Edgar Filing: INDIA FUND INC

Filed Pursuant to Rule 497 (c)

PROSPECTUS

THE INDIA FUND, INC.

7,546,991 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF NON-TRANSFERABLE
RIGHTS TO SUBSCRIBE FOR SHARES OF COMMON STOCK

The India Fund, Inc. (the "Fund") is offering to its common stockholders
of record as of December 17, 2004 non-transferable rights. These rights will
allow you to subscribe for one share of common stock for each three rights held.
You will receive one right for each whole share of common stock that you hold of
record as of December 17, 2004. You need three rights to purchase one share at
the subscription price. The Fund will not issue fractional shares upon the
exercise of less than three rights. The rights will not be listed for trading on
the New York Stock Exchange (the "NYSE") or any other exchange. The subscription
price will be 95% of the net asset value per share as of the close of business
on the expiration date of the offer.

THE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON JANUARY 31,
2005, UNLESS EXTENDED TO NOT LATER THAN FEBRUARY 7, 2005 OR TERMINATED EARLY AS
DESCRIBED HEREIN. The Fund announced the offer after the close of business on
the NYSE on May 24, 2004. The net asset value per share at the close of business
on May 21, 2004 and November 26, 2004 was $20.82 and $26.23, respectively.
Because the expiration date and the date upon which the price of the rights will
be determined will be the same date, stockholders who exercise their rights will
not know the purchase price of the shares when they make their investment
decision. Once you subscribe for shares and the Fund receives payment or a
guarantee of payment, you will not be able to change your decision. If the
market price of the Fund's common stock is below 95% of the net asset value per
share, it may not be in your interest to participate in this offering.

The Fund is a closed-end investment company whose shares of common stock
are listed and traded on the NYSE under the symbol "IFN" and whose primary
investment goal is long-term capital appreciation by investing primarily in
Indian equity securities. Under normal market conditions, at least 80% of the
Fund's total assets are invested in the equity securities of Indian companies.
The Fund operates under an interval fund structure pursuant to which it conducts
semi-annual repurchase offers for between 5% and 25% of the Fund's outstanding
common stock at prices equal to the net asset value of the Fund as of a
specified date after the repurchase request deadline, with payment for tendered
shares being distributed within one week thereafter. See "Semi-Annual
Repurchases of Securities" and "Risk Factors--Risks Related to the Fund's
Operations--The Fund's 'interval fund' structure involves certain risks and
special considerations not typically associated with other closed-end funds" in
this prospectus.

INVESTMENT IN THE FUND INVOLVES CERTAIN SPECIAL CONSIDERATIONS AND RISKS
ARISING IN PART FROM THE FUND'S INVESTMENT IN SECURITIES OF INDIAN COMPANIES,
WHICH ARE NOT INVOLVED IN INVESTMENTS IN SECURITIES OF U.S. COMPANIES OR CERTAIN
OTHER NON-U.S. ISSUERS. THESE RISKS RELATE TO, AMONG OTHER THINGS, POLITICAL,
SOCIAL AND ECONOMIC CONDITIONS IN INDIA, AND ARE DESCRIBED IN GREATER DETAIL
ELSEWHERE IN THIS PROSPECTUS. THE FUND MAY ALSO INVEST IN DEBT OBLIGATIONS THAT
MAY BE RATED BELOW INVESTMENT GRADE OR IN COMPARABLE DEBT OBLIGATIONS. DEBT
OBLIGATIONS OF BELOW INVESTMENT GRADE QUALITY ARE REGARDED AS HAVING
PREDOMINATELY SPECULATIVE CHARACTERISTICS WITH RESPECT TO CAPACITY TO PAY
INTEREST AND REPAY PRINCIPAL AND ARE COMMONLY REFERRED TO AS "JUNK BONDS." THERE
ARE SPECIAL RISKS AND CONSIDERATIONS ASSOCIATED WITH INVESTING IN SUCH HIGH
YIELD/HIGH RISK DEBT OBLIGATIONS. YOU COULD LOSE SOME OR ALL OF YOUR INVESTMENT
AND YOU SHOULD CAREFULLY CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 31 OF
THIS PROSPECTUS BEFORE PARTICIPATING IN THIS OFFER.

This prospectus contains important information you should know before
investing. Please read it before you invest and keep it for future reference. A
Statement of Additional Information dated December 9, 2004 containing additional
information about the Fund has been filed with the Securities and Exchange
Commission and legally forms a part of this prospectus. The table of contents of
the Statement of Additional Information appears on page 67 of this prospectus.
You may obtain a copy of the Statement of Additional Information without charge
by contacting the Fund at (800) 421-4777.

Stockholders who do not fully exercise their rights will own a smaller
proportional interest in the Fund. In addition, because the subscription price
will be less than the net asset value per share, the offer will result in an
immediate dilution of the net asset value per share for all stockholders. See
"Risk Factors and Special Considerations at a Glance" on page 6 of this
prospectus.

This prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors are advised to
read this prospectus and to retain it for future reference.

FOR INFORMATION REGARDING THE OFFER, CONTACT GEORGESON SHAREHOLDER
COMMUNICATIONS INC., THE INFORMATION AGENT, AT (866) 297-1264.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

ESTIMATED ESTIMATED ESTIMATED
PRICE SALES PROCEEDS TO THE
TO PUBLIC (1) LOAD FUND (2)(3)
------------- --------- ---------------
Per Share ........ $ 24.92 None $ 24.87
Total ............ $ 188,071,016 None $ 187,711,016

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(1) The estimated subscription price to the public is based upon 95% of the
Fund's net asset value per share on November 26, 2004.

(2) After deduction of expenses payable by the Fund, estimated at $360,000.

(3) If the Fund increases the number of shares subject to subscription by 25%,
the total proceeds, after expenses, to the Fund will be approximately
$234,728,751.

The Fund may increase the number of shares of common stock subject to
subscription by up to 25%, or up to an additional 1,886,747 shares, for an
aggregate total of 9,433,738 shares.

The shares will be ready for delivery on or about February 25, 2005.

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The date of this prospectus is December 9, 2004.

TABLE OF CONTENTS

PAGE
----
Prospectus Summary ...................................................... 1
Summary of Expenses ..................................................... 11
Financial Highlights .................................................... 12
The Fund ................................................................ 14
Investment in India ..................................................... 14
The Offer ............................................................... 16
Use of Proceeds ......................................................... 23
Investment Objective and Policies ....................................... 23
Additional Investment Activities ........................................ 26
Investment Restrictions ................................................. 29
Risk Factors ............................................................ 31
Management of the Fund................................................... 41
Control Persons and Principal Holders of
Securities ........................................................... 46
Portfolio Transactions .................................................. 46
Semi-Annual Repurchases of Securities ................................... 47
Dividends and Distributions; Dividend
Reinvestment and Cash Purchase Plan .................................. 49
Taxation ................................................................ 50

Net Asset Value ......................................................... 58
Description of Capital Stock ............................................ 59
Investment Management and Other Services ................................ 62
Custodians, Transfer Agent, Dividend Paying
Agent and Registrar .................................................. 66
Experts ................................................................. 66
Legal Matters ........................................................... 66
Enforceability of Civil Liabilities ..................................... 66
Official Documents ...................................................... 66
Additional Information .................................................. 66
Table of Contents of the Statement of Additional
Information .......................................................... 67

Financial Statements .................................................... F-1
Appendix A: General Characteristics and Risks
of Hedging ........................................................... A-1
Appendix B: Republic of India ........................................... B-1
Appendix C: The Indian Securities Market ................................ C-1

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THE INFORMATION CONTAINED IN THIS PROSPECTUS SPEAKS ONLY AS OF THE DATE OF
THIS PROSPECTUS UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE
APPLIES. NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.

--------------------------

In this prospectus and except as the context otherwise requires or
indicates:

o The "Fund" means The India Fund, Inc., a Maryland corporation.

o "Advantage" or "Investment Manager" means Advantage Advisers,
Inc., a Delaware corporation.

o "Imperial" or "Country Adviser" means Imperial Investment
Advisors Private Limited, a company organized under the laws of
India.

In this prospectus, unless otherwise indicated, all references to "U.S.
dollars," "US$," "dollars" and "$" are to United States dollars, the lawful
currency of the United States of America, and all reference to "rupees" and
"Rs." are to Indian rupees. On November 26, 2004, the U.S. dollar value of the
Indian rupee was Rs. 44.944 = US$1.00, as reported in The Wall Street Journal on
November 29, 2004.

FORWARD-LOOKING STATEMENTS

The Fund may not claim the safe harbor for forward-looking statements
contained in the federal securities laws of the United States because that safe
harbor does not apply to investment companies. Nevertheless, you should note
that certain statements in this prospectus are forward-looking statements, which
involve known and unknown risks, uncertainties and other factors that may cause
the Fund's actual results or level of performance to be materially different
from any future results or level of performance expressed or implied by such
forward-looking statements. Such factors include, among others, those listed
under "Risk Factors," "Appendix B: Republic of India," "Appendix C: The Indian
Securities Market" and elsewhere in this prospectus. As a result of these and
other factors, the Fund cannot give you any assurances as to its future results
or level of performance. To the extent required by law, the Fund undertakes to
amend or reflect any material changes to it after the date of this prospectus.

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PROSPECTUS SUMMARY

YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE STATEMENT OF
ADDITIONAL INFORMATION THAT LEGALLY FORMS PART OF THIS PROSPECTUS, BEFORE YOU
DECIDE WHETHER TO EXERCISE YOUR RIGHTS. IN PARTICULAR, YOU SHOULD CAREFULLY READ
THE RISKS OF INVESTING IN THE SHARES, AS DISCUSSED UNDER "RISK FACTORS."

THE OFFER AT A GLANCE

THE OFFER

The India Fund, Inc., or the Fund, is offering to its common stockholders
of record as of December 17, 2004 non-transferable rights. These rights will
allow you to subscribe for one share of common stock, par value $.001 per share,
for each three rights held. You will receive one right for each whole share of
common stock that you hold of record as of December 17, 2004. You need three
rights to purchase one share at the subscription price. The Fund will not issue
fractional shares upon the exercise of less than three rights. The rights will
not be listed for trading on the NYSE or any other exchange. Rights may be
exercised at any time from December 17, 2004 through 5:00 p.m., Eastern Standard
Time, on January 31, 2005, unless extended to not later than February 7, 2005 or
terminated early as described herein. See "The Offer--Expiration, Extension and
Early Termination of the Offer." Since the expiration date is prior to the
pricing date, stockholders who exercise their rights will not know the
subscription price at the time they exercise their rights. If the market price
of the Fund's common stock is below 95% of the net asset value per share, it may
not be in your interest to participate in this offering. Once you subscribe for
shares and the Fund receives payment or a guarantee of payment, you will not be
able to change your decision. In certain instances described below under
"-- Over-Subscription Privilege," the Fund may increase the number of shares of
common stock subject to subscription by up to 25% of the shares. We refer to any
such additional shares as "additional shares." See "The Offer."

The Fund has not previously conducted a rights offering.

SUBSCRIPTION PRICE

The subscription price will be 95% of the net asset value per share as of
the close of business on the expiration date of the offer. See "The
Offer--Subscription Price."

OVER-SUBSCRIPTION PRIVILEGE

If you fully exercise all rights issued to you, you will be entitled to
subscribe for additional shares that were not subscribed for by other
stockholders. This is known as the "over-subscription privilege." If sufficient
shares are available, all stockholders' over-subscription requests will be
honored in full. If sufficient shares are not available to honor all requests
for over-subscription, the Fund may increase the number of shares available by
up to 25%, or 1,886,747 shares, in order to satisfy over-subscription requests.
If the requests for additional shares exceed the shares available, the available
shares, including any additional shares, will be allocated pro rata among
stockholders who over-subscribe based on the number of rights originally issued
to them by the Fund. See "The Offer--Over-Subscription Privilege."

HOW TO EXERCISE RIGHTS

Rights may be exercised by stockholders who fill in and sign the
accompanying subscription certificate and mail it in the envelope provided or
deliver the completed and signed subscription certificate to the subscription
agent, together with any required payment for the shares as described below
under "The Offer--Payment for Shares." Rights may also be exercised by a
stockholder contacting his or her broker, bank or trust company, which can
arrange, on the stockholder's behalf, to guarantee delivery, by using a notice
of guaranteed delivery, of a properly completed and executed subscription
certificate and payment for the shares. The broker, bank or trust company may
charge a fee for this service. Stockholders who choose to exercise their rights
will not know at the time of exercise the subscription price for shares being
acquired and will be required initially to pay for such shares at the estimated
subscription price of $24.92 per share. Fractional shares will not be issued.
Completed subscription certificates must be received by the subscription agent
prior to 5:00 p.m., Eastern Standard Time, on the expiration date, which is
January 31, 2005 (unless payment is to be effected by means of a notice of
guaranteed delivery). See "The Offer--Payment for Shares."

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RIGHTS MAY NOT BE PURCHASED OR SOLD

You may not purchase or sell the rights, and they will not trade on any
exchange. If you do not exercise your rights before the conclusion of this
offer, your rights will expire without value.

RESTRICTIONS ON FOREIGN SHAREHOLDERS

The Fund will not mail subscription certificates to stockholders whose
record addresses are outside the United States. PFPC Inc. will hold the rights
to which subscription certificates relate for foreign stockholders accounts
until instructions are received to exercise the rights. If no instructions are
received prior to the expiration date, which is January 31, 2005, the rights
will expire.

OBTAINING SUBSCRIPTION INFORMATION

If you have any questions or requests for assistance, please contact
Georgeson Shareholder Communications Inc., the information agent, toll-free at
(866) 297-1264. You may also call your broker or nominee for information with
respect to this offer. See "The Offer--Information Agent" and "--Subscription
Agent." Please note that the dates in the table may change if the offer is
extended.

IMPORTANT DATES TO REMEMBER

EVENT DATE
------------------------------------------------------------------------- -------------------------------------

Record Date ............................................................. December 17, 2004
Subscription Period* .................................................... December 17, 2004 to January 31, 2005
Expiration Date* ........................................................ January 31, 2005
Pricing Date* ........................................................... January 31, 2005
Subscription Certificate and Payment for Shares or Notice of
Guaranteed Delivery Due* ............................................. January 31, 2005
Subscription Certificate and Payment for Shares Due for
Those Using Notice of Guaranteed Delivery* ........................... February 4, 2005
Confirmation to Participants* ........................................... February 11, 2005
Final Payment for Shares* ............................................... February 25, 2005

--------------------
* Unless extended or terminated early as described herein.

TAX CONSEQUENCES

For federal income tax purposes, neither the receipt nor the exercise of
the rights will result in taxable income to you. You will not realize a taxable
loss if your rights expire without being exercised. See "The Offer--United
States Federal Income Tax Consequences of the Offer."

USE OF PROCEEDS

We estimate the net proceeds of this offer to be approximately
$187,711,016. If the Fund increases the number of shares subject to subscription
by 25%, then the total net proceeds of the offer will be approximately
$234,728,751. These figures assume (i) all rights are exercised in full, (ii) a
subscription price of $24.92 and (iii) payment of offering expenses of
approximately $360,000.

The Fund anticipates that investment of the net proceeds of this offer in
accordance with the Fund's investment goal and policies may take up to six
months from their receipt by the Fund, depending on market conditions and the
availability of appropriate securities. The Fund may require up to six months
due to the Fund's need to invest substantially all of its assets in the
securities of issuers organized under the laws of a foreign jurisdiction. See
"Use of Proceeds" and "Risk Factors--Risks Related to the Fund's Operations."

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THE FUND AT A GLANCE

THE FUND

The Fund is a Maryland corporation organized on December 27, 1993 and is a
non-diversified, closed-end management investment company. As of November 26,
2004, the net assets of the Fund were approximately $593.9 million. Assuming
that all rights are exercised at the estimated subscription price, including the
additional shares that may be issued under the over-subscription privilege, the
net assets of the Fund would be approximately $828.6 million.

INVESTMENT IN INDIA

The Fund's investment objective and policies reflect the Investment
Manager's opinion that economic and political developments and changes in the
last several years have well positioned India to experience a period of
significant economic growth. The Investment Manager believes that India should
continue to grow as an economic force and that investment in its securities
market offers significant potential returns. For a detailed description of India
and its securities market, see "Appendix B: Republic of India" and "Appendix C:
The Indian Securities Market."

The Fund invests in India pursuant to the Securities and Exchange Board of
India (Foreign Institutional Investors) Regulations, 1995, which we refer to as
the "FII Regulations" and which were established by the Securities and Exchange
Board of India ("SEBI") to regulate investment by foreign institutional
investors in Indian securities. The FII Regulations allow direct investment in
Indian securities by registered foreign institutional investors or their
clients, also known as "sub-accounts." Under the FII regulations, the Fund
invests in India as a sub-account of the Investment Manager, which is registered
with SEBI as a foreign institutional investor. The Investment Manager in its
capacity as a foreign institutional investor acts on behalf of the Fund and
other approved clients. The Fund's investments are held in the Fund's name
through the Fund's custodian, Deutsche Bank AG. See "Risk Factors--Risks Related
to the Fund's Operations" and "Investment in India."

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is long-term capital appreciation by
investing primarily in the equity securities of Indian companies. Under normal
market conditions, at least 80% of the Fund's total assets are invested in
equity securities of Indian companies. Equity securities include common and
preferred stock (including convertible preferred stock), American, global or
other types of depositary receipts, convertible bonds, notes and debentures,
equity interests in trusts, partnerships, joint ventures or similar enterprises
and common stock purchase warrants and rights. Most of the equity securities
purchased by the Fund are traded on an Indian or other foreign stock exchange or
over-the-counter market. However, the Fund may invest to a limited extent in
securities that are not publicly traded and in investment funds that invest at
least 80% of their total assets in the equity securities of Indian companies in
which the Fund is authorized to invest. The Fund invests in such investment
funds when the Investment Manager believes that such investments may be more
advantageous to the Fund than a direct market purchase of such securities. For
temporary defensive purposes, the Fund may invest without limitation in
temporary investments. No assurance can be given that the Fund's investment
objective will be realized. See "Investment Objective and Policies" and "Risk
Factors--Risks Related to the Fund's Operations."

Indian companies include companies that:

o are organized under the laws of India;

o regardless of where organized, derive at least 50% of their
revenues from goods produced or sold, investments made, or
services performed, in India, or have at least 50% of their
assets in India; or

o have securities which are traded principally on any Indian stock
exchange or in the Indian over-the-counter market.

See "Investment Objective and Policies--Portfolio Structure" for other
eligible investments.

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Up to 20% of the Fund's total assets may be invested, subject to certain
restrictions, in:

o equity securities of companies (other than companies meeting the
definition of Indian companies), regardless of where organized,
which the Investment Manager and the Country Adviser believe
derive, or will derive, at least 25% of their revenues from
business in or with India, or have at least 25% of their assets
in India;

o debt securities denominated in Indian rupees or issued or
guaranteed by an Indian company, the Government of India or an
Indian governmental entity; and

o short-term debt securities of the type described under
"Investment Objective and Policies--Temporary Investments."

Up to 20% of the Fund's total assets may also be utilized to purchase and
sell options on securities, financial futures, fixed income indices and other
financial futures contracts, enter into interest rate transactions and to enter
into currency transactions, sell securities short and loan portfolio securities.
The Fund will only invest in such assets in order to hedge against financial
risks. The Fund will not be obligated, however, to do any hedging and makes no
representation as to the availability of these techniques at this time or at any
time in the future. See "Risk Factors--Risks Related to the Fund's Operations,"
"--The Fund's ability to successfully hedge against financial risks may
adversely affect the Fund's net asset value" and "Additional Investment
Activities--Hedging."

The Fund's assets may be invested in debt securities (other than temporary
investments) when the Investment Manager believes that, based upon factors such
as relative interest rate levels and foreign exchange rates, such securities
offer opportunities for long-term capital appreciation.

See "Risk Factors--Risks Related to the Fund's Operations."

LISTING

The Fund's common stock is listed and traded on the NYSE under the symbol
"IFN."

DIVIDENDS AND DISTRIBUTIONS

The Fund distributes annually to holders of common stock substantially all
of its net investment income and distributes any net realized capital gains at
least annually.

Under the Fund's dividend reinvestment and cash purchase plan, all
dividends and distributions are automatically reinvested in additional shares of
common stock of the Fund unless a stockholder elects to receive cash.
Participants also have the option of making additional cash payments, annually,
to be used to acquire additional shares of common stock of the Fund in the open
market. Stockholders whose shares are held in the name of a broker or nominee
should contact such broker or nominee to confirm that they are able to
participate in the plan. See "Dividends and Distributions; Dividend Reinvestment
and Cash Purchase Plan."

SEMI-ANNUAL SHARE REPURCHASES

In April 2003, stockholders of the Fund voted to adopt an interval fund
structure, pursuant to which the Fund conducts semi-annual repurchase offers for
between 5% and 25% of the Fund's outstanding common stock. Pursuant to this
policy, the Fund has conduced three repurchase offers of up to 15%, 5% and 5%,
respectively, of its outstanding common stock. See "Semi-Annual Repurchases of
Securities."

INVESTMENT MANAGER AND COUNTRY ADVISER

The Investment Manager is Advantage Advisers, Inc., a wholly owned
subsidiary of Oppenheimer Asset Management Inc., which is an affiliate of
Oppenheimer & Co. Inc., the Fund's administrator. For more information on the
Investment Manager, see "Investment Management and Other Services--Investment
Manager."

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The Country Adviser is Imperial Investment Advisors Private Limited, which
is a 99%-owned subsidiary of Advantage India, Inc., which is wholly owned by
Oppenheimer & Co. Inc. For more information on the Country Adviser, see
"Investment Management and Other Services--Country Adviser."

Under the existing management agreement, the Fund pays the Investment
Manager a monthly fee at an annual rate of 1.10% of the Fund's average weekly
net assets for its services, and, under the existing country advisory agreement,
the Investment Manager pays the Country Adviser a monthly fee at an annual rate
of 0.10% of the Fund's average weekly net assets.

Because the Investment Manager and the Country Adviser receive fees based
on net assets, they will benefit from the increase in assets that will result
from this offer.

Pursuant to an amended and restated management agreement that will become
effective upon the consummation of this offer, the Investment Manager has agreed
to lower its fee upon the consummation of this offer to a rate of 0.95% of the
Fund's average weekly net assets on any assets in excess of $600 million. See
"The Offer--Purposes of the Offer" and "Investment Management and Other
Services--Investment Manager." It is not possible to state precisely the amount
of additional compensation that the Investment Manager and the Country Adviser
might receive as a result of this offer because it is not known how many shares
will be subscribed for and because the proceeds of this offer will be invested
in additional portfolio securities, which will fluctuate in value. However,
assuming that the value of the Fund's assets remained constant prior to the
offer at $593.9 million (its approximate value as of November 26, 2004) and
after the offer at $828.6 million (which assumes that all rights are exercised
at the estimated subscription price, including the additional shares that may be
issued under the over-subscription privilege), the annual compensation received
by the Investment Manager and the Country Adviser would be increased by
approximately $2.2 million and $234,700, respectively.

The advisory fees paid by the Fund are higher than those paid by most
other investment companies that invest predominantly in the securities of U.S.
companies, primarily due to the additional time and expense required of the
Investment Manager and the Country Adviser in pursuing the Fund's objective,
which is long-term capital appreciation by investing primarily in the equity
securities of Indian companies.

FUND ADMINISTRATORS

Oppenheimer & Co. Inc. serves as the Fund's administrator. The Fund pays
Oppenheimer & Co. Inc. a monthly fee at an annual rate of 0.20% of the Fund's
average monthly net assets for its services. Because the Fund administrator
receives fees based on net assets, it will benefit from the increase in assets
that will result from this offer. Oppenheimer & Co. Inc. subcontracts certain of
its services to PFPC Inc. Assuming that the value of the Fund's assets remained
constant prior to the offer at $593.9 million (its approximate value as of
November 26, 2004) and after the offer at $828.6 million (which assumes that all
rights are exercised at the estimated subscription price, including the
additional shares that may be issued under the over-subscription privilege), the
annual compensation received by the Fund's administrator would be increased by
approximately $469,400.

Multiconsult Ltd. serves as the Fund's Mauritius administrator. The Fund
pays Multiconsult Ltd. a monthly fee of $1,500 for its services and a quarterly
fee of $1,000 for its calculation of net asset value. The Fund also reimburses
Multiconsult Ltd. for all reasonable out-of-pocket expenses reasonably incurred
by it in the performance of its duties.

See "Investment Management and Other Services--Administrator" and
"Investment Management and Other Services--Mauritian Administrator."

CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR

Deutsche Bank AG is custodian of the assets of the Fund. Deutsche Bank
(Mauritius) Limited acts as custodian of the cash assets of the Fund. PFPC Inc.
acts as transfer agent, dividend paying agent and registrar for the Fund.

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RISK FACTORS AND SPECIAL CONSIDERATIONS AT A GLANCE

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, AS WELL AS THE OTHER
INFORMATION IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT IN THE FUND UNDER
THIS OFFER.

AS A RESULT OF THIS OFFER, YOU WILL INCUR IMMEDIATE ECONOMIC DILUTION, AND, IF
YOU DO NOT EXERCISE ALL OF YOUR RIGHTS, YOU MAY INCUR VOTING DILUTION.

You should expect that you will, at the completion of this offer,
experience immediate dilution of net asset value per share because the
subscription price will be less than the net asset value per share, and the
number of shares outstanding after the offer will have increased proportionately
more than the increase in the size of the Fund's net assets. This dilution of
net asset value will disproportionately affect stockholders who do not exercise
their rights. In addition, whether or not you exercise your rights, you will
experience a dilution of net asset value because you will indirectly bear the
expenses of this offer, which include, among other items, SEC registration fees,
state "blue sky" qualification fees, printing expenses and the fees assessed by
service providers (including the cost of the Fund's counsel and accountants). We
cannot state precisely the amount of any decrease because we do not know at this
time how many shares will be subscribed for or what the net asset value per
share will be at the pricing date. For example, assuming (i) a net asset value
of $593.9 million (the Fund's approximate net asset value on November 26, 2004),
(ii) a subscription price of $24.92 (which is 95% of the Fund's approximate net
asset value per share on November 26, 2004) and (iii) that all rights are
exercised at the estimated subscription price, including the additional shares
that may be issued under the over-subscription privilege, the Fund's net asset
value per share (after payment of estimated expenses) would be reduced by
approximately $0.40 per share. As of November 26, 2004, the Fund's net asset
value per share was $26.23.

In addition to the economic dilution described above, if you do not
exercise all of your rights, you may also incur voting dilution as a result of
this offer. This voting dilution may occur because you could own a smaller
interest in the Fund after the offer than you owned prior to the offer. If you
do not submit a subscription request pursuant to the over-subscription
privilege, you may also experience dilution in your Fund ownership if the Fund
offers additional shares for subscription.

See "The Offer--Dilution" and "Risk Factors--Risks Relating to the
Offer--As a result of this offer, you will incur immediate economic dilution,
and, if you do not exercise all of your rights, you may incur voting dilution."

