,543,941
------------ ------------
Hotels & Leisure 0.00%
121 Indian Hotels Company Ltd ................ 1,976 882
------------ ------------
1,976 882
------------ ------------
Household Appliances 0.08%
600,000 IFB Industries Ltd+ ...................... 3,271,110 111,724
200 Kalyani Sharp India Ltd+ ................. 274 88
500 Phil Corporation Ltd ..................... 1,366 443
20 Philips India Ltd ........................ 19 48
200 Samtel Color Ltd+ ........................ 395 202
450 Videocon Appliances Ltd .................. 2,629 190
519 Videocon International Ltd ............... 951 727
377,322 Voltas Ltd ............................... 833,091 517,842
------------ ------------
4,109,835 631,264
------------ ------------
Packaging 0.05%
737,630 Flex Industries Ltd+ ...................... 4,136,752 390,011
500 Universal Prime Aluminum+* ................ 788 35
------------ ------------
4,137,540 390,046
------------ ------------
Petroleum Related 1.54%
2,312,850 Hindustan Petroleum Corporation Ltd ....... 17,045,112 9,729,921
820 Indian Petrochemicals Corporation Ltd ..... 1,740 2,055
1,719,526 Madras Refineries Ltd ..................... 3,203,917 2,047,619
------------ ------------
20,250,769 11,779,595
------------ ------------
Pharmaceuticals 11.87%
395,850 Cipla Ltd ................................. 2,638,991 12,649,000
184,000 Dabur India Ltd ........................... 1,409,963 4,991,264
642,822 Dr. Reddy's Laboratories Ltd .............. 5,334,042 21,309,180
556,500 E. Merck (India) Ltd ...................... 3,639,822 8,187,586
64,550 Glaxo India Ltd ........................... 573,330 1,084,366
199,300 Hoechst Marion Roussel Ltd ................ 2,004,007 4,747,693
179,800 IPCA Laboratories Ltd ..................... 655,603 980,013
200 Orchid Chemicals & Pharmaceuticals Ltd .... 677 1,614
</TABLE>
15
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (continued) December 31, 1999
COMMON STOCKS (continued)
<TABLE>
<CAPTION>
Number Percent of
of Shares Security Holdings Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pharmaceuticals (continued)
50 Parke-Davis (India) Ltd ................... $ 506 $ 414
917,897 Ranbaxy Laboratories Ltd .................. 8,378,013 19,476,297
212,800 Rhone-Poulenc India Ltd ................... 2,958,132 6,971,034
149,100 Sun Pharmaceutical Industries Ltd ......... 1,013,606 5,869,741
174,600 Torrent Pharmaceuticals Ltd ............... 1,554,071 2,376,166
175,000 Wyeth Lederle Ltd ......................... 1,810,382 1,984,540
------------ ------------
31,971,145 90,628,908
------------ ------------
Steel 1.24%
6,010 Essar Steel Ltd+ .......................... 23,144 1,699
2,905,426 Tata Iron and Steel Company Ltd ........... 12,851,321 9,457,663
------------ ------------
12,874,465 9,459,362
------------ ------------
Steel Products 0.29%
295,250 Bharat Forge Ltd .......................... 1,199,128 2,205,891
100 Choksi Tube Company Ltd ................... 237 32
20 Super Forging & Steels Ltd+ ............... 36 3
------------ ------------
1,199,401 2,205,926
------------ ------------
Telecommunications 4.29%
3,101,000 Mahanagar Telephone Nigam Ltd ............. 17,238,722 13,758,460
260,602 Videsh Sanchar Nigam Ltd .................. 5,526,620 10,837,448
329,000 Videsh Sanchar Nigam Ltd GDR .............. 5,703,860 8,159,200
------------ ------------
28,469,202 32,755,108
------------ ------------
Telecommunications Equipment 2.46%
300 Bhagyanagar Metals Ltd .................... 724 272
32,000 Global Tele-Systems Ltd ................... 747,802 704,736
1,158,500 Himichal Futuristic Communications Ltd .... 7,149,723 18,043,305
------------ ------------
7,898,249 18,748,313
------------ ------------
Textiles - Cotton 0.18%
390,700 Arvind Mills Ltd+ ......................... 1,382,087 211,068
100 HP Cotton Textile Mills Ltd +* ............ 233 12
500,000 Pantaloon Fashions (India)+ ............... 497,863 862,069
200,000 Vardhaman Spinning & General Mills Ltd .... 455,739 308,046
------------ ------------
2,335,922 1,381,195
------------ ------------
</TABLE>
16
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (continued) December 31, 1999
BONDS (0.04% of holdings)
<TABLE>
<CAPTION>
Par Value Percent of
(000) Security Holdings Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Textiles - Synthetic 3.45%
131,000 Bombay Dyeing GDR ......................... $ 379,550 $ 370,075
150 DCL Polyesters Ltd+ ....................... 296 27
100 Ester Industries Ltd+ ..................... 104 11
300 Haryana Petrochemicals Ltd+ ............... 343 23
4,834,284 Reliance Industries Ltd ................... 19,835,014 25,971,774
5,800 SRF Ltd+ .................................. 15,613 6,167
------------ ------------
20,230,920 26,348,077
