Advantage Advisers, Inc.
The India Fund, Inc.
Annual Report
December 31, 2002
THE INDIA FUND, INC.
THE INDIA FUND, INC.
February 19, 2003
DEAR FUND SHAREHOLDER,
We are pleased to present you with the audited financial statements of The India
Fund, Inc. (the "Fund") for the twelve-month period ended December 31, 2002. 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 recently closed year.
The Fund's net asset value (NAV) increased 7.5% during the twelve months ended
December 31, 2002. This return includes the anti-dilutive effect of the Fund's
Tender Offer and Share Repurchase Program which approximated .25%. The Fund
underperformed its benchmark, the IFC Investable Index, which increased 9.9%
during the same period.
Although 2002 was a volatile year, the economic and political scene seemed to
calm down by December. Perhaps the most important news for investors was about
the privatization process. The Indian government continues to divest its
holdings in several companies. At one point during the year, the process slowed
considerably, essentially because of rising differences within the government's
ruling coalition. Yet, the divestiture program was brought back to life and the
government appears on track to finalize the sale of assets in the coming months.
The situation in Kashmir seemed ready to explode in the first half of the year.
Violent acts in that region came on the heels of a terrorist attack on the
Indian Parliament at the end of the previous December. Yet, to the relief of the
whole world, diplomatic talks between India and its neighbor Pakistan resolved
the immediate tension. By about mid-year the threat of military action subsided,
but Kashmir continues to bear on the market.
In our opinion, India's economy has shown surprising strength despite a number
of disappointments and negative influences through the year. The monsoon season
was poor, the government's budget increased its deficit and of course the global
economic situation was not ideal. Still, as reported, Indian economists forecast
significant gross domestic product growth for the current fiscal year.
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THE INDIA FUND, INC.
The Investment Manager believes that the Indian market environment can continue
to deliver favorable returns. The primary concern for investors in India will be
the government's privatization process in the coming months. The results of this
process will significantly influence the direction of the Indian market.
On behalf of the Board of Directors, we thank you for your participation and
continued support of the Fund. If you have any questions, please do not hesitate
to call our toll-free number, (800) 421-4777.
Sincerely,
/s/ BRYAN MCKIGNEY
Bryan McKigney
Director, President and Secretary
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THE INDIA FUND, INC.
REPORT OF THE INVESTMENT MANAGER
FOR THE YEAR ENDED DECEMBER 31, 2002
The net asset value ("NAV") of The India Fund, Inc. (the "Fund") increased 7.5%
during the twelve months ended December 31, 2002, underperforming its benchmark,
the IFC Investable Index, which rose 9.9% during the same period.
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OVERVIEW OF INDIA'S STOCK MARKET
It was another roller coaster year for Indian equities in 2002, but one that we
believe ended reasonably well. As reported, the bell weather BSE 30 Sensex's
4.1% gain (in U.S.-dollar terms) placed the Indian market in the top quartile of
performance relative to world equity markets. As recently as late October 2002,
the Sensex was registering a 10% year-on-year decline, and the prospect of the
Indian market seeing any gain at all for 2002 looked slim indeed. As reported,
the market ended the year with a powerful two-month rally, fueled by
better-than-expected economic data, key progress on structural reform, and a
stream of positive corporate news flow, especially in the information technology
sector.
The Indian market began the year showing impressive resilience. Despite
worsening cross-border tensions with Pakistan as a result of the December 2001
terrorist attack in Parliament, Indian stocks managed to rally. Investor hopes
were also high during the period preceding the government's annual Budget speech
at the end of February 2002. However, in our opinion, the Budget, while
acceptable, fell short of investors' high expectations. Moreover, communal
violence also reared its ugly head, as riots between Hindus and Muslims broke
out in Gujarat, the only state controlled by the ruling Bhartiya Janata Party
("BJP"). The market fell back sharply to lower levels during the second quarter
of 2002.
In our opinion, heightened tension between India and Pakistan, concern over the
government's handling of Gujarat's riots, and a disappointing monsoon all
combined to keep the market depressed through the second and early third
quarters. Nevertheless, the news flow was not all bad. There was important
progress in the government's drive to deregulate the oil and telecommunications
industries and to continue the privatization of state-owned companies.
After rebounding in August from an oversold position, the government's September
announcement about a three-month delay in the privatization process for
Hindustan Petroleum ("HPCL") and Bharat Petroleum ("BPCL") sent the market into
a renewed downdraft. By October 31, 2002, the market was down (10%) year-to-date
and looked to be on its way to a third straight losing year.
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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.
Fortunately, however, the final two months of the year saw the Indian market put
together an impressive rally, underpinned by both strong fundamentals and
improving sentiment. First, India's industrial production ("IIP") continued to
surprise market watchers. For the first eight months of the fiscal year ending
March 31, 2003 (i.e., March 31, 2002 - November 30, 2002) India's IIP recorded
5.3% year-on-year growth, twice as strong as the 2.4% growth shown in the
corresponding period for the previous fiscal year. 1 In addition, positive
corporate news from Indian IT companies also boosted investor sentiment.
Finally, the market was spurred by significant progress in the structural reform
process, specifically (1) the announcement that the government's privatization
of HPCL and BPCL was back on track; and (2) the passage of the Foreclosure Law
by Parliament, sharply improving the banking environment.
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POLITICS
Politics, as always, played a dominant role in India during 2002. The country
began the year on a subdued note, in the aftermath of the December 13, 2001
terrorist attack on the Indian Parliament, which killed 14 people. The incident
once again escalated Indian-Pakistani tensions, which, although never leading to
full-scale hostilities, did hang over the market during the first half of 2002.
In addition to cross-border tensions, India also saw its worst outbreak of
violence between Hindus and Muslims in a decade. In the Indian state of Gujarat,
February brought a brutal attack on Hindu activists and their families, which
was followed by a wave of retaliatory violence against the Muslim community
there. The incident culminated in a censure vote in Parliament, which the
government won despite a walkout by a key ally, the Telugu Desam Party ("TDP")
before the vote. As reported, repercussions from the Gujarat violence continue
to reverberate on India's domestic political landscape.
India saw a number of state elections during the year. In what was probably the
most watched, the Uttar Pradesh ("UP") elections turned out to be a major
setback for the BJP government. These elections have always been important to
India since UP is the most populous state in India and contributes almost 15% of
the representatives to Parliament. Traditionally a BJP stronghold, the party
itself lost about 50 votes (a loss of 32%), diluting their claim to power. The
BJP, however, did manage to set up the state government with the help of a
coalition partner.
Meanwhile, tensions with Pakistan refused to subside, largely as a result of
terrorist incidents continuing in India-administered Kashmir. On May 14, a
Pakistan based group reportedly coordinated a terrorist attack on Indian
soldiers stationed in Kashmir and on a bus carrying civilians, triggering a
strong reaction. As reported, the Indian government made it apparent, even to
the distant Western world, that they were serious about taking military action
against Pakistan. Expulsion of the Pakistan High Commissioner, high level
meetings between political leaders and military chiefs and a huge army build-up
along the border gave clear signals of India's willingness to commit aggression.
Gradually, however, high-level diplomatic intervention and an easing in
Pakistan's hard line stance finally mitigated tensions. Eventually, India
re-opened its air space to Pakistan, the war tensions softened, and by the third
quarter relations between India and Pakistan stabilized.
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1 Salomon Smith Barney India Economics research, January 10, 2003
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THE INDIA FUND, INC.
At mid-year, the government surprised the market with a shake-up of its cabinet.
LK Advani was named Deputy Prime Minister, a move that was widely interpreted as
an attempt by BJP to emphasize its ideology and reassert itself within the
ruling coalition, the National Democratic Alliance ("NDA"). The move was also
widely seen as undermining Prime Minister Vajpayee's position within the party
and the NDA. In addition, the Finance Minister (Yashwant Sinha) and Foreign
Minister (Jaswant Singh) switched posts. We believe growing perception that the
BJP government was becoming weak and directionless continued to dampen investor
sentiment.
If the first half of 2002 was mainly marked by tensions with Pakistan and
domestic communal strife, the second half of the year saw investors' attention
turn toward the government's privatization and reform agenda. As reported in
September, investors were stunned and disappointed to hear that the centerpiece
of the privatization program - the sale of HPCL and BPCL - was to be delayed
until December 2002, a result of strong differences within the NDA coalition.
Shares in the two companies reacted by plunging 30%-35%, as the market perceived
a setback to the privatization agenda. In addition, since it came in the wake of
the earlier cabinet shake-up, we believe this incident reinforced the growing
perception that Prime Minister Vajpayee was not as supportive of the
privatization process as he had seemed.
However, India's privatization proponents fought back, surprising the skeptics.
The reform efforts and privatization program actually ended the year on a strong
note as the government committed itself to resuming its efforts. In the banking
industry, a key measure, the Securitization Bill (also known as the Foreclosure
Bill), was passed by Parliament. In our opinion, the Securitization Bill is an
extremely favorable measure for banks and financial institutions because it may
substantially boost their efforts at recovering non-performing loans from
defaulting debtors.
As reported in December, close to 30 bills were passed during the final
Parliamentary session, including the Securitization Bill, the Companies
(Amendment) Bill, The SEBI (Amendment) Bill, the UTI (Repeal) Bill, and the
Cable Television Networks Amendment (Regulation) Bill. In addition,
by year-end, in our opinion, the deadlock appeared to have been broken regarding
the privatization of HPCL and BPCL. It was proposed that HPCL be divested first
through a strategic route and BPCL through a public issue. At the time of this
writing, however, this issue is still in limbo with speculation over whether the
HPCL and BPCL privatizations will require Parliamentary approval.
December was also marked by the ruling BJP party sweeping the Gujarat state
elections by a significant margin, providing a major morale boost to the
Centrist party. However, we believe the victory was seen as further weakening
Prime Minister Vajpayee's position vis-a-vis the Hindu faction within the BJP
cadre, as it boosted the Hindu hard-line faction. 2
In 2003, elections will be held in nine Indian states, the most important among
them in Rajasthan and Madhya Pradesh, where it looks like the ruling BJP stands
a good chance in our opinion of capitalizing on the anti-incumbency sentiment in
those two states. We believe a strong showing in these elections would also
provide a positive backdrop for the BJP, moving into the 2004 presidential
elections.