YOU MAY LOSE MONEY BY INVESTING IN THE FUND, INCLUDING THE POSSIBILITY THAT YOU
MAY LOSE ALL OF YOUR INVESTMENT.

An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the U.S. Federal Deposit Insurance Corporation or any other
governmental agency.

Among the principal risks of investing in the Fund is market risk, which
is the risk that the value of your investment may fluctuate as stock markets
fluctuate.

As an investment company that primarily holds common stocks, the Fund's
portfolio is subject to the possibility that common stock prices will decline
over short or even extended periods. The Fund may remain substantially fully
invested during periods when stock prices generally rise and also during periods
when they generally decline. Risks are inherent in investments in equities, and
Fund stockholders should be able to tolerate significant fluctuations in the
value of their investment in the Fund.

In addition, the Fund may invest up to 20% of its assets in debt
securities whose value will tend to decrease as interest rates rise. Interest
rates are at historical lows and, accordingly, it is likely that they will
increase over time.

The Fund is intended to be a long-term investment vehicle and is not
designed to provide investors with a means of speculating on short-term stock
market movements. Investors should not consider the Fund a complete investment
program. See "Risk Factors--Risks Related to the Offer--You may lose money by
investing in the Fund, including the possibility that you may lose all of your
investment."

--------------------------------------------------------------------------------

THE FUND'S "INTERVAL FUND" STRUCTURE INVOLVES CERTAIN RISKS AND SPECIAL
CONSIDERATIONS NOT TYPICALLY ASSOCIATED WITH OTHER CLOSED-END FUNDS.

In April 2003, the Fund's stockholders voted to adopt an interval fund
structure whereby the Fund conducts semi-annual repurchase offers for between 5%
and 25% of the Fund's outstanding common stock. The Fund's required semi-annual
repurchases are likely to continually decrease the overall size of the Fund
which could over time:

o harm investment performance in part by limiting the extent to which
the Fund may invest in illiquid securities;

o increase the Fund's expense ratio as the Fund's assets decrease;

o threaten the Fund's continued listing on the NYSE, and, consequently,
the liquidity of its shares; and

o jeopardize the Fund's viability and continued existence.

Moreover, there are additional risks associated with the Fund's repurchase
offers, including the risk that:

o if the repurchase offer is over-subscribed, stockholders may be
unable to liquidate all or a given percentage of their investment at
net asset value during the repurchase offer;

o due to the potential for pro-ration if the repurchase offer is
over-subscribed, some investors may tender more shares than they wish
to have repurchased in order to ensure the repurchase of a specific
number of shares;

o the repurchase offer may not eliminate any discount at which the
Fund's shares trade;

o because the Fund expects to liquidate portfolio securities in order
to fund repurchase offers, the need to sell such securities may in
turn affect the market for such securities and accordingly diminish
the value of the Fund's investments; and

o share values may decrease as a result of currency fluctuations
between the date of tender and the repurchase pricing date.

See "Risk Factors--Risks Related to the Fund's Operations--The Fund's
'interval fund' structure involves certain risks and special considerations not
typically associated with other closed-end funds" and "Semi-Annual Repurchases
of Securities."

INVESTING IN INDIA INVOLVES CERTAIN RISKS AND SPECIAL CONSIDERATIONS NOT
TYPICALLY ASSOCIATED WITH INVESTING IN U.S. COMPANIES.

Investing in Indian equity securities involves certain risks and special
considerations not typically associated with investing in the securities of
established U.S. companies, including:

o greater political, economic and social uncertainty;

o significantly greater price volatility, substantially less liquidity
and much smaller market capitalization of securities markets;

o less developed corporate disclosure and governance standards;

o greater difficulty in enforcing judgments;

o restrictions on foreign investment and repatriation of capital;

o exchange control regulations;

o currency exchange rate fluctuations, which may increase the costs
associated with conversion of investment principal and income from
one currency to another;

o higher rates of inflation; and

o greater governmental involvement in the economy.

--------------------------------------------------------------------------------

These risks are described in more detail under "Risk Factors--Risks
Related to the Fund's Operations--political, economic, social and other factors
in India may adversely affect the Fund's performance," "--Indian securities
markets are substantially smaller, less liquid and more volatile than securities
markets in the United States," "--India has different corporate disclosure,
governance and regulatory requirements than you may be familiar with in the
United States," "--The Fund may have difficulty enforcing foreign judgments
against Indian companies or their management," "--Indian investment restrictions
applicable to the Fund may hinder its ability to invest in certain companies or
industries," "--Foreign currency fluctuations could adversely affect the Fund's
performance," "--The liquidation of investments, if required, may have an
adverse impact on the Fund's performance," "--Exchange controls in India may
restrict the Fund's ability to repatriate investment" and "--Investments in
unseasoned and small and mid-capitalization Indian companies may expose the Fund
to greater investment risk."

THE EXTENT TO WHICH THE FUND INVESTS IN HIGH YIELD/HIGH RISK AND UNRATED DEBT
MAY ADVERSELY AFFECT THE FUND'S PERFORMANCE.

The Fund has not established any rating criteria for the debt securities
in which it may invest. Securities rated in medium to low rating categories of
nationally recognized statistical rating organizations and unrated securities of
comparable credit quality, or "high yield/high risk securities," are speculative
with respect to the capacity to pay interest and repay principal in accordance
with the terms of the security and generally involve a greater volatility of
price than securities in higher-rated categories. These securities are commonly
referred to as "junk bonds." The value of Indian debt securities held by the
Fund may be expected to vary inversely in relation to fluctuations in interest
rates in India. See "Risk Factors--Risks Related to the Fund's Operations--The
extent to which the Fund invests in high yield/high risk and unrated debt may
adversely affect the Fund's performance."

THE FUND'S INVESTMENTS IN ILLIQUID SECURITIES MAY RESTRICT ITS ABILITY TO
DISPOSE OF ITS INVESTMENTS IN A TIMELY FASHION AND AT A PRICE APPROXIMATING THE
VALUE AT WHICH THE FUND CARRIES THE SECURITIES ON ITS BOOKS.

The Fund may invest up to 20% of its total assets in illiquid securities,
for which there may be no or only a limited trading market and for which a low
trading volume of a particular security may result in abrupt and erratic price
movements. The Fund may encounter substantial delays and could incur losses in
attempting to resell illiquid securities. See "Additional Investment Activities"
and "Risk Factors--Risks Related to the Fund's Operations--The Fund's
investments in illiquid securities may restrict its ability to dispose of its
investments in a timely fashion and at a price approximating the value at which
the Fund carries the securities on its books."

THE CONCENTRATION OF THE FUND'S INVESTMENTS IN SPECIFIC ECONOMIC SECTORS AND
RELATED INDUSTRIES MAY EXPOSE IT TO GREATER RISK OF LOSS WITH RESPECT TO ITS
PORTFOLIO SECURITIES.

From time to time, the Fund may invest a greater proportion of its assets
in the securities of companies that are part of specific sectors and related
industries of the Indian economy. For example, at March 31, 2004, the Fund
maintained 20.3% of its total assets in the securities of Indian companies in
the petroleum sector and related industries. The Fund is therefore subject to
greater risk of loss with respect to its portfolio securities as a result of its
concentration in such sectors and related industries. See "Risk Factors--Risks
Related to the Fund's Operations--The concentration of the Fund's investments in
specific economic sectors and related industries may expose it to greater risk
of loss with respect to its portfolio securities."

THE FUND'S ABILITY TO SUCCESSFULLY HEDGE AGAINST FINANCIAL RISKS MAY ADVERSELY
AFFECT THE FUND'S NET ASSET VALUE.

The Fund may purchase and sell options on securities, financial futures,
fixed income indices and other financial instruments, enter into financial
futures contracts, enter into interest rate transactions, enter into currency
transactions, enter into equity swaps and related transactions, enter into
securities transactions on a when-issued or delayed delivery basis, enter into
repurchase agreements, sell securities short and lend portfolio securities.
Hedging involves special risks, including possible default by the other party to
the transaction, illiquidity and, to the extent the Investment Manager's view as
to certain market movements is incorrect, the risks that the use of hedging
could result in losses greater than if they had not been used. The extent to
which the Fund can engage in such investment practices in India may be limited.
See "Additional Investment Activities," "Investment Objective and
Policies--Other Investments" "Risk Factors--Risks Related to the Fund's
Operations--The Fund's ability to successfully hedge against financial risks may
adversely affect the Fund's net asset value" and "Appendix A: General
Characteristics and Risks of Hedging."

--------------------------------------------------------------------------------

THE EXTENT TO WHICH THE FUND UTILIZES LEVERAGE TO HEDGE AGAINST FINANCIAL RISKS
MAY INCREASE ITS EXPENSES AND ADVERSELY AFFECT THE FUND'S PERFORMANCE.

Although the Fund has no present intention to do so to any significant
extent, the Fund may utilize leverage by borrowing or by issuing preferred stock
or short-term debt securities in an amount up to 25% of the Fund's total assets.
Leverage by the Fund creates an opportunity for increased return but, at the
same time, creates special risks. For example, leverage may exaggerate changes
in the net asset value of the Fund's common stock and in the return on the
Fund's portfolio. Although the principal of any leverage will be fixed, the
Fund's assets may change in value during the time the leverage is outstanding.
Leverage will create expenses for the Fund that can, during any period, exceed
the income from the assets acquired with the proceeds of the leverage.
Furthermore, an increase in interest rates could reduce or eliminate the
benefits of leverage and could reduce the value of the Fund's securities. The
Fund may also borrow by entering into reverse repurchase agreements, which will
subject the Fund to additional market risk, as well as credit risk with respect
to the buyer of the securities under such an agreement. See "Risk Factors--Risks
Related to the Fund's Operations--The extent to which the Fund utilizes leverage
to hedge against financial risks may increase its expenses and adversely affect
the Fund's performance."

A CHANGE IN THE FUND'S TAX STATUS COULD ADVERSELY AFFECT THE FUND'S RETURN ON
ITS INVESTMENTS.

The Fund currently operates through a branch in the Republic of Mauritius
to take advantage of favorable tax treatment by the Indian government pursuant
to a taxation treaty between India and Mauritius. Recently, the Supreme Court of
India upheld the validity of this tax treaty in response to a lower court
challenge contesting the treaty's applicability to entities such as the Fund.
Any change in the provision of this treaty or in its applicability to the Fund
could result in the imposition of withholding and other taxes on the Fund by
India, which would reduce the return to the Fund on its investments.

The Fund has historically elected and intends to continue to elect to
"pass-through" to the Fund's stockholders as a deduction or credit the amount of
foreign taxes paid by the Fund. The taxes passed through to stockholders are
included in each stockholder's income. Certain stockholders, including some
non-U.S. stockholders, are not entitled to the benefit of a deduction or credit
with respect to foreign taxes paid by the Fund. Other foreign taxes, such as
transfer taxes, may be imposed on the Fund, but would not give rise to a credit,
or be eligible to be passed through to stockholders. See "Risk Factors--Risks
Related to the Fund's Operations--A change in the Fund's tax status could
adversely affect the Fund's return on its investments," "Taxation--U.S.
Stockholders" and "Taxation--Mauritian Tax Status."

THE FUND'S SHARES HAVE TRADED AND MAY IN THE FUTURE TRADE AT A DISCOUNT TO NET
ASSET VALUE.

Although the Fund's shares of common stock have recently traded on the
NYSE at a premium to their net asset value, the Fund's shares have in the past
traded at a discount to their net asset value. There can also be no assurance
that the Fund's shares will trade at a premium in the future or that the present
premium is sustainable. The Fund's shares have traded at discounts of as much as
40% in the past five years.

In addition, you should note that shares of closed-end investment
companies frequently trade at a discount from net asset value. This
characteristic is a risk separate and distinct from the risk that the Fund's net
asset value will decrease as a result of its investment activities. The Fund
cannot predict whether its shares will trade at, above or below net asset value.
The Fund is intended primarily for long-term investors and should not be
considered as a vehicle for trading purposes. See "Risk Factors--Risks Related
to the Fund's Operations--The Fund's shares have traded and may trade in the
future at a discount to net asset value."

THE FUND'S STATUS AS A "NON-DIVERSIFIED" INVESTMENT COMPANY MAY EXPOSE IT TO
GREATER RISK OF LOSS WITH RESPECT TO ITS PORTFOLIO SECURITIES.

The Fund is classified as a "non-diversified" investment company under the
U.S. Investment Company Act of 1940, which means that the Fund is not limited in
the proportion of its assets that may be invested in the securities of a single
issuer. However, the Fund complies and intends to continue to comply with the
diversification requirements imposed by the U.S. Internal Revenue Code of 1986
for qualification as a regulated investment company. As a non-diversified
investment company, the Fund may invest a greater proportion of its assets in
the securities of a smaller

--------------------------------------------------------------------------------

number of issuers and, as a result, is subject to greater risk of loss with
respect to its portfolio securities. See "Risk Factors--Risks Related to the
Fund's Operations--The Fund's status as a 'non-diversified' investment company
may expose it to greater risk of loss with respect to its portfolio securities"
and "Taxation--The Fund."

THERE ARE NO FIXED LIMITATIONS REGARDING PORTFOLIO TURNOVER.

Frequency of portfolio turnover is not a limiting factor if the Fund
considers it advantageous to purchase or sell securities. The Fund anticipates
that its annual portfolio turnover rate will not exceed 150%. For the year ended
December 31, 2003, the Fund's portfolio turnover rate was 33.89%. A high rate of
portfolio turnover involves correspondingly greater aggregate payments for
brokerage commissions than a lower rate, which expenses must be borne by the
Fund and its stockholders, while a lower rate of portfolio turnover involves
correspondingly lower aggregate payments and stockholder expenses. See "Risk
Factors--Risks Related to the Fund's Operations--There are no fixed limitations
regarding portfolio turnover."

THE ANTI-TAKEOVER PROVISIONS IN THE FUND'S ARTICLES OF AMENDMENT AND RESTATEMENT
AND AMENDED AND RESTATED BY-LAWS MAY LIMIT YOUR ABILITY TO SELL YOUR SHARES AT A
PREMIUM.

The Fund's articles of amendment and restatement and amended and restated
by-laws contain certain anti-takeover provisions that, among other things, may
have the effect of inhibiting the Fund's possible conversion to open-end status
and delaying or limiting the ability of other persons to acquire control of the
Fund. In certain circumstances, these provisions may also inhibit the ability of
holders of common stock to sell their shares at a premium over prevailing market
prices by discouraging a third party from seeking to obtain control of the Fund.
The Fund's board of directors has determined that these provisions are in the
best interests of stockholders generally. See "Risk Factors--Risks Related to
the Fund's Operations--The anti-takeover provisions in the Fund's articles of
amendment and restatement and amended and restated by-laws may limit your
ability to sell your shares at a premium."

THE OPERATING EXPENSES OF THE FUND ARE HIGHER THAN INVESTMENT COMPANIES THAT
INVEST PRIMARILY IN THE SECURITIES OF U.S. COMPANIES.

The Fund's estimated annual operating expenses are higher than those of
most other investment companies that invest predominately in the securities of
U.S. companies, primarily because of the additional time and expense required of
the Investment Manager and the Country Adviser in pursuing the Fund's objective
of long-term capital appreciation through investing in equity securities of
Indian Companies. Investments in Indian equity securities require additional
time and expense because the available public information regarding such
securities is more limited in comparison to, and not as comprehensive as, the
information available for U.S. equity securities. In addition, brokerage
commissions, custodial fees and other fees are generally higher for investments
in foreign securities markets. As a result of these higher expected operating
expenses, the Fund needs to generate higher relative returns to provide
investors with an equivalent economic return. See "Risk Factors--Risks Related
to the Fund's Operations--The operating expenses of the Fund are higher than
investment companies that invest primarily in the securities of U.S. companies."

FUTURE MARKET DISRUPTIONS RESULTING FROM TERRORIST ATTACKS IN THE UNITED STATES
AND ELSEWHERE OR U.S. MILITARY ACTION ABROAD COULD NEGATIVELY AND ADVERSELY
AFFECT THE MARKET FOR THE FUND'S COMMON STOCK.

As a result of the terrorist attacks on the World Trade Center and the
Pentagon on September 11, 2001, some of the U.S. securities markets were closed
for a four-day period. These terrorist attacks and related events have led to
increased short-term market volatility. Moreover, the ongoing U.S. military and
related action in Iraq and other events in the Middle East could have
significant adverse effects on U.S. and world economies and markets. The Fund
does not know how long the securities markets will continue to be affected by
these and other geopolitical events and cannot predict the effects of military
action or similar events in the future on the U.S. economy and securities
markets. A similar disruption of the U.S. or world financial markets could
affect interest rates, secondary trading, ratings, credit risk, inflation and
other factors relating to the Fund's common stock. See "Risk Factors--Risks
Related to the Fund's Operations--Future market disruptions resulting from
terrorist attacks in the United States and elsewhere or U.S. military action
abroad could negatively and adversely affect the market for the Fund's common
stock."

--------------------------------------------------------------------------------

SUMMARY OF EXPENSES

Stockholder transaction expenses
Sales load ............................................................................ None
Dividend reinvestment and cash purchase plan fees ..................................... *
Repurchase offer fees ................................................................. **%
Offering Costs (1)........................................................................ 0.19%
Annual expenses (as a percentage of average net assets attributable to common stock)
Management fees (2) ................................................................... 1.07%
Interest payments in borrowed funds ................................................... None
Other expenses (3) .................................................................... 0.55%
Total annual expenses (3) ................................................................ 1.62%

--------------------
* Participants in the Fund's dividend reinvestment and cash purchase plan
pay only transaction-based charges. Actual costs will vary for each
participant depending on the nature and number of transactions made. See
"Dividends and Distributions; Dividend Reinvestment and Cash Purchase
Plan."

** Participants in the Fund's repurchase offers pay a repurchase fee of up to
2% of the value of the shares repurchased. See "Semi-Annual Repurchases of
Securities."

(1) These costs include those incurred in connection with this offer, which
are estimated at $360,000, or approximately 0.19% of the total estimated
net proceeds of the offer without giving effect to the issuance of
additional shares pursuant to the over-subscription privilege.

(2) The percentage shown is based upon the net assets of the Fund at November
26, 2004 and after giving effect to this offer (excluding the issuance of
additional shares pursuant to the over-subscription privilege) and
reflects the reduction in the management fee for assets in excess of $600
million. The management fee was reduced in order to reflect potential
economies of scale at higher asset levels. If the management fee were not
reduced, the percentage shown would have been 1.10%. See "The
Offer--Purposes of the Offer."

(3) Based upon estimated expenses for the current fiscal year. Total expenses
for the fiscal year ended December 31, 2003 were 1.76% of average net
assets.

EXAMPLE

The following example demonstrates the projected dollar amount of total
cumulative expense that would be incurred over various periods with respect to a
hypothetical investment in the Fund. These amounts are based upon payment by the
Fund of investment management and advisory fees and other expenses at the levels
set forth in the above table.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------

You will pay the following expenses on
a $1,000 investment, assuming a 5% annual return: $ 16 $ 51 $ 88 $ 192

This example further assumes that the percentage amounts listed under
Annual Expenses in the table above remain the same in the years shown, the
reinvestment of all dividends and distributions at net asset value and the full
exercise of all the rights. The above tables and the assumption in the example
of a 5% annual return and reinvestment at net asset value are required by
regulation of the U.S. Securities and Exchange Commission, which we refer to as
the "SEC," and are applicable to all investment companies, and the assumed 5%
annual return is not a prediction of, and does not represent, the projected
performance of the Fund's common stock. In addition, although the example
assumes reinvestment of all distributions at net asset value, this may not be
the case for participants in the dividend reinvestment and cash purchase plan.
See "Dividends and Distributions; Dividend Reinvestment and Cash Purchase Plan."

WE HAVE PREPARED THE FOREGOING TABLE AND EXAMPLE TO ASSIST YOU IN
UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT YOU WILL BEAR, DIRECTLY OR
INDIRECTLY. YOU SHOULD NOT CONSIDER THIS EXAMPLE OR THE FOREGOING TABLE AS A
REPRESENTATION OF FUTURE EXPENSES OR RATE OF RETURN. THE FUND'S ACTUAL EXPENSES
MAY BE MORE OR LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the
Fund's financial performance for the periods presented and reflects financial
results for a single Fund share. The information for each of the years
presented, except for "Total Investment Return Based on Net Asset Value" and the
information for the six month period ended June 30, 2004, has been derived from
financial statements audited by PricewaterhouseCoopers LLP, the Fund's
independent registered public accounting firm, whose report is included in the
Fund's financial statements which are incorporated by reference in this
prospectus. The following information should be read in conjunction with the
financial statements and notes, which legally form a part of this prospectus and
are available upon request.

SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 2004 --------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
---------------- --------- --------- --------- --------- ---------

PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period...... $ 23.76 $ 12.72 $ 11.93 $ 16.18 $ 23.21 $ 8.85
---------------- --------- --------- --------- --------- ---------
Net investment income (loss).............. 0 0.11(1) 0.09 0.07 (0.16) (0.10)
Net realized and unrealized gain
(loss) on investments, foreign currency
holdings, and translation of other
assets and liabilities denominated in
foreign currency....................... (3.94) 11.00(1) 0.76 (4.29) (7.27) 14.36
---------------- --------- --------- --------- --------- ---------
Net increase (decrease) from
investment operations.................. (3.94) 11.11 0.85 (4.22) (7.43) 14.26
---------------- --------- --------- --------- --------- ---------
Less: Dividends and Distributions
Dividends from net investment
income.............................. -- (0.13) (0.09) (0.07) -- --
Distributions from net realized
gains............................... -- -- -- -- -- --
---------------- --------- --------- --------- --------- ---------
Total dividends and distributions......... -- (0.13) (0.09) (0.07) -- --
---------------- --------- --------- --------- --------- ---------

CAPITAL SHARE TRANSACTIONS
Anti-dilutive effect of Share
Repurchase Program..................... --(2) 0.06 0.01 0.04 0.40 0.10
Anti-dilutive effect of Tender
Offer.................................. -- -- 0.02 -- -- --
---------------- --------- --------- --------- --------- ---------
Total capital share transactions.......... 0.00 0.06 0.03 0.04 0.40 0.10
---------------- --------- --------- --------- --------- ---------
Net asset value, end of period............ $ 19.82 $ 23.76 $ 12.72 $ 11.93 $ 16.18 $ 23.21
================ ========= ========= ========= ========= =========

Per share market value,
end of period.......................... $ 21.48 $ 25.20 $ 10.59 $ 9.50 $ 12.06 $ 16.75

TOTAL INVESTMENT RETURN BASED
ON MARKET VALUE(3)..................... (14.76)% 139.04% 12.36% (20.69)% (27.99)% 165.35%
TOTAL INVESTMENT RETURN BASED
ON NET ASSET VALUE(3).................. (16.58)% 87.64% 7.47% (25.75)% (30.29)% 162.26%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)....... $ 461,817 $ 556,811 $ 350,838 $ 366,491 $ 504,769 $ 768,948
Ratios of expenses to average
net assets............................. 1.66%(4) 1.76% 1.73% 1.70% 1.59% 1.84%
Ratios of net investment income
(loss) to average net assets........... 0.03%(4) 0.72% 0.65% 0.57% (0.75)% (0.68)%
Portfolio turnover........................ 12.04% 33.89% 39.36% 16.06% 19.24% 18.65%

FOR THE PERIOD
FEBRUARY 23, 1994
(COMMENCEMENT
OF OPERATIONS)
YEARS ENDED DECEMBER 31, THROUGH
--------------------------------------------------- DECEMBER 31,
1998 1997* 1996 1995 1994
--------- --------- --------- --------- ----------------

PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........... $ 8.11 $ 7.56 $ 8.94 $ 13.92 $ 13.98(5)
--------- --------- --------- --------- ----------------
Net investment income (loss)................... (0.03) (0.03) 0.02 (0.05) (0.01)
Net realized and unrealized gain (loss)
on investments, foreign currency
holdings, and translation of other
assets and liabilities denominated
in foreign currency......................... 0.77 0.58 (1.39) (4.93) 0.08
--------- --------- --------- --------- ----------------
Net increase (decrease) from investment
operations.................................. 0.74 0.55 (1.37) (4.98) 0.07
--------- --------- --------- --------- ----------------
Less: Dividends and Distributions
Dividends from net investment income........ -- -- (0.01) -- --
--------- --------- --------- --------- ----------------
Distributions from net realized gains....... -- -- -- -- (0.13)
--------- --------- --------- --------- ----------------
Total dividends and distributions.............. -- -- (0.01) -- (0.13)
--------- --------- --------- --------- ----------------

CAPITAL SHARE TRANSACTIONS
Anti-dilutive effect of Share Repurchase
Program..................................... -- -- -- -- --
--------- --------- --------- --------- ----------------
Total capital share transactions............... -- -- -- -- --
--------- --------- --------- --------- ----------------
Net asset value, end of year................... $ 8.85 $ 8.11 $ 7.56 $ 8.94 $ 13.92
========= ========= ========= ========= ================
Per share market value, end of year............ $ 6.31 $ 7.37 $ 7.62 $ 8.87 $ 10.75
TOTAL INVESTMENT RETURN BASED ON
MARKET VALUE(3)............................. (14.41)% (3.28)% (14.08)% (17.44)% (23.32)%
TOTAL INVESTMENT RETURN BASED ON
NET ASSET VALUE(3).......................... 9.12% 7.28% (15.34)% (35.78)% 0.51%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)............ $ 300,523 $ 275,814 $ 257,156 $ 303,940 $ 473,241
Ratios of expenses to average net assets....... 2.03% 1.98% 2.03%(6) 2.03% 1.98%(4)
Ratios of net investment income (loss)
to average net assets....................... (0.34)% (0.37)% 0.22%(6) (0.38)% (0.06)%(4)
Portfolio turnover............................. 28.85% 42.61% 33.57% 25.28% 20.93%

--------------------
* Barclays Global Investors International Inc., formerly known as Barclays
de Zoete Wedd Investment Management Inc., served as the Fund's investment
adviser until August 1, 1997.

(1) Based on average shares outstanding.

(2) Less than $0.01 per share.

(3) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported, except that for the period ended December 31,
1994, total investment return is based on a beginning of period price of
$14.02 (initial offering price of $15.00 less underwriting discount of
$0.98). Dividends and distributions, if any, are assumed, for purposes of
this calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions or sales charges and is not annualized.

(4) Annualized.

(5) Initial public offering price $15.00 per share less underwriting discount
of $0.98 per share and offering costs of $0.04 per share.

(6) Includes expense waivers by The Bank of New York, as custodian. If such
expenses had not been waived, the ratio of expenses to average net assets
and the ratio of net investment income to average net assets would have
been 2.12% and 0.13%, respectively, for the year ended December 31, 1996.