------------ ------------
Transportation 0.00%
100 NEPC India Ltd+ ........................... 194 17
------------ ------------
194 17
------------ ------------
Vehicle Components 0.43%
25 Antifriction Bearings Corporation Ltd+ .... 101 8
120,001 Cummins Ltd B ............................. 1,407,289 1,577,944
125 FAG Bearings (India) Ltd .................. 334 200
100 Gleitlager (India) Ltd+* .................. 96 13
118,000 Swaraj Engines Ltd ........................ 1,298,970 1,695,402
------------ ------------
2,706,790 3,273,567
------------ ------------
Vehicles 5.98%
853,962 Ashok Leyland Ltd ......................... 2,285,197 2,238,951
233,125 Bajaj Auto Ltd ............................ 3,202,478 1,763,175
220,187 Hero Honda Motors Ltd 'B' ................. 3,144,529 5,714,738
600 Hindustan Motors Ltd+ ..................... 467 149
100 LML Ltd ................................... 178 148
834,699 Mahindra & Mahindra Ltd ................... 7,210,620 8,059,163
920,950 Punjab Tractors Ltd ....................... 6,441,601 21,999,061
289,335 Tata Engineering & Locomotive Company Ltd . 2,060,689 1,336,927
363,700 TVS Suzuki Ltd ............................ 2,766,232 4,506,536
------------ ------------
27,111,991 45,618,848
------------ ------------
TOTAL COMMON STOCKS ....................... 311,133,405 763,170,927
------------ ------------
</TABLE>
17
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (continued) December 31, 1999
Bonds (0.04% of holdings)
<TABLE>
<CAPTION>
Par Value Percent of
(000) Security Holdings Cost Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Diversified Industries 0.04%
INR 4,220 DCM Shriram Consolidated NCD 13.00%,
11/6/01* ............................. $ 134,584 $ 107,942
INR 4,096 DCM Shriram Consolidated NCD 13.00%,
11/6/02* ............................. 130,627 104,768
INR 4,096 DCM Shriram Consolidated NCD 13.00%,
11/6/03* ............................. 130,627 104,768
------------ ------------
395,838 317,478
------------ ------------
TOTAL BONDS ............................... 395,838 317,478
------------ ------------
TOTAL INDIA ............................... 311,529,243 763,488,405
------------ ------------
TOTAL INVESTMENTS** .................100.00% $311,529,243 $763,488,405
============ ============
</TABLE>
See page 19 for Footnotes and Abbreviations.
18
<PAGE>
THE INDIA FUND, INC.
Schedule of Investments (concluded) December 31, 1999
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 $311,836,540.
The aggregate gross unrealized appreciation (depreciation) for
all securities is as follows:
Excess of value over tax cost $496,767,009
Excess of tax cost over value (45,115,144)
------------
$451,651,865
============
See accompanying notes to financial statements.
19
<PAGE>
THE INDIA FUND, INC.
Statement of Assets and Liabilities December 31, 1999
Assets
Investments, at value (Cost $311,529,243) ..................... $ 763,488,405
Cash (including Indian Rupees of $7,369,574 with a cost
of $7,373,224) .............................................. 7,752,458
Receivables:
Dividends and reclaims of excess taxes withheld ............ 993,685
Interest ................................................... 16,252
Securities sold ............................................ 1,273,840
Prepaid expenses .............................................. 77,088
-------------
Total Assets ............................................ 773,601,728
-------------
Liabilities
Payable for securities purchased .............................. 2,743,215
Due to Investment Manager ..................................... 640,804
Due to Administrator .......................................... 124,503
Accrued expenses .............................................. 1,145,393
-------------
Total Liabilities ....................................... 4,653,915
-------------
Net Assets .............................................. $ 768,947,813
=============
NET ASSET VALUE PER SHARE ($768,947,813 / 33,134,733
shares issued and outstanding) ....................... $ 23.21
=============
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 ............................................... 466,440,960
Cost of 872,400 shares held in treasury stock ................. (9,526,174)
Accumulated net investment loss ............................... (72,514)
Accumulated net realized loss on investments .................. (139,781,620)
Net unrealized appreciation in value of investments, foreign
currency holdings and on translation of other assets and
liabilities denominated in foreign currency .............. 451,853,154
-------------
Net Assets .............................................. $ 768,947,813
=============
See accompanying notes to financial statements
20
<PAGE>
THE INDIA FUND, INC.