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2 VOTE FOR DISCORD, Far Eastern Economic Review, Dec 26, 2002 - Jan. 2, 2003
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THE INDIA FUND, INC.
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ECONOMY
The Indian economy began 2002 on a cautious note, amid evidence of slowing
domestic growth in the aftermath of the September 11, 2001 attacks in the United
States. Sentiment soon got a lift, however, with evidence that the government's
positive structural reform measures were back on track. In February, the
government successfully sold its stake in VSNL and IBP, while announcing plans
for the privatization of HPCL and BPCL.
In February 2002, we believe the government's annual Budget announcement did not
measure up to the market's highest expectations, but on the other hand did
unveil that steps were being taken in the right direction. With the key task
being to spur growth while containing the budget deficit, the Finance Minister
announced a reduction in selected subsidies, new privatization targets, and a
more flexible regime for interest rates. 3 Yet, as reported, market reaction was
muted-to-negative.
Further evidence that the reform agenda was on track was the oil and
telecommunications sectors' deregulation on April 1, 2002, as scheduled. We
believe the shedding of two legacies of India's planned economy - namely, (1)
the monopoly on international phone calls and (2) the state-run system of fixed
prices for retail fuel products heralds a significant achievement for the
government. 4
Moreover, the oil sector deregulation was immediately followed up with the
divestment of Indian Petrochemicals Ltd. ("IPCL"), which the government sold to
Reliance Industries. As reported, Reliance bid 78% higher than the
second-highest bidder, with the price exceeding even the most optimistic market
expectations. We believe the transaction further improved sentiment regarding
the government's privatization efforts.
On the other hand, we believe India's monsoon during 2002 was a disappointment
with total rainfall approximately 19% below "normal" levels and sub-standard
distribution. Surprisingly in our opinion, the disappointing monsoon has not yet
had the negative impact on the economy that many analysts were expecting. 5
Given that agriculture accounts for a quarter of GDP and supports approximately
two-thirds of the population, the lack of a significant negative impact has been
a surprise although some analysts still expect fallout.
We believe the overall strength of the Indian economy during 2002 has been a
pleasant surprise for investors. In the second quarter of India's fiscal year
ending March 31, 2003 (July 1, 2002 - September 30, 2002), India's GDP
registered 5.8% year-on-year growth, driven largely by the financial, trade, and
transport sectors. 6 As reported, the Finance Ministry forecasts that for the 12
months ending March 31, 2003, India's GDP is expected to expand 5.0%-5.5%. 7
In our opinion, surprising resilience of India's economy during 2002 resulted
from a number of factors. First, India continued to see steadily falling
interest rates throughout 2002, with the lending
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3 EVER SO SLOWLY, Far Eastern Economic Review, March 14, 2002
4 PRIVATIZATION: A SECOND WIND, Far Eastern Economic Review, April 11, 2002
5 DROUGHT HITS GROWTH, Far Eastern Economic Review, August 29, 2002
6 India's Central Statistical Organization, January 2003
7 India Finance Ministry, January 2003
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THE INDIA FUND, INC.
rate to prime borrowers falling from 8.9% in December 2001 to 6.25% by the end
of 2002. 8 The fact that this was accomplished in spite of the country's huge
budget deficit we believe can be explained by: (1) continued benign inflation,
which averaged 3%-3.5% during 2002; (2) sharply improving external accounts,
with exports up 16% in the first eight months of the fiscal year ending March
31, 2003 (March 31, 2002 - November 30, 2002); and (3) evidence of a likely
second straight year of current account surplus, forecast at 1% of GDP. 9 As
reported for the fiscal year ended March 31, 2002, India saw its first current
account surplus in 24 years. 10 We believe the sharp improvement in India's
external accounts over the past few years can be explained by the recent
emergence of its new, globally competitive service industries. For example, its
burgeoning software industry, which currently accounts for 1.4% of the country's
gross domestic product, is forecast to grow approximately eightfold to $80
billion by 2008. 11
The 2% appreciation of the rupee against the US dollar in the second half of
2002 was perhaps the single biggest surprise, in terms of the economy, and was a
strong reflection of the country's rising role in global trade, led by its
software and pharmaceutical industries. The gathering strength of the rupee is
also a reflection of rising foreign direct investment in India, which as
reported during the first six months of 2002-registered year-on-year growth of
86%, coming in at US$2.5 billion. 12
In a recent study, the International Finance Corporation has stated that
although India's foreign direct investment in 2001 (estimated at only US$3
billion) seems to pale in comparison to China's US$47 billion, they believe that
the two socioeconomic rivals are actually not nearly so disparate in this
regard. China's foreign direct investment numbers, it is believed, are greatly
exaggerated by the fact that much of it involves "round-tripping" i.e., mainland
funds that leave China only to return as foreign investment to gain tax and
other incentives. On the other hand, IFC officials speculate that India does not
accurately record all of its foreign direct investment. For example, when an
existing foreign multinational in India increases its investment in its
facilities, it does not always get recorded as foreign direct investment.
Adjusting for these distortions, the IFC analysts speculate that foreign direct
investment into India is about 1.7% of GDP while in China, foreign direct
investment is about 2% of GDP. 13
With less than two months remaining in the fiscal year ending March 31, 2003,
most private economists expect that the government's forecast of 5%-5.5% GDP
growth for the fiscal year may
be achievable. 14 However, peering out to the rest of calendar year 2003, we
believe the outlook is more clouded. Although last year's poor monsoon does not
appear to have negatively impacted GDP growth yet, many are expecting that the
impact will be felt over the next several months.
Also, although many of the positive trends that the Indian economy felt in 2002
are forecast to continue, such as benign inflation, low interest rates, and a
stable currency, we do not believe everything is going India's way. Most
notably, India is an oil-importing country and the current $30-$35 per barrel
oil price does not help India's import bill. In addition, as already noted, the
country's
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8 JP Morgan research, January 2003
9 Salomon Smith Barney India Economics research, January 7, 2003
10 INDIA DELIVERS THE FINANCIAL GOODS, Far Eastern Economic Review,
December 12, 2002
11 INFOSYS PLANS A SOFTWARE CENTER IN INDIA'S KERALA, Bloomberg, January 7, 2003
12 TWO PLUS TWO, Far Eastern Economic Review, August 29, 2002
13 TWO PLUS TWO, Far Eastern Economic Review, August 29, 2002
14 Salomon Smith Barney India Economics Research, January 10, 2003
7
THE INDIA FUND, INC.
combined federal and state budget deficits have actually deteriorated in the
past few months and remain the biggest concern for the country, with the
combined deficits adding up to an estimated 10% of GDP. In our opinion, the
government's privatization program must stay on track in order to raise the
funds that are vital to reining in the budget. A budget deficit could probably
doom the country to a low GDP growth scenario.
In summary, we believe the economic structural reform process will continue to
be the dominant factor in determining both the short-term and long-term health
and growth rate of the Indian economy. We remain optimistic that the government
can continue to deliver on the economic restructuring front in 2003 and beyond,
although perhaps more erratically than investors would hope.
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PORTFOLIO STRATEGY
During 2002, the Fund increased its weighting in banks and financial
institutions, as both the economic and regulatory environment turned more
favorable. The Fund also selectively increased holdings of certain Public Sector
Undertakings on the continuing theme of stepped-up government divestments and
privatizations. A significant part of this buying was centered in the
petroleum-related sector.
Broadly speaking, the Fund also spent the year increasing its exposure to the
market's mid-cap and small-cap stocks. The Fund's attempt to be more aggressive
in the small- and mid-cap area was hindered by the low liquidity in these asset
classes.
The Fund also selectively reduced its exposure in the telecommunications and
information technology sectors during the year, moving to positions that are
neutral to slightly-underweight in these sectors.
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KEY SECTOR HOLDINGS
PERCENT OF NET ASSETS
SECTOR AS OF DECEMBER 31, 2002 TOP HOLDINGS
------------------------------- ----------------------- ----------------------
Computer Software & Programming 18.4% Infosys Technologies,
Satyam Computers
Petroleum Related 17.1% Reliance Industries,
Hindustan Petroleum
Finance 12.1% State Bank of India,
ICICI Bank
Consumer Non-Durables 11.7% Hindustan Lever,
ITC Ltd.
Pharmaceuticals 10.2% Ranbaxy Laboratories,
Dr. Reddy's
Vehicles 6.0% Tata Engineering,
Bajaj Auto Ltd.
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THE INDIA FUND, INC.
COMPUTER SOFTWARE & PROGRAMMING
We believe the Indian information technology service industry has shown
impressive resilience over the past two-and-a-half years, in spite of the sharp
cutbacks in corporate information technology spending globally. Pricing pressure
(and the attendant margin pressure), which had been one of the biggest negative
trends over the past few years, has in our opinion recently shown signs of
stabilizing. Meanwhile, as more multinational companies look to reduce operating
expenses and optimize capital expenditures without compromising operations, we
believe Indian information technology companies are proving themselves to be an
unbeatable cost-value proposition. 15 We believe the sector's underlying
fundamentals look extremely encouraging, with new customers being added, volumes
being ramped up, and capacity utilization rates recovering sharply. One negative
trend that the sector has never had to deal with in the past is the recent
strengthening of the rupee, which negatively impacts export earnings. This is a
minor issue, however and we believe it unlikely that the rupee's recent strength
will be sustained. We remain positive on the long-term outlook for the Indian
information technology sector.
INFOSYS TECHNOLOGIES, LTD. ("INFOSYS"), India's second largest software maker by
market value, remains one of the Fund's largest holdings, representing 11.8% of
the Fund's net assets. The company continues to execute ahead of its peers with
a performance that underscores its strong fundamentals and high-quality
management, as well as its excellent systems and processes. During 2002,
offshore outsourcing accelerated sharply as customers strove to minimize costs,
and Infosys lead the way in exploiting this trend. 16 As reported in its most
recent quarterly earnings release, Infosys announced that for its third quarter,
ended December 31, 2002, net profit rose 24% to Rs 2,563 million (from Rs 2,066
million in the year-earlier period), which was at the upper-end of management's
forecast guidance. 17 With this result, Infosys has delivered three straight
quarters of double-digit sequential volume growth. The company's per client
revenue run-rate has also been continuously expanding.