THE FUND

The Fund, which was incorporated in Maryland on December 27, 1993, is a
non-diversified, closed-end management investment company registered under the
U.S. Investment Company Act of 1940, as amended. The Fund's investment objective
is long-term capital appreciation, which it seeks to achieve by investing
primarily in the equity securities of Indian companies. Under normal market
conditions, at least 80% of the Fund's total assets are invested in the equity
securities of Indian companies. The Fund cannot assure that its investment
objective will be realized. Due to the risks inherent in international
investments generally, you should consider the Fund as a vehicle for investing a
portion of your assets in foreign securities markets and not as a complete
investment program.

INVESTMENT IN INDIA

The Fund's investment objective and policies reflect the Investment
Manager's opinions that economic and political developments and changes in the
last several years have well positioned India to experience a period of
significant economic growth. The Investment Manager believes that India should
grow as an economic force over the next ten years and that investment in its
securities markets offers significant potential returns. For a detailed
description of India and its securities market see "Appendix B: Republic of
India" and "Appendix C: The Indian Securities Market."

BACKGROUND

Since 2000, foreign investment in Indian securities has been regulated by
the Indian Foreign Exchange Management Act, 1999 and the rules, regulations and
notifications issued thereunder. This Act is the principal legislation that
governs foreign investment and foreign exchange in India. Its objective is to
facilitate foreign trade and payments and to promote the development and
maintenance of foreign exchange markets in India.

In 2000, the Reserve Bank of India issued the Indian Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2000, which we refer to as the "FEMA Regulations," to regulate the
issue of Indian securities to persons who reside outside India and the transfer
of Indian securities by or to such persons. Under the FEMA regulations, a
foreign investor may invest in Indian securities through either an "automatic"
route, which does not require the prior approval of the Indian government or the
Reserve Bank of India but which is nonetheless subject to government-imposed
foreign investment restrictions in certain economic sectors, or an "approval"
route. The FEMA regulations also prescribe rules for the transfer of Indian
securities between foreign, domestic, Indian and non-Indian security holders.
Such transfers often require the approval of either the Indian government or the
Reserve Bank of India.

INVESTMENTS BY FOREIGN INSTITUTIONAL INVESTORS

In 1992, the Indian government issued guidelines that enable foreign
institutional investors and their sub-accounts to make portfolio investments in
securities of listed and unlisted Indian companies. In 1995, the Securities and
Exchange Board of India ("SEBI") issued regulations applicable to foreign
institutional investors and sub-accounts investing in Indian securities, which
we refer to as the "FII Regulations."

Foreign institutional investors and sub-accounts wishing to invest and
trade in Indian securities in India are required to register with SEBI and
obtain special permission from the Reserve Bank of India. Once qualified under
applicable Indian law, a foreign institutional investor or its sub-account,
subject to the restrictions noted below, may:

o buy and sell securities of Indian companies;

o realize capital gains on investments;

o participate in rights offerings for shares;

o appoint a domestic custodian for custody of investments made; and

o repatriate capital, capital gains, dividends, interest income and any
proceeds received in connection with the sale of Indian securities.

Under applicable Indian law, a foreign institutional investor or a
sub-account may only invest in the following Indian securities:

o securities in the primary and secondary Indian markets including shares,
debentures and warrants of Indian companies;

o securities of Indian mutual funds;

o Government securities;

o derivatives traded on a recognized Indian stock exchange; and

o commercial paper.

Investments by all foreign institutional investors and sub-accounts under
the FEMA Regulations in the primary and secondary markets are subject to an
aggregate ceiling of 24% of the equity capital or the value of each series of
convertible debentures of any Indian company, with certain exceptions. The
ceiling would apply to the total holdings of foreign institutional investors
collectively in an Indian company. The FII Regulations prescribe that each
foreign institutional investor investing through its sub-account or each
sub-account can invest up to 10% of the equity capital of an Indian company.
Investments by the foreign institutional investor made in its own behalf would
be registered in the name of the foreign institutional investor while
investments by the sub-accounts in Indian securities may be registered in the
name of either the foreign institutional investor or the sub-account. A foreign
institutional investor cannot purchase shares or convertible debentures of an
Indian company which is engaged in the print media sector.

If a foreign institutional investor or a sub-account wishes to invest in
securities through the Indian secondary market, it must, with certain
exceptions, conduct its securities transactions through brokers certified by
SEBI.

With some exceptions, the total investments in equity and equity-related
instruments, such as convertible debentures and tradeable warrants, made by a
foreign institutional investor, whether on account of itself or its
sub-accounts, cannot generally be less than 70% of the aggregate of all the
investments of the foreign institutional investor in India, made on its own or
through its various sub-accounts. Additionally, applicable Indian law imposes
aggregate investment limitations on the dollar amount of certain Indian
securities held by a foreign institutional investor.

A foreign institutional investor or a sub-account may generally issue,
deal in or hold any off-shore derivative instruments such as participatory
notes, equity-linked notes or other similar instruments against underlying
securities listed or proposed to be listed on an Indian stock exchange.
Moreover, a foreign institutional investor is required to disclose periodically
certain information relating to off-shore derivative instruments entered into by
such foreign institutional investor or its sub-accounts with respect to Indian
securities such as the name of the parties involved, and the principal terms of,
such off-shore derivative transactions.

At present, foreign institutional investor registrations are granted for
five-year periods and may be renewed for further five-year periods by SEBI. The
registration for each sub-account must be renewed upon renewal of the relevant
registration if the sub-account intends to continue investing in India. The
Investment Manager is registered with SEBI as a foreign institutional investor
to invest in India on behalf of the Fund, its sub-account, and its other
approved clients. If not renewed, the Investment Manager will explore other
avenues of investment which may be available at that time, which may include a
trust or other arrangement for investment established under Indian law.

Registered foreign institutional investors and sub-accounts are generally
subject to tax under Section 115AD of the Indian Income Tax Act of 1961. There
is uncertainty under Indian law as to the tax regime applicable to foreign
institutional investors or sub-accounts that hold and trade in American
depositary shares. See "Taxation--Indian Taxes."

EXCHANGE CONTROLS

A foreign institutional investor or its sub-account may open both foreign
currency denominated accounts and "special non-resident rupee" accounts with
Indian banks, and any amount that the investor or its sub-account transfers
between these accounts may occur at the prevailing rate of exchange. However,
under rules and policies promulgated by the Reserve Bank of India, a foreign
institutional investor or its sub-account may only invest in Indian securities
out of its special non-resident rupee account. In addition, it may only
repatriate amounts from its foreign currency account after its designated bank
or custodian has deducted and paid all withholding taxes relating to any capital
gains.

THE OFFER

TERMS OF THE OFFER

The Fund is offering to stockholders of record as of the close of business
on December 17, 2004 non-transferable rights to subscribe for 7,546,991 shares
of common stock of the Fund. The Fund may increase the number of shares of
common stock subject to subscription by up to 25% of the shares, or up to
1,886,747 additional shares, for an aggregate total of 9,433,738 shares.

Each stockholder is being issued one right for each whole share of common
stock owned on the record date. The rights entitle you to acquire at the
subscription price one share for each three rights held. You need three rights
to purchase one share at the subscription price. The Fund will not issue
fractional shares upon the exercise of less than three rights.

Rights may be exercised at any time during the subscription period, which
commences on December 17, 2004 and ends at 5:00 p.m., Eastern Standard Time, on
January 31, 2005, unless extended by the Fund to not later than February 7, 2005
or terminated early as described herein (such date, as it may be extended, is
referred to in this prospectus as the "expiration date," and such period, as it
may be extended, is referred to in this prospectus as the "subscription
period"). See "--Expiration, Extension and Early Termination of the Offer"
below. A stockholder's right to acquire one additional share for each three
rights held during the subscription period at the subscription price is referred
to as the "primary subscription." The rights are evidenced by subscription
certificates, which will be mailed to subscribing stockholders.

In addition, any stockholder who fully exercises all rights issued to him
or her is entitled to subscribe for additional shares, which were not otherwise
subscribed for in the primary subscription, at the subscription price, which we
refer to as the "over-subscription privilege." Shares acquired pursuant to the
over-subscription privilege are subject to allotment and may be subject to
increase, which is more fully discussed below under "--Over-Subscription
Privilege."

The subscription price will be 95% of the net asset value per share as of
the close of business on the expiration date of the offer.

Because the expiration date and the date upon which the price of the
rights will be determined will be the same date, stockholders who exercise their
rights will not know the purchase price of the shares when they make their
investment decision. If the market price of the Fund's common stock is below 95%
of the net asset value per share, it may not be in your interest to participate
in this offering. Once you subscribe for shares and the Fund receives payment or
a guarantee of payment, you will not be able to change your decision.

The rights are non-transferable. Therefore, only the underlying shares,
and not the rights, will be listed for trading on the NYSE.

PURPOSES OF THE OFFER

The board of directors of the Fund has determined that it would be in the
best interests of the Fund and its stockholders to increase the assets of the
Fund through this offer.

In consultation with the Investment Manager, the board determined that
this offer may provide the following benefits:

o A greater ability to take advantage of investment opportunities
without being required to sell current portfolio positions that
the Investment Manager believes should be retained.

o Additional investment flexibility, including the ability to
diversify the Fund by investing in a greater number of small-
and mid-capitalization companies.

o Lower the Fund's expense ratios by spreading the Fund's fixed
costs over a larger asset base. Moreover, the Investment Manager
has agreed to reduce its fees to 0.95% of the average weekly net
assets on such net assets of the Fund in excess of $600 million.

o Improved market visibility for the Fund.

o Improved liquidity of the trading market for shares on the NYSE.

o An opportunity for existing stockholders by providing them with
an opportunity to purchase additional shares potentially at a
price below the current market price.

Prior to reaching this conclusion, the Fund's board of directors, in
consultation with the Investment Manager and others, reviewed the structure,
timing and terms of this offer, as well as its dilutive effect on both
shareholders who exercise their rights and those who do not and other
potentially adverse consequences resulting from this offer. The board of
directors also considered the fact that the Fund's semi-annual repurchase offers
will tend to diminish assets over time and that that diminution in assets will
offset in whole or in part the potential benefits discussed above. After careful
consideration, the board of directors voted unanimously to approve the terms of
this offer. However, there can be no assurance that the offer will provide any
of the benefits listed above.

One of the Fund's directors who voted to authorize this offer is
affiliated with the Investment Manager, the Country Adviser and Oppenheimer &
Co. Inc., the Fund's administrator, and therefore could benefit indirectly from
this offer. The other six directors are not "interested persons" of the Fund
within the meaning of the U.S. Investment Company Act of 1940, as amended.
Although the Investment Manager has agreed to lower its monthly fee by adding a
breakpoint to its management fee, subject to certain conditions as noted above,
the Investment Manager, as well as the Country Adviser and the Fund's
administrator, may also benefit from this offer because their fees will be based
on the net assets of the Fund. The Fund's board of directors considered this in
its evaluation of the offer and determined that, in its business judgement,
these increased fees were offset by the potential benefits of the offer to the
Fund and its stockholders. See "Investment Management and Other
Services--Investment Manager," "--Country Adviser" and "--Administrator." It is
not possible to state precisely the amount of additional compensation the
Investment Manager, the Country Adviser and the Fund's administrator might
receive as a result of this offer because it is not known how many shares will
be subscribed for and because the proceeds of this offer will be invested in
additional portfolio securities, which will fluctuate in value. However,
assuming that the value of the Fund's assets remained constant prior to the
offer at $593.9 million (its approximate value as of November 26, 2004) and
after the offer at $828.6 million (which assumes that all rights are exercised
at the estimated subscription price, including the additional shares that may be
issued under the over-subscription privilege), the annual compensation received
by the Investment Manager, the Country Adviser and administrator would increase
by approximately $2.2 million, $234,700 and $469,400, respectively.

The Fund may, in the future, choose to make additional rights offerings
from time to time for a number of shares and on terms that may or may not be
similar to this offer. Any such future rights offerings will be made in
accordance with the then-applicable requirements of the U.S. Investment Company
Act of 1940, as amended, and the U.S. Securities Act of 1933, as amended.

There can be no assurance that the Fund or its stockholders will achieve
any of the foregoing objectives or benefits through this offer.

OVER-SUBSCRIPTION PRIVILEGE

If some stockholders do not exercise all of the rights initially issued to
them, any shares for which subscriptions have not been received from
stockholders will be offered by means of the over-subscription privilege to
those stockholders who have exercised all of the rights initially issued to them
and who wish to acquire additional shares. Stockholders who exercise all of the
rights initially issued to them should indicate on the subscription certificate
how many shares they are willing to acquire through this over-subscription
privilege. If sufficient shares are available, all over-subscription requests
will be honored in full. If sufficient shares are not available to honor all
requests for over-subscription, the Fund may increase the number of shares
available by up to 25%, or 1,886,747 shares in order to satisfy
over-subscription requests.

To the extent that there are not sufficient shares to honor all
over-subscription requests, the available shares will be allocated among those
who over-subscribe based on the number of rights originally issued to them by
the Fund, so that the number of shares issued to stockholders who subscribe
through the over-subscription privilege will generally be in

proportion to the number of shares of the Fund owned by them on the record date.
The percentage of remaining shares each over-subscribing stockholder may acquire
may be rounded down to the nearest whole share to result in delivery of whole
shares. The allocation process may involve a series of allocations in order to
ensure that the total number of shares available for over-subscriptions is
distributed, as nearly as may be practicable, on a pro rata basis. The Fund will
not offer or sell any shares that are not subscribed for through the primary
subscription or the over-subscription privilege.

SUBSCRIPTION PRICE

The subscription price will be 95% of the net asset value per share as of
the close of business on the expiration date of the offer.

The Fund announced the offer after the close of business on the NYSE on
May 24, 2004. The net asset value per share at the close of business on May 21,
2004 and November 26, 2004 was $20.82 and $26.23, respectively. The last
reported sale price of a share of the Fund's common stock on the NYSE on May 24,
2004 and November 26, 2004 was $22.05 and $26.20, respectively.

RIGHTS MAY NOT BE PURCHASED OR SOLD

The rights are non-transferable. You may not purchase or sell them. The
rights will not trade on the NYSE or any other exchange. The shares to be issued
upon the exercise of the rights, however, will trade on the NYSE under the
symbol "IFN." If you do not exercise your rights before the conclusion of this
offer, your rights will expire without value.

EXPIRATION, EXTENSION AND EARLY TERMINATION OF THE OFFER

The expiration date is 5:00 p.m., Eastern Standard Time, on January 31,
2005, unless extended by the Fund to not later than February 7, 2005 or
terminated early as described herein. The Fund may elect to extend the offer in
order to, among other things, increase potential stockholder participation in
the offer or allow stockholders additional time to evaluate the terms of the
offer. Moreover, the Fund may extend the offer upon the occurence of the events
described below under "--Notice of Net Asset Value Decline--Possible Suspension
or Withdrawal of the Offer."

The rights will expire on the expiration date and may not be exercised
after that date. Because the expiration date and the date upon which the price
of the rights will be determined will be the same date, stockholders who
exercise their rights will not know the purchase price of the shares when they
make their investment decision. If the market price of the Fund's common stock
is below 95% of the net asset value per share, it may not be in your interest to
participate in this offering. Once you subscribe for shares and the Fund
receives payment or a guarantee of payment, you will not be able to change your
decision except as provided under "--Notice of Net Asset Value Decline--Possible
Suspension or Withdrawal of the Offer."

The Fund may elect to terminate the offer early if, in the judgment of the
Fund's board of directors, market circumstances significantly change and the
Fund's board determines that the offer no longer constitutes a net benefit to
the Fund or the Fund's stockholders. In such event, the Fund's board would
likely determine that the risks associated with proceeding with the offer would
be greater to the Fund and the Fund's stockholders than the risks associated
with early termination, which risks could include negative public perception of
the Fund and a negative impact on the Fund's peformance.

SUBSCRIPTION AGENT

The subscription agent for this offer is The Colbent Corporation, which
will receive, for its administrative, processing, invoicing and other services
as subscription agent, an estimated fee of $53,000 and reimbursement for all
out-of-pocket expenses related to this offer. Stockholder inquiries may be
directed to Georgeson Shareholder Communications Inc., the information agent,
toll-free at (866) 297-1264.

THE SIGNED SUBSCRIPTION CERTIFICATES SHOULD BE SENT TO THE COLBENT
CORPORATION, by one of the following methods:

BY FIRST CLASS MAIL: BY EXPRESS MAIL OR OVERNIGHT COURIER: BY HAND:

The Colbent Corporation The Colbent Corporation The Colbent Corporation
Attn: Corporate Actions Attn: Corporate Actions Attn: Corporate Actions
P.O. Box 859208 161 Bay State Drive 161 Bay State Drive
Braintree, MA 02185-9208 Braintree, MA 02184-5203 Braintree, MA 02184-5203

BY FACSIMILE TRANSMISSION:
(781) 380-3388

CONFIRM BY TELEPHONE:
(781) 843-1833, Ext. 200

THE FUND WILL ONLY ACCEPT SUBSCRIPTION CERTIFICATES ACTUALLY RECEIVED ON A
TIMELY BASIS. IF YOU DELIVER THE CERTIFICATES TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, THAT DELIVERY WILL NOT BE EFFECTIVE.

INFORMATION AGENT

Any questions or requests for assistance may be directed to the
information agent at its telephone number listed below:

Georgeson Shareholder Communications Inc.
Toll Free: (866) 297-1264

Stockholders may also call their nominees, who hold shares for the account
of others, for information with respect to this offer.

The Fund will pay an estimated fee of $15,000 to Georgeson Shareholder
Communications Inc. and reimburse it for all out-of-pocket expenses related to
its services as information agent.

METHOD FOR EXERCISING RIGHTS

Rights may be exercised by stockholders who fill in and sign the
accompanying subscription certificate and mail it in the envelope provided or
deliver the completed and signed subscription certificate to the subscription
agent, together with any required payment for the shares as described below
under "--Payment for Shares." Rights may also be exercised by a stockholder
contacting his or her broker, bank or trust company, which can arrange, on the
stockholder's behalf, to guarantee delivery, using a "notice of guaranteed
delivery," of a properly completed and executed subscription certificate and
payment for the shares. The broker, bank or trust company may charge a fee for
this service. Fractional shares will not be issued. Completed subscription
certificates must be received by the subscription agent prior to 5:00 p.m.,
Eastern Standard Time, on the expiration date (unless payment is to be effected
by means of a notice of guaranteed delivery at the offices of the subscription
agent. See "--Payment for Shares."

Depending on your status, the following methods of delivery should be
used:

o FOR STOCKHOLDERS WHO ARE RECORD OWNERS. Stockholders who are record
owners can choose between either option set forth below under
"--Payment for Shares." If time is of the essence, option (1) set
forth below under "--Payment for Shares" will permit delivery of the
subscription certificate and payment after the expiration date.

o FOR INVESTORS WHOSE SHARES ARE HELD THROUGH A NOMINEE. Stockholders
whose shares are held by a nominee such as a broker, bank or trust
company must contact that nominee to exercise their rights. In that
case, the nominee will complete the subscription certificate on
behalf of the stockholder and arrange for proper payment by one of
the methods set forth below under "--Payment for Shares."

o FOR NOMINEES. Nominees, who hold shares for the account of others,
should notify the respective beneficial owners of such shares as soon
as possible to ascertain the beneficial owners' intentions and to
obtain instructions with respect to the rights. If the beneficial
owner so instructs, the nominee should complete the

subscription certificate and submit it to the subscription agent,
together with the proper payment described below under "--Payment
for Shares."

PAYMENT FOR SHARES

Stockholders who acquire shares in the primary subscription or pursuant to
the over-subscription privilege may choose between the following methods of
payment:

(1) If, prior to 5:00 p.m., Eastern Standard Time, on the expiration
date, the subscription agent has received a notice of guaranteed
delivery by facsimile or otherwise from a bank, trust company or a
NYSE member firm guaranteeing delivery of (a) payment of the full
subscription price for the shares subscribed for in the primary
subscription and any additional shares subscribed for through the
over-subscription privilege and (b) a properly completed and executed
subscription certificate, the subscription will be accepted by the
subscription agent. The bank, trust company or NYSE member firm may
charge you a fee for this service. The subscription agent will not
honor a notice of guaranteed delivery if a properly completed and
executed subscription certificate is not received by the subscription
agent by the close of business on February 4, 2005.

(2) Alternatively, a record owner can send payment for the shares
acquired in the primary subscription, together with the subscription
certificate, to the subscription agent based on an estimated
subscription price of $24.92 per share. To be accepted, such payment,
together with the subscription certificate, must be received by the
subscription agent prior to 5:00 p.m., Eastern Standard Time, on the
expiration date.

IF THE SECOND METHOD DESCRIBED ABOVE IS USED, PAYMENT BY CHECK MUST
ACCOMPANY ANY SUBSCRIPTION CERTIFICATE FOR THE SUBSCRIPTION CERTIFICATE TO BE
ACCEPTED.

If the market price of the Fund's common stock is below 95% of the net
asset value per share, it may not be in your interest to participate in this
offering. You will have no right to rescind your subscription after receipt of
your payment for shares by the subscription agent, except as provided below
under "--Notice of Net Asset Value Decline/Possible Suspension or Withdrawal of
the Offer."

The subscription agent will deposit all checks received by it prior to the
final due date into a segregated interest bearing and insured account at a
non-affiliated bank pending distribution of the shares. Interest will accrue to
the benefit of the Fund regardless of whether shares are issued by the Fund.

THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE FUND WILL BE AT YOUR ELECTION AND RISK, BUT, IF SENT
BY MAIL, WE RECOMMEND THAT YOU SEND THE SUBSCRIPTION CERTIFICATES AND PAYMENT BY
REGISTERED MAIL, PROPERLY INSURED WITH RETURN RECEIPT REQUESTED, AND THAT A
SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE FUND PRIOR TO
5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE. THE FUND RESERVES THE
RIGHT NOT TO ACCEPT YOUR PAYMENT IF PAYMENT IS NOT RECEIVED IN A TIMELY FASHION.
YOU ARE THEREFORE STRONGLY ENCOURAGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS
OF A CERTIFIED OR BANK CASHIER'S CHECK.

A confirmation will be sent by the subscription agent to each stockholder
(or, if the Fund's shares on the record date are held by a nominee, to such
nominee) by February 11, 2005, showing:

o the number of shares acquired pursuant to the primary subscription;

o the number of shares, if any, acquired through the over-subscription
privilege;

o the per share and total purchase price for the shares; and

o any additional amount payable by the stockholder to the Fund or any
excess to be refunded by the Fund to the stockholder, in each case
based on the subscription price as determined on the Pricing Date.

In the case of any stockholder who exercises his or her right to acquire
shares pursuant to the over-subscription privilege, any excess payment which
would otherwise be refunded to the stockholder will be applied by the Fund
toward payment for additional shares acquired pursuant to exercise of the
over-subscription privilege. Any additional payment required from a stockholder
must be received by the subscription agent by February 25, 2005. Any excess
payment to be refunded by the Fund to a stockholder will be mailed by the
subscription agent to such stockholder as promptly as possible after February
25, 2005. All payments by a stockholder must be made in United States dollars by
money order or check drawn on a bank located in the United States of America and
payable to The India Fund, Inc.

Issuance and delivery of certificates for the shares purchased are subject
to collection of checks and actual payment through any notice of guaranteed
delivery.

If a stockholder who acquires shares pursuant to the primary subscription
or over-subscription privilege does not make payment of all amounts due by
February 25, 2005, the Fund reserves the right, among other things, to:

o find other purchasers for such subscribed and unpaid shares; and/or

o apply any payment actually received by it toward the purchase of the
greatest number of whole shares which could be acquired by such
stockholder upon exercise of the primary subscription and/or
over-subscription privilege.

All questions concerning the timeliness, validity, form and eligibility of
any exercise of rights will be determined by the Fund, whose determinations will
be final and binding. The Fund may, in its sole discretion, waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Fund determines
in its sole discretion. The Fund will not be under any duty to give notification
of any defect or irregularity in connection with the submission of subscription
certificates or incur any liability for failure to give such notification.

NOTICE OF NET ASSET VALUE DECLINE/POSSIBLE SUSPENSION OR WITHDRAWAL OF THE OFFER

The Fund has, as required by the SEC, undertaken to suspend this offer
until it amends this prospectus if, subsequent to the effective date of the
Fund's Registration Statement, the Fund's net asset value declines more than 10%
from its net asset value as of the effective date. Accordingly, the Fund will
notify stockholders of any such decline and thereby permit them to cancel their
exercise of rights.

DELIVERY OF SHARE CERTIFICATES

Participants in the Fund's dividend reinvestment and cash purchase plan
will have any shares acquired in the primary subscription and pursuant to the
over-subscription privilege credited to their accounts in the plan. Stock
certificates will not be issued for shares credited to plan accounts.
Stockholders whose shares are held of record by a nominee on their behalf will
have any shares acquired in the primary subscription and pursuant to the
over-subscription privilege credited to the account of such nominee. For all
other stockholders, the Fund will issue stock certificates for shares acquired
through subscription only upon request made at the time of exercise of the
rights. If a request is made, stock certificates will be mailed promptly after
February 25, 2005 and after full payment for the subscribed shares has been
received and cleared.

RESTRICTIONS ON FOREIGN SHAREHOLDERS

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER

Stockholders who receive rights pursuant to this offer will not recognize
taxable income for United States federal income tax purposes upon their receipt
of the rights. If rights issued to a stockholder expire without being exercised,
no basis will be allocated to such rights, and the stockholder will not
recognize any gain or loss for U.S. federal income tax purposes upon such
expiration.

Provided that the fair market value of the rights distributed pursuant to
this offer is less than 15% of the fair market value of the Fund's common stock
at the time of distribution (which the Fund expects will be the case), the tax
basis of a stockholder's common stock will remain unchanged, and the
stockholder's basis in the rights will be zero. A stockholder may, however,
elect to allocate his basis in his common stock between his rights and common
stock based on their relative fair market values on the date of distribution of
the rights; this allocation is mandatory if the fair market value of the rights
distributed pursuant to this offer is at least equal to 15% of the fair market
value of the Fund's common stock at the time of distribution. A stockholder who
exercises rights will not recognize any gain or loss for United States federal
income tax purposes upon the exercise. The basis of the newly acquired common
stock will equal the subscription price paid for the common stock. Upon a sale
or exchange of the common stock so acquired, the stockholder will recognize gain
or loss measured by the difference between the proceeds of the sale or exchange
and the cost basis of such common stock. Assuming the stockholder holds the
common stock as a capital asset, any gain or loss realized upon its sale will
generally be treated as a capital gain or loss, and the gain or loss will be
long-term capital gain or loss if the common stock has a holding period of more
than one year at the time of the sale. However, any loss recognized upon the
sale of shares of common stock with a tax holding period of six months or less
will be treated as a long-term capital loss to the extent of any capital gain
distribution previously received by the stockholder with respect to such shares,
and a loss may be disallowed under wash sale rules to the extent that the
stockholder purchases additional common stock (including by reinvestment of
distributions) within 30 days before or after the sale date. The holding period
for common stock acquired upon the exercise of rights will begin on the date of
exercise of the rights.