<TABLE>
<CAPTION>
For the Year Ended
Statement of Operations December 31, 1999
<S> <C> <C>
Investment Income
Dividends ....................................................... $ 5,496,400
Interest (net of Indian taxes withheld of $7,480) ............... 123,881
-------------
Total investment income ............................. 5,620,281
-------------
Expenses
Management fees ................................................. $ 5,310,173
Custodian fees .................................................. 1,998,254
Administration fees ............................................. 992,285
Legal fees ...................................................... 201,900
Audit fees ...................................................... 117,033
Insurance ....................................................... 110,150
Directors' fees ................................................. 41,199
NYSE fees ....................................................... 32,339
Printing ........................................................ 32,017
Transfer agent fees ............................................. 17,601
Amortization of organizational costs ............................ 9,542
Miscellaneous expenses .......................................... 42,491
-------------
Total expenses ...................................... 8,904,984
-------------
Net investment loss ................................. (3,284,703)
-------------
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 .................................... 42,307,923
Foreign currency related transactions .................... (139,303)
-------------
42,168,620
Net change in unrealized appreciation in value of investments,
foreign currency holdings and translation of other assets
and liabilities denominated in foreign currency .......... 438,817,690
-------------
Netrealized and unrealized gain on investments, foreign
currency holdings and translation of other assets and
liabilities denominated in foreign currency .............. 480,986,310
-------------
Net increase in net assets resulting from operations ............ $ 477,701,607
=============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
THE INDIA FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
December 31, 1999 December 31, 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss .................................................. $ (3,284,703) $ (968,843)
Net realized gain (loss) on investments and foreign currency
related transactions .............................................. 42,168,620 (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 ................................... 438,817,690 40,891,321
------------- -------------
Net increase in net assets resulting from operations .............. 477,701,607 24,957,921
------------- -------------
Capital Share Transactions
Shares repurchased under Stock Repurchase Plan
(830,700 shares and 41,700 shares, respectively) .................. (9,276,977) (249,197)
------------- -------------
Net decrease in net assets resulting from capital share
transactions ...................................................... (9,276,977) (249,197)
------------- -------------
Total increase in net assets ......................................... 468,424,630 24,708,724
NET ASSETS
Beginning of year .................................................... 300,523,183 275,814,459
------------- -------------
End of year .......................................................... $ 768,947,813 $ 300,523,183
============= =============
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
THE INDIA FUND, INC.
Financial Highlights
For a Share Outstanding throughout Each Period
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of year ..... $ 8.85 $ 8.11 $ 7.56 $ 8.94 $ 13.92
---------- ---------- ---------- ---------- ----------
Net investment income (loss) ........... (0.10) (0.03) (0.03) 0.02 (0.05)
Net realized and unrealized gain (loss)
on investments, foreign currency
holdings, and translation of other
assets and liabilities denominated
in foreign currency .................. 14.36 0.77 0.58 (1.39) (4.93)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations ................ 14.26 0.74 0.55 (1.37) (4.98)
---------- ---------- ---------- ---------- ----------
Less: Dividends and Distributions
Dividends from net investment
income ............................... -- -- -- (0.01) --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions ...... -- -- -- (0.01) --
---------- ---------- ---------- ---------- ----------
Capital share transactions
Anti-dilutive effect of Share Repurchase
Program .............................. 0.10 -- -- -- --
---------- ---------- ---------- ---------- ----------
Total capital share transactions ....... 0.10 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ........... $ 23.21 $ 8.85 $ 8.11 $ 7.56 $ 8.94
========== ========== ========== ========== ==========
Per share market value, end of year .... $ 16.7500 $ 6.3125 $ 7.3750 $ 7.6250 $ 8.8750
Total Investment Return Based
on Market Value* ..................... 165.35% (14.41)% (3.28)% (14.08)% (17.44)%
Ratios/Supplemental Data
Net assets, end of period
(in 000s) ............................ $ 768,948 $ 300,523 $ 275,814 $ 257,156 $ 303,940
Ratios of expenses to average
net assets ........................... 1.84% 2.03% 1.98% 2.03%+ 2.03%
Ratios of net investment income (loss)
to average net assets ................ (0.68)% (0.34)% (0.37)% 0.22%+ (0.38)%
Portfolio turnover ..................... 18.65% 28.85% 42.61% 33.57% 25.28%
</TABLE>
See page 24 for footnotes.