SATYAM COMPUTER SERVICES ("SATYAM") is the Fund's second largest software
company holding, representing 4.2% of the Fund's net assets. While Satyam
management does not have quite the stellar reputation of Infosys, we believe the
company is well run and like Infosys has been benefiting from a much improved
business environment. Satyam has recently won a number of new contracts in the
energy/utilities sector, while there are also signs that downward pricing
pressure has bottomed out. 18 In its most recently released earnings statement,
for the second fiscal quarter (three months ended September 30, 2002) net profit
declined 11.9% year-on-year to Rs 1.18 billion from Rs 1.34 billion in the year
earlier period. However, the company did see 9% quarter-on-quarter volume growth
in the second quarter of fiscal 2003 as well as 7.6% revenue growth (from $96.6
million to $104 million), positive trends that are continuing. With the
stabilization in pricing pressure and foreign exchange losses, the market
consensus forecasts Satyam to register flat year-on-year earnings growth for its
current fiscal year ending March 31, 2003. 19
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15 INDIA TECHNOLOGY, JP Morgan, October 11, 2002
16 IT SERVICES, Salomon Smith Barney, September 13, 2002
17 INFOSYS 3Q03 RESULTS, Credit Lyonnais research, January 10, 2003
18 SATYAM: JOINING THE GROWTH BANDWAGON,, SSB research, October 25, 2002
19 SATYAM: JOINING THE GROWTH BANDWAGON,, SSB research, October 25, 2002
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THE INDIA FUND, INC.
PETROLEUM RELATED
By year-end 2002, approximately 17.1% of the Fund's holdings were in the
petroleum-related sector. We believe 2002 will be remembered as a watershed year
for the industry in terms of the progress seen in industry deregulation and
privatization. As reported, on April 1, 2002 the government effectively ended a
26-year old monopoly by lifting price controls on retail fuels and allowing
companies the freedom to import crude oil without government involvement. This
was followed up in May with the government's sale of Indian Petroleum Corp (IPC)
to Reliance Industries. Of course, the capstone of the
deregulation/privatization drive in the oil and gas sector will be the completed
privatization of the two state-owned oil refiners, 51%-held HPCL and 66%-held
BPCL. Together, the two refine 40% of the 2 million barrels of oil India
consumes per day. 20
Not surprisingly, the politically controversial sale of HPCL and BPCL was a
stop-and-go process during 2002, a trajectory that we expect to continue during
2003. At the time of this writing, the government was reported to be debating
whether the sale requires Parliamentary approval, which, if so, could
conceivably delay the privatization again for several months. 21 Although the
government's 21-party alliance does cause the approval process to be drawn-out
and cumbersome, we believe that the privatization of HPCL and BPCL will
eventually happen. Put simply, we believe the privatization of state-owned
assets is the only way the government can raise enough money to relieve its
crushing budget deficit, as well as accelerate the economy's growth rate to the
targeted 8% per year over the next five years.
The largest holding in the petroleum related sector is RELIANCE INDUSTRIES LTD.
("RELIANCE"), representing 11.5% of the Fund's net assets. On October 31, 2002,
the company announced that it had discovered a gas field off India's eastern
coast that may yield as much as 7 trillion cubic feet of gas. This is India's
largest gas finding in over three decades and boosts India's gas reserves by as
much as 60%, according to Reliance Chairman, Mukesh Ambani. 22 In addition, in
its most recent earnings announcement, for the second fiscal quarter ended
September 30, 2002, Reliance reported that net profit rose 25% to Rs 10 billion
from Rs 8 billion in the previous year's period. 23 The result was better than
market consensus forecasts.
HINDUSTAN PETROLEUM CORP. LTD. ("HPCL") is the Fund's second-largest petroleum
related holding, representing 3.9% of the Fund's net assets. As already
mentioned, HPCL is scheduled to be the first state-owned oil refiner to be sold,
when the government finally commences with privatizing both HPCL and BPCL. Since
being granted the power to set their own retail fuel prices (with a few
exceptions), both HPCL and BPCL raised prices several times during 2002 to keep
them in line with rising international crude oil prices. 24 In addition, HPCL
was paid past dues owed to it by the government for subsidizing cooking fuel,
which helped boost profit. For its fiscal second quarter (three months ended
September 30, 2002), HPCL's net profit reportedly more than tripled to Rs 4.56
billion from Rs 1.4 billion in the year-earlier period, as margins expanded
dramatically under the new pricing regime. 25
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20 INDIA MAY FACE DELAY IN SALE OF OIL REFINERS, Bloomberg, January 8, 2003
21 INDIA IN REVIEW - DECEMBER 2002, Merrill Lynch research, January 3, 2003
22 RELIANCE 2ND QTR NET RISES; SHARES JUMP ON GAS FIND, Bloomberg, October 31,
2002
23 RELIANCE 2ND QTR NET RISES; SHARES JUMP ON GAS FIND, Bloomberg, October 31,
2002
24 HPCL 2ND QTR PROFIT TRIPLES ON PRICES, Bloomberg, October 31, 2002
25 HPCL 2ND QTR PROFIT TRIPLES ON PRICES, Bloomberg, October 31, 2002
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THE INDIA FUND, INC.
FINANCE
In our opinion, Indian banks saw both a strong operating environment and
positive regulatory reform during 2002. As reported, banks have cut interest
rates consistently over the past 12-18 months while at the same time focusing on
the lucrative, fast-growing consumer loans environment, earning higher yields
with lower defaults. Moreover, the growth outlook for banks remains favorable,
with economic indicators strengthening and the consumer lending boom appearing
more secular than cyclical. In addition, bank margins are reportedly stabilizing
at current levels, as deposit rates prove stickier than lending rates.
In addition to the attractive operating environment, the government passed a few
key progressive measures for the banks in 2002. The first measure, passed in
February, raised the foreign ownership limit of Indian private banks to 49%.
Although this has yet to spark the merger and acquisition boom that many
analysts initially forecasted, we believe there is no doubt that the more
liberal foreign ownership requirements will accelerate the industry's improving
fundamentals.
An even more important piece of legislation was the Parliament's recent passage
of the Securitization Bill (also known as the Foreclosure Bill) that
dramatically strengthens a bank's powers to foreclose and liquidate assets of
defaulting companies, allowing the bank to retrieve at least some of their
money. The Bill is a huge positive development for Indian lenders, and it is
expected to accelerate the pace of non-performing loan recovery, thereby
allowing banks to increase their risk appetite, strengthen their balance sheets,
and free up funds currently mired in asset quality problems. 26 It is no
exaggeration, in our opinion, to say that this bill represents a tremendous,
positive sea change for the industry.
Together STATE BANK OF INDIA ("SBI") and ICICI Bank account for about half of
the Fund's 12.1% holding in the banking sector. SBI is the Fund's largest
holding in the finance sector, representing 3.5% of the Fund's net assets. SBI
is a government-owned entity with 9,000 outlets and 214,000 employees,
controlling one-fifth of the banking business in India. Over the past 18 months,
SBI has excelled at leveraging its large presence across the country to increase
its retail lending. We believe management has also done a good job at slashing
costs and avoiding a heavy reliance on trading income to boost its bottom
line. 27 In its most recent earnings announcement, for the second fiscal quarter
(three months ended September 30, 2002) net profit surged 34% to Rs 8.3 billion
from Rs 6.2 billion in the year-earlier period. 28
ICICI BANK LTD. is a privately owned bank, which has been spending the past nine
months digesting the merger between former parent company ICICI and ICICI Bank.
ICICI is the Fund's second-largest holding in the finance sector, representing
3.2% of the Fund's net assets. Similar to SBI, we believe ICICI Bank will reap a
huge windfall as a result of the government's recent passage of the Foreclosure
Bill, as ICICI Bank also has a huge legacy of non-performing loans that it can
now tackle much more aggressively in the new legal framework. 29 As reported in
its most recent earnings result, for the second fiscal quarter (three months
ended September 30, 2002), net earnings dropped
----------
26 INDIA EQUITY GUIDE - BANKS, SSB, September 13, 2002
27 INDIAN BANKS, Molital Oswal research, December 11, 2002
28 STATE BANK OF INDIA PROFIT RISES 34%; BEATS FORECAST, Bloomberg, October 30,
2002
29 INDIA EQUITY GUIDE - BANKS, SSB, September 13, 2002
11
THE INDIA FUND, INC.
12.5% to Rs 2.5 billion from Rs 3.2 billion in the year-earlier period. The
merger cost impacted net interest margins during the period, a situation
management stated would continue for 18 months, although there would be
improvement in every quarter. 30
CONSUMER NON-DURABLES
In our opinion, India's consumer non-durables sector saw a challenging 2002, as
a third straight year of below-average rainfall negatively impacted rural
incomes while rising competitive pressures and commoditization of certain
products also dampened industry profitability. 31 Nevertheless, top-quality
companies, such as HINDUSTAN LEVER LTD. and ITC LTD., were able to weather the
slowdown better than most rivals by concentrating their resources on their
top-selling brands and discontinuing under-performing brands.
HINDUSTAN LEVER ("HLL") is the Fund's largest consumer non-durables holding,
representing 7.3% of the Fund's net assets. As India's biggest consumer products
company, HLL sells through one million shops in the country, with more than half
its soaps and detergents sold in most of the country's 580,000 villages. As
reported in its most recent earnings announcement, HLL's fiscal third quarter
profit (three months ended September 30, 2002) rose 3.5% to Rs 4.1 billion from
Rs 3.99 billion in the year-earlier period. However, reflecting the difficult
environment, sales reportedly declined for the third straight quarter, dropping
7.2% to Rs 23.6 billion from Rs 25.5 billion in the year earlier period. 32
ITC LTD. ("ITC") is the Fund's second-largest holding in this sector,
representing 3.7% of the Fund's net assets. ITC is also India's biggest
cigarette maker and 32% owned by British American Tobacco, Ltd, has seen more
resilient demand, in no small part due to the higher demand inelasticity of
cigarettes. As a result of this, ITC has been able to raise prices, especially
of its premium brands, while also boosting sales of its lower-end brands. As
reported in its most recent earnings announcement, ITC's second quarter fiscal
year profit (three months ending September 30, 2002) rose 12.4% to Rs 3.8
billion from Rs 3.39 billion in the year earlier period. 33
PHARMACEUTICALS
The pharmaceutical sector now accounts for 10.2% of the Fund's holdings. Driven
by steady growth in the domestic market and exciting growth opportunities in the
export/generic markets, we believe Indian pharmaceutical companies are likely to
continue showing solid performance over the coming years. In our opinion there
still remains immense scope for exports, especially to the U.S., where the
regulatory authority, the Food & Drug Administration ("FDA") has recently issued
rulings increasingly favorable to the generic drug industry. 34 Similar to the
Information Technology and Software industry, we believe Pharmaceuticals is an
industry where India holds key competitive advantages, most notably, a large,
low-cost pool of talented scientists and a huge domestic market.