The foregoing is a summary of certain U.S. federal income tax consequences
of this offer under the provisions of U.S. Internal Revenue Code of 1986 and
applicable existing and proposed regulations thereunder, all as currently in
effect and all subject to change at any time, perhaps with retroactive effect.
It does not include any state, local or foreign tax consequences of this offer.
This summary is generally applicable to stockholders that are United States
persons as defined in the U.S. Internal Revenue Code. Further, this summary is
not intended to be, nor should it be, construed as legal or tax advice, and
stockholders are urged to consult their own tax advisors to determine the tax
consequences to them of this offer and their ownership of rights and common
stock.

DILUTION

As a result of this offer, you will incur immediate economic dilution,
and, if you do not exercise all of your rights, you may incur voting dilution.

USE OF PROCEEDS

o all rights are exercised in full;

o a subscription price of $24.92; and

o payment of offering expenses of approximately $360,000.

The Investment Manager anticipates that investment of the net proceeds of
this offer in accordance with the Fund's investment goal and policies may take
up to six months from their receipt by the Fund, depending on market conditions
and the availability of appropriate securities. The Fund may require up to six
months due to the Fund's need to invest substantially all of its assets in the
securities of issuers organized under the laws of a foreign jurisdiction. See
"Risk Factors--Risks Related to the Fund's Operations." Pending investment, the
net proceeds of this offer will be held in the types of short-term debt
securities and instruments in which the Fund may invest. See "Investment
Objective and Policies." As a result of this short-term investment of the
proceeds, a lower yield may be realized.

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is long-term capital appreciation,
which it seeks to achieve by investing primarily in the equity securities of
Indian companies. Equity securities include common and preferred stock
(including convertible preferred stock), American, global or other types of
depositary receipts, or ADRs, convertible bonds, notes and debentures, equity
interests in trusts, partnerships, joint ventures or similar enterprises and
common stock purchase warrants and rights. Most of the equity securities
purchased by the Fund are expected to be traded on an Indian stock exchange or
in an Indian over-the-counter market.

The Fund's investment objective and its policy to invest, under normal
market conditions, at least 80% of its total assets in equity securities of
Indian companies are fundamental policies of the Fund that may not be changed
without the approval of a majority of the Fund's outstanding voting securities.
See "Investment Restrictions."

PORTFOLIO STRUCTURE

Under normal market conditions, at least 80% of the Fund's total assets
are invested in equity securities of Indian companies. "Indian companies"
include companies that:

o are organized under the laws of India,

o regardless of where organized, derive at least 50% of their
revenues or profits from goods produced or sold, investments
made, or services performed, in India, or have at least 50% of
their assets in India, or

o have securities which are traded principally on any Indian stock
exchange or in the Indian over-the-counter market.

Up to 20% of the Fund's total assets may be invested, subject to certain
restrictions, in:

o equity securities of companies (other than companies considered
"Indian companies" under the above criteria), regardless of where
organized, which the Investment Manager believes derive, or will
derive, at least 25% of their revenues from business in or with
India, or have at least 25% of their assets in India,

o debt securities denominated in Indian rupees or issued or
guaranteed by an Indian company, the Government of India or an
Indian governmental entity, and

o debt securities of the type described under "--Temporary
Investments." We refer to these securities as "temporary
investments."

Up to 20% of the Fund's assets may also be utilized to purchase and sell
options on securities, financial futures, fixed income indices and other
financial futures contracts, enter into interest rate transactions and to enter
into currency transactions, sell securities short and loan portfolio securities.
The Fund will only invest in such assets in order to hedge

against financial risks. The Fund will not be obligated, however, to do any
hedging and makes no representation as to the availability of these techniques
at this time or at any time in the future. See "Risk Factors--Risks Related to
the Fund's Operations -- The Fund's ability to successfully hedge against
financial risks may adversely affect the Fund's net asset value" and "Additional
Investment Activities--Hedging."

The Fund's assets may be invested in debt securities, other than temporary
investments, when the Investment Manager believes that, based upon factors such
as relative interest rate levels and foreign exchange rates, such securities
offer opportunities for long-term capital appreciation. The Fund may invest up
to 100% of its assets in temporary investments for temporary defensive purposes
due to political, market or other factors affecting markets in India.

The Fund may invest in investment funds that invest at least 80% of their
total assets in the equity securities of Indian companies in which the Fund is
authorized to invest. The Fund may invest in investment funds as a means of
investing in other equity securities in which the Fund is authorized to invest
when the Investment Manager believes that such investments may be more
advantageous to the Fund than a direct market purchase of such securities. Under
the U.S. Investment Company Act of 1940, as amended, the Fund is restricted in
the amount it may invest in such funds. See "Additional Investment
Activities--Investment Funds."

The Fund may invest its assets in a broad spectrum of industries. In
selecting industries and companies for investment, the Investment Manager will
consider overall growth prospects, financial condition, competitive position,
technology, research and development, productivity, labor costs, raw material
costs and sources, profit margins, return on investment, structural changes in
local economies, capital resources, the degree of government regulation or
deregulation, management and other factors. See "Investment Restrictions."

There are risks associated with investments in securities of small and
medium capitalization companies that are not customarily associated with
investments in securities of more established and larger capitalized companies.
Although the opportunities for growth may be greater with these companies, they
also involve greater risks. For example, they are more susceptible to abrupt and
erratic price movements and adverse general market and economic developments,
and it may be more difficult to obtain information about these companies because
they tend to be less well known and followed by fewer securities analysts. See
"Risk Factors--Risks Related to the Fund's Operations--Investments in unseasoned
and small and mid-capitalization Indian companies may expose the Fund to greater
investment risk."

TEMPORARY INVESTMENTS

The Fund may hold and/or invest its assets in cash and/or temporary
investments for cash management purposes, pending investment in accordance with
the Fund's investment objective and policies and to meet operating expenses. In
addition, the Fund may take a temporary defensive posture and invest without
limitation in temporary investments. The Fund may assume a temporary defensive
posture when, due to political, market or other factors broadly affecting
markets, the Investment Manager determines that either opportunities for capital
appreciation in those markets may be significantly limited or that significant
diminution in value of the securities traded in those markets may occur. To the
extent that the Fund invests in temporary investments, it may not achieve its
investment objective.

Specifically, "temporary investments" are debt securities denominated in
U.S. dollars or in another freely convertible currency including:

o short-term (less than 12 months to maturity) and medium-term (not
greater than five years to maturity) obligations issued or
guaranteed by:

o the U.S. government or the Indian government or their
agencies or instrumentalities, or

o international organizations designated or supported by
multiple foreign governmental entities to promote economic
reconstruction or development;

o finance company obligations, corporate commercial paper and other
short-term commercial obligations, in each case rated, or issued
by companies with similar securities outstanding that are rated,
Prime-1 or A or better by Moody's Investors Service, Inc. or A-1
or A or better by Standard & Poor's Ratings Services, a division
of the McGraw Hill Companies, Inc., or, if unrated, of comparable
quality as determined by the Investment Manager;

o obligations (including certificates of deposit, time deposits,
demand deposits and bankers' acceptances) of banks, subject to
the restriction that the Fund may not invest more than 25% of its
total assets in bank securities; and

o repurchase agreements with respect to securities in which the
Fund may invest. The banks whose obligations may be purchased by
the Fund and the banks and broker-dealers with which the Fund may
enter into repurchase agreements include any member bank of the
U.S. Federal Reserve System and any broker-dealer or any foreign
bank that has been determined by the Investment Manager to be
creditworthy.

Repurchase agreements are contracts pursuant to which the seller of a
security agrees at the time of sale to repurchase the security at an agreed upon
price and date. When the Fund enters into a repurchase agreement, the seller
will be required to maintain the value of the securities subject to the
repurchase agreement, marked to market daily, at not less than their repurchase
price. Repurchase agreements may involve risks in the event of insolvency or
other default by the seller, including possible delays or restrictions upon the
Fund's ability to dispose of the underlying securities.

OTHER INVESTMENTS

ILLIQUID SECURITIES. The Fund may invest up to 20% of its total assets in
illiquid securities for which there may be no or only a limited trading market
and for which a low trading volume of a particular security may result in abrupt
and erratic price movements. The Fund may be unable to dispose of its holdings
in illiquid securities at then-current market prices and may have to dispose of
such securities over extended periods of time. See "Risk Factors--Risks Related
to the Fund's Operations--The Fund's investments in illiquid securities may
restrict its ability to dispose of its investments in a timely fashion and at a
price approximating the value at which the Fund carries the securities on its
books." In many cases, illiquid securities will be subject to contractual or
legal restrictions on transfer. In addition, issuers whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements that may be applicable if their securities were publicly
traded.

RULE 144A SECURITIES. The Fund may purchase certain restricted securities,
or Rule 144A securities, for which there is a secondary market of qualified
institutional buyers, as contemplated by Rule 144A under the U.S. Securities Act
of 1933, as amended. Rule 144A provides an exemption from the registration
requirements of the Securities Act for the resale of certain restricted
securities to qualified institutional buyers. One effect of Rule 144A is that
certain restricted securities may now have liquidity, though there is no
assurance that a liquid market for Rule 144A securities will develop or be
maintained. To the extent that the number of qualified institutional buyers is
reduced, a previously liquid Rule 144A security may be determined to be
illiquid, thus increasing the percentage of illiquid assets in the Fund's
portfolio. The board of directors has adopted policies and procedures for the
purpose of determining whether securities that are eligible for resale under
Rule 144A are liquid or illiquid securities. Pursuant to those policies and
procedures, the board of directors has delegated to the Investment Manager the
determination as to whether a particular security is liquid or illiquid.

CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest generally paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Convertible securities have
several unique investment characteristics such as:

o higher yields than common stocks but lower yields than comparable
nonconvertible securities;

o a lesser degree of fluctuation in value than the underlying stock
since they have fixed income characteristics; and

o the potential for capital appreciation if the market price of the
underlying common stock increases.

A convertible security might be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Fund is called for redemption,
the Fund may be required to permit the issuer to redeem the security, convert it
into the underlying common stock or sell it to a third party.

In selecting convertible debt securities for the Fund, the following
factors, among others, may be considered by the Investment Manager:

o the creditworthiness of the issuers of the securities;

o the interest income generated by the securities;

o the potential for capital appreciation of the securities and the
underlying stock;

o the conversion prices of the securities relative to the underlying
stocks; and

o the conversion prices of the securities relative to other comparable
securities.

WARRANTS. The Fund may invest in warrants, which are securities permitting
but not obligating their holder to subscribe for other securities. Warrants do
not carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holder to purchase, and they do not represent
any rights in the assets of an issuer. As a result, an investment in warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date.

EQUITY-LINKED DEBT SECURITIES. The Fund may invest in equity-linked debt
securities. The amount of interest and/or principal payments that an issuer of
equity-linked debt securities is obligated to make is linked to the performance
of a specified index of equity securities and may be significantly greater or
less than payment obligations in respect of other types of debt securities. As a
result, an investment in equity-linked debt securities may be considered more
speculative than other types of debt securities. In selecting equity-linked debt
securities for the Fund, the Investment Manager may consider, among other
factors, the creditworthiness of the issuers of the securities and the
volatility of the index of equity securities.

ADDITIONAL INVESTMENT ACTIVITIES

In addition to the investment policies discussed above, the Fund may
engage in certain additional investment activities. These activities may be
limited by Indian law or regulations.

HEDGING

The Fund is authorized to use various hedging and investment strategies
described below to hedge various market risks (such as broad or specific market
movements and interest rates and currency exchange rates). Although these
strategies are regularly used by some investment companies and other
institutional investors, few of these strategies can practicably be used to a
significant extent by the Fund at the present time and may not become available
for extensive use in the future. In addition, techniques and instruments may
change over time as new instruments and strategies are developed or regulatory
changes occur. Limitations on the portion of the Fund's assets that may be used
in connection with the investment strategies described below are set out in
"Appendix A: General Characteristics and Risks of Hedging."

Subject to the constraints described above, the Fund may purchase and sell
interest rate, currency or stock index futures contracts and enter into currency
forward contracts and currency swaps. It may purchase and sell (or write)
exchange listed and over-the-counter put and call options on debt and equity
securities, currencies, futures contracts, fixed income and stock indices and
other financial instruments. And, it may enter into interest rate transactions,
equity swaps and related transactions and other similar transactions that may be
developed to the extent the Investment Manager determines are consistent with
the Fund's investment objective and policies and applicable regulatory
requirements. The Fund's futures transactions will be entered into for hedging
purposes. There is, however, no limit on the Fund's assets that can be put at
risk through the use of futures contracts and options thereon, and the value of
the Fund's futures contracts and options thereon may equal or exceed 100% of the
Fund's total assets. The Fund's interest rate transactions may take the form of
swaps, caps, floors and collars, currency forward contracts, currency futures
contracts, currency swaps and options on currency or currency futures contracts.

Hedging may be used to attempt to protect against possible changes in the
market value of securities held in or to be purchased for the Fund's portfolio
resulting from securities markets or currency exchange rate fluctuations, to
protect the Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of those securities for investment

purposes, to manage the effective maturity or duration of the Fund's portfolio
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular debt or equity securities. The ability of
the Fund to utilize hedging successfully will depend on the Investment Manager's
ability to predict pertinent market movements, and this ability cannot be
assured. These skills are different from those needed to select portfolio
securities. The use of hedging in certain circumstances will require that the
Fund segregate cash, U.S. government securities or other liquid debt obligations
to the extent the Fund's obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or currency.

A detailed discussion of hedging, including applicable requirements of the
U.S. Commodity Futures Trading Commission, the requirement to segregate assets
with respect to these transactions and special risks associated with such
strategies, appears in this prospectus as "Appendix A: General Characteristics
and Risks of Hedging." See also "Risk Factors--Risks Related to the Fund's
Operations--The Fund's ability to successfully hedge against financial risks may
adversely affect the Fund's net asset value."

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase securities on a when-issued or delayed delivery
basis. Securities purchased on a when-issued or delayed delivery basis are
purchased for delivery beyond the normal settlement date at a stated price. No
income accrues to the purchaser of a security on a when-issued or delayed
delivery basis prior to delivery. Such securities are recorded as an asset and
are subject to changes in value based upon changes in market prices. Purchasing
a security on a when-issued or delayed delivery basis can involve a risk that
the market price at the time of delivery may be lower than the agreed-upon
purchase price, in which case there could be an unrealized loss at the time of
delivery. The Fund will only make commitments to purchase securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but it may sell them before the settlement date if it is deemed
advisable. The Fund generally will establish a segregated account in which it
will maintain liquid assets in an amount at least equal in value to the Fund's
commitments to purchase securities on a when-issued or delayed delivery basis.
If the value of these assets declines, the Fund will place additional liquid
assets in the account on a daily basis so that the value of the assets in the
account is equal to the amount of such commitments. As an alternative, the Fund
may elect to treat when-issued or delayed delivery securities as senior
securities representing indebtedness, which are subject to asset coverage
requirements under the U.S. Investment Company Act of 1940, as amended. See
"Investment Restrictions."

LOANS OF PORTFOLIO SECURITIES

The Fund may lend portfolio securities. By doing so, the Fund attempts to
earn income through the receipt of interest on the loan. In the event of the
bankruptcy of the other party to a securities loan, the Fund could experience
delays in recovering the securities that it lent. To the extent that, in the
meantime, the value of the securities that the Fund has lent has increased, the
Fund could experience a loss.

The Fund may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities lent
(including accrued interest thereon) plus the interest payable to the Fund with
respect to the loan is maintained by the Fund in a segregated account. Any
securities that the Fund may receive as collateral will not become a part of its
portfolio at the time of the loan and, in the event of a default by the
borrower, the Fund will, if permitted by law, dispose of such collateral except
for such part thereof that is a security in which the Fund is permitted to
invest. During the time that securities are on loan, the borrower will pay the
Fund any accrued income on those securities, and the Fund may invest the cash
collateral and earn additional income or receive an agreed-upon fee from a
borrower that has delivered cash equivalent collateral. Cash collateral received
by the Fund will be invested in securities in which the Fund is permitted to
invest. The value of securities lent will be marked to market daily. Portfolio
securities purchased with cash collateral are subject to possible depreciation.
Loans of securities by the Fund will be subject to termination at the Fund's or
the borrower's option. The Fund may pay reasonable negotiated fees in connection
with loaned securities, so long as such fees are set forth in a written contract
and approved by the Fund's board of directors.

INVESTMENT FUNDS

The Fund may invest in investment funds, other than those for which the
Investment Manager or Country Adviser or serve as investment adviser or sponsor
and which invest principally in securities in which the Fund is authorized to
invest. Under the U.S. Investment Company Act of 1940, as amended, the Fund may
invest a maximum of 10% of its total assets in the securities of other
investment companies. In addition, the Fund may not invest more than 5% of its
total

assets in the securities of any one investment company, and it may not
invest in any investment company if it would own more than 3% of the outstanding
voting stock of that company. To the extent that the Fund invests in other
investment funds, the Fund's stockholders will incur certain duplicative fees
and expenses, including investment advisory fees.

SHORT SALES

Although the Fund does not presently do so or intend to do so to any
significant extent, the Fund may from time to time sell securities short. A
short sale is a transaction in which the Fund would sell securities it does not
own but has borrowed. In the event the Fund elects to sell securities short, the
Fund's intention would be to seek to take advantage of decreases in the market
prices of securities in order to increase the Fund's return on its investments.
When the Fund makes a short sale, the proceeds it receives from the sale will be
held on behalf of a broker until the Fund replaces the borrowed securities. To
deliver the securities to the buyer, the Fund will need to arrange through a
broker to borrow the securities, and, in so doing, the Fund will become
obligated to replace the securities borrowed at their market price at the time
of replacement, whatever that price may be. The Fund may have to pay a premium
to borrow the securities and must pay any dividends or interest payable on the
securities until they are replaced.

The Fund's obligation to replace the securities borrowed in connection
with a short sale will be secured by collateral deposited with the broker that
consists of cash, U.S. government securities or other liquid debt obligations.
In addition, the Fund will place in a segregated account with its custodian, or
designated sub-custodian, an amount of cash, U.S. government securities or other
liquid debt obligations equal to the difference, if any, between the market
value of the securities sold at the time they were sold short and any cash, U.S.
government securities or other liquid obligations deposited as collateral with
the broker in connection with the short sale (not including the proceeds of the
short sale). Until it replaces the borrowed securities, the Fund will maintain
the segregated account daily at a level so that the amount deposited in the
account plus the amount deposited with the broker (not including the proceeds
from the short sale) will equal the current market value of the securities sold
short and the amount deposited in the account plus the amount deposited with the
broker (not including the proceeds from the short sale) will not be less than
the market value of the securities at the time they were sold short.

Short sales by the Fund involve certain risks and special considerations.
Possible losses from short sales differ from losses that could be incurred from
a purchase of a security because losses from short sales may be unlimited
whereas losses from purchases can equal only the total amount invested.

LEVERAGE

Although the Fund does not presently do so or intend to do so to any
significant extent, the Fund may utilize leverage by borrowing or by issuing
preferred stock or short-term debt securities in an amount up to 25% of the
Fund's total assets. Borrowings may be secured by the Fund's assets. Temporary
borrowings in an additional amount of up to 5% of the Fund's total assets may be
made without regard to the foregoing limitation for temporary or emergency
purposes such as clearance of portfolio transactions, share repurchases and
payment of dividends.

Leverage by the Fund creates an opportunity for increased return but, at
the same time, creates special risks. For example, leverage may exaggerate
changes in the net asset value of the common stock and in the return on the
Fund's portfolio. Although the principal of any leverage will be fixed, the
Fund's assets may change in value during the time the leverage is outstanding.
Leverage will create expenses for the Fund that can exceed the income from the
assets acquired with the proceeds of the leverage. Furthermore, an increase in
interest rates could reduce or eliminate the benefits of leverage and could
reduce the value of the Fund's common stock.

The Fund also may enter into reverse repurchase agreements with any member
bank of the U.S. Federal Reserve System and any broker-dealer or any foreign
bank that has been determined by the Investment Manager to be creditworthy.
Under a reverse repurchase agreement, the Fund would sell securities and agree
to repurchase them at a mutually agreed upon date and price. At the time the
Fund enters into a reverse repurchase agreement, it may establish and maintain a
segregated account with its custodian or a designated sub-custodian that
contains cash, U.S. government securities or other liquid debt obligations that
have a value not less than the repurchase price (including accrued interest).
Reverse repurchase agreements involve the risk that the market value of the
securities purchased with the proceeds of the sale of securities received by the
Fund may decline below the price of the securities that the Fund is obligated to
repurchase. In the event that the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes

insolvent, the buyer or its trustee or receiver may receive an extension of time
to determine whether to enforce the Fund's obligations to repurchase the
securities, and the Fund's use of proceeds of the reverse repurchase agreement
may effectively be restricted pending the decision. Reverse repurchase
agreements will be treated as borrowings for purposes of calculating the Fund's
borrowing limitation to the extent the Fund does not establish and maintain a
segregated account.

ASSET COVERAGE REQUIREMENTS

The U.S. Investment Company Act of 1940, as amended, requires the Fund to
satisfy an asset coverage requirement of 300% of its indebtedness, including
amounts borrowed, measured at the time that the Fund incurs the indebtedness.
This requirement, which we refer to as the "asset coverage requirement," means
that the value of the Fund's total indebtedness may not exceed one-third of the
value of its total assets (including such indebtedness), measured at the time
the Fund incurs the indebtedness. The staff at the SEC's Division of Investment
Management has taken the position that short sales of securities, reverse
repurchase agreements, use of margin, sales of put and call options on specific
securities or indices, investments in certain other types of instruments
(including certain derivatives, such as swap agreements) and the purchase and
sale of securities on a when-issued or forward commitment basis may be deemed to
constitute indebtedness subject to the asset coverage requirement.

The SEC's staff has stated, however, that it will not deem a portfolio
position involving these instruments to be subject to the asset coverage
requirement if an investment company "covers" its position by segregating liquid
securities on its books or in account with its custodian in an amount sufficient
to offset the liability associated with the position. Generally, in conjunction
with portfolio positions that are deemed to constitute senior securities, the
Fund must:

o observe the asset coverage requirement;

o maintain daily a segregated account in cash or liquid securities at
such a level that the amount segregated plus any amounts pledged to a
broker as collateral will equal the current value of the position; or

o otherwise cover the portfolio position with offsetting portfolio
securities.

Segregation of assets or covering portfolio positions with offsetting
portfolio positions may limit the Fund's ability to otherwise invest those
assets or dispose of those securities. If the Fund were to issue preferred
stock, the asset coverage requirement with respect to such preferred stock would
be 200%.

INVESTMENT RESTRICTIONS

The following restrictions, along with the Fund's investment objective,
its policy to invest at least 80% of the Fund's total assets in the equity
securities of Indian companies under normal market conditions and its interval
fund structure, are, subject to the next sentence, the Fund's only fundamental
policies, that is, policies that cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities. In addition,
as a matter of fundamental policy and notwithstanding any other fundamental
investment policy or limitation, the Fund may invest all or a portion of its
assets invested in India through a subsidiary, trust or other similar
arrangement (including a branch) established by the Fund at any such time that
the board of directors of the Fund determines that it is in the best interests
of the Fund's stockholders. As used in here and otherwise in this prospectus, a
"majority of the Fund's outstanding voting securities" means the lesser of (i)
67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares. The other policies and investment restrictions referred to in this
prospectus are not fundamental policies of the Fund and may be changed by the
Fund's board of directors without stockholder approval. If a percentage
restriction set forth below is adhered to at the time a transaction is effected,
later changes in any percentage resulting from any cause other than actions by
the Fund will not be considered a violation.

Under its fundamental restrictions, the Fund may not:

o purchase any securities that would cause 25% or more of the value of
its total assets at the time of such purchase to be invested in
securities of one or more issuers conducting their principal business
activities in the same industry, except that there is no limitation
with respect to investment in obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities;

o issue senior securities or borrow money, except for (a) senior
securities (including borrowing money, margin transactions if the
margin securities are owned and entering into reverse repurchase
agreements, or any similar transactions) not in excess of 25% of its
total assets (including the amount borrowed) and (b) borrowings of up
to 5% of its total assets (including the amount borrowed) for
temporary or emergency purposes (including for the clearance of
transactions, repurchase of its shares or payment of dividends),
without regard to the amount of senior securities outstanding under
clause (a) above. However, with respect to the above, the Fund's
obligations under when-issued and delayed delivery and similar
transactions and reverse repurchase agreements are not treated as
senior securities if covering assets are appropriately segregated,
and the use of hedging shall not be treated as involving the issuance
of a "senior security" or a "borrowing." Also, for purposes of
clauses (a) and (b) above, the term "total assets" shall be
calculated after giving effect to the net proceeds of senior
securities issued by the Fund reduced by any liabilities and
indebtedness not constituting senior securities, except for such
liabilities and indebtedness as are excluded from treatment as senior
securities by this second bullet. The Fund's obligations under
interest rate, currency and equity swaps are not treated as senior
securities;

o purchase or sell commodities or commodity contracts, including
futures contracts and options thereon, except that the Fund may
engage in hedging, as described in the section titled "Additional
Investment Activities--Hedging";

o make loans, except that: (1) the Fund may (a) purchase and hold debt
instruments (including bonds, debentures or other obligations and
certificates of deposit, bankers' acceptances and fixed time
deposits) in accordance with its investment objective and policies,
(b) enter into repurchase agreements with respect to portfolio
securities and (c) make loans of portfolio securities, as described
under "Additional Investment Activities--Loans of Portfolio
Securities" in this prospectus; and (2) delays in the settlement of
securities transactions will not be considered loans;

o underwrite the securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter;

o purchase real estate, real estate mortgage loans or real estate
limited partnership interests (other than securities secured by real
estate or interests therein or securities issued by companies that
invest in real estate or interests therein);

o purchase securities on margin, except (1) as provided in the second
bullet above and (2) (a) for delayed delivery or when-issued
transactions, (b) such short-term credits as are necessary for the
clearance of transactions and (c) margin deposits in connection with
transactions in futures contracts, options on futures contracts,
options on securities and securities indices and currency
transactions); or

o invest for the purpose of exercising control over the management of
any company.

For purposes of the above restrictions on senior securities and as further
described above under "Additional Investment Activities--Asset Coverage
Requirements," the U.S. Investment Company Act of 1940, as amended, requires the
Fund to satisfy an asset coverage requirement of 300% of its indebtedness,
including amounts borrowed, measured at the time the Fund incurs the
indebtedness. Short sales of securities, reverse repurchase agreements, use of
margin, sales of put and call options on specific securities or indices,
investments in certain other types of instruments (including certain
derivatives, such as swap agreements) and the purchase and sale of securities on
a when-issued or forward commitment basis may be deemed to constitute
indebtedness subject to this requirement.