23
<PAGE>
THE INDIA FUND, INC.
Financial Highlights (concluded)
* 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. 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.
+ 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.
24
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements December 31, 1999
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 operates through 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, which totaled $324,722 (0.04% of net
assets) at December 31, 1999, 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,
25
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (continued) December 31, 1999
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, 1999, the Fund had a capital loss carryover of $139,474,324
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, $47,709,534 will expire in the year 2004, $56,935,932
will expire in 2005 and $34,828,858 will expire in 2006. During the year ended
December 31, 1999, the Fund utilized $42,331,872 of capital loss carried forward
from prior periods.
The Fund's foreign exchange losses incurred after October 31, 1999, but before
December 31, 1999, 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 $72,514.
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 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
26
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (continued) December 31, 1999
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, 1999, the Fund reclassified $143,940 from
accumulated net realized gain on investments to accumulated net investment loss
as a result of permanent book and tax differences relating primarily to realized
foreign currency losses and reclassified $3,416,169 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, 1999. Net
investment loss and net assets were not affected by the reclassifications.
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. ("Advantage"), a subsidiary of CIBC World Markets Corp.
("CIBC WM"), serves as the Fund's Investment Manager (the "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 (the "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
27
<PAGE>
THE INDIA FUND, INC.
Notes to Financial Statements (continued) December 31, 1999
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 year ended December 31,
1999, fees earned by the Investment Manager amounted to $5,310,173, of which the
Investment Manager informed the Fund it paid $965,486 to ILFS.
CIBC WM, 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 year ended December 31, 1999,
these fees amounted to $965,486. 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 year ended December 31, 1999, fees and expenses of the
Mauritius Administrator amounted to $26,799. At December 31, 1999, CIBC WM owned
7,133 shares of the Fund's common stock.
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 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
$88,917,340 and $100,517,558 respectively, for the year ended December 31, 1999.
At December 31, 1999, the Fund owned securities valued at approximately
$23,052,923 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.
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THE INDIA FUND, INC.
Notes to Financial Statements (continued) December 31, 1999
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. Effective June 1, 1997, dividend income from domestic companies is exempt
from Indian income tax. The Fund is subject to and accrues Indian withholding
tax on interest earned on Indian securities at the rate of 20%.
The Fund will, in any year that it has taxable income for Mauririus tax
purposes, elect to pay tax on its net income for Mauritius tax purposes at any
rate between 0% and 35%. For the year ended December 31, 1999, no provision for
Mauritius taxes is considered necessary as a result of the net investment loss
incurred by the Fund. 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, which is at
the rates of 10% on long-term and 30% on short-term capital gains, and could 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: CAPITAL STOCK
During the year ended December 31, 1999, the Fund purchased 830,700 shares of
capital stock on the open market at a total cost of $9,276,977. The weighted
average discount of these purchases, comparing the purchase price to the net
asset value at the time of purchase, was 27.07%. These shares were purchased
pursuant to the Fund's Stock Repurchase Plan approved by the Fund's Board of
Directors 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 at a total cost of $249,197 and at a weighted average discount
of 27.93%. The shares purchased are held in treasury.
At a meeting held on December 10, 1999, the Fund's Board of Directors authorized
the Fund to purchase up to an additional 1,000,000 shares of its capital stock.
Subsequent to December 31,
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THE INDIA FUND, INC.
Notes to Financial Statements (concluded) December 31, 1999
1999, the Fund made additional purchases aggregating 72,000 shares of capital
stock in the open market at a total cost of $1,291,025. The weighted average
discount of these purchases was 26.50%.
NOTE F: CONCENTRATION OF RISKS
At December 31, 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. At December 31, 1999, the Fund has a concentration
of its investments in the computer industry. The values of such investments may
be affected by changes in such industry.
30
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THE INDIA FUND, INC.