----------
30 ICICI BANK 2ND-QTR PROFIT CRIMPED BY MERGER COSTS, Bloomberg, October 31,
2002
31 CONSUMER - INDIA, Goldman Sachs, December 17, 2002
32 HINDUSTAN LEVER 3RD-QTR NET RISES 3.5%, SALES DROP 7%, Bloomberg, October 25,
2002
33 ITC 2ND-QTR PROFIT RISES 12% ON HIGHER SALES, Bloomberg, October 24, 2002
34 INDIA EQUITY GUIDE - PHARMACEUTICALS, SSB, September 13, 2002
12
THE INDIA FUND, INC.
RANBAXY LABORATORIES LTD. ("RANBAXY") is India's largest pharmaceutical company
measured by sales. Ranbaxy is also the Fund's largest holding in the
pharmaceuticals sector, representing 5.8% of the Fund's net assets. The
company's international business (its products are sold in over 70 countries)
should be the key growth driver over the medium term. While the U.S. market is
the most important in terms of sales and profits, Europe and Latin America are
showing high growth rates as well, albeit, from a low base. In the U.S.,
currently about 30 products are waiting for FDA approval, we believe putting
Ranbaxy in good stead for 2003. In its most recent earnings release, for the
fiscal third quarter (three months ended September 30, 2002), net profit surged
79% to Rs 1.6 billion from Rs 891 million in the year earlier period, driven in
large part by sales of its version of GlaxoSmithKline Plc's antibiotic
Ceftin. 35
DR. REDDY'S LABORATORIES LTD. is the Fund's second-largest holding in the
pharmaceuticals sector, representing 3.0% of the Fund's net assets. It continues
to build its international business and remains committed to research and
development. Management's ultimate objective is to become a discovery-led global
pharmaceutical company. In its most recent earnings announcement, fiscal second
quarter earnings (three months ended September 30, 2002) declined 31% to Rs 992
million from Rs 1.4 billion rupees in the year earlier period. The sharp fall
was mainly a result of the expiration in the U.S. of the exclusive marketing
period for its Prozac antidepressant copy, Fluoxetine. 36
VEHICLES
The Fund maintains an overweight position relative to the benchmark index in
motor vehicles, with the largest holding being TATA ENGINEERING AND LOCOMOTIVE
COMPANY LTD. ("TATA ENGINEERING"). Automobile sales in India have been in a
cyclical recovery for the past 12-15 months, which is expected to continue
during 2003. We believe sales growth is also being aided by positive structural
factors such as improved availability of consumer financing, as well as
replacement demand for commercial vehicles.
Tata Engineering, is the Fund's largest motor vehicle holding, representing 1.7%
of the Fund's net assets, is a credible turnaround story with management's cost
reduction efforts expected to continue paying off. As reported in its most
recent earnings release for its fiscal second quarter (three months ended
September 30, 2002), net profit registered Rs 588 million compared with a year
earlier loss of Rs 618 million. Sales reportedly surged 25% to Rs 25.7 million
versus Rs 20.6 million previously. 37
BAJAJ AUTO LTD. ("BAJAJ AUTO") is the Fund's second-largest holding in the
vehicles sector. It represents 1.6% of the Fund's net assets. Bajaj Auto is
India's second-largest two-wheeler company. The corporation has also been
reportedly undergoing a corporate restructuring, slashing costs and boosting
production to compete with its bigger rival, Hero Honda. We believe management's
efforts have started to bear fruit. As reported in its most recent earnings
release, for its fiscal third quarter (three months ended December 31, 2002),
net profit surged 24% to Rs 1.3 billion, versus 1.08 billion in the year-earlier
period. 38
----------
35 RANBAXY'S PROFIT ROSE 79% IN 3RD QTR ON U.S. SALES, Bloomberg, October 16,
2002
36 INDIA'S DR. REDDY'S 2ND-QTR PROFIT DROPS 31%, Bloomberg, October 24, 2002
37 TATA ENGINEERING POSTS 2ND-QTR NET OF 588 MLN RUPEES, Bloomberg, October 30,
2002
38 Bajaj Auto 3rd-Qtr Profit Rises 24% on Motorcycles, Bloomberg, January 15,
2003
13
THE INDIA FUND, INC.
OUTLOOK
Looking at 2003, we find plenty of reasons to be bullish on Indian equities. We
believe corporate fundamentals are the best they have been in a decade, with
free cash flows turning significantly positive, and still rising. Return on
equity (ROE) is high for most stocks, with Corporate India's average ROE at 18%
and sustaining. Balance sheets also reveal low leverage, with net corporate
gearing also at approximately 18%. 39 In comparison to the rest of Asia, we
believe the overall quality of public-listed Indian companies is demonstrably
superior.
On the macroeconomic front, India has been enjoying an industrial recovery that
we fully expect to sustain through 2003 - notwithstanding the recent weak
monsoon. And although consumer credit is booming, it still remains under 3% of
GDP, which is far below the level in other Asian countries. 40 We believe ample
liquidity, the change in mindset of the banks (triggered in large part by the
new foreclosure law), and a continuing stable, low interest rate regime should
make consumer credit a major growth driver in India for years to come.
In our opinion, the seminal issue for Indian equities will be the outlook for
its economic reform measures, i.e., the privatization program and further
industry deregulation. We believe it is no exaggeration to say that the
government's progress on economic reforms will be the make-or-break factor for
both the economy and the equity market. It is important for investors to
realize, too, that tied in with the outlook for reforms and privatization is the
towering budget deficit. The two issues are arguably different sides of the same
coin. In our opinion, the only way the government can effectively control its
budget deficit (combined state and federal deficit is currently estimated at 10%
of GDP) is: (1) to sell off inefficient, money-draining state-owned assets; and
(2) to deregulate industries further. Deregulation will, in our opinion, do away
with the massive government subsidies and corruption that are draining the
treasury and hindering the growth of the economy. On the corporate level, we
believe Indian managements have clearly been able to show their capability when
the government is able to clear up macroeconomic distortions and simply get out
of the way to let market forces take over.
We firmly believe that the government's reform/privatization efforts will see
further progress in 2003, a key factor underpinning our bullish stance on the
Indian market in the current year.
Punita Kumar-Sinha
/s/ PUNITA KUMAR-SINHA
Portfolio Manager
January 14, 2003
----------
39 INDIA EQUITY GUIDE - INVESTMENT SUMMARY, SSB, September 13, 2002
40 INDIA DELIVERS THE FINANCIAL GOODS, Far Eastern Economic Review, December 12,
2002
14
THE INDIA FUND, INC.
--------------------------------------------------------------------------------
CHANGE IN INVESTMENT POLICY
On April 30, 2002, the Board of Directors of the Fund approved a change to the
Fund's investment policies in connection with new Rule 35d-1 under the
Investment Company Act of 1940. Under normal conditions, the Fund will invest at
least 80% of the value of its assets in equity securities of Indian Companies
(as defined in the Fund's prospectus.) Previously, the Fund's investment
policies stated that the Fund would invest at least 65% of the value of its
assets in such securities. The Board also adopted a policy to provide the
stockholders of the Fund with 60 days' notice of any change to the investment
policy adopted if such notice is required by Rule 35d-1.
TENDER OFFER
The Fund conducted a tender offer during the third quarter of 2002 for up to 10%
of the Fund's outstanding shares of common stock for cash at a price equal to
95% of the Fund's net asset value per share at the termination of the tender
offer. The tender offer commenced on August 30, 2002 and expired on September
27, 2002. In connection with the tender offer, the Fund purchased 3,063,433
shares of capital stock at a total cost of $33,305,126, including expenses of
$97,512.
SHARE REPURCHASE PROGRAM
The Board of Directors of the Fund has authorized the Fund to repurchase from
time to time in the open market up to 4,000,000 shares of the Fund's common
stock at such times and in such amounts as management believes will enhance
shareholders value, subject to review by the Fund's Board of Directors. During
the year ended December 31, 2002, the Fund repurchased a total of 89,000 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.
--------------------------------------------------------------------------------
15
THE INDIA FUND, INC.
DECEMBER 31, 2002
SCHEDULE OF INVESTMENTS
INDIA (100% OF HOLDINGS)
COMMON STOCKS (99.26% of holdings)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
--------------------------------------------------------------------------------------------------------
CEMENT 1.55%
1,565,008 Associated Cement Companies Ltd ................ $ 4,563,088 $ 5,388,589
700 Gujarat Ambuja Cements Ltd ..................... 2,705 2,385
47,840 Panyam Cements and Mineral Industries Ltd*+ .... 481,083 35,758
------------ ------------
5,046,876 5,426,732
------------ ------------
CHEMICALS 0.60%
504,500 Gujarat Alkalies & Chemicals Ltd+ .............. 341,908 313,537
1,657,800 Indo Gulf Corporation Ltd ...................... 1,727,495 1,775,350
------------ ------------
2,069,403 2,088,887
------------ ------------
COMPUTER HARDWARE 2.04%
473,601 Digital Globalsoft Ltd ......................... 5,143,020 6,207,187
287,403 Moser-Baer India Ltd ........................... 1,782,053 924,245
------------ ------------
6,925,073 7,131,432
------------ ------------
COMPUTER SOFTWARE & PROGRAMMING 18.49%
850,030 HCL Technologies Ltd ........................... 4,425,544 3,307,938
416,458 Infosys Technologies Ltd ....................... 3,292,099 41,438,665
55,849 Mphasis BFL Ltd ................................ 658,309 834,416
83,250 Polaris Software Lab Ltd ....................... 362,861 312,340
2,528,629 Satyam Computer Services Ltd ................... 1,471,874 14,654,977
1,300 Silverline Technologies Ltd+ ................... 4,371 614
118,150 Wipro Ltd ...................................... 3,871,441 4,017,963
------------ ------------
14,086,499 64,566,913
------------ ------------
COMPUTER TRAINING 0.61%
544,440 NIIT Ltd ....................................... 4,009,437 2,126,098
------------ ------------
4,009,437 2,126,098
------------ ------------
CONSUMER MISCELLANEOUS 1.41%
2,428,700 Zee Telefilms Ltd .............................. 12,591,404 4,938,442
------------ ------------
12,591,404 4,938,442
16
THE INDIA FUND, INC.