For purposes of the above restrictions on loans of portfolio securities
and as further described under "Additional Investment Activities--Loans of
Portfolio Securities," the Fund may make loans of portfolio securities if liquid
assets in an amount at least equal to the current market value of the securities
lent (including accrued interest thereon) plus the interest payable to the Fund
with respect to the loan is maintained by the Fund in a segregated account.

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE YOU DECIDE TO PARTICIPATE IN THIS OFFER.
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING THE
FUND. ADDITIONAL RISKS AND UNCERTAINTIES MAY ALSO ADVERSELY AFFECT AND IMPAIR
THE FUND. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THE FUND'S OPERATIONS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD LIKELY SUFFER, WHICH IN TURN
COULD MATERIALLY ADVERSELY AFFECT YOUR INVESTMENT IN THE FUND.

RISKS RELATING TO THE OFFER

AS A RESULT OF THIS OFFER, YOU WILL INCUR IMMEDIATE ECONOMIC DILUTION, AND, IF
YOU DO NOT EXERCISE ALL OF YOUR RIGHTS, YOU MAY INCUR VOTING DILUTION.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND, INCLUDING THE POSSIBILITY THAT YOU
MAY LOSE ALL OF YOUR INVESTMENT.

An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the U.S. Federal Deposit Insurance Corporation or any other
governmental agency.

Among the principal risks of investing in the Fund is market risk, which
is the risk that the value of your investment may fluctuate as stock markets
fluctuate.

As an investment company that holds primarily common stocks, the Fund's
portfolio is subject to the possibility that common stock prices will decline
over short or even extended periods. The Fund may remain substantially fully
invested during periods when stock prices generally rise and also during periods
when they generally decline. Moreover, as a holder of common stock, the Fund's
rights to the assets of the companies in which it invests will be subordinated
to such companies' holders of preferred stock and debt in the event of a
bankruptcy, liquidation or similar proceeding. Accordingly, if such an event
were to occur to such a company in which the Fund invests, the Fund would be
entitled to such a company's assets only after such company's preferred
stockholders and debt holders have been paid. Risks are inherent in investments
in equities, and Fund stockholders should be able to tolerate significant
fluctuations in the value of their investment in the Fund.

RISKS RELATED TO THE FUND'S OPERATIONS

THE FUND'S "INTERVAL FUND" STRUCTURE INVOLVES CERTAIN RISKS AND SPECIAL
CONSIDERATIONS NOT TYPICALLY ASSOCIATED WITH OTHER CLOSED-END FUNDS.

o harm investment performance in part by limiting the extent to which
the Fund may invest in illiquid securities;

o increase the Fund's expense ratio as the Fund's assets decrease;

o threaten the Fund's continued listing on the NYSE, and, consequently,
the liquidity of its shares; and

o jeopardize the Fund's viability, investment opportunities and
continued existence.

Moreover, there are additional risks associated with the Fund's repurchase
offers, including that:

o if the repurchase offer is over-subscribed, stockholders may be
unable to liquidate all or a given percentage of their investment at
net asset value during the repurchase offer;

o the repurchase offer may not eliminate any discount at which the
Fund's shares trade;

o share values may decrease as a result of fluctuations between the
date of tender and the repurchase pricing date.

The decrease in the Fund's assets resulting from the semi-annual
repurchase offers will likely offset in whole or in part the potential benefits
to the Fund associated with having increased assets as a result of this offer.

See "Semi-Annual Repurchases of Securities" and "Semi-Annual Repurchases
of Securities--Fundamental Policy Regarding Semi-Annual Repurchase Offers."

POLITICAL, ECONOMIC, SOCIAL AND OTHER FACTORS IN INDIA MAY ADVERSELY AFFECT THE
FUND'S PERFORMANCE.

The value of the Fund's assets may be adversely affected by political,
economic, social and religious factors, changes in Indian law or regulations and
the status of India's relations with other countries. In addition, the economy
of India may differ favorably or unfavorably from the U.S. economy in such
respects as the rate of growth of gross domestic product, the rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. Agriculture occupies a more prominent position in the Indian economy
than in the United States, and the Indian economy therefore is more susceptible
to adverse changes in weather. The Indian government has exercised and continues
to exercise significant influence over many aspects of the economy, and the
number of public sector enterprises in India is substantial.

Accordingly, Indian government actions in the future could have a significant
effect on the Indian economy, which could affect private sector companies and
the Fund, market conditions, and prices and yields of securities in the Fund's
portfolio.

Since mid-1991, the Indian government has committed itself to implementing
an economic structural reform program with the objective of liberalizing India's
exchange and trade policies, reducing the fiscal deficit, controlling inflation,
promoting a sound monetary policy, reforming the financial sector, and placing
greater reliance on market mechanisms to direct economic activity. A significant
component of the program is the promotion of foreign investment in key areas of
the economy and the further development of, and the relaxation of restrictions
in, the private sector. These policies have been coupled with the expressed
intention to redirect the government's central planning function away from the
allocation of resources and toward the issuance of indicative guidelines. While
the government's policies have resulted in improved economic performance there
can be no assurance that the economic recovery will be sustained. Moreover,
there can be no assurance that these economic reforms will persist. In April and
May of 2004, general elections in India took place in India resulting in a
change in the ruling coalition government of Prime Minister Atal Bihari Vajpayee
which came to power in 1999. There can be no assurance that the newly elected,
Congress Party-led government will continue the program of economic
liberalization of the last government which may adversely affect Indian laws and
policies affecting foreign investment and currency exchange. Such changes in
economic policies could negatively affect the general business and economic
conditions in India, which could in turn affect the Fund's investments.

Religious and border disputes persist in India. The longstanding
grievances between the Hindu and Muslim populations resulted in communal
violence during 1993 in the aftermath of the destruction of a mosque in Ayodhya
by radical elements of the Hindu population. More recently, there has been
communal violence between Hindus and Muslims in the western Indian state of
Gujarat. Moreover, India has from time to time experienced civil unrest and
hostilities with neighboring countries such as Pakistan. The Indian government
has confronted separatist movements in several Indian states. The longstanding
dispute with Pakistan over the border Indian state of Jammu and Kashmir, a
majority of whose population is Muslim, remains unresolved. If the Indian
government is unable to control the violence and disruption associated with
these tensions, the results could destabilize the economy and, consequently,
adversely affect the Fund's investments.

Since early 2003, there have also been military hostilities and civil
unrest in Afghanistan, Iraq and other Asian countries. These events could
adversely influence the Indian economy and, as a result, negatively affect the
Fund's investments. See "Appendix B: Republic of India."

INDIAN SECURITIES MARKETS ARE SUBSTANTIALLY SMALLER, LESS LIQUID AND MORE
VOLATILE THAN SECURITIES MARKETS IN THE UNITED STATES.

There are 23 recognized stock exchanges in India, including The Over the
Counter Exchange of India. Most stock exchanges are governed by regulatory
boards. The Stock Exchange, Mumbai, which we refer to as the "BSE," and the
National Stock Exchange of India Limited, which we refer to as the "NSE," have
nationwide trading terminals and, taken together, are the principal Indian stock
exchanges in terms of the number of listed companies, market capitalization and
trading volume. The securities market in India is substantially smaller, less
liquid and significantly more volatile than the securities market in the United
States. At December 31, 2003, there were 6,700 companies listed on the BSE and
the NSE and the aggregate market capitalization of listed equity securities of
these companies was approximately $535 billion (Rs. 24,404 billion). For the
year ended December 31, 2003, the average daily equity trading values of listed
companies on the BSE and NSE were approximately $354 million (Rs. 16,117
million) and $784 million (Rs. 35,743 million), respectively, resulting in
aggregate trading values for the period of approximately $898 billion (Rs.
40,937 billion) and $1,992 billion (Rs. 90,778 bllion), respectively. By
comparison, for the year ended December 31, 2003, the average daily equity
trading value on the NYSE was approximately $38 billion and the aggregate
trading value for the period was $9.7 trillion. On December 31, 2003, the global
market capitalization of the NYSE was $16.8 trillion. The relatively small
market capitalizations of, and trading values on, the BSE and NSE may cause the
Fund's investments in securities listed on these exchanges to be comparatively
less liquid and subject to greater price volatility than comparable U.S.
investments.

Under current Indian law, only companies organized under the laws of India
may list their securities on the Indian securities exchanges or over-the-counter
markets. If Indian law changes in this regard, the Fund would be able to

invest in companies that are principally traded in India but which may be
organized outside of India, which could subject the Fund to different risks of
the country where they are organized. Similarly, Indian companies may have
operations outside of India and, accordingly, may be subject to risks in the
various countries where they have operations.

A high proportion of the shares of many Indian issuers are held by a
limited number of persons, which may limit the number of shares available for
investment by the Fund. In addition, further issuances, or the perception that
such issuances may occur, of securities by Indian issuers in which the Fund has
invested could dilute the earnings per share of the Fund's investment and could
adversely affect the market price of such securities. Sales of securities by
such issuer's major shareholders, or the perception that such sales may occur,
may also significantly and adversely affect the market price of such securities
and, in turn, the Fund's investment. A limited number of issuers represent a
disproportionately large percentage of market capitalization and trading value.
At December 31, 2003, the 30 largest companies by market capitalization
accounted for approximately 50% and 59% of the aggregate market capitalization
of the BSE and NSE, respectively. The limited liquidity of the Indian securities
markets may also affect the Fund's ability to acquire or dispose of securities
at the price and time that it desires.

Anticipation of this offering in the Indian securities markets may
adversely influence the prices paid by the Fund in purchasing certain securities
for its portfolio and may affect the speed with which the Fund can initially
invest in Indian securities. In addition, the small trading volume concentrated
in a limited number of the largest companies, combined with certain investment
diversification requirements and other restrictions applicable to the Fund, also
may affect the rate at which the Fund can initially invest. Further, the stock
markets in India are presently at high levels that may not persist. Accordingly,
to the extent the Fund purchases securities at present levels, there may be
greater risk that the value of such securities may decline.

Indian stock exchanges, including the BSE and the NSE, have in the past
experienced substantial fluctuations in the prices of their listed securities.
They have also experienced problems such as temporary exchange closures, broker
defaults, settlement delays and broker strikes that, if they occur again in the
future, could affect the market price and liquidity of the Indian securities in
which the Fund invests. In addition, the governing bodies of the various Indian
stock exchanges have from time to time imposed restrictions on trading in
certain securities, limitations on price movements and margin requirements.
Disputes have also occurred from time to time among listed companies, the stock
exchanges and other regulatory bodies, and in some cases those disputes have had
a negative effect on overall market sentiment. Recently, there have been delays
and errors in share allotments relating to initial public offerings, which in
turn affect overall market sentiment and lead to fluctuations in the market
prices of the securities of those companies and others in which the Fund may
invest.

Uncertainties relating to the recent Indian general elections and the
corresponding potential changes in Indian economic policies may cause
significant volatility in the price and trading volumes of Indian securities.
For example, on May 17, 2004, the BSE and NSE recorded their biggest single-day
falls ever and trading was temporarily suspended in response to investors'
concerns over potential changes in Indian economic policies as a result of the
election of a new Congress Party-led government. These fluctuations may in turn
adversely affect the Fund's investments.

The foregoing factors could impede the ability of the Fund to effect
portfolio transactions on a timely basis and could have an adverse effect on the
net asset value of the Fund's shares of common stock and the price at which
those shares trade.

INDIA HAS DIFFERENT CORPORATE DISCLOSURE, GOVERNANCE AND REGULATORY REQUIREMENTS
THAN YOU MAY BE FAMILIAR WITH IN THE UNITED STATES.

In addition to their smaller size, lesser liquidity and greater
volatility, Indian securities markets are less developed than U.S. securities
markets. Disclosure and regulatory standards are in many respects less stringent
than U.S. standards. Issuers in India are subject to accounting, auditing and
financial standards and requirements that differ, in some cases significantly,
from those applicable to U.S. issuers. In particular, the assets and profits
appearing on the financial statements of an Indian issuer may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. There is substantially less publicly available
information about Indian issuers than there is about U.S. issuers.

There is less regulation and monitoring of Indian securities markets and
the activities of investors, brokers and other participants than in the United
States. Moreover, issuers of securities in India are not subject to the same
degree of regulation as are U.S. issuers with respect to such matters as insider
trading rules, tender offer regulation, shareholder proxy requirements and the
timely disclosure of information. There is also less publicly available
information about Indian companies than U.S. companies. See "Appendix C: The
Indian Securities Market."

Legal principles relating to corporate affairs and the validity of
corporate procedures, directors' fiduciary duties and liabilities and
shareholders' rights may differ from those that may apply in other
jurisdictions. Shareholders' rights under Indian law may not be as extensive as
those that exist under the laws of the United States. The Fund may therefore
have more difficulty asserting its rights as a shareholder of an Indian company
in which it invests than it would as a shareholder of a comparable American
company.

THE FUND MAY HAVE DIFFICULTY ENFORCING FOREIGN JUDGMENTS AGAINST INDIAN
COMPANIES OR THEIR MANAGEMENT.

The Indian companies in which the Fund invests are primarily limited
liability companies incorporated under the laws of India. Generally, the
directors, executive officers and a substantial portion of the assets of such
companies are located in India. It may be difficult for the Fund to obtain a
judgment in a court outside the United States to the extent that there is a
default with respect to the security of an Indian issuer or with respect to any
other claim that the Fund may have against any such issuer or its directors and
officers. As a result, even if the Fund initiates a suit against the issuer in a
U.S. court, it may not be possible for the Fund to effect service of process in
India. Moreover, if the Fund obtains a judgment in a U.S. court, it may be
difficult to enforce such judgment in India as India is not a party to any
international treaty with respect to the recognition or enforcement of foreign
judgments. Provisions of Indian law regulate the enforcement of foreign
judgments and such laws contain broad exceptions. For example, an Indian court
would not enforce any foreign judgment if it viewed the amount of damages
awarded as excessive or inconsistent with Indian practice. A party seeking to
enforce a foreign judgment in India is also required to obtain approval from the
Reserve Bank of India to execute such judgment or to repatriate any amount
recovered outside of India.

INDIAN INVESTMENT RESTRICTIONS APPLICABLE TO THE FUND MAY HINDER ITS ABILITY TO
INVEST IN CERTAIN COMPANIES OR INDUSTRIES.

The Fund will invest in India as a sub-account of the Investment Manager,
which is registered as a foreign institutional investor with SEBI. Under SEBI
regulations applicable to foreign institutional investors and subject to certain
exceptions, total investments by foreign institutional investors and their
sub-accounts, taken together, in the primary and secondary Indian markets may
not exceed 24% of the equity capital or the value of each series of convertible
debentures of any Indian company in which they invest. The ceiling would apply
to the total holdings in any Indian Company of all foreign institutional
investors and their sub-accounts collectively in a given Indian company. In
addition, to this 24% overall investment limitation, no individual foreign
institutional investor, together with its sub-accounts, may generally invest
more than 10% of the equity capital of any Indian company.

In addition, a foreign institutional investor and its sub-accounts, may
not, with certain exceptions, hold more than 30% of their total investments in
the debt securities of Indian companies.

Foreign institutional investors are also limited in their ability to
invest in certain industries, such as the print media. In such industries, there
is often a ceiling on total foreign holdings, against which holdings of foreign
institutional investors are counted. To the extent that the ceiling has been
reached in that industry, further investment by foreign institutional investors
may not be permitted.

Accordingly, the ability of the Fund to invest in certain companies may be
restricted, and there can be no assurance that additional restrictions on
investments permissible for foreign institutional investors will not be imposed
in the future. There can be no assurance that the foreign institutional investor
guidelines will not be amended, clarified, interpreted by judicial or
administrative ruling or superseded in the future in such a way that may
adversely affect the Fund. At present, registrations for foreign institutional
investors and their sub-accounts are granted for five-year periods and may be
renewed for further five-year periods with the prior approval of SEBI. Renewal
is required so long as a foreign institutional investor and its sub-accounts
continue to invest in Indian securities. If not renewed, the Investment Manager

will explore other avenues of investment which may be available at that time,
which may include a trust or other arrangement for investment established under
Indian law.

FOREIGN CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT THE FUND'S PERFORMANCE.

The Fund's assets will be invested principally in securities of Indian
issuers and substantially all of the income received by the Fund will be in
Indian rupees. However, the Fund will compute and distribute its income in U.S.
dollars, and the computation of income will be made on the date that the income
is earned by the Fund at the foreign exchange rate on that date. Therefore, if
the value of the Indian rupee falls relative to the U.S. dollar between the
earning of the income and the time at which the Fund converts the Indian rupees
to U.S. dollars, the Fund may be required to liquidate securities in order to
make distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements. See "Taxation" and "Dividends and Distributions;
Dividend Reinvestment and Cash Purchase Plan."

THE LIQUIDATION OF INVESTMENTS, IF REQUIRED, MAY HAVE AN ADVERSE IMPACT ON THE
FUND'S PERFORMANCE.

Since the Fund will invest primarily in securities denominated or quoted
in Indian rupees, changes in the U.S. dollar-Indian rupee exchange rate will
affect the dollar value of securities in the Fund's portfolio and the unrealized
appreciation or depreciation of investments. The exchange rate between the
Indian rupee and the U.S. dollar has changed substantially in the last two
decades and may fluctuate substantially in the future. On an annual average
basis, the Indian rupee declined against the U.S. dollar from 1980 until 2002.
From April 1, 1999 until March 31, 2002, the rupee lost approximately 15% of
value relative to the U.S. dollar. From April 1, 2003 until March 31, 2004, the
value of the Indian rupee appreciated 7% in value relative to the U.S. dollar.

Furthermore, the Fund may incur costs in connection with conversions
between U.S. dollars and Indian rupees. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire immediately to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either at the spot
rate prevailing in the foreign currency exchange market or through entering into
forward, futures or options contracts to purchase or sell foreign currencies, if
available.

EXCHANGE CONTROLS IN INDIA MAY RESTRICT THE FUND'S ABILITY TO REPATRIATE
INVESTMENT.

The ability of the Fund to invest in Indian securities, exchange Indian
rupees into U.S. dollars and repatriate investment income, capital and proceeds
of sales realized from its investments in Indian securities is subject to the
Indian Foreign Exchange Management Act, 1999 and the rules, regulations and
notifications issued thereunder. See "Investment in India."

There can be no assurance that the Indian government in the future,
whether for purposes of managing its balance of payments or for other reasons,
will not impose restrictions on foreign capital remittances abroad or otherwise
modify the exchange control regime applicable to foreign institutional investors
in such a way that may adversely affect the ability of the Fund to repatriate
its income and capital. If for any reason the Fund is unable, through borrowing
or otherwise, to distribute an amount equal to substantially all of its
investment company taxable income (as defined for U.S. tax purposes, without
regard to the deduction for dividends paid) within the applicable time periods,
the Fund would cease to qualify for the favorable tax treatment afforded to
regulated investment companies under the U.S. Internal Revenue Code.

INVESTMENTS IN UNSEASONED AND SMALL AND MID-CAPITALIZATION INDIAN COMPANIES MAY
EXPOSE THE FUND TO GREATER INVESTMENT RISK.

While the Fund invests a substantial portion of its assets in the
securities of established Indian companies, it also may invest in the securities
of less seasoned and smaller and mid-capitalization Indian companies.
Investments in the securities of these companies may present greater
opportunities for growth but also involve greater risks than are customarily
associated with investments in securities of more established and larger
capitalized companies. The securities of less seasoned and smaller capitalized
companies are often traded in the over-the-counter market and have fewer market

makers and wider price spreads, which may in turn result in more abrupt and
erratic market price movements and make the Fund's investments more vulnerable
to adverse general market or economic developments than would investments only
in large, more established Indian companies. It is more difficult to obtain
information about less seasoned and smaller capitalization companies because
they tend to be less well known and have shorter operating histories and because
they tend not to have significant ownership by large investors or be followed by
many securities analysts. Additionally, these companies may have limited product
lines, markets or financial resources, or they may be dependent upon a limited
management group that may lack depth and experience. Investments in larger and
more established companies present certain advantages in that such companies
generally have greater financial resources, more extensive research and
development, manufacturing, marketing and service capabilities, more stability
and greater depth of management and technical personnel.

The Fund has not established any minimum capitalization or length of
operating history for the smaller, less seasoned issuers in whose securities it
may invest.

THE EXTENT TO WHICH THE FUND INVESTS IN HIGH YIELD/HIGH RISK AND UNRATED DEBT
MAY ADVERSELY AFFECT THE FUND'S PERFORMANCE.

The Fund has not established any rating criteria for the debt securities
in which it may invest and such securities may not be rated at all for
creditworthiness. Securities rated in medium to low rating categories by
nationally recognized statistical rating organizations and unrated securities of
comparable quality, or "high yield/high risk securities," are speculative with
respect to the capacity to pay interest and repay principal in accordance with
the terms of the security and generally involve a greater volatility of price
than securities in higher rated categories. These securities are commonly
referred to as "junk bonds," and credit ratings issued with respect to such
securities evaluate only the safety of principal and interest in respect of such
securities and not the risk of change in market value. In purchasing such
securities, the Fund will rely on the Investment Manager's analysis, judgment
and experience in evaluating the creditworthiness of an issuer of such
securities. The Investment Manager will take into consideration, among other
things, the issuer's financial resources, its operating history, its sensitivity
to economic conditions and trends, the quality of the issuer's management and
regulatory matters.

The market values of high yield/high risk securities tend to reflect
individual issuer developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Issuers of high yield/high risk securities may be highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risks associated with acquiring the securities of such
issuers generally are greater than is the case with higher rated securities. For
example, during a sustained period of rising interest rates or an economic
downturn, issuers of high yield/high risk securities may be more likely to
experience financial stress, especially if such issuers are highly leveraged.
During such periods, service of debt obligations also may be adversely affected
by the issuer's inability to meet specific projected business forecasts,
specific issuer developments or the unavailability of additional financing. The
risk of loss due to default by the issuer is significantly greater for the
holders of high yield/high risk securities because such securities may be
unsecured and may be subordinated to other creditors of the issuer.

High yield/high risk securities may have redemption or call features that
would permit an issuer to repurchase the securities from the Fund. If a call
were exercised by the issuer during a period of declining interest rates, the
Fund in all likelihood would have to replace the called securities with lower
yielding securities, thus decreasing the net investment income to the Fund and
dividends to stockholders.

The Fund may have difficulty disposing of certain high yield/high risk
securities, as there may be a thin trading market for such securities. To the
extent that a secondary trading market for high yield/high risk securities does
exist, it is generally not as liquid as the secondary market for higher rated
securities. Reduced secondary market liquidity may have an adverse impact on
market price and the Fund's ability to dispose of particular issues when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the issuer.
Reduced secondary market liquidity for certain high yield/high risk securities
may also make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio. Market quotations are
generally available on many high yield/high risk securities only from a limited
number of dealers and may not necessarily represent firm bids of such dealers of
prices for actual sales. The Fund's board of directors or the Investment Manager
will carefully consider

the factors affecting the market for high yield/high risk securities in
determining whether any particular security is liquid or illiquid and whether
current market quotations are readily available. Adverse publicity and investor
perceptions, which may not be based on fundamental analysis, also may decrease
the value and liquidity of high yield/high risk securities, particularly in a
thinly traded market. Factors adversely affecting the market value of high
yield/high risk securities are likely to adversely affect the Fund's net asset
value. In addition, the Fund may incur additional expenses to the extent it is
required to seek recovery upon a default on a portfolio holding or to
participate in the restructuring of the obligations.

The Fund may invest up to 20% of its total assets in illiquid securities.
Illiquid securities are securities that are not readily marketable. The prices
of such securities may change abruptly and erratically, and investment of the
Fund's assets in illiquid securities may restrict the ability of the Fund to
dispose of its investments in a timely fashion and at a price approximating the
value at which the Fund carries the securities on its books, as well as restrict
its ability to take advantage of market opportunities. The risks associated with
illiquidity will be particularly acute in situations in which the Fund's
operations require cash, such as when the Fund repurchases shares or pays
dividends or distributions, and could result in the Fund borrowing to meet
short-term cash requirements or incurring capital losses on the sale of illiquid
investments. Further, companies whose securities are not publicly traded are not
subject to the disclosure and other investor protection requirements that would
be applicable if their securities were publicly traded.

THE CONCENTRATION OF THE FUND'S INVESTMENTS IN SPECIFIC ECONOMIC SECTORS AND
RELATED INDUSTRIES MAY EXPOSE IT TO GREATER RISK OF LOSS WITH RESPECT TO ITS
PORTFOLIO SECURITIES.

THE FUND'S ABILITY TO SUCCESSFULLY HEDGE AGAINST FINANCIAL RISKS MAY ADVERSELY
AFFECT THE FUND'S NET ASSET VALUE.

The risks and special considerations of certain of the investment
practices in which the Fund may engage are described under "Investment Objective
and Policies" and "Additional Investment Activities." Hedging involves special
risks, including possible default by the other party to the transaction,
illiquidity and, to the extent the Investment Manager's view as to certain
market movements is incorrect, the risk that the use of hedging could result in
losses greater than if they had not been used. Use of put and call options could
result in losses to the Fund, force the sale or purchase of portfolio securities
at inopportune times or for prices higher than (in the case of put options) or
lower than (in the case of call options) current market values, or cause the
Fund to hold a security that it might otherwise sell. The use of currency
transactions could result in the Fund's incurring losses as a result of the
imposition of exchange controls, suspension of settlements or the inability to
deliver or receive a specified currency. The use of options and futures
transactions entails certain special risks. In particular, the variable degree
of correlation between price movements of futures contracts and price movements
in the related portfolio position of the Fund could create the possibility that
losses on the hedging instrument will be greater than gains in the value of the
Fund's position. In addition, futures and options markets could be illiquid in
some circumstances, and certain over-the-counter options could have no markets.
As a result, in certain markets, the Fund might not be able to close out a
position without incurring substantial losses. To the extent that the Fund
utilizes futures and options transactions for hedging, such transactions should
tend to minimize the risk of loss due to a decline in the value of the hedged
position and, at the same time, limit any potential gain to the Fund that might
result from an increase in value of the position. There is, however, no limit on
the amount of the Fund's assets that can be put at risk through the use of
futures contracts and options thereon, and the value of the Fund's futures
contracts and options thereon may equal or exceed 100% of the Fund's total
assets. Finally, the daily variation margin requirements for futures contracts
create a greater ongoing potential financial risk than would purchases of
options, in which case the exposure is limited to the cost of the initial
premium and transaction costs. Losses resulting from the use of hedging will
reduce the Fund's net asset value, and possibly income, and the losses can be
greater than if hedging had not been used. See "Appendix A: General
Characteristics and Risks of Hedging."

THE EXTENT TO WHICH THE FUND UTILIZES LEVERAGE TO HEDGE AGAINST FINANCIAL RISKS
MAY INCREASE ITS EXPENSES AND ADVERSELY AFFECT THE FUND'S PERFORMANCE.