Report of Independent Accountants
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THE INDIA FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The India Fund, Inc. (the "Fund")
at December 31, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 18, 2000
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THE INDIA FUND, INC.
Dividends and Distributions
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund intends to distribute annually to shareholders substantially all of its
net investment income, and to distribute any net realized capital gains at least
annually. Net investment income for this purpose is income other than net
realized long and short-term capital gains net of expenses.
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
shareholders whose shares of Common Stock are registered in their own names will
be deemed to have elected to have all distributions automatically reinvested by
The Bank of New York (the "Plan Agent") in Fund shares pursuant to the Plan,
unless such shareholders elect to receive distributions in cash. Shareholders
who elect to receive distributions in cash will receive all distributions in
cash paid by check in dollars mailed directly to the shareholder by The Bank of
New York, as dividend paying agent. In the case of shareholders such as banks,
brokers or nominees, that hold shares for others who are beneficial owners, the
Plan Agent will administer the Plan on the basis of the number of shares
certified from time to time by the shareholders as representing the total amount
registered in such shareholders' names and held for the account of beneficial
owners that have not elected to receive distributions in cash. Investors that
own shares registered in the name of a bank, broker or other nominee should
consult with such nominee as to participation in the Plan through such nominee,
and may be required to have their shares registered in their own names in order
to participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the directors of the Fund declare an income dividend or a capital gains
distribution payable either in the Fund's Common Stock or in cash,
nonparticipants in the Plan will receive cash and participants in the Plan will
receive Common Stock, to be issued by the Fund or purchased by the Plan Agent in
the open market, as provided below. If the market price per share on the
valuation date equals or exceeds net asset value per share on that date, the
Fund will issue new shares to participants at net asset value; provided,
however, that if the net asset value is less than 95% of the market price on
valuation date, then such shares will be issued at 95% of the market price. The
valuation date will be the dividend or distribution payment date or, if that
date is not a New York Stock Exchange trading day, the next preceding trading
day. If net asset value exceeds the market price of Fund shares at such time, or
if the Fund should declare an income dividend or capital gains distribution
payable only in cash, the Plan Agent will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere, for
the participants' accounts on, or shortly after, the payment date. If, before
the Plan Agent has completed its purchases, the market price exceeds the net
asset value of a Fund share, the average per share purchase price paid by the
Plan Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the distribution had been paid in shares
issued by the Fund on the dividend payment date.
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THE INDIA FUND, INC.
Dividends and Distributions (continued)
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Because of the forgoing difficulty with respect to open market purchases, the
Plan provides that if the Plan Agent is unable to invest the full dividend
amount in open market purchases during the purchase period or if the market
discount shifts to a market premium during the purchase period, the Plan Agent
will cease making open-market purchases and shareholders will receive the
uninvested portion of the dividend amount in newly issued shares at the close of
business on the last purchase date.
Participants have the option of making additional cash payments to the Plan
Agent, annually, in any amount from $100 to $3,000, for investment in the Fund's
Common Stock. The Plan Agent will use all such funds received from participants
to purchase Fund shares in the open market on or about February 15.
Any voluntary cash payment received more than 30 days prior to this date will be
returned by the Plan Agent, and interest will not be paid on any uninvested cash
payment. To avoid unnecessary cash accumulations, and also to allow ample time
for receipt and processing by the Plan Agent, it is suggested that participants
send in voluntary cash payments to be received by the Plan Agent approximately
ten days before an applicable purchase date specified above. A participant may
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than 48 hours before such payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transaction in an account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan.
There is no charge to participants for reinvesting dividends or capital gains
distributions or voluntary cash payments. The Plan Agent's fees for the
reinvestment of dividends and capital gains distributions and voluntary cash
payments will be paid by the Fund. There will be no brokerage charges with
respect to shares issued directly by the Fund as a result of dividends or
capital gains distributions payable either in stock or in cash. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and capital gains distributions and voluntary cash
payments made by the participant. Brokerage charges for purchasing small amounts
of stock for individual accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions, because the Plan Agent will
be purchasing stock for all participants in blocks and prorating the lower
commissions thus attainable.
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THE INDIA FUND, INC.
Dividends and Distributions (concluded)
The receipt of dividends and distributions under the Plan will not relieve
participants of any income tax that may be payable on such dividends or
distributions.
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to members of the Plan at
least 30 days before the record date for such dividend or distribution. The Plan
also may be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by at least 30 days' written notice to participants in the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent at
101 Barclay Street, New York, New York 10286.
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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