DECEMBER 31, 2002
SCHEDULE OF INVESTMENTS (CONTINUED)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
--------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES 11.71%
179,567 Godfrey Philips India Ltd ...................... $ 3,109,433 $ 1,274,008
470,799 Godrej Consumer Products Ltd ................... 991,812 925,398
6,799,951 Hindustan Lever Ltd ............................ 25,641,961 25,774,585
936,851 ITC Ltd ........................................ 16,379,501 12,902,952
------------ ------------
46,122,707 40,876,943
------------ ------------
DIVERSIFIED INDUSTRIES 3.09%
721,502 Grasim Industries Ltd .......................... 5,469,830 4,743,557
135,870 Gujarat Gas Company Ltd ........................ 1,618,157 1,331,781
209,500 Hinduja TMT Ltd ................................ 1,388,956 1,217,459
1,744 Indian Rayon and Industries Ltd ................ 6,451 3,421
591,831 Larsen & Toubro Ltd ............................ 3,960,462 2,635,778
402,008 Raymond Ltd .................................... 859,901 855,158
------------ ------------
13,303,757 10,787,154
------------ ------------
ELECTRICITY 0.00%
4 CESC Ltd+ ...................................... 29 2
150 Tata Power Company Ltd ......................... 357 349
------------ ------------
386 351
------------ ------------
ELECTRONICS & ELECTRICAL EQUIPMENT 2.79%
723 Alstom Projects India Ltd+ ..................... 1,213 772
120,100 Bharat Electronics Ltd ......................... 456,301 437,444
2,280,963 Bharat Heavy Electricals Ltd ................... 8,261,993 8,210,517
1,083,600 Crompton Greaves Ltd+ .......................... 1,084,792 1,076,821
------------ ------------
9,804,299 9,725,554
------------ ------------
ENGINEERING 1.06%
495,426 Asea Brown Boveri Ltd .......................... 5,551,958 2,569,087
378,200 Thermax India Ltd .............................. 1,041,255 1,116,065
------------ ------------
6,593,213 3,685,152
------------ ------------
17
THE INDIA FUND, INC.
DECEMBER 31, 2002
SCHEDULE OF INVESTMENTS (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
--------------------------------------------------------------------------------------------------------
EXTRACTIVE INDUSTRIES 2.95%
68,985 Gujarat Mineral Development Corporation Ltd .... $ 138,073 $ 135,236
314,355 Hindalco Industries Ltd ........................ 5,018,811 3,844,048
1,097,828 National Aluminium Company Ltd ................. 1,367,895 2,120,102
576,800 Oil and Natural Gas Corporation Ltd ............ 4,380,395 4,207,814
600 Sesa Goa Ltd ................................... 4,568 860
------------ ------------
10,909,742 10,308,060
------------ ------------
FERTILIZERS 0.16%
876,945 Gujarat Narmada Valley Fertilizers Company Ltd . 542,545 572,438
700 Nagarjuna Fertilizers and Chemicals Ltd+ ....... 764 87
50 Southern Petrochemical Industries
Corporation Ltd+ ............................. 43 7
------------ ------------
543,352 572,532
------------ ------------
FINANCE 12.11%
272,550 Bank of Baroda ................................. 268,702 434,545
1,228,260 Bank of Punjab Ltd ............................. 412,475 370,143
477,675 Corporation Bank ............................... 1,294,451 1,223,824
286,600 Federal Bank Ltd ............................... 539,006 525,085
1,424,562 HDFC Bank Ltd .................................. 6,612,558 6,506,343
26,100 HDFC Bank Ltd ADR .............................. 367,443 351,306
992,410 Housing Development Finance Corporation Ltd .... 6,795,728 7,413,584
3,758,721 ICICI Bank Ltd ................................. 10,074,379 11,017,484
31,125 ICICI Bank Ltd ADR ............................. 187,746 202,312
1,884,938 IDBI Bank Ltd .................................. 1,113,886 1,027,970
200,000 ING Vysya Bank Ltd ............................. 1,071,855 1,049,218
2,200 Oriental Bank of Commerce ...................... 2,008 2,280
1,828,933 State Bank of India ............................ 7,752,803 10,780,981
98,000 State Bank of India GDR ........................ 1,117,250 1,372,000
------------ ------------
37,610,290 42,277,075
------------ ------------
FOOD 0.20%
63,588 Nestle India Ltd ............................... 696,010 694,031
50 Tata Tea Ltd ................................... 179 181
276 United Breweries Holdings Ltd+ ................. 1,110 175
184 United Breweries Ltd+ .......................... 1,118 435
------------ ------------
698,417 694,822
------------ ------------
18
THE INDIA FUND, INC.
DECEMBER 31, 2002
SCHEDULE OF INVESTMENTS (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
--------------------------------------------------------------------------------------------------------
HOTELS & LEISURE 0.00%
21 Indian Hotels Company Ltd ...................... $ 343 $ 83
------------ ------------
343 83
------------ ------------
HOUSEHOLD APPLIANCES 0.00%
400 Phil Corporation Ltd+ .......................... 1,093 58
200 Samtel Color Ltd ............................... 395 149
450 Videocon Appliances Ltd+ ....................... 2,629 101
194 Videocon International Ltd+ .................... 174 126
------------ ------------
4,291 434
------------ ------------
MEDIA 1.06%
1,145,200 Balaji Telefilms Ltd ........................... 2,058,027 2,031,268
376,000 ETC Networks Ltd+ .............................. 376,191 571,253
550,000 Pritish Nandy Communications Ltd ............... 2,152,749 294,213
393,259 Sri Adhikari Brothers Television Network Ltd ... 1,263,903 775,856
250,000 Vans Information Ltd+ .......................... 573,395 26,069
------------ ------------
6,424,265 3,698,659
------------ ------------
PACKAGING 0.01%
12,133 Essel Propack Ltd .............................. 62,600 49,076
------------ ------------
62,600 49,076
------------ ------------
PETROLEUM RELATED 17.14%
773,753 Bharat Petroleum Corporation Ltd ............... 3,630,538 3,497,622
2,700 Chennai Petroleum Corporation Ltd .............. 3,200 1,540
2,270,328 Hindustan Petroleum Corporation Ltd ............ 12,482,694 13,633,808
374,960 Indian Oil Corporation Ltd ..................... 1,763,015 1,863,462
524 Indian Petrochemicals Corporation Ltd .......... 1,112 863
32,000 Niko Resources Ltd ADR ......................... 463,956 524,864
6,441,287 Reliance Industries Ltd ........................ 31,891,188 39,991,064
25,000 Reliance Industries Ltd 144A GDR ............... 247,500 312,500
------------ ------------
50,483,203 59,825,723
------------ ------------
19
THE INDIA FUND, INC.
DECEMBER 31, 2002
SCHEDULE OF INVESTMENTS (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
--------------------------------------------------------------------------------------------------------
PHARMACEUTICALS 10.25%
184,576 Cipla Ltd ...................................... $ 2,335,157 $ 3,461,907
557,158 Dr. Reddy's Laboratories Ltd ................... 3,620,353 10,436,112
7,000 Dr. Reddy's Laboratories Ltd ADR ............... 150,918 135,310
405 Glaxosmithkline Pharmaceuticals Ltd ............ 3,165 2,581
100 IPCA Laboratories Ltd .......................... 309 377
219 Nicholas Piramal Ltd ........................... 2,326 1,115
100 Orchid Chemicals & Pharmaceuticals Ltd ......... 339 163
1,641,705 Ranbaxy Laboratories Ltd ....................... 11,326,139 20,311,610
114,800 Sun Pharmaceutical Industries Ltd .............. 461,858 1,429,314
------------ ------------
17,900,564 35,778,489
------------ ------------
RETAIL STORES 0.48%
487,556 Pantaloon Retail India Ltd+ .................... 474,246 548,564
1,138,000 SB&T International Ltd ......................... 787,677 821,164
81,600 Trent Ltd ...................................... 273,103 289,557
------------ ------------
1,535,026 1,659,285
------------ ------------
STEEL 1.79%
2,180,279 Steel Authority of India Ltd+ .................. 490,390 466,066
1,830,616 Tata Iron and Steel Company Ltd ................ 5,737,616 5,783,908
------------ ------------
6,228,006 6,249,974
------------ ------------
TELECOMMUNICATIONS 1.67%
2,947,237 Mahanagar Telephone Nigam Ltd .................. 10,011,322 5,829,937
------------ ------------
10,011,322 5,829,937
------------ ------------
TELECOMMUNICATIONS EQUIPMENT 0.81%
179,300 GTL Ltd ........................................ 353,275 357,852
100 Himachal Futuristic Communications Ltd+ ........ 168 80
775,250 ITI Ltd ........................................ 501,148 350,843
1,267,600 Shyam Telecom Ltd+ ............................. 8,621,487 1,609,945
372,068 Sterlite Optical Technologies Ltd+ ............. 764,146 494,668
------------ ------------
10,240,224 2,813,388
------------ ------------
20
THE INDIA FUND, INC.