Although the Fund has no present intention to do so to any significant
extent, the Fund may utilize leverage by borrowing or by issuing preferred stock
or short-term debt securities in an amount up to 25% of the Fund's total assets.
Leverage by the Fund creates an opportunity for increased return but, at the
same time, creates special risks. For example, leverage may exaggerate changes
in the net asset value of the common stock and in the return on the Fund's
portfolio. Although the principal of any leverage will be fixed, the Fund's
assets may change in value during the time the leverage is outstanding. Leverage
will create expenses for the Fund that can, during any period, exceed the income
from the assets acquired with the proceeds of the leverage. Furthermore, an
increase in interest rates could reduce or eliminate the benefits of leverage
and could reduce the value of the Fund's securities. The Fund may also borrow by
entering into reverse repurchase agreements, which will subject the Fund to
additional market risk as well as credit risks with respect to the buyer of the
securities under the agreement.

A CHANGE IN THE FUND'S TAX STATUS COULD ADVERSELY AFFECT THE FUND'S RETURN ON
ITS INVESTMENTS.

The Fund has historically elected and intends to continue to elect to
"pass-through" to the Fund's stockholders as a deduction or credit the amount of
foreign taxes paid by the Fund. The taxes passed through to stockholders are
included in each stockholder's income. Certain stockholders, including some
non-U.S. stockholders, are not entitled to the benefit of a deduction or credit
with respect to foreign taxes paid by the Fund. Other foreign taxes, such as
transfer taxes, may be imposed on the Fund, but would not give rise to a credit,
or be eligible to be passed through to stockholders. See "Taxation--U.S.
Stockholders" and "Taxation--Mauritian Tax Status."

THE FUND'S SHARES HAVE TRADED AND MAY TRADE IN THE FUTURE AT A DISCOUNT TO NET
ASSET VALUE.

Although the Fund's shares of common stock have recently traded on the
NYSE at a premium to their net asset value, the Fund's shares have traded at a
discount to their net asset value in the past. There can also be no assurance
that the Fund's shares will trade at a premium in the future or that the present
premium is sustainable. The Fund's shares have traded at discounts of as much as
40% in the past five years.

Shares of closed-end investment companies frequently trade at a discount
from their net asset values and initial offering price. This characteristic of
shares of a closed-end fund is a risk separate and distinct from the risk that a
fund's net asset value will decrease. The Fund cannot predict whether its own
shares will trade at, below or above net asset value.

THE FUND'S STATUS AS A "NON-DIVERSIFIED" INVESTMENT COMPANY MAY EXPOSE IT TO
GREATER RISK OF LOSS WITH RESPECT TO ITS PORTFOLIO SECURITIES.

The Fund is classified as a non-diversified investment company under the
U.S. Investment Company Act of 1940, as amended, which means that the Fund is
not limited in the proportion of its assets that may be invested in the
obligations of a single issuer. The Fund, however, complies and intends to
continue to comply with the diversification requirements imposed by the U.S.
Internal Revenue Code for qualification as a regulated investment company.
Because the Fund is not limited by the U.S. Investment Company Act of 1940, as
amended for diversification purposes, the Fund may invest a greater proportion
of its assets in the securities of a smaller number of issuers and, as a result,
will be subject to greater risk of loss with respect to its portfolio
securities. See "Taxation--The Fund" and "Investment Restrictions."

THERE ARE NO FIXED LIMITATIONS REGARDING PORTFOLIO TURNOVER.

THE ANTI-TAKEOVER PROVISIONS IN THE FUND'S ARTICLES OF AMENDMENT AND RESTATEMENT
AND AMENDED AND RESTATED BY-LAWS MAY LIMIT YOUR ABILITY TO SELL YOUR SHARES AT A
PREMIUM.

The Fund's articles of amendment and restatement and amended and restated
bylaws, contain certain anti-takeover provisions that, among other things, may
have the effect of inhibiting the Fund's possible conversion to open-end status
and delaying or limiting the ability of other persons to acquire control of the
Fund. In certain circumstances, these provisions might also inhibit the ability
of holders of common stock to sell their shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
the Fund. The Fund's board of directors has determined that these provisions are
in the best interests of stockholders generally.

THE OPERATING EXPENSES OF THE FUND ARE HIGHER THAN INVESTMENT COMPANIES THAT
INVEST PRIMARILY IN THE SECURITIES OF U.S. COMPANIES.

MANAGEMENT OF THE FUND

The names of the directors and principal officers of the Fund are set
forth below, together with their positions with the Fund and their principal
occupations during the past five years. None of the Fund's nonresident directors
has authorized an agent in the United States to receive notice.

Directors considered by the Fund to be "interested persons" (as defined in
the U.S. Investment Company Act of 1940, as amended) of the Fund or of the
Investment Manager:

------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
FUNDS IN
FUND
COMPLEX
LENGTH OF OVERSEEN BY
POSITION(S) TERM SERVED; DIRECTOR OTHER
HELD WITH TERM OF PRINCIPAL OCCUPATION(S) (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND OFFICE DURING PAST 5 YEARS THE FUND) HELD BY NOMINEE
------------------------------------------------------------------------------------------------------------------------------------

Bryan McKigney* Director, Since Managing Director, 2 None
90 Broad Street President and 1999; term Oppenheimer Asset
New York, NY 10004 Chairman of expires 2007 Management Inc. (June
Age: 45 the Board 2003-Present); Managing Director
(2000-June 2003) and Executive
Director (1993-2000), CIBC World
Markets Corp.; Managing
Director, CIBC Oppenheimer
Advisers, L.L.C. and Advantage;
President of The Asia Tigers
Fund, Inc.; and formerly, Vice
President and Division
Executive, Head of Derivative
Operations (1986-1993).
------------------------------------------------------------------------------------------------------------------------------------

* Mr. McKigney is an "interested person" because he serves as Managing
Director of Advantage and a director and/or officer of affiliates of the
Investment Manager.

Directors considered by the Fund not to be "interested persons" (as
defined in the U.S. Investment Company Act of 1940, as amended) of the Fund or
the Investment Manager:

Lawrence K. Becker Director and Since Treasurer of The France Growth 11 None
8039 Harbor View Terrace Member of the 2003; term Fund, Inc. (February
Brooklyn, NY 11209 Audit and expires 2006 2004-Present); Private Investor,
Age: 48 Nominating Real Estate Investment
Committees Management (July 2003-Present);
Vice President,
Controller/Treasurer, National
Financial Partners (2002-2003);
Managing Director,
Controller/Treasurer,
Oppenheimer Capital-PIMCO
(1981-2000)
------------------------------------------------------------------------------------------------------------------------------------

Leslie H. Gelb Director and Since 1994; President Emeritus, The Council 2 Britannica.com;
The Council on Foreign Member of the term expires on Foreign Relations Director of 31
Relations Audit and 2005 (2003-Present); President, The registered
58 East 68th Street Nominating Council on Foreign Relations investment
New York, NY 10021 Committees (1993-2003); Columnist companies
Age: 66 (1991-1993); Deputy Editorial advised by
Page Editor (1985-1990) and Salomon Brothers
Editor, Op-Ed Page (1988-1990), Asset
THE NEW YORK TIMES. Management.
------------------------------------------------------------------------------------------------------------------------------------
J. Marc Hardy Director and Since 2002; Managing Director, Mainstream 1 None
c/o Multiconsult Ltd. Member of the term expires Ltd. (independent financial
Frere Felix de Valois Street Nominating 2007 advisor) and Value Investors
Port Louis, Mauritius Committee Ltd. (private investment
Age: 49 company).
------------------------------------------------------------------------------------------------------------------------------------
Stephane R.F. Henry Director and Since 2004; Managing Director, Premium Asset 1 Boyer Allan
c/o Premium Asset Member of the term expires Management Ltd., (1998-present). India Fund Inc.
Management Ltd. Nominating 2005
Jamalacs, Committee
Vieux Conseil Street
Port Louis, Mauritius
Age: 37
------------------------------------------------------------------------------------------------------------------------------------
Luis F. Rubio Director and Since 1999; President, Centro de 11 None
Jaime Balmes No. 11, D-2 Member of the term expires Investigacion para el
Los Morales, Polanco Audit and 2005 Desarrollo, A.C. (Center of
Mexico, D.F. 11510 Nominating Research for Development)
Age: 48 Committees (2002-Present); Director
General, Centro de Investigacion
para el Desarrollo, A.C.
(1984-2002); frequent
contributor of op-ed pieces to
THE LOS ANGELES TIMES and THE
WALL STREET JOURNAL.
------------------------------------------------------------------------------------------------------------------------------------
Jeswald W. Salacuse Director and Since 1993; Henry J. Braker Professor of 2 Director of 31
The Fletcher School Chairman of the term expires Commercial Law, The Fletcher registered
of Law & Diplomacy Audit and 2006 School of Law & Diplomacy investment
at Tufts University Nominating (1986-Present); Dean, The companies
Medford, MA 02155 Committees Fletcher School of Law & advised by
Age: 66 Diplomacy, Tufts University Salomon
(1986-1994). Brothers Asset
Managerment.
------------------------------------------------------------------------------------------------------------------------------------

The following table provides information concerning the number and dollar
range of equity securities owned beneficially by each director as of December
31, 2003:

-------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
DOLLAR RANGE OF EQUITY SECURITIES IN ALL
EQUITY SECURITIES IN FUNDS OVERSEEN BY DIRECTOR
NAME OF DIRECTOR THE FUND AND ADVISED BY ADVANTAGE
-------------------------------------------------------------------------------------

NON-INTERESTED DIRECTORS

Lawrence K. Becker None None
Leslie H. Gelb None None
J. Marc Hardy None None
Stephane R.F. Henry None None
Luis F. Rubio None None
Jeswald W. Salacuse $1 - 10,000 $1 - 10,000
-------------------------------------------------------------------------------------
INTERESTED DIRECTOR

Bryan McKigney* $1 - 10,000 $1 - 10,000
-------------------------------------------------------------------------------------

* Mr. McKigney is an "interested person" because he serves as Managing
Director of Advantage and a director and/or officer of affiliates of the
Investment Manager.

As of December 31, 2003, the holdings of no director or executive officer,
nor the directors and executive officers of the Fund as a group, represented
more than 1% of the outstanding shares of the Fund's common stock. During
calendar years 2002 and 2003, no director who is not an "interested person" of
the Fund (as defined in the U.S. Investment Company Act of 1940, as amended) nor
any immediate family member of such persons, had any interest in Advantage,
Imperial or person or entity (other than the Fund) directly or indirectly
controlling, controlled by or under common control with Advantage or Imperial.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS

The board of directors is responsible for ensuring that the Fund is
managed in the best interest of its stockholders. The directors oversee the
Fund's business by, among other things, meeting with the Fund's management and
evaluating the performance of the Fund's service providers including Advantage,
Imperial, the custodian, the transfer agent and the administrator. As part of
this process, the directors consult with the Fund's independent registered
public accounting firm and with their own separate independent counsel.

The board of directors has four regularly scheduled meetings each year and
additional meetings are scheduled as needed. In addition, the Board has an audit
committee and a nominating committee that meet periodically during the year and
whose responsibilities are described below.

The directors regularly review the Fund's financial statements,
performance and market price as well as the quality of the services being
provided to the Fund. As part of this process, the directors review the Fund's
fees and expenses to determine if they are reasonable and competitive in light
of the services being received, while also ensuring that the Fund continues to
have access to high quality services in the future. Based on these reviews, the
directors periodically make suggestions to the Fund's management and monitor to
ensure that responsive action is taken. The directors also monitor potential
conflicts of interest among the Fund, Advantage, Imperial and its affiliates and
other funds and clients managed by Advantage to ensure that the Fund is managed
in a manner which is in the best interest of the Fund's stockholders.

OFFICERS

The executive officers of the Fund are chosen each year at the first
meeting of the board of directors of the Fund following the Annual Meeting of
Stockholders, to hold office until the meeting of the board of directors
following the next Annual Meeting of Stockholders and until their successors are
chosen and qualified. In addition to Mr. McKigney, the current executive
officers of the Fund are:

LENGTH OF
POSITION(S) TIME SERVED;
HELD WITH TERM OF
NAME, ADDRESS AND AGE FUND OFFICE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
----------------------------------------------------------------------------------------------------------------------------------

Deborah Kaback Secretary Since 2003* Senior Vice President and Senior Counsel, Oppenheimer Asset
200 Park Avenue Management Inc. (June 2003-Present); Executive Director, CIBC World
24th Floor Markets Corp. (August 2001-June 2003); Vice President and Senior
New York, NY 10166 Counsel, Oppenheimer Funds, Inc. (November 1999-August 2001);
Age: 53 Senior Vice President and Deputy General Counsel, Oppenheimer
Capital (April 1989-November 1999).

----------------------------------------------------------------------------------------------------------------------------------
Alan E. Kaye Treasurer Since 1999* Senior Vice President, Oppenheimer Asset Management Inc. (June
90 Broad Street 2003-Present) and Executive Director (1995-June 2003); CIBC World
New York, NY 10004 Markets Corp.; Vice President, Oppenheimer & Co., Inc. (1986-1994).
Age: 52

----------------------------------------------------------------------------------------------------------------------------------

--------------------
* Elected by and serves at the pleasure of the Board of Directors of the
Fund.

BOARD COMMITTEES AND MEETINGS

The Fund's audit committee is composed entirely of directors who are not
"interested persons" of the Fund or of Advantage, Imperial or its affiliates
within the meaning of the U.S. Investment Company Act of 1940, as amended, and
who are "independent" as defined in the NYSE listing standards. Currently,
Messrs. Becker, Gelb, Rubio and Salacuse are members of the audit committee. The
audit committee convened six times during the fiscal year ended December 31,
2003. The principal functions of the audit committee are to appoint and retain
the Fund's independent accountants, to review with the independent accountants
the scope, performance and anticipated cost of their audit and to receive and
consider a report from the independent accountants concerning their conduct of
the audit, including the form of the opinion proposed to be rendered and any
comments or recommendations the independent accountants might want to make in
that connection. The board has determined that Mr. Becker will serve as the
"audit committee financial expert," as defined in Section 401(h) of Regulation
S-K. The Fund adopted an audit committee charter in February 2000, which was
most recently amended and restated in December 2003.

The nominating committee is composed entirely of directors who are not
"interested persons" of the Fund, Advantage or of Imperial or its affiliates
within the meaning of the U.S. Investment Company Act of 1940, as amended, and
who are "independent" as defined in the NYSE listing standards. Currently
Messrs. Becker, Hardy, Henry, Gelb, Rubio and Salacuse are members of the
nominating committee. This Committee met one time during the fiscal year ended
December 31, 2003. The principal function of the nominating committee is to
select and nominate persons for election as directors of the Fund. The Fund
adopted a nominating committee charter in December 2003.

In identifying and evaluating nominees, the nominating committee considers
factors it deems relevant which include: whether or not the person is qualified
under applicable laws and regulations to serve on the board of directors of the
Fund; whether or not the person has any relationship that might impair his or
her independence; whether or not the person serves on boards of competing
organizations or funds; the character and integrity of the person and the
contribution which the person can make to the board. The nominating committee
will accept nominations for the office of director made by Fund stockholders.
Stockholders who wish to recommend a nominee should send nominations to the
secretary of the Fund that include biographical information and set forth the
qualifications of the proposed nominee.

During the fiscal year ended December 31, 2003, the board of directors
held four regular meetings and five special meetings.

COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS

The following table provides information concerning the approximate
compensation paid to directors and certain officers by the Fund as well as by
the various other U.S. registered investment companies advised by Advantage,
Imperial or an affiliate of Advantage during the fiscal year ended December 31,
2003. No remuneration was paid during the fiscal year ended December 31, 2003 by
the Fund to Mr. McKigney who, as an officer or employee of Advantage and
Oppenheimer Asset Management Inc., is an "interested person," as defined under
the U.S. Investment Company Act of 1940, as amended. The Fund does not provide
any pension or retirement benefits to directors.

AGGREGATE TOTAL COMPENSATION TOTAL COMPENSATION
COMPENSATION FROM FROM OTHER FUNDS FROM FUND AND FUND
NAME OF DIRECTOR FUND ADVISED BY ADVANTAGE COMPLEX
----------------------- ------------------ -------------------- -------------------
Directorships (A) Directorships (A)

Lawrence K. Becker $ 2,050 $ 19,600 (1) $ 21,650 (11)
Leslie H. Gelb $ 5,850 $ 6,800 (1) $ 12,650 (2)
J. Marc Hardy $ 6,600 $ 0 $ 6,600 (1)
Stephane R.F. Henry (B) $ 0 $ 0 $ 0 (1)
Luis F. Rubio $ 6,350 $ 75,200 (1) $ 81,550 (11)
Jeswald W. Salacuse $ 7,150 $ 8,000 (1) $ 15,150 (2)

--------------------
(A) The numbers in parentheses indicate the applicable number of funds in the
fund complex held by that director (including the Fund).

(B) Mr. Henry was first elected as a director in February 2004.

CODE OF ETHICS

The Fund's Board of Directors approved a code of ethics, as amended, under
Rule 17j-1 of the U.S. Investment Company Act of 1940, as amended. Subject to
certain conditions and restrictions, each code of ethics permits directors,
officers and other personnel subject to its provisions to invest in securities,
including securities that may be purchased or held by the Fund.

The code of ethics can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information about the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The code of
ethics is available on the EDGAR database on the SEC's website at
http://www.sec.gov. Copies may also be obtained, after paying a duplicating fee,
by electronic request to "publicinfo@sec.gov" or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102.

PROXY VOTING POLICIES AND PROCEDURES

The Fund has adopted the Investment Manager's policies and procedures with
respect to the voting of proxies related to portfolio securities. These proxy
voting policies and procedures delegate to the Investment Manager the
responsibility for voting proxy securities, subject to the board of directors'
continuing oversight. A copy of the Fund's proxy voting policies and procedures
is included in the Statement of Additional Information which is available
without charge by calling the Fund at (800) 421-4777.

Information regarding how the Fund voted proxies relating to portfolio
securities for the 12-month period ended June 30, 2004 is available, without
charge, by calling (800) 421-4777 or on the SEC's website at http://www.sec.gov.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of November 26, 2004, there were 22,640,975 shares of common stock
(rounded to the nearest whole share) and no shares of preferred stock of the
Fund outstanding. The following table sets forth the beneficial ownership of
shares of the Fund, as of November 26, 2004, by each person (including any
group) known to the Fund to be deemed to be the beneficial owner of more than 5%
of the outstanding shares of the Fund:

NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES BENEFICIALLY OWNED PERCENT OWNERSHIP
------------------------------------ ----------------------------------- -----------------

Barclays Global Investors, N.A. (1) 911,101 3.89%
45 Fremont Street
San Francisco, CA 94105

Barclays Global Investors, Ltd. (1) 707,903 3.02%
Murray House
1 Royal Mint Court
London EC3N 4HH
United Kingdom

Barclays Life Assurance Company Limited (1) 5,017 0.02%
Unicorn House, 5th Floor
252 Romford Road, Forest Gate
London 37 9JB
United Kingdom

--------------------
(1) Based solely upon information presented in Schedule 13G, providing
information as of December 31, 2003, filed jointly by the above-listed
entities, which, in each case, reports sole voting and dispositive
power as to all such shares. Each such entity disclaims membership in a
group. The aggregate ownership of the above-listed entities is equal to
6.93%.

In addition, as of November 26, 2004, Cede & Co., a nominee for
participants in The Depository Trust Company, held of record 22,547,622 shares,
equal to 99.6% of the outstanding shares of the Fund.

PORTFOLIO TRANSACTIONS

The Fund has no obligation to deal with any brokers or dealers in the
execution of transactions in portfolio securities. Subject to policy established
by the Fund's board of directors, the Investment Manager is primarily
responsible for the Fund's portfolio decisions and the initiation of the Fund's
portfolio transactions.

In placing orders, it is the policy of the Fund to obtain the best results
taking into account the general execution and operational facilities of the
broker or dealer, the type of transaction involved and other factors such as the
risk of the broker or dealer in positioning the securities involved. While
generally the best price is sought in placing orders, the Fund may not
necessarily be paying the lowest price available. Securities firms that provide
supplemental research to the Investment Manager or the Country Adviser may
receive orders for transactions by the Fund. In these circumstances, as
contemplated by Section 28(e) of the U.S. Securities Exchange Act of 1934, as
amended, the Fund may pay commissions that are higher than those that the Fund
might otherwise have paid to another broker if those services had not been
provided. Information so received will be in addition to and not in lieu of the
services that the Investment Manager and the Country Adviser must perform under
their respective agreements, and the expenses of the Investment Manager or the
Country Adviser will not necessarily be reduced as a result of the receipt of
such supplemental information. The Investment Manager and the Country Adviser
may use the research services furnished to them by brokers who effect securities
transactions for the Fund in servicing other investment companies and accounts
that they manage. Similarly, the Investment Manager and the Country Adviser may
use the research services furnished to them by those brokers in servicing the
Fund. The Investment Manager and the Country Adviser do not use all of these
research services in managing any particular account, including the Fund. To the
extent that any services are provided by other NYSE members, the Fund will
consider whether the commissions and fees with respect to those transactions are
fair and reasonable pursuant the Rule 17e-1 under the U.S. Investment Company
Act of 1940, as amended.

The Fund anticipates that, in connection with the execution of portfolio
transactions on its behalf, affiliated persons (as such term is defined in the
U.S. Investment Company Act of 1940, as amended) of the Fund, or affiliated
persons of such persons, may from time to time be selected to perform brokerage
services for the Fund, subject to the considerations discussed above. The U.S.
Investment Company Act of 1940, as amended prohibits such affiliated persons
from dealing with the Fund as principal in the purchase or sale of securities.
In order for such an affiliated person to be permitted to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by such affiliated person must be reasonable and fair compared to the
commissions, fees or other remuneration received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. This standard
would allow such an affiliated person to receive no more than the remuneration
that an unaffiliated broker would expect to be receive in a commensurate
arm's-length transaction.

The Investment Manager makes investment decisions or recommendations for
the Fund independently from those rendered for other funds and accounts that
they advise or manage. The other funds and accounts that the Investment Manager
advises or manages may also invest in the same securities as the Fund. If those
funds or accounts are prepared to invest in, or desire to dispose of, the same
security at the same time as the Fund, however, transactions in such securities
will be made, insofar as feasible, for the respective funds and accounts in a
manner deemed equitable to all. In some cases, this procedure may adversely
affect the size of the position obtained for or disposed of by the Fund or the
price paid or received by the Fund. In addition, because of different investment
objectives, a particular security may be purchased for one or more funds or
accounts when one or more funds or accounts are selling the same security.

Although the management agreement does not contain any restrictions on
portfolio turnover, the Fund's policy is not to engage in transactions with the
objective of seeking profits from short-term trading. It is expected that the
annual portfolio turnover rate of the Fund will not exceed 150%. The portfolio
turnover rate is calculated by dividing the lesser of sales or purchases of
portfolio securities by the average monthly value of the Fund's portfolio
securities. For purposes of this calculation, portfolio securities exclude all
securities having a maturity when purchased of one year or less. Higher
portfolio turnover involves correspondingly higher transaction costs and may
result in greater amounts of short-term capital gains, which are taxed to
stockholders as ordinary income when distributed. See "Taxation--The Fund."

For the fiscal years ended December 31, 2003, 2002 and 2001, the Fund paid
commissions for the execution of its portfolio transactions amounting in the
aggregate to $1,483,875, $1,276,490 and $630,039, respectively.

SEMI-ANNUAL REPURCHASES OF SECURITIES

GENERAL

Under the U.S. Investment Company Act of 1940, as amended, the Fund may
repurchase its securities:

o on a securities exchange or such other open market designated by
the SEC (so long as the Fund has, in the case of purchases of its
stock, informed holders of the class of stock involved within the
preceding six months of its intention to repurchase such stock);

o by a tender offer open to all holders of the class of securities
involved; or

o as otherwise permitted by the SEC, including, for example, by
electing for an interval fund structure.

In April 2003, stockholders of the Fund voted to adopt an "interval fund"
structure, pursuant to which the Fund conducts semi-annual repurchase offers for
between 5% and 25% of the Fund's outstanding common stock. Accordingly, the
Fund's board of directors authorized the Fund's three previous repurchase offers
of up to 15%, 5% and 5%, respectively, of its outstanding common stock. See
"--Procedures Relating to Semi-Annual Repurchase Offers." The Fund currently
intends to fund repurchase offers by using cash on hand and liquidating
portfolio securities and does not intend to make additional discretionary
repurchase offers.

If the Fund repurchases its shares of common stock for a price below their
net asset value, the net asset value of those shares of common stock that remain
outstanding would be enhanced, but this does not necessarily mean that the
market price of those outstanding shares would be affected, either positively or
negatively. Repurchases of shares of common stock by the Fund would also
decrease its total assets and accordingly may increase its expenses as a
percentage of average net assets. Further, interest on any borrowings to finance
any such share repurchase transactions would reduce the Fund's net income.

FUNDAMENTAL POLICY REGARDING SEMI-ANNUAL REPURCHASE OFFERS

The Fund's fundamental policy with respect to repurchase offers is as
follows:

o The Fund will make offers to repurchase its shares at semi-annual
intervals pursuant to Rule 23c-3 under the U.S. Investment Company
Act of 1940, as amended, and the Fund's board of directors may place
such conditions and limitations on the repurchase offers as may be
permitted under Rule 23c-3;

o 14 days prior to the last Friday of each of the Fund's first and
third fiscal quarters (or the next business day if such Friday is not
a business day) will be the deadline, which we refer to as the
"repurchase request deadline," by which the Fund must receive
repurchase requests submitted by stockholders in response to the
repurchase offer;

o The date on which the repurchase price for shares is to be determined
shall occur no later than the last Friday of each of the Fund's first
and third fiscal quarters, or the next business day if such Friday is
not a business day; and

o Repurchase offers may be suspended or postponed only under certain
circumstances as provided for in Rule 23c-3 under the U.S. Investment
Company Act of 1940, as amended.

The foregoing policy cannot be changed without stockholder approval.

From the date that notice is sent to stockholders announcing the
repurchase offer until the repurchase pricing date, the Fund maintains a
percentage of its portfolio assets in liquid securities at least equal to the
value of the percentage of the Fund's shares that the Fund has offered to
purchase.

PROCEDURES RELATING TO SEMI-ANNUAL REPURCHASE OFFERS

As noted above, in April 2003, stockholders of the Fund voted to adopt an
"interval fund" structure, pursuant to which the Fund conducts semi-annual
repurchase offers for between 5% and 25% of the Fund's outstanding common stock.
Prior to each repurchase offer, the board of directors, in the exercise of its
fiduciary duties, will determine the number of shares subject to the repurchase
offer based upon such considerations as market demand and the Fund's net asset
value per share. If a repurchase offer is over-subscribed, the Fund may, but is
not obligated to, either:

o repurchase all additional shares tendered if the additional shares do
not exceed 2% of the Fund's outstanding common stock; or

o purchase all shares tendered on a pro rata basis.

All shares tendered may by withdrawn at any time prior to the
repurchase request deadline in accordance with certain procedures.

Repurchase prices are set at a price equal to the net asset value of the
Fund as of a specified date that occurs after the repurchase request deadline.
The Fund charges a repurchase fee of up to 2% of the value of the shares that
are repurchased. Payment for tendered shares is distributed within one week
thereafter. All repurchase offer materials are mailed to stockholders of record
before commencement of the repurchase offer. Stockholders whose shares are held
in the name of a broker, dealer, commercial bank, trust company or other nominee
should contact such firm if they desire to tender their shares in the repurchase
offer.

During repurchase offers, net asset value per share is calculated as of
the close of regular trading on the NYSE each Friday and each of the five
business days preceding the repurchase request deadline. Stockholders who wish
to obtain the net asset value during this period should contact the Fund's
information agent for the repurchase offer.

See "Taxation--U.S. Stockholders--Dispositions and Repurchases."

DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN

The Fund intends to distribute annually to stockholders 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 Fund's dividend reinvestment and cash purchase plan, which
we refer to as the "plan," stockholders whose shares of common stock are
registered in their own names will be deemed to have elected to have all
distributions automatically reinvested by PFPC Inc., which serves as the plan
agent, in Fund shares pursuant to the plan, unless such stockholders elect to
receive distributions in cash. Stockholders who elect to receive distributions
in cash will receive all distributions in cash paid by check in dollars mailed
directly to the stockholders by the dividend paying agent. In the case of
stockholders, 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 stockholders as
representing the total amount registered in such stockholders' 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 stockholders 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. 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, except if the net asset value is less than
95% of the market price on the valuation date, in which case such shares will
then 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 NYSE trading
day, the next preceding trading day. If the 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
NYSE 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. Because of the foregoing 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 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
of each year. 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 10 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 stockholder accounts in the plan and
furnishes written confirmations of all transactions in an account, including
information needed by stockholders 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 stockholder'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 Fund will pay the plan
agent's fees for the reinvestment of dividends and capital gains distributions
and voluntary cash payments. 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
commission thus attainable.

The receipt of dividends and distributions under the plan will not relieve
participants of any income tax which may be payable on such dividends or
distributions. See "Taxation."

Experience under the plan may later 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 P.O. Box 43027, Westborough, Massachusetts 43027
(telephone: (508) 871-8500).

TAXATION

The following is a general summary of certain United States federal income
tax considerations affecting the Fund and its stockholders. It is not expected
that stockholders will be subject to the alternative minimum tax as a result of
their investment in the Fund. No attempt is made to present a detailed
explanation of all federal, state, local and foreign income tax considerations,
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential investors are urged to consult their own tax advisors
regarding an investment in the Fund. This summary reflects applicable tax laws
as of the date of this prospectus, which tax laws may be changed or subject to
new interpretations by the courts of the U.S. Internal Revenue Service (the
"IRS"), retroactively or prospectively.

THE FUND

The Fund has qualified as and intends to continue to qualify as a
"regulated investment company" for federal income tax purposes under the U.S.
Internal Revenue Code. In order to so qualify, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to loans of securities, gains from
the sale or other disposition of stock or securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies (including, but not limited to, gains from options,
futures or forward contracts) and (b) diversify its holdings so that, at the end
of each quarter of each taxable year, (i) at least 50% of the value of the
Fund's assets is represented by cash, cash items, U.S. government securities,
securities of other regulated investment companies, and other securities which,
with respect to any one issuer, do not represent more than 5% of the value of
the Fund's assets nor more than 10% of the voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's assets is invested in the
securities (other than U.S. government securities or the securities of other
regulated investment companies) of any one issuer, or any two or more issuers
that the Fund controls and that are engaged in the same, similar or related
trades or businesses.

The American Jobs Creation Act of 2004 (the "Act"), which the President
recently signed into law, provides that for taxable years beginning after the
date of enactment, income from certain publicly traded partnerships will be
treated as qualifying income for purposes of the 90% gross income test. However,
the aggregate value of a regulated investment company's holdings in publicly
traded partnerships will be subject to the 25% diversification limitation
described above.

If the Fund qualifies as a regulated investment company and distributes to
its stockholders at least 90% of its investment company taxable income (as that
term is defined in the U.S. Internal Revenue Code, without regard to the
deduction for dividends paid), then the Fund will not be subject to federal
income tax on the income so distributed. However, the Fund would be subject to
corporate income tax at a rate of 35% on any undistributed income. Investment
company taxable income includes dividends, interest, and net short-term capital
gains in excess of net long-term capital losses, but does not include "net
capital gain," which is net long-term capital gains in excess of net short-term
capital losses. If in any year the Fund should fail to qualify as a regulated
investment company, the Fund would be subject to federal income tax in the same
manner as an ordinary corporation, and distributions to stockholders would be
taxable to such holders as ordinary dividend income to the extent of the
earnings and profits of the Fund. Such distributions generally would be eligible
(i) to be treated as "qualified dividend income" (as discussed below) in the
case of individual stockholders and (ii) for the dividends-received deduction in
the case of corporate stockholders. Distributions in excess of earnings and
profits will be treated as a tax-free return of capital, to the extent of a
holder's basis in its shares, and any excess, as a long- or short-term capital
gain. In addition, the Fund will be subject to a nondeductible 4% excise tax on
the amount by which the aggregate income it distributes in any calendar year is
less than the sum of: (a) 98% of the Fund's ordinary income for such calendar
year, (b) 98% of the excess of capital gains over capital losses for the
one-year period ending on October 31 of such year, and (c) 100% of the
undistributed ordinary income and gains from prior years. For these purposes,
the Fund will be deemed to have distributed any income or gains on which it paid
corporate income tax.

The Fund intends to distribute sufficient income so as to avoid both
corporate income tax and the excise tax.

The Fund may engage in hedging involving foreign currencies, forward
contracts, options and futures contracts (including options and futures
contracts of foreign currencies). See "Additional Investment
Activities--Hedging." Such transactions will be subject to special provisions of
the U.S. Internal Revenue Code that, among other things, may affect the
character of gains and losses realized by the Fund (that is, may affect whether
gains or losses are ordinary or capital), accelerate recognition of income to
the Fund and defer recognition of certain of the Fund's losses. These rules
could therefore affect the character, amount and timing of distributions to
stockholders. In addition, these provisions (1) will require the Fund to
"mark-to-market" certain types of positions in its portfolio (that is, treat
them as if they were closed out) and (2) may cause the Fund to recognize income
without receiving cash with which to pay dividends or make distributions in
amounts necessary to satisfy the distribution requirements for avoiding income
and excise taxes. The Fund intends to monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it acquires any forward contract, option, futures contract, or
hedged investment in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.

The Fund will maintain accounts and calculate income by reference to the
U.S. dollar for U.S. federal income tax purposes. Investments generally will be
maintained and income therefrom calculated by reference to certain foreign
currencies and such calculations will not necessarily correspond to the Fund's
distributable income and capital gains for U.S. federal income tax purposes as a
result of fluctuations in currency exchange rates. Under Section 988 of the U.S.
Internal Revenue Code, gains or losses attributable to fluctuations in exchange
rates between the time the Fund accrues income or receivables or expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects such income or receivables or pays such liabilities are
generally treated as ordinary income or loss. Similarly, gains or losses on
foreign currency forward contracts and the disposition of debt securities
denominated in foreign currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and disposition dates, are also treated
as ordinary income or loss.

Furthermore, exchange control regulations may restrict the ability of the
Fund to repatriate investment income or the proceeds of sales of securities.
These restrictions and limitations may limit the Fund's ability to make
sufficient distributions to satisfy the 90% distribution requirement and avoid
the 4% excise tax.

The tax treatment of certain investments of the Fund is not free from
doubt and it is possible that an IRS examination of the issuers of such
securities or of the Fund could result in adjustments to the income of the Fund.
An upward adjustment by the IRS to the income of the Fund may result in the
failure of the Fund to satisfy the 90% distribution requirement necessary for
the Fund to maintain its status as a regulated investment company under the U.S.
Internal Revenue Code. In such event, the Fund may be able to make a "deficiency
dividend" distribution to its stockholders with respect to the year under
examination to satisfy this requirement. Such distribution will be taxable as a

dividend to the stockholders receiving the distribution (whether or not the Fund
has sufficient current or accumulated earnings and profits for the year in which
such distribution is made) in the taxable year in which such dividends are
received. A downward adjustment by the IRS to the income of the Fund may cause a
portion of the previously made distribution with respect to the year under
examination not to be treated as a dividend. In such event, the portion of
distributions to each stockholder not treated as a dividend would be
recharacterized as a return of capital and reduce the stockholder's basis in the
shares held at the time of the previously made distributions. Accordingly, this
reduction in basis could cause a stockholder to recognize additional gain upon
the sale of such stockholder's shares.

The Fund intends to make investments which may, for federal income tax
purposes, constitute investments in shares of foreign corporations. If the Fund
purchases shares in certain foreign investment entities, called "passive foreign
investment companies" ("PFICs"), the Fund may be subject to U.S. federal income
tax on a portion of any "excess distribution" or gain from the disposition of
the shares even if the income is distributed as a taxable dividend by the Fund
to its stockholders. The Fund will generally not be able to pass through to its
stockholders any credit or deduction for this tax. Additional charges in the
nature of interest may be imposed with respect to deferred taxes arising from
the distributions or gains. If the Fund were to invest in a PFIC and (if the
Fund received the necessary information available from the PFIC, which may be
difficult to obtain) elected to treat the PFIC as a "qualified electing fund"
under the U.S. Internal Revenue Code, in lieu of the foregoing requirements, the
Fund would generally be required to include in income each year a portion of the
ordinary earnings and net capital gains of the PFIC, even if not distributed to
the Fund, and the amounts would be subject to the 90% and calendar year
distribution requirements described above.

Alternatively, the Fund may elect to "mark-to-market" any stock in a PFIC
it owns at the end of its taxable year. "Marking-to-market," in this context,
means including in ordinary income for each taxable year the excess, if any, of
the fair market value of the stock over the Fund's adjusted basis therein as of
the end of that year. Pursuant to the election, the Fund also may deduct (as an
ordinary, not capital, loss) the excess, if any, of its adjusted basis in PFIC
stock over the fair market value thereof as of the taxable year-end, but only to
the extent of any net mark-to-market gains with respect to that stock the Fund
included in income for prior taxable years under the election. The Fund's
adjusted basis in each PFIC's stock subject to the election would be adjusted to
reflect the amounts of income included and deductions taken thereunder. Any
income recognized by the Fund pursuant to the "mark-to-market" election would be
subject to the 90% and calendar year distribution requirements described above.

U.S. STOCKHOLDERS

DISTRIBUTIONS. Distributions to stockholders of investment company taxable
income will, except in the case of distributions attributable to "qualified
dividend income" described below, be taxable as ordinary income to the extent of
the Fund's earnings and profits, whether such distributions are paid in cash or
reinvested in additional shares. It is not anticipated that a significant
portion of such dividends, if any, will qualify for the dividends-received
deduction generally available for corporate stockholders under the U.S. Internal
Revenue Code. Stockholders receiving distributions from the Fund in the form of
additional shares pursuant to the dividend reinvestment plan will generally be
treated for federal income tax purposes as receiving a distribution in an amount
equal to the fair market value of the additional shares on the date of such a
distribution. Consequently, if the number of shares distributed reflects a
market premium, the amount distributed to stockholders participating in the plan
would exceed the amount of the cash distributed to nonparticipating
stockholders.

For taxable years beginning on or before December 31, 2008, distributions
of investment company taxable income that are designated by the Fund as derived
from "qualified dividend income" are taxed to individual stockholders at the
rates applicable to long-term capital gain, which reach a maximum of 15%.
Qualified dividend income includes dividends received from foreign corporations
only if such corporations are "qualified foreign corporations" and the Fund
meets holding period and other requirements with respect to its investment in
such corporations. The Fund will not be able to pass through to any stockholder
the tax treatment of qualified dividend income (namely, that such income will be
taxed at long-term capital gain rates) unless that stockholder also meets the
same holding period and other requirements with respect to its investment in
stock of the Fund. A foreign corporation is a "qualified foreign corporation" if
it is (i) eligible for benefits of a comprehensive income tax treaty with the
United States that the United States Treasury Department determines is
satisfactory for this purpose and that includes an exchange of information
program or (ii) any other foreign corporation with respect to any dividend paid
by such corporation if the stock with respect to which such

dividend is paid is readily tradable on an established securities market in the
United States. The United States Treasury Department has issued a notice
indicating that the income tax convention between the United States and India
currently in effect (the "Convention") satisfies the requirements described in
clause (i) of the preceding sentence. Accordingly, dividends paid by Indian
corporations that are eligible for the benefits of the Convention will generally
be eligible to be passed through to Fund stockholders as qualified dividend
income. Dividends paid by PFICs, however, will not be treated as qualified
dividend income. The provisions of the U.S. Internal Revenue Code applicable to
qualified dividend income and the 15% maximum individual tax rate on long-term
capital gains are currently effective through 2008. Thereafter, qualified
dividend income will no longer be taxed at the rates applicable to long-term
capital gains, and the maximum individual tax rate on long-term capital gains
will increase to 20%, unless Congress enacts legislation providing otherwise.

Distributions to stockholders of net capital gain that are designated by
the Fund as "capital gain dividends" will be taxable as long-term capital gains,
whether paid in cash or additional shares, regardless of how long the shares
have been held by such stockholders. Capital gain dividends will not be eligible
for the dividends-received deduction. The current maximum federal income tax
rate imposed on individuals with respect to long-term capital gains is limited
to 15%, whereas the current maximum federal income tax rate imposed on
individuals with respect to ordinary income (and short-term capital gains, which
are taxed at the same rates as ordinary income) is 35%. With respect to
corporate taxpayers, long-term capital gains are currently taxed at the same
federal income tax rates as ordinary income and short-term capital gains.

A distribution to a stockholder of an amount in excess of the Fund's
current and accumulated earnings and profits will be treated by the stockholder
as a return of capital which is applied against and reduces the stockholder's
basis in his shares. To the extent that the amount of any such distribution
exceeds the stockholder's basis in its shares, the excess will be treated by the
stockholder as gain from a sale or exchange of the shares.

The Fund may elect to retain its net capital gain or a portion thereof for
investment and be taxed at corporate rates on the amount retained. In such case,
it may designate the retained amount as undistributed capital gains in a notice
to its stockholders, who will be treated as if each received a distribution of
its pro rata share of such gain, with the result that each stockholder will (i)
be required to report his pro rata share of such gain on his tax return as
long-term capital gain, (ii) receive a refundable tax credit for his pro rata
share of tax paid by the Fund on the gain and (iii) increase the tax basis for
his shares by an amount equal to the deemed distribution less the tax credit.

Dividends and distributions by the Fund are generally taxable to the
stockholders at the time the dividend or distribution is made (even if paid or
reinvested in additional shares). Any dividend declared by the Fund in October,
November or December of any calendar year, however, which is payable to
stockholders of record on a specified date in such a month and which is not paid
on or before December 31 of such year will be treated as paid by the Fund and
received by the stockholders as of December 31 of such year, provided that the
dividend is paid during January of the following year.

A notice detailing the tax status of dividends and distributions paid by
the Fund will be mailed annually to the stockholders of the Fund.

DISPOSITIONS AND REPURCHASES. Gain or loss, if any, recognized on the sale
or other disposition of shares of the Fund will be taxed as capital gain or loss
if the shares are capital assets in the stockholder's hands. Generally, a
stockholder's gain or loss will be a long-term gain or loss if the shares have
been held for more than one year. If a stockholder sells or otherwise disposes
of a share of the Fund before holding it for more than six months, any loss on
the sale or other disposition of such share shall be treated as a long-term
capital loss to the extent of any capital gain dividends received or deemed
received by the stockholder with respect to such share. A loss realized on a
sale or exchange of shares may be disallowed if other substantially identical
shares are acquired (whether under the plan or otherwise) within a 61-day period
beginning 30 days before and ending 30 days after the date that the shares are
disposed of. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.

A repurchase by the Fund of shares generally will be treated as a sale of
the shares by a stockholder provided that after the repurchase the stockholder
does not own, either directly or by attribution under Section 318 of the U.S.
Internal Revenue Code, any shares. If, after a repurchase a stockholder
continues to own, directly or by attribution, any shares, it is possible that
any amounts received in the repurchase by such stockholder will be taxable as a
dividend to such stockholder,

and there is a risk that stockholders who do not have any of their shares
repurchased would be treated as having received a dividend distribution as a
result of their proportionate increase in the ownership of the Fund. Use of the
Fund's cash to repurchase shares may adversely affect the Fund's ability to
satisfy the 90% distribution requirement described above. The Fund may also
recognize income in connection with the liquidation of portfolio securities to
fund share purchases. Any such income would be taken into account in determining
whether the 90% distribution requirement has been satisfied.

FOREIGN TAXES. The Fund will be subject to withholding and other taxes
imposed by India and may be subject to certain taxes imposed by other foreign
countries with respect to dividends, interest, capital gains and other income.
If the Fund qualifies as a regulated investment company, the 90% distribution
requirement discussed above is satisfied and more than 50% in value of the
Fund's total assets at the close of any taxable year consists of stocks or
securities of foreign corporations, which for this purpose should include
obligations issued by foreign governmental issuers, then the Fund may elect to
treat any foreign income taxes paid by it (if such taxes are treated as income
taxes under U.S. income tax principles) as paid by its stockholders. The Fund
has historically made and intends to continue to qualify for and to make this
election. For any year that the Fund makes such an election, an amount equal to
the foreign income taxes paid by the Fund that can be treated as income taxes
under U.S. income tax principles will be included in the income of its
stockholders. Each stockholder will be required to include in its gross income,
even though not actually received, his pro rata share of the foreign income
taxes paid by the Fund, and will be entitled (subject to certain limitations) to
credit the amount included in his income against his U.S. tax liabilities, if
any, or to deduct such amount from his U.S. taxable income, if any. Shortly
after any year for which it makes such an election, the Fund will report to its
stockholders, in writing, the amount per share of such foreign income taxes that
must be included in each stockholder's gross income and the amount that will be
available for deductions or credit. In general, a stockholder may elect each
year whether to claim deductions or credits for foreign taxes. No deductions for
foreign taxes may be claimed, however, by non-corporate stockholders (including
certain foreign stockholders as described below) who do not itemize deductions.
If a stockholder elects to credit foreign taxes, the amount of credit that may
be claimed in any year may not exceed the same proportion of the U.S. tax
against which such credit is taken that the stockholder's taxable income from
foreign sources (but not in excess of the stockholder's entire taxable income)
bears to his entire taxable income. This limitation must be applied separately
to certain categories of income and the related foreign taxes. In certain
circumstances, a stockholder that (i) has held shares of the Fund for less than
a specified minimum period during which it is not protected from risk of loss or
(ii) is obligated to make payments related to the dividends, will not be allowed
a foreign tax credit for foreign taxes deemed imposed on dividends paid on such
shares. Additionally, the Fund must meet this holding period requirement with
respect to its foreign stock and securities in order for "creditable" foreign
taxes to be passed through to its stockholders. Generally, under U.S. law,
capital gains realized by U.S. residents are treated as U.S. source income.
Under the Convention, however, capital gains realized by U.S. residents which
may be taxed in India will be treated as foreign source income, unless
inconsistent with U.S. law. Section 865(h) of the U.S. Internal Revenue Code
provides that if a taxpayer elects, gain from the sale of stock of a foreign
corporation by a U.S. resident (as defined in Section 865(g) of the U.S.
Internal Revenue Code) will be treated as foreign source if, pursuant to a U.S.
tax treaty (without regard to the general U.S. sourcing rule for capital gains),
such income is treated as foreign source. Accordingly, capital gains realized by
the Fund which may be subject to Indian capital gains tax should be treated as
foreign source if the election is made. Stockholders should consult their own
tax advisors with respect to making this election and the general application of
foreign tax credits.

BACKUP WITHHOLDING. The Fund may be required to withhold federal income
tax ("backup withholding") from dividends and redemption proceeds paid to
non-corporate stockholders. This tax may be withheld from dividends if (i) the
stockholder fails to furnish the Fund with the stockholder's correct taxpayer
identification number, (ii) the IRS notifies the Fund that the stockholder has
failed to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (iii) when required to do so, the
stockholder fails to certify that he or she is not subject to backup
withholding. Redemption proceeds may be subject to withholding under the
circumstances described in (i) above. Corporate stockholders and other
stockholders specified in the U.S. Internal Revenue Code or the Treasury
regulations promulgated thereunder are exempt from backup withholding. Backup
withholding is not an additional tax. Any amounts withheld under the backup
withholding rules from payments made to a stockholder may be credited against
such stockholder's federal income tax liability, provided the required
information is furnished to the IRS.

DISCLOSURE REGULATIONS. Under recently promulgated Treasury regulations,
if a stockholder recognizes a loss with respect to shares of $2 million or more
for an individual stockholder or $10 million or more for a corporate stockholder
(or a greater loss over a combination of years), the stockholder must file with
the IRS a disclosure statement on IRS Form

8886. Direct stockholders of portfolio securities are in many cases excepted
from this reporting requirement, but under current guidance, stockholders of a
regulated investment company are not excepted. Future guidance may extend the
current exception from this reporting requirement to stockholders of most or all
regulated investment companies. The fact that a loss is reportable under these
regulations does not affect the legal determination of whether the taxpayer's
treatment of the loss is proper. Stockholders should consult their own tax
advisors to determine the applicability of these regulations in light of their
individual circumstances.

FOREIGN STOCKHOLDERS

U.S. taxation of a stockholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign corporation,
or a foreign partnership ("foreign stockholder"), depends on whether the income
from the Fund is "effectively connected" with a U.S. trade or business carried
on by such stockholder. Ordinarily, income from the Fund will not be treated
as so "effectively connected."

INCOME NOT EFFECTIVELY CONNECTED. If the income from the Fund is not
"effectively connected" with a U.S. trade or business carried on by the foreign
stockholder, then, except as described below with respect to interest-related
dividends and short-term capital gain dividends, distributions of investment
company taxable income (including dividends designated as qualified dividend
income) will generally be subject to a U.S. tax of 30% (or lower treaty rate),
which tax is generally withheld from such distributions. Furthermore, foreign
stockholders may be subject to U.S. tax at the rate of 30% (or lower treaty
rate) of the income resulting from the Fund's election to treat any foreign
taxes paid by it as paid by its stockholders, but will not be able to claim a
credit or deduction for the foreign taxes as having been paid by them.

Under the Act, a new exemption is created under which the 30% U.S.
withholding tax is no longer imposed on dividends paid by regulated investment
companies to the extent the dividends are designated as "interest-related
dividends" or "short-term capital gain dividends." Under this exemption,
interest-related dividends and short-term capital gain dividends generally
represent distributions of interest or short-term capital gains that would not
have been subject to U.S. withholding tax at the source if they had been
received directly by a foreign person, and that satisfy certain other
requirements. The exemption applies to dividends with respect to taxable years
of regulated investment companies beginning after December 31, 2004 and before
January 1, 2008.

Distributions of capital gain dividends to a non-resident alien who is
present in the United States for fewer than one hundred eighty-three days during
the taxable year will not be subject to the 30% U.S. withholding tax. An alien
individual who is physically present in the United States for more than one
hundred eighty-two days during the taxable year generally is treated as a
resident for U.S. federal income tax purposes, in which case he or she will be
subject to U.S. federal income tax on his or her worldwide income, including
ordinary income and capital gain dividends, at the graduated rates applicable to
U.S. citizens, rather than the 30% U.S. withholding tax. In the case of a
foreign stockholder who is a non-resident alien individual, the Fund may be
required to withhold U.S. federal income tax from distributions of capital gain
dividends under the backup withholding system unless the foreign stockholder
makes required certifications to the Fund on a properly completed IRS Form
W-8BEN (or other applicable form), or otherwise establishes an exemption. The
amount so withheld could be applied as a credit against any U.S. tax due from
the stockholder or, if no tax is due, refunded pursuant to a claim therefor
properly filed on an income tax return.

Any gain that a foreign stockholder realizes upon the sale or other
disposition of shares of the Fund will ordinarily be exempt from U.S.
withholding tax unless the stockholder is an alien individual who is physically
present in the United States for more than one hundred eighty-two days during
the taxable year (as discussed above), the gain is U.S. source income and
certain other requirements are met.

INCOME EFFECTIVELY CONNECTED. If the income from the Fund is "effectively
connected" with a U.S. trade or business carried on by a foreign stockholder,
then distributions of investment company taxable income and net capital gain,
and any gains realized upon the sale of shares or the Fund, will be subject to
U.S. federal income tax at the graduated rates applicable to U.S. citizens,
residents and domestic corporations. Corporate stockholders may also be subject
to the 30% branch profits tax.

The tax consequences to a foreign stockholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign stockholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.

INDIAN TAXES

The income of foreign institutional investors and their sub-accounts,
including the Fund, from the transfer of securities or from capital gains
arising from the transfer of securities is taxable as per the provisions of
section 115AD of the Indian Income Tax Act, 1961. Selected provisions as they
apply to the Fund are as follows:

o Income received in respect of securities (other than (1) income from
dividends on which a dividend distribution tax has been paid or (2)
income from units of the Unit Trust of India or specified mutual
funds covered by Section 115AB of the Indian Income Tax Act) are
taxed at a rate of 20.91%.

o With respect to long-term capital gains:

o Income received in respect of long-term capital gains from
(A) the transfer of (i) equity shares of an Indian company
listed on an Indian securities exchange or (ii) units of an
equity-oriented mutual fund listed on an Indian securities
exchange or (B) the repurchase of units by an equity-oriented
mutual fund is not subject to any long-term capital gains tax
if that income is otherwise subject to the securities
transaction tax described under "--Securities Transaction
Tax" below.

o Income received in respect of long-term capital gains from
the transfer of securities other than as set forth above are
taxed at a rate of 10.455%;

o With respect to short-term capital gains:

o Income received in respect of short-term capital gains from
(A) the transfer of (i) equity shares of an Indian company
listed on an Indian securities exchange or (ii) units of an
equity-oriented mutual fund listed on an Indian securities
exchange or (B) the repurchase of units by an equity oriented
mutual fund are taxed at a rate of 10.455% if that income is
otherwise subject to the securities transaction tax described
under "--Securities Transaction Tax" below.

o Income received in respect of short-term capital gains from
the transfer of securities other than as set forth above are
taxed at a rate of 31.365%.

o If the Fund only has income from securities (other than (1) income
from dividends on which a dividend distribution tax has been paid or
(2) income from units of the Unit Trust of India or specified mutual
funds registered with SEBI and covered by Section 115AB of the Indian
Income Tax Act), then the Fund may not claim a deduction on the gross
amount of such income under Sections 28 through 44C, Section 57 and
Chapter VIA of the Indian Income Tax Act.

As used above, the term "securities" has the meaning assigned to it
Section 2(h) of the Indian Securities Contract (Regulations) Act, 1956 and
includes:

o shares, scrips, stocks, bonds, debentures, derivatives, debenture
stock or other marketable securities of a like nature in or of any
incorporated company or other body corporate;

o Indian government securities; and

o rights or interests in securities.