DECEMBER 31, 2002
SCHEDULE OF INVESTMENTS (continued)
COMMON STOCKS (continued)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
--------------------------------------------------------------------------------------------------------
TEXTILES - COTTON 0.00%
36 Arvind Mills Ltd+ .............................. $ 133 $ 17
------------ ------------
133 17
------------ ------------
TRANSPORTATION 1.14%
793,451 Container Corporation of India Ltd ............. 4,187,519 3,797,645
174,900 South East Asia Marine Engineering and
Construction Ltd+ ............................ 1,132,008 176,906
------------ ------------
5,319,527 3,974,551
------------ ------------
VEHICLE COMPONENTS 0.13%
125 FAG Bearings (India) Ltd ....................... 335 142
118,000 Swaraj Engines Ltd ............................. 1,298,970 467,940
------------ ------------
1,299,305 468,082
------------ ------------
VEHICLES 6.01%
1,374,090 Ashok Leyland Ltd .............................. 3,074,780 2,841,315
521,035 Bajaj Auto Ltd ................................. 4,241,984 5,458,101
907,437 Hero Honda Motors Ltd .......................... 3,299,153 5,136,151
600 Hindustan Motors Ltd+ .......................... 467 125
623,989 Mahindra & Mahindra Ltd ........................ 1,897,349 1,466,602
1,792,158 Tata Engineering and Locomotive Company Ltd+ ... 4,020,570 6,030,548
41,527 Tata Engineering and Locomotive Company Ltd -
Warrants Expire 9/30/04+ ..................... 0 46,334
------------ ------------
16,534,303 20,979,176
------------ ------------
TOTAL COMMON STOCKS ............................ 296,357,967 346,533,021
------------ ------------
PREFERRED STOCK (0.00% of holdings)
PHARMACEUTICALS
884,000 Sun Pharmaceutical Industries Ltd
Preference Shares+ ........................... 0 20,279
------------ ------------
TOTAL PREFERRED STOCK .......................... 0 20,279
------------ ------------
21
THE INDIA FUND, INC.
DECEMBER 31, 2002
SCHEDULE OF INVESTMENTS (concluded)
SHORT-TERM INVESTMENTS (0.74% of holdings)
NUMBER PERCENT OF
OF SHARES SECURITY HOLDINGS COST VALUE
--------------------------------------------------------------------------------------------------------
2,421,806 HDFC Liquid Fund+ .............................. $ 591,474 $ 599,264
2,409,158 Prudential ICICI Liquid Plan+ .................. 724,788 736,665
3,266,586 Standard Chartered Grindlays Cash Fund+ ........ 747,608 756,138
1,917,532 Zurich India Liquidity Fund+ ................... 491,029 493,588
------------ ------------
2,554,899 2,585,655
------------ ------------
TOTAL SHORT-TERM INVESTMENTS ................... 2,554,899 2,585,655
------------ ------------
TOTAL INDIA .................................... 298,912,866 349,138,955
------------ ------------
TOTAL INVESTMENTS** ..................... 100.00% $298,912,866 $349,138,955
============ ============
----------
FOOTNOTES AND ABBREVIATIONS
ADR - American Depository Receipts
GDR - Global Depository Receipts
+ Non-income producing security.
* At fair value as determined under the supervision of the Board of
Directors.
** Aggregate cost for Federal income tax purposes is $303,262,003.
The aggregate gross unrealized appreciation (depreciation) for all
securities is as follows:
Excess of value over tax cost $ 91,603,732
Excess of tax cost over value (45,726,780)
------------
$ 45,876,952
============
See accompanying notes to financial statements.
22
THE INDIA FUND, INC.
DECEMBER 31, 2002
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Investments, at value (Cost $298,912,866) ............................... $349,138,955
Cash (including Indian Rupees of $2,566,669 with a cost of $2,565,600) .. 4,205,768
Receivables:
Dividends and reclaims of excess taxes withheld .................... 394,455
Interest ........................................................... 391
Securities sold .................................................... 308,589
Prepaid expenses ........................................................ 145,710
------------
TOTAL ASSETS .......................................... 354,193,868
------------
LIABILITIES
Payable for securities purchased ........................................ 119,175
Distribution payable .................................................... 2,343,527
Due to Investment Manager ............................................... 321,933
Due to Administrator .................................................... 61,033
Accrued expenses ........................................................ 509,820
------------
TOTAL LIABILITIES ..................................... 3,355,488
------------
NET ASSETS ............................................ $350,838,380
============
NET ASSET VALUE PER SHARE ($350,838,380/27,570,900
SHARES ISSUED AND OUTSTANDING) ........................ $ 12.72
============
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 ......................................................... 460,635,809
Cost of 6,436,233 shares repurchased .................................... (75,640,440)
Overdistribution of net investment income ............................... (277,954)
Accumulated net realized loss on investments ............................ (84,025,823)
Net unrealized appreciation in value of investments, foreign
currency holdings and on translation of other assets and liabilities
denominated in foreign currency .................................... 50,112,781
------------
NET ASSETS ............................................ $350,838,380
============
See accompanying notes to financial statements.
23
THE INDIA FUND, INC.
FOR THE YEAR ENDED
STATEMENT OF OPERATIONS DECEMBER 31, 2002
INVESTMENT INCOME
Dividends (net of Indian taxes withheld of $1,115,235) ......................... $ 8,710,745
-----------
TOTAL INVESTMENT INCOME ...................................... 8,710,745
-----------
EXPENSES
Management fees ................................................... $4,021,761
Custodian fees .................................................... 823,096
Administration fees ............................................... 754,942
Legal fees ........................................................ 199,560
Insurance ......................................................... 158,972
Audit fees ........................................................ 127,206
Transfer agent fees ............................................... 58,578
Directors' fees ................................................... 48,885
Printing .......................................................... 44,051
NYSE fees ......................................................... 33,248
ICI fees .......................................................... 14,619
Miscellaneous expenses ............................................ 55,024
---------
TOTAL EXPENSES ............................................... 6,339,942
-----------
NET INVESTMENT INCOME ........................................ 2,370,803
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN CURRENCY
HOLDINGS AND TRANSLATION OF OTHER ASSETS AND LIABILITIES DENOMINATED IN FOREIGN
CURRENCY:
Net realized loss on:
Security transactions ..................................................... (12,554,775)
Foreign currency related transactions ..................................... (137,200)
-----------
(12,691,975)
Net change in unrealized appreciation in value of investments, foreign currency
holdings and translation of other assets and liabilities denominated in
foreign currency .......................................................... 31,237,020
-----------
Net realized and unrealized gain on investments, foreign currency holdings and
translation of other assets and liabilities denominated in foreign currency 18,545,045
-----------
Net increase in net assets resulting from operations ........................... $20,915,848
===========
See accompanying notes to financial statements.
24
THE INDIA FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
-------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income ................................................. $ 2,370,803 $ 2,270,894
Net realized loss on investments and foreign currency
related transactions ............................................. (12,691,975) (26,293,962)
Net change in unrealized appreciation (depreciation) in value of
investments, foreign currency holdings and translation of
other assets and liabilities denominated in foreign currency ..... 31,237,020 (107,009,155)
------------ -------------
Net increase (decrease) in net assets resulting from operations ....... 20,915,848 (131,032,223)
------------ -------------
DISTRIBUTION TO SHAREHOLDERS
Net investment income ($0.085 and $0.07 per share respectively) ....... (2,343,527) (2,150,634)
------------ -------------
Decrease in net assets resulting from distributions ................... (2,343,527) (2,150,634)
------------ -------------
CAPITAL SHARE TRANSACTIONS
Shares repurchased under Stock Repurchase Plan
(89,000 shares and 480,000 shares respectively) .................. (920,118) (5,095,214)
Shares repurchased under Tender Offer
(3,063,433 shares), including expenses of $97,512 ................ (33,305,126) --
------------ -------------
Net decrease in net assets resulting from capital share transactions .. (34,225,244) (5,095,214)
------------ -------------
Total decrease in net assets .......................................... (15,652,923) (138,278,071)
NET ASSETS
Beginning of year ..................................................... 366,491,303 504,769,374
------------ -------------
End of year ........................................................... $350,838,380 $ 366,491,303
============ =============
See accompanying notes to financial statements.
25
THE INDIA FUND, INC.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, 2002 DEC. 31, 2001 DEC. 31, 2000 DEC. 31, 1999 DEC. 31, 1998
----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year ..... $ 11.93 $ 16.18 $ 23.21 $ 8.85 $ 8.11
-------- -------- -------- -------- --------
Net investment income (loss) ........... 0.09 0.07 (0.16) (0.10) (0.03)
Net realized and unrealized gain (loss)
on investments, foreign currency
holdings, and translation of other
assets and liabilities denominated
in foreign currency ................. 0.76 (4.29) (7.27) 14.36 0.77
-------- -------- -------- -------- --------
Net increase (decrease) from
investment operations ............... 0.85 (4.22) (7.43) 14.26 0.74
-------- -------- -------- -------- --------
Less: Dividends and Distributions
Dividends from net investment
income ............................ (0.09) (0.07) -- -- --
-------- ------ ------ ------ --------
Total dividends and distributions ...... (0.09) (0.07) -- -- --
-------- -------- -------- -------- --------
Capital share transactions
Anti-dilutive effect of Share
Repurchase Program .................. 0.01 0.04 0.40 0.10 --
Anti-dilutive effect of
Tender Offer ........................ 0.02 -- -- -- --
-------- -------- -------- -------- --------
Total capital share transactions ....... 0.03 0.04 0.40 0.10 --
-------- -------- -------- -------- --------
Net asset value, end of period ......... $ 12.72 $ 11.93 $ 16.18 $ 23.21 $ 8.85
======== ======== ======== ======== ========
Per share market value, end of year .... $10.5900 $ 9.5000 $12.0625 $16.7500 $ 6.3125
TOTAL INVESTMENT RETURN BASED
ON MARKET VALUE* .................... 12.36% (20.69)% (27.99)% 165.35% (14.41)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000s) ...... $350,838 $366,491 $504,769 $768,948 $300,523
Ratios of expenses to average net assets 1.73% 1.70% 1.59% 1.84% 2.03%
Ratios of net investment income
(loss) to average net assets ........ 0.65% 0.57% (0.75)% (0.68)% (0.34)%
Portfolio turnover ..................... 39.36% 16.06% 19.24% 18.65% 28.85%
See page 23 for footnotes.
26
THE INDIA FUND, INC.
FINANCIAL HIGHLIGHTS (concluded)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
* 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.
See accompanying notes to financial statements.
27
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS
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 accounting principles
generally accepted in the United States of America 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 $35,758 (0.01% of net
assets) at December 31, 2002, 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
28
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
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.
Income and capital gain distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP.
The tax character of distributions paid during year ended December 31, 2002:
Ordinary income ...................................................................................... $ 2,343,527
=============
At December 31, 2002, the components of net assets (excluding paid in capital)
on a tax basis were as follows:
Currently Distributable Ordinary Income ................................. $ 0
Plus/Less: Cumulative Timing Differences ................................ (277,954)
------------
Accumulated net investment loss ...................................................................... $ (277,954)
-------------
Tax basis capital loss carryover ........................................ $(76,658,179)
Plus/Less: Cumulative Timing Differences ................................ (3,018,507)
------------
Accumulated capital loss ............................................................................. (79,676,686)
-------------
Book unrealized foreign exchange loss ................................................................ (113,308)
-------------
Book unrealized appreciation ............................................ $ 50,226,089
Plus/Less: Cumulative Timing Differences ................................ (4,349,137)
------------
Unrealized appreciation .............................................................................. 45,876,952
-------------
Net assets (excluding paid in capital) $ (34,190,996)
=============
The differences between book and tax basis unrealized appreciation is primarily
attributable to wash sales and a dividend overdistribution. The cumulative
timing difference for the capital loss carryover is due to Post October Losses.
Net Asset Value ...................................................................................... $ 350,838,380
Paid in Capital ...................................................................................... (385,029,376)
-------------
Net assets (excluding paid in capital) ............................................................... $ (34,190,996)
=============
29
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
At December 31, 2002, the Fund had a capital loss carryover of $76,658,179 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, $9,970,780 will expire in 2005, $34,828,858 will expire in 2006,
$20,935,877 will expire in 2009 and $10,922,664 will expire in 2010.
The Fund's realized capital losses incurred after October 31, 2002, but before
December 31, 2002, are deemed to arise on the first business day of the
following year. The Fund incurred and elected to defer such realized capital
losses of $3,018,507.
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 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.
30
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
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 accounting principles generally accepted in the United States of
America. 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, 2002, the Fund reclassified $137,200 from
accumulated net realized loss on investments to overdistribution of net
investment income as a result of permanent book and tax differences relating
primarily to realized foreign currency losses. Net investment income and net
assets were not affected by the reclassifications.
NOTE B: MANAGEMENT, INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
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"). Imperial
Investment Advisors Private Limited ("Imperial"), an Indian company and
subsidiary of CIBC WM and Advantage India, Inc., serves since May 1, 2002 as the
Fund's Country Adviser (the "Country Adviser") under the terms of an advisory
agreement (the "Country Advisory Agreement"). From August 1, 2001 to April 30,
2002, Advantage India, Inc. served as the Fund's Country Adviser under similar
terms. 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
provides statistical and factual information and research regarding economic,
political factors and investment opportunities in India to the Investment
Manager. For their services, the Investment Manager receives 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 a fee to be agreed upon by the
Investment Manager and the Country Adviser from time to time. For the year ended
December 31, 2002, fees earned by the Investment Manager amounted to $4,021,761.
31
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
CIBC WM, an indirect wholly-owned subsidiary of Canadian Imperial Bank of
Commerce ("CIBC"), 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, 2002,
these fees amounted to $731,229. 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, 2002, fees and expenses of the
Mauritius Administrator amounted to $23,713. At December 31, 2002, 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
$139,894,122 and $177,636,120 respectively, for the year ended December 31,
2002.
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 (the "tax treaty" or "treaty"). 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. Under current regulations, a fund which is a tax resident
in Mauritius under the treaty, but has no branch or permanent establishment in
India, will not be subject to capital gains tax in India on the sale of
securities but is subject to a 15% withholding tax on dividends declared,
distributed or paid by an Indian company prior to June 1, 1997 and after March
31, 2002. During the period June 1, 1997 through March 31, 2002, dividend income
from domestic companies was 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 21% (20% prior to April 1, 2002).
The Fund will, in any year that it has taxable income for Mauritius tax
purposes, elect to pay tax on its net income for Mauritius tax purposes at any
rate between 0% and 35%.
32
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
In March 2000, the Indian tax authorities issued an assessment order ("March
2000 Assessment Order") with respect to the Fund's Indian income tax return
filed for the fiscal year ended March 31, 1997 which denied the benefits of the
tax treaty between India and Mauritius. In the March 2000 Assessment Order, the
Indian tax authorities held that the Fund is not a resident of Mauritius and
assessed tax on the dividend income for the year ended March 31, 1997 at the
rate of 20%, instead of the 15% rate claimed by the Fund under the tax treaty
between India and Mauritius. Similar assessment orders were issued to several
other mutual fund companies relying on the tax treaty between India and
Mauritius. On April 13, 2000, the Central Board of Direct Taxes ("CBDT") of the
Ministry of Finance in India issued a circular ("Circular 789") "clarifying" its
position on Indian taxation under the tax treaty between India and Mauritius
that, wherever a certificate of residence is issued by the Mauritian
authorities, such certificate will constitute sufficient evidence for accepting
the status of residence as well as beneficial ownership for applying the tax
treaty between India and Mauritius. The Fund, relying on Circular 789 and in
absence of a rectification order from the assessing officer, filed an appeal
against the March 2000 Assessment Order with the Indian tax authorities.
Hearings on the appeal were scheduled in which the Fund made submissions to the
Indian tax authorities, however, the hearings were adjourned by Indian tax
authorities, each time without a decision.
Previously, however, an Indian public interest group had initiated litigation in
the Indian courts challenging Circular 789. In connection with this litigation,
the Delhi High Court, in May 2002, passed an order invalidating Circular 789.
The history of past assessments by the Indian tax authorities (prior to issuance
of Circular 789) and the arguments made in the recent Delhi High Court ruling
suggest that the Indian tax authorities may adopt an aggressive position and
investigate the taxability of Mauritius based funds, i.e., the Indian tax
authorities may look beyond the tax residency certificate issued by Mauritius
tax authorities to Mauritius based funds. The Indian tax authorities may also
seek to reopen previously completed assessments of the Fund's Indian income tax
returns and deny the benefits of the tax treaty between India and Mauritius to
the Fund. During the period the public interest litigation was pending with the
high courts in India, the Indian tax authorities were generally allowing the
benefits of the tax treaty between India and Mauritius to Mauritius based funds
relying on Circular 789, however, the assessment orders issued were conditional
upon the outcome of the public interest litigation.
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 prior sale of securities, which are currently at the rates
of 10.5% on long-term capital gains and 31.5% on short-term capital gains (10%
and 30%, respectively, prior to April 1, 2002). Further, the Fund, if the treaty
benefits are denied, would be subject to tax on dividend income earned by the
Fund prior to June 1, 1997 and subsequent to March 31, 2002, at a higher rate,
which is currently 21% (20% prior to April 1, 2002), instead of 15%.
33
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
In addition, for the fiscal years for which the assessment of the Fund's Indian
tax returns has been completed, the Indian tax authorities have denied the
carryforward of realized capital losses incurred by the Fund in such fiscal
years on the grounds that the Fund was not subject to taxes on realized capital
gains in India due to the application of the benefits of the tax treaty between
India and Mauritius to the Fund. Therefore, the Fund may not, in a year in which
it has net realized capital gains and the benefits of the tax treaty between
India and Mauritius are denied by the Indian tax authorities, be able to offset
capital losses realized in previous years.
The Fund continues to: (i) comply with the requirements of the tax treaty
between India and Mauritius; (ii) be a tax resident of Mauritius; and (iii)
maintain that its central management and control resides in Mauritius and
therefore management believes that the Fund will be able to obtain the benefits
of the tax treaty between India and Mauritius. Accordingly, no provision for
Indian income taxes has been made in accompanying financial statements of the
Fund.
The foregoing is based upon current interpretation and practice and is subject
to future changes in Indian or Mauritian tax laws and in the treaty between
India and Mauritius.
Although management of the Fund expects to obtain the benefits of the tax
treaty, if the Fund were denied such benefits retrospectively, the Fund could be
subject to cumulative income taxes, interest and penalties. Management estimates
that the amount of taxes and interest, based on realized gains through December
31, 2002 and unrealized gains as of December 31, 2002 could be in the range of
$7 million to $41 million (2% to 12% of the Fund's net assets at December 31,
2002). This range does not include penalties which could be assessed as such
penalties are not determinable. The aforementioned range is estimated utilizing
various assumptions as to how the Indian tax authorities might interpret the
calculation of Indian income taxes if the tax treaty benefits were denied.
Actual amounts, if incurred, could differ significantly from the aforementioned
estimate.
NOTE E: CAPITAL STOCK
During the year ended December 31, 2002, the Fund purchased 89,000 shares of
capital stock on the open market at a total cost of $920,118. The weighted
average discount of these purchases, comparing the purchase price to the net
asset value at the time of purchase, was 17.29%. These shares were purchased
pursuant to the Fund's Stock Repurchase Plan previously approved by the Fund's
Board of Directors authorizing the Fund to purchase up to 4,000,000 shares of
its capital stock on the open market.
During the year ended December 31, 2001, the Fund purchased 480,000 shares of
capital stock at a total cost of $5,095,214 and at a weighted average discount
of 19.11%.
34
THE INDIA FUND, INC.
DECEMBER 31, 2002
NOTES TO FINANCIAL STATEMENTS (concluded)
At a meeting of the Board of Directors held on January 29, 2002, the Board of
Directors approved a tender offer. Pursuant to the tender offer, the Fund
offered to purchase up to 10% of the Fund's outstanding shares of common stock
for cash at a price equal to 95% of the Fund's net asset value per share as of
the closing date. The tender offer commenced on August 30, 2002 and expired on
September 27, 2002. In connection with the tender offer, the Fund purchased
3,063,433 shares of capital stock at a total cost of $33,305,126, including
expenses of $97,512.
NOTE F: CONCENTRATION OF RISKS
At December 31, 2002, 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, 2002, the Fund has a concentration
of its investment in computer and technology-related industries. The values of
such investments may be affected by changes in such industry sectors.
NOTE G: SUBSEQUENT EVENTS
On December 10, 2002, CIBC and Fahnestock Viner Holdings Inc. ("Fahnestock")
announced that Fahnestock had agreed to acquire the U.S. brokerage and asset
management businesses of CIBC WM. The acquisition of the U.S. brokerage business
closed on January 3, 2003. Upon completion of Fahnestock's acquisition of the
asset management business, which is scheduled to occur on or about April 30,
2003 (subject to customary closing conditions), it is anticipated that
Fahnestock & Co., Inc., Fahnestock's principal subsidiary, or one of its
affiliated companies will replace CIBC WM as the Fund's administrator and
acquire ultimate control of Advantage and Imperial. As required under the
Investment Company Act of 1940, as amended (the "1940 Act"), the Fund's existing
Management Agreement and Country Advisory Agreement provide for their automatic
termination in the event of their "assignment" as defined in the 1940 Act.
Consummation of the acquisition by Fahnestock of the asset management business
of CIBC WM will constitute an assignment of the Fund's existing Management
Agreement and Country Advisory Agreement. At a meeting on January 17, 2003, the
Board of Directors of the Fund, including a majority of the independent
Directors, approved a new investment management agreement between the Fund and
Advantage and a new country advisory agreement between Advantage and Imperial.
As required by the 1940 Act, stockholders of the Fund will be asked to approve
the new investment management agreement and the new country advisory agreement
at the Fund's 2003 annual meeting of stockholders.
35
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, 2002, 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 of
America. 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 of
America, 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, 2002 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 19, 2003
36
THE INDIA FUND, INC.
INFORMATION ABOUT DIRECTORS AND OFFICERS
The business and affairs of The India Fund, Inc. (the "Fund") are managed under
the direction of the Board of Directors. Information pertaining to the Directors
and executive officers of the Fund is set forth below.
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
TERM OF OVERSEEN BY OTHER
POSITION OFFICE 1 AND DIRECTOR TRUSTEESHIPS/
WITH LENGTH OF PRINCIPAL OCCUPATION(S) (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND 1 TIME SERVED DURING PAST 5 YEARS THE FUND) HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
Charles F. Barber Director, Since 1993 Consultant; formerly 6 None
Chairman of Audit Chairman of the
66 Glenwood Drive Committee and Board, ASARCO
Greenwich, CT 06830 Member of the Incorporated.
Nominating
Age: 85 Committe,
Class II
------------------------------------------------------------------------------------------------------------------------------------
Leslie H. Gelb Director and Member Since 1994 President, The Council on 2 Britannica.com:
The Council on Foreign of the Audit and Foreign Relations Director of 13
Relations Nominating (1993-Present); Columnist registered
58 East 68th Street Committees, (1991-1993), Deputy investment companies
New York, NY 10021 Class I Editorial Page Editor advised by Salomon
(1986-1990) and Editor, Brothers Asset
Age: 65 Op-Ed Page (1988-1990), Management ("SBAM").
THE NEW YORK TIMES.
------------------------------------------------------------------------------------------------------------------------------------
J. Marc Hardy Director and Member Since 2002 Managing Director, 1 None
of the Nominating Mainstream Ltd.
De Chazal De Mee Building 10 Committee, Class III (independent financial
Frere Felix de Valois Street advisor) and Value
Port Louis, Mauritius Investors Ltd. (private
investment company).
Age: 48
------------------------------------------------------------------------------------------------------------------------------------
37
THE INDIA FUND, INC.
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
TERM OF OVERSEEN BY OTHER
POSITION OFFICE 1 AND DIRECTOR TRUSTEESHIPS/
WITH LENGTH OF PRINCIPAL OCCUPATION(S) (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND 1 TIME SERVED DURING PAST 5 YEARS THE FUND) HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
Luis Rubio Director and Member Since 1999 President, Centro de 7 None
of the Audit and Investigacion para el
Jaime Balmes No. 11, D-2 Nominating Desarrollo, A.C. (Center
Los Morales Polanco Committees, Class I of Research for
Mexico, D.F. 11510 Development)
(1981-Present); frequent
Age: 47 contributor of op-ed
pieces to THE LOS ANGELES
TIMES and THE WALL STREET
JOURNAL.
------------------------------------------------------------------------------------------------------------------------------------
Jeswald W. Salacuse Director, Member Since 1993 Henry J. Braker Professor 2 Director of 13
of the Audit of Commercial Law registered
The Fletcher School of Committee and (1990-Present), and investment companies
Law and Diplomacy Chairman of the formerly Dean advised by SBAM.
Tufts University Nominating Committee, (1986-1994), The Fletcher
Packard Avenue Class II School of Law &
Medford, MA 02155 Diplomacy, Tufts
University; formerly,
Age: 65 Fulbright Distinguished
Chair in Comparative Law,
University of Trento,
Italy.
------------------------------------------------------------------------------------------------------------------------------------
Gabriel Seeyave Director and Member Since 1994 Tax Advisor; formerly 1 Director, The United
of the Nominating Partner, De Chazal De Mee Basalt Products
De Chazal De Mee Building 10 Committee, Class I & Co. (chartered Limited.
Frere Felix de Valois Street accountants).
Port Louis, Mauritius
Age: 71
------------------------------------------------------------------------------------------------------------------------------------
38
THE INDIA FUND, INC.
------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
TERM OF OVERSEEN BY OTHER
POSITION OFFICE 1 AND DIRECTOR TRUSTEESHIPS/
WITH LENGTH OF PRINCIPAL OCCUPATION(S) (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND 1 TIME SERVED DURING PAST 5 YEARS THE FUND) HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
------------------------------------------------------------------------------------------------------------------------------------
Bryan McKigney Director, President Since 2000 Managing Director 1 None
and Secretary, (2000-Present) and
622 Third Avenue, 8th Floor Class III Executive Director
New York, NY 10017 (1993-2000), CIBC World
Markets Corp.; Managing
Age: 44 Director, CIBC
Oppenheimer Advisers LLC
and Advantage Advisers,
Inc.; President and
Secretary, The Asia
Tigers Fund, Inc.;
formerly, Vice President
and Division Executive,
Head of Derivative
Operations (1986-1993)
and Assistant Vice
President, Securities and
Commodity Operations
(1981-1985), Chase
Manhattan Bank.
------------------------------------------------------------------------------------------------------------------------------------
Howard M. Singer Director and Since 2000 Managing Director, CIBC 11 None
Chairman of the World Markets Corp., CIBC
622 Third Avenue 8th Floor Board of Directors, Oppenheimer Advisers LLC
New York, NY 10017 Class II and Advantage Advisers,
Inc.
Age: 39
------------------------------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICER WHO IS NOT A DIRECTOR
------------------------------------------------------------------------------------------------------------------------------------
Alan E. Kaye Treasurer Since 1999 Executive Director N/A N/A
(1976-Present), CIBC
622 Third Avenue 8th Floor World Markets Corp.;
New York, NY 10017 formerly, Vice President,
Oppenheimer & Co., Inc.
Age: 51 (1986-1994).
------------------------------------------------------------------------------------------------------------------------------------
1 The Fund's Board of Directors is divided into three classes: Class I, Class
II, and Class III. The terms of office of the Class I, Class II, and Class III
Directors expire at the Annual Meeting of Stockholders in the year 2005, year
2003, and year 2004, respectively, or thereafter in each case when their
respective successors are duly elected and qualified. The Fund's executive
officers are chosen each year at the first meeting of the Fund's Board of
Directors following the Annual Meeting of Stockholders, to hold office until
the meeting of the Board following the next Annual Meeting of Stockholders and
until their successors are duly elected and qualified.
39
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 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 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.
40
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 transactions 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.
41
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
400 Bellevue Parkway, Wilmington, Delaware 19809.
42
ADVANTAGE ADVISERS, INC.
THE INDIA FUND, INC.
(A WHOLLY OWNED SUBSIDIARY OF CIBC WORLD MARKETS CORP.)
--------------------------------------------------------------------------------
CIBC OPPENHEIMER PRIVACY POLICY
YOUR PRIVACY IS PROTECTED
At CIBC Oppenheimer, the Private Client Division of CIBC World Markets Corp., an
important part of our commitment to you is our respect for your right to
privacy. Protecting all the information we are either required to gather or
which accumulates in the course of doing business with you is a cornerstone of
our relationship with you. While the range of products and services we offer
continues to expand, and the technology we use continues to change, our
commitment to maintaining standards and procedures with respect to security
remains constant.
COLLECTION OF INFORMATION
The primary reason that we collect and maintain information is to more
effectively administer our customer relationship with you. It allows us to
identify, improve and develop products and services that we believe could be of
benefit. It also permits us to provide efficient, accurate and responsive
service, to help protect you from unauthorized use of your information and to
comply with regulatory and other legal requirements. These include those related
to institutional risk control and the resolution of disputes or inquiries.
Various sources are used to collect information about you, including (i)
information you provide to us at the time you establish a relationship, (ii)
information provided in applications, forms or instruction letters completed by
you, (iii) information about your transactions with us or our affiliated
companies, and/or (iv) information we receive through an outside source, such as
a bank or credit bureau. In order to maintain the integrity of client
information, we have procedures in place to update such information, as well as
to delete it when appropriate. We encourage you to communicate such changes
whenever necessary.
DISCLOSURE OF INFORMATION
CIBC Oppenheimer does not disclose any nonpublic, personal information (such as
your name, address or tax identification number) about our clients or former
clients to anyone, except as permitted or required by law. We maintain physical,
electronic and procedural safeguards to protect such information, and limit
access to such information to those employees who require it in order to provide
products or services to you.
The law permits us to share client information with companies within the CIBC
family which provide financial, credit, insurance, trust, legal, accounting and
administrative services to CIBC Oppenheimer or its clients. This allows us to
enhance our relationship with you by providing a broader
43
ADVANTAGE ADVISERS, INC.
THE INDIA FUND, INC.
(A WHOLLY OWNED SUBSIDIARY OF CIBC WORLD MARKETS CORP.)
--------------------------------------------------------------------------------
range of products to better meet your needs and to protect the assets you may
hold with us by preserving the safety and soundness of our firm.
Finally, we are also permitted to disclose nonpublic, personal information to
unaffiliated outside parties who assist us with processing, marketing or
servicing a financial product, transaction or service requested by you,
administering benefits or claims relating to such a transaction, product or
service, and/or providing confirmations, statements, valuations or other records
or information produced on our behalf.
CIBC Oppenheimer is committed to upholding this Privacy Policy. We will notify
you on an annual basis of our policies and practices in this regard and at any
time that there is a material change that would require your consent. If you
have any questions regarding this matter we suggest that you speak with your
Account Executive.
44
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The India Fund, Inc.
INVESTMENT MANAGER:
Advantage Advisers, Inc., a
subsidiary of CIBC World
Markets Corp.
ADMINISTRATOR:
CIBC World Markets Corp.
SUB-ADMINISTRATOR:
PFPC Inc.
TRANSFER AGENT:
PFPC Inc.
CUSTODIAN:
Deutsche Bank AG