As used above, "equity-oriented mutual fund" means a mutual fund
registered with SEBI that has invested more than 50% of its total proceeds in
the equity shares of Indian companies.

On account of the lower tax rate on capital gains, provisions that would
otherwise apply to non-residents to protect them from currency fluctuations in
computing the capital gains arising from the transfer of shares or debentures of
an Indian company do not apply to the capital gains of foreign institutional
investors and their sub-accounts. In addition, the benefit of cost inflation
indexation is also not available to foreign institutional investors and their
sub-accounts when computing long-term capital gains from the transfer of
securities.

Shares in a company, listed securities or units of a mutual fund must be
held for more than twelve months in order to qualify as a long-term capital
asset. All other securities must be held for more than thirty-six months in
order to qualify as a long-term capital asset.

The income of foreign institutional investors and their sub-accounts from
securities is subject to a tax deduction at source. However, no deduction may be
made on any capital gains income from the transfer of securities. In order for
the tax on capital gains of foreign institutional investors and their
sub-accounts to be realized, each foreign institutional investor and sub-account
must specify an agent as defined in Section 163 of the Indian Income Tax Act
when initially registering with SEBI.

Dividends paid to a foreign institutional investor or sub-account will not
be subject to tax. However, an Indian company must pay a "dividend distribution
tax," which is currently 13.06%, on the total amount distributed as a dividend.
A distribution to non-residents of bonus shares or rights to subscribe for
shares is not subject to Indian tax.

SECURITIES TRANSACTION TAX. The Indian Finance (No. 2) Act, 2004 imposes a
securities transaction tax on the following types of securities transactions:

o the purchase or sale of equity shares of an Indian company on an
Indian securities exchange;

o the sale of a derivative on an Indian securities exchange; and

o the sale of units of any equity-oriented mutual fund on an Indian
securities exchange or the repurchase of units by an equity-oriented
mutual fund.

The applicable securities transaction tax rate is as follows:

o for any transaction involving the purchase or sale of an equity share
of an Indian company or of a unit of an equity-oriented mutual fund,
where the transaction occurs on an Indian securities exchange and
where the purchase or sale contract is settled by actual delivery or
transfer of the share or unit, 0.075%, which is payable by each of
the purchaser and the seller;

o for any transaction involving the sale of an equity share of an
Indian company or of a unit of an equity-oriented mutual fund, where
the transaction occurs on an Indian securities exchange and where the
purchase or sale contract is settled other than by actual delivery or
transfer of the share or unit, 0.01%, which is payable by the seller;

o for any transaction involving the sale of a derivative, where the
transaction occurs on an Indian securities exchange, 0.015%, which is
payable by the seller; and

o for any transaction involving the sale of a unit of an
equity-oriented mutual fund to the mutual fund, 0.15%, which is
payable by the seller.

EDUCATION CESS. Pursuant to the Indian Finance (No. 2) Act, 2004 an
"education cess" of 2% will be levied on income tax (inclusive of surcharge, as
applicable) from all securities transactions.

CAPITAL LOSSES. Section 115AD of the Indian Income Tax Act does not
contain provisions for the tax treatment of capital losses arising on a transfer
of shares in India. In general, losses arising from a transfer of a capital
asset in India can only be set off against capital gains and not against any
other income. To the extent that the losses are not absorbed in the year of
transfer, they may be carried forward for a period of eight assessment years
immediately succeeding the assessment year for which the loss was first computed
and may be set off against the capital gains assessable for such subsequent
assessment years. However, a long-term capital loss can be set off only against
a long-term capital gain. In order to make use of capital losses in this manner,
the foreign institutional investor or sub-account must file appropriate and
timely tax returns in India and undergo certain assessment procedures.

After October 1, 2004, long-term capital losses with respect to (i) a sale
transaction of equity shares or units of an equity-oriented mutual fund on an
Indian securities exchange or (ii) a repurchase of units of an equity-oriented
mutual fund may not be set off against long-term capital gains and may not be
carried forward to subsequent years.

TAX TREATIES. Currently, dividend income is not subject to tax in India in
the hands of the holder of the shares. The provisions of the Double Taxation
Avoidance Agreement entered into by the Government of India with the country of
residence of a foreign institutional investor or sub-account will be applicable
in the matter of taxation of income, gains or dividends (if applicable). Where
the Government of India has entered into a Double Taxation Avoidance Agreement,
the provisions of the Indian Income Tax Act will apply to the foreign
institutional investor or the sub-account to the extent that they are more
beneficial.

STAMP DUTY. Purchasers of shares who seek to register such shares on the
share register of an Indian company are required to pay an Indian stamp duty at
the rate of Rs. 0.25 for every Rs. 100 (or part thereof) of the market value of
such shares. In order to register a transfer of shares in certificated form with
an Indian company, it is necessary to present a stamped deed of transfer. Upon
issuing shares, an Indian company will be required to pay a stamp duty at the
applicable rate on the share certificate. However, if the shares are delivered
in uncertificated or "dematerialized" form, which occurs with most listed
companies, no stamp duty is payable upon transfer.

SERVICE TAX. Brokerage or commission fees paid to stockbrokers in
connection with the sale or purchase of securities are subject to an Indian
service tax of 10.2%. A stockbroker is responsible for collecting this tax and
for paying it to the relevant authority.

MAURITIAN TAX STATUS

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, which is referred to as the "tax treaty" or
"treaty." To obtain benefits under the 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 treaty. Under current
regulations, a fund that 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 from June 1, 1997
through March 31, 2002, and subsequent to March 31, 2003, dividend income from
domestic companies was exempt from Indian income tax. For the period from April
1, 2002 through March 31, 2003, dividend income from domestic companies was
subject to a 15% withholding tax. Effective April 1, 2003, dividend income from
domestic companies is exempt from Indian tax. The Fund is subject to and accrues
Indian withholding tax on interest earned on Indian securities at the rate of
20.5% effective April 1, 2003, 21% between April 1, 2002 and April 1, 2003, and
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%.

The Fund continues to (i) comply with the requirements of the tax treaty,
(ii) be a tax resident of Mauritius and (iii) maintain that its central
management and control resides in Mauritius, and therefore the Fund's management
believes that the Fund will be able to obtain the benefits of the tax treaty.

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.

NET ASSET VALUE

The net asset value of the Fund's shares of common stock is calculated no
less frequently than weekly, on the last business day of each week and at such
other times as the board of directors may determine. In addition, during a
repurchase offer, the Fund makes this information available by telephone
toll-free at 800-421-4777. Currently, The Wall Street Journal, The New York
Times and Barron's publish net asset values for closed-end investment companies
weekly.

The net asset value per share of the common stock is determined by
dividing the value of the net assets of the Fund (the value of its assets less
its liabilities including borrowings, exclusive of capital stock and surplus) by
the total number of shares of common stock outstanding. In valuing the Fund's
assets, all securities for which market quotations are readily available are
valued:

o at the last sale price prior to the time of determination if there
was a sale on the date of determination;

o 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

o at the bid price if there was no sales price on such date and only
bid quotations are available. In instances where a price determined
above is deemed not to represent fair market value, the price is
determined in such manner as the board of directors may prescribe.

Securities may be valued by independent pricing services that use prices
provided by market-makers or estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics. Short-term
investments having a maturity of 60 days or less are valued at amortized cost,
unless the board of directors determines that that valuation does not constitute
fair value. In valuing assets, prices denominated in foreign currencies are
converted to U.S. dollar equivalents at the current exchange rate. Securities
for which reliable quotations or pricing services are not readily available and
all other securities and assets are valued at fair value as determined in good
faith by, or under procedures established by, the board of directors.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Fund is 100,000,000 shares of common
stock, par value $.001 per share. The common stock is fully paid and
nonassessable. All shares of common stock are equal as to dividends,
distributions and voting privileges. There are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of common
stock is entitled to its proportion of the Fund's assets after debts and
expenses. There are no cumulative voting rights for the election of directors.
As a NYSE-listed company, the Fund is required to hold annual meetings of its
stockholders.

The Fund has no present intention of offering additional shares of its
common stock other than by this offering. Other offerings of its common stock,
if made, will require approval of the Fund's board of directors. Any additional
offering will be subject to the requirements of the U.S. Investment Company Act
of 1940, as amended, that shares of common stock may not be sold at a price
below the then-current net asset value (exclusive of underwriting discounts and
commissions) except in connection with an offering to existing stockholders or
with the consent of a majority of the Fund's outstanding common stock.

The following table shows the number of shares of (i) capital stock
authorized and (ii) capital stock outstanding for each class of authorized
securities of the Fund as of November 26, 2004 and as adjusted for this offer:

AMOUNT OUTSTANDING,
AMOUNT OUTSTANDING AS AS ADJUSTED FOR THE
TITLE OF CLASS AMOUNT AUTHORIZED OF NOVEMBER 26, 2004 OFFER (2)
--------------------------------- ----------------- ---------------------- --------------------

Common Stock .................... 100,000,000 22,640,975(1) 30,187,966

--------------------
* All figures have been rounded to the nearest whole share.

(1) The Fund held 3,372,800 treasury shares. These shares were not counted for
purposes of determining the amount of shares outstanding.

(2) This amount assumes that all rights are exercised. If the Fund increases
the number of shares subject to this offer by 25% in order to satisfy
over-subscription requests, the amount of shares of common stock
outstanding, as adjusted, would be increased by 1,886,747 shares, to an
aggregate of 32,074,713 shares outstanding, as adjusted.

COMMON STOCK

The Fund's shares of common stock are publicly held and are listed and
traded on the NYSE under the symbol "IFN." The following table sets forth for
the periods indicated the high and low sales prices on the NYSE per share of the
common stock of the Fund and the net asset value per share on the dates of those
market highs and lows:

NET ASSET VALUE
MARKET PRICE PER SHARE PER SHARE ON DATE
AND RELATED OF MARKET HIGH
DISCOUNT (-)/PREMIUM (+) (2)(3) AND LOW (1)
--------------------------------------- -----------------------
PERIOD ENDED HIGH LOW HIGH LOW
------------- --------------- --------------- ------ ------

June 30, 2002........................ $10.81 (-17.3%) $ 9.23 (-21.3%) $13.07 $11.73
September 30, 2002................... $10.00 (-20.8%) $ 8.73 (-22.3%) $12.62 $11.23
December 31, 2002.................... $10.67 (-16.6%) $ 8.66 (-20.5%) $12.80 $10.89
March 31, 2003....................... $11.10 (-13.1%) $10.01 (-14.5%) $12.77 $11.71
June 30, 2003........................ $12.25 (-13.8%) $ 9.50 (-16.3%) $14.21 $11.35
September 30, 2003................... $15.56 (-14.2%) $12.29 (-15.1%) $18.13 $14.48
December 31, 2003.................... $25.75 (+8.4%) $15.53 (-16.9%) $23.76 $18.69
March 31, 2004....................... $28.64 (+14.1%) $23.60 (+3.8%) $25.09 $22.74
June 30, 2004........................ $28.55 (+11.0%) $20.71 (+1.4%) $25.71 $20.42
September 30, 2004................... $24.61 (+5.80%) $19.98 (-4.95%) $23.26 $21.02
November 26, 2004.................... $27.33 (+6.47%) $23.75 (+2.02%) $25.67 $23.28

--------------------
(1) Based on the Fund's computations.

(2) Highest and lowest closing market price per share reported on the NYSE.

(3) "Related Discount (-) / Premium (+)" represents the discount or premium
from net asset value of the shares on the date of the high and low market
price for the respective quarter.

Although the Fund's common stock has recently traded at a premium, it has
historically traded at a discount to its net asset value per share. In an
attempt to reduce this discount, the Fund may conduct periodic repurchases of
shares or, with the approval of shareholders, amend its articles of amendment
and restatement so that it may convert to an open-end investment company. The
Fund has, in the past, conducted open-market repurchases and a tender offer of
its shares. In April 2003, the Fund converted to an interval fund structure
pursuant to which it conducts semi-annual repurchase offers for between 5% and
25% of the Fund's outstanding common stock. The Fund's board of directors has
authorized three previous repurchase offers of up to 15%, 5% and 5%,
respectively, of its outstanding common stock.

There is no assurance that tendering for shares, conducting repurchase
offers or converting to an open-end fund will cause the shares to trade at or
above net asset value because the market price of the Fund's shares is, among
other things, determined the supply and demand for the Fund's shares, the Fund's
investment performance and investor perception of the Fund's overall
attractiveness as an investment as compared with alternative investments.

PREFERRED STOCK

The Fund's articles of amendment and restatement provide that the board of
directors may classify or reclassify any unissued shares of capital stock into
one or more additional or other classes or series, with rights as determined by
the board of directors, by action by the board of directors without the approval
of the holders of common stock. Holders of common stock have no preemptive right
to purchase any shares of preferred stock that might be issued. The terms of any
preferred stock, including its dividend rate, liquidation preference and
redemption provisions, will be determined by the board of directors, subject to
applicable law and the Fund's charter. Presently, the Fund has no outstanding
preferred stock and has no intention of offering shares of preferred stock.

SPECIAL VOTING PROVISIONS

The Fund presently has provisions in its articles of amendment and
restatement and its amended and restated by-laws that are commonly referred to
as "anti-takeover" provisions and may have the effect of limiting the ability of
other entities or persons to acquire control of the Fund, to cause it to engage
in certain transactions or to modify its structure.

First, a director may be removed from office only for cause by vote of at
least 75% of the shares entitled to be cast for the election of directors.

Second, the affirmative vote of 75% of the entire board of directors is
required to authorize the conversion of the Fund from a closed-end to an
open-end investment company. The conversion also requires the affirmative vote
of holders of at least 75% of the common stock unless it is approved by a vote
of 75% of the continuing directors (as defined below), in which event such
conversion requires the approval of the holders of a majority of the common
stock. A "continuing director" for purposes of this section is any member of the
board of directors of the Fund who:

o is not a person or affiliate of a person who enters or proposed
to enter into a business combination (as defined below) with the
Fund (an "interested party"), and

o who has been a member of the board of directors for a period of
at least 12 months, or has been a member of the board of
directors since February 1, 1994, or is a successor of a
continuing director who is unaffiliated with an interested party
and is recommended to succeed a continuing director by a majority
of the continuing directors then on the board of directors of the
Fund.

Third, the board of directors is classified into three classes, each with
a term of three years with only one class of directors standing for election in
any year. Such classification may prevent replacement of a majority of the
directors for up to a two-year period. The affirmative vote of at least 75% of
the shares will also be required to amend the charter or by-laws to change any
of the provisions in this paragraph and the preceding two paragraphs.

Additionally, the affirmative vote of 75% of the entire board of directors
and the holders of at least (i) 80% of the common stock and (ii) in the case of
a business combination (as defined below), 662 1/43% of the common stock other
than common stock held by an interested party who is (or whose affiliate is) a
party to a business combination or an affiliate or associate of the interested
party, are required to authorize any of the following transactions:

o merger, consolidation or statutory share exchange of the Fund
with or into any other person;

o issuance or transfer by the Fund (in one or a series of
transactions in any 12-month period) of any securities of the
Fund to any person or entity for cash, securities or other
property (or combination thereof) having an aggregate fair market
value of $1,000,000 or more, excluding issuances or transfers of
debt securities of the Fund, sales of securities of the Fund in
connection with a public offering, issuances of securities of the
Fund pursuant to a dividend reinvestment plan adopted by the
Fund, issuances of securities of the Fund upon the exercise of
any stock subscription rights distributed by the Fund, transfers
by the Fund of securities or other property to a corporation,
trust, partnership or other entity which is wholly owned by the
Fund and portfolio transactions effected by the Fund in the
ordinary course of its business;

o sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Fund (in one or a series of transactions in
any 12-month period) to or with any person or entity of any
assets of the Fund having an aggregate fair market value of
$1,000,000 or more, excluding sales, exchanges, transfers or
other dispositions by the Fund to any person or entity which is
wholly owned by the Fund, and except for portfolio transactions
(including pledges of portfolio securities in connection with
borrowings) effected by the Fund in the ordinary course of its
business (we refer to the transactions described in these first
three bullets as "business combinations");

o the voluntary liquidation or dissolution of the Fund, or an
amendment to the Fund's charter to terminate the Fund's
existence; or

o unless the U.S. Investment Company Act of 1940, as amended, or
federal law requires a lesser vote, any stockholder proposal as
to specific investment decisions made or to be made with respect
to the Fund's assets as to which stockholder approval is required
under federal or Maryland law.

However, the stockholder vote described above will not be required with
respect to the foregoing transactions (other than those set forth in the fifth
bullet above) if they are approved by a vote of 75% of the continuing directors.
In that case, if Maryland law requires, the affirmative vote of a majority of
the votes entitled to be cast thereon shall be required.

The Fund's by-laws contain provisions the effect of which is to prevent
matters, including nominations of directors, from being considered at a
stockholders' meeting where the Fund has not received notice of the matters at
least 60 days prior to the meeting (or 10 days following the date notice of such
meeting is given by the Fund if the Fund gives less than 70 days' notice of such
meeting).

Reference is made to the articles of amendment and restatement and amended
and restated by-laws of the Fund, each on file with the SEC, for the full text
of these provisions. The percentage of votes required under these provisions,
which is greater than the minimum requirements under Maryland law absent the
elections described above or in the U.S. Investment Company Act of 1940, as
amended, will make more difficult a change in the Fund's business or management
and may have the effect of depriving stockholders of an opportunity to sell
shares at a premium over prevailing market prices by discouraging a third party
from seeking to obtain control of the Fund in a tender offer or similar
transaction. The Fund's board of directors, however, has considered these
anti-takeover provisions and believes they are in the best interests of
stockholders.

In addition, in the opinion of the Investment Manager, these provisions
offer several advantages. They may require persons seeking control of the Fund
to negotiate with its management regarding the price to be paid for the shares
required to obtain such control; they promote continuity and stability; and they
enhance the Fund's ability to pursue long-term strategies that are consistent
with its investment objective.

INVESTMENT MANAGEMENT AND OTHER SERVICES

INVESTMENT MANAGER

The Fund is party to a Management Agreement dated June 4, 2003 between the
Fund and Advantage Advisers, Inc., a Delaware corporation. Advantage Advisers,
Inc., which is a registered investment adviser under the U.S. Investment
Advisers Act of 1940, as amended, or the Advisers Act, has been the Investment
Manager of the Fund since the Fund's organization in 1993. The Investment
Manager is a wholly owned subsidiary of Oppenheimer Asset Management Inc., which
is an affiliate of Oppenheimer & Co. Inc., the Fund's administrator. Oppenheimer
& Co. Inc. has been engaged in the management of investment funds for more than
44 years. As of December 31, 2003, total assets under management by Oppenheimer
& Co. Inc. and its affiliates were approximately $46 billion for investment
company, corporate, pension, profit-sharing and other accounts. Oppenheimer &
Co. Inc. is an indirect wholly owned subsidiary of Oppenheimer Holdings, Inc.
The address of the Investment Manager is 200 Park Avenue, 24th Floor, New York,
NY 10166.

The Investment Manager acts as an investment adviser of the Fund and is
responsible on a day-to-day basis for investing the Fund's portfolio in
accordance with its investment objective and policies. The Investment Manager
will have discretion over investment decisions for the Fund and, in that
connection, will initiate purchase and sale orders for the Fund's portfolio
securities. Punita Kumar-Sinha, as noted below, is the Fund's portfolio manager
and is primarily responsible for the day-to-day management of the Fund's
portfolio. In addition, the Investment Manager will make available research and
statistical data to the Fund.

The Investment Manager serves as investment manager or investment adviser
for two registered investment companies, including the Fund and The Asia Tigers
Fund, Inc., which was initially offered in November 1993 and has approximately
$80 million in assets.

Under the Fund's articles of amendment and restatement and Maryland law,
the Fund's business and affairs are managed under the direction of its board of
directors. Investment decisions for the Fund are made by Advantage, subject to
any direction it may receive from the Fund's board of directors, which
periodically reviews the Fund's investment performance.

COMPENSATION. Under the existing management agreement, the Fund pays the
Investment Manager monthly fees at an annual rate of 1.10% of the Fund's average
weekly net assets. Pursuant to an amended and restated management agreement that
will become effective upon the consummation of this offer, the Investment
Manager has agreed to lower its fee upon the consummation of this offer to a
rate of 0.95% of the Fund's average weekly net assets in excess of $600 million.
For example, under the amended and restated management agreement, if the Fund's
average weekly net assets are valued at $700 million and remain constant, then
the Fund would pay a monthly fee at an annual rate of 1.10% on $600 million and
a rate of 0.95% on $100 million. For the purposes of calculating compensation,
average weekly net assets are determined at the end of each month based on the
average of the net assets as calculated on each valuation date (generally
Fridays) during the month.

For the fiscal years ended December 31, 2003, 2002 and 2001, the Fund paid
the Investment Manager $4,395,688, $4,021,761 and $4,348,875, respectively.
Assuming that the value of the Fund's assets remained constant prior to the
offer at $593.9 milllion (its approximate value as of November 26, 2004) and
after the offer at $828.6 million (which assumes that all rights are exercised
at the estimated subscription price, including the additional shares that may be
issued under the over-subscription privilege), the annual compensation received
by the Investment Manager would be increased by approximately $2.2 million.

In reaching a decision to continue the engagement of the Investment
Manager and the Country Adviser, which is discussed below, the Fund's board
reviewed information derived from a number of sources covering a range of
issues. The board considered, among other things: the terms of their respective
agreements; comparative fee information concerning other investment companies;
the terms of the management or advisory agreements of any other similar
investment companies, particularly with respect to fee levels; the nature,
quality and scope of the operations and services to date provided to the Fund;
their commitment to maintain and enhance the services provided to the Fund; the
benefits to the Investment Manager and its affiliates of its relationship with
the Fund; the experience and reputation of the Investment Manager; and the
likelihood of its continued financial stability.

Based on its review, the board of directors, including all of the
non-interested directors, concluded that it was satisfied with the nature and
quality of the services provided by the Investment Manager and the Country
Adviser to the Fund and that the management and country advisory fees were
reasonable in relation to such services. Accordingly, the board of directors
approved the continuation of their respective agreements as being in the
interests of the Fund's stockholders.

EXPENSES. Except for the expenses borne by the Investment Manager pursuant
to the management agreement, the Fund pays or causes to be paid all of their
expenses and liabilities, including, among other things, organizational and
offering expenses (which include out-of-pocket expenses, but not overhead or
employee costs, of the Investment Manager); expenses for legal, accounting and
auditing services; taxes and governmental fees; dues and expenses incurred in
connection with membership in investment company organizations; fees and
expenses incurred in connection with listing the Fund's shares on any stock
exchange; costs of printing and distributing stockholder reports, proxy
materials, prospectuses, stock certificates and distributions of dividends;
charges of the Fund's custodians, sub-custodians, administrators and
sub-administrators, registrars, transfer agents, dividend disbursing agents and
dividend reinvestment plan agents; payment for portfolio pricing services to a
pricing agent, if any, registration and filing fees of the SEC; expenses of
registering or qualifying securities of the Fund for sale in the various states;
freight and other charges in connection with the shipment of the Fund's
portfolio securities; fees and expenses of non-interested directors or
non-interested members of any advisory or investment board, committee or panel
of the Fund; travel expenses or an appropriate portion thereof of directors and
officers of the Fund, or members of an advisory or investment board, committee,
or panel of the Fund, to the extent that such expenses relate to attendance at
meetings of the board of directors or any committee thereof, or of any such
advisory of investment board committee or panel; salaries of stockholder
relations personnel; costs of stockholders meetings; insurance; interest;
brokerage costs; and litigation and other extraordinary or non-recurring
expenses.

PORTFOLIO MANAGER. As noted above, Punita Kumar-Sinha is the Fund's
portfolio manager, the person associated with the Investment Manager who is
primarily responsible for the day-to-day management of the Fund's portfolio. Ms.
Kumar-Sinha has been portfolio manager since 1997. In addition to her service to
the Fund, Ms. Kumar-Sinha has also served as a Managing Director of Oppenheimer
Asset Management Inc., has been a Senior Portfolio Manager to The Asia Tigers
Fund, Inc. since 1999 and has also co-managed several funds not registered under
the U.S. Investment Company Act of 1940. She has both a masters and doctorate in
finance from The Wharton School, a masters of business administration from
Drexel University and a degree from the Indian Institute of Technology in
chemical engineering. She is a member of the Association of Investment
Management and Research, the Boston Security Analysts Association and the
Council on Foreign Relations.

COUNTRY ADVISER

The Fund is party to an Amended and Restated Country Advisory Agreement
dated October 26, 2004 between the Fund and Imperial Investment Advisors Private
Limited, a company organized under the laws of India. Imperial, which is a
registered investment adviser under the U.S. Investment Advisers Act of 1940, as
amended, has been the Country Adviser for the Fund since May 1, 2002. Imperial
is a 99%-owned subsidiary of Advantage India, Inc., which served as the Fund's
country adviser from August 1, 2001 to April 30, 2002. Advantage India, Inc. is
a wholly owned subsidiary of Oppenheimer & Co. Inc., the Fund's administrator.
The address of the Country Adviser is Taj President-Mumbai, Room No. 802, 90,
Cuffe Parade, Mumbai-400 005, India. The address of Advantage India, Inc. is 200
Park Avenue, 24th Floor, New York, New York 10166.

Pursuant to the country advisory agreement, the Country Adviser acts as a
consultant to the Investment Manager and provides and procures statistical and
factual information and research for the Investment Manager regarding investing
in India. The Country Adviser is not responsible for the actual investment
decisions of the Fund. The Country Adviser has a team of four research analysts
that cover approximately 100 companies. The Country Adviser is registered as an
investment adviser under the U.S. Investment Advisers Act of 1940, as amended.

COMPENSATION. Under the country advisory agreement, for its services, the
Country Adviser receives from the Investment Manager a monthly fee at an annual
rate of 0.10% of the Fund's average weekly net assets. For the fiscal years
ended December 31, 2003, 2002 and 2001, the Investment Manager paid the Country
Adviser $399,608, $495,029 and $790,705, respectively. In 2001, the Fund's
Country Adviser was Advantage India, Inc. Assuming that the value of the Fund's
assets remained constant prior to the offer at $593.9 milllion (its approximate
value as of November 26, 2004) and after the offer at $828.6 million (which
assumes that all rights are exercised at the estimated subscription price,
including the additional shares that may be issued under the over-subscription
privilege), the annual compensation received by the Country Adviser would be
increased by approximately $234,700.

EXPENSES. The Country Adviser, at its expense, provides office space,
office facilities and personnel reasonably necessary for the performance of its
services.

ADMINISTRATOR

The Fund is party to an Administration Agreement dated June 4, 2003
between the Fund and Oppenheimer & Co. Inc. (formerly known as Fahnestock & Co.
Inc.), a New York corporation. Oppenheimer & Co. Inc. has been the Fund's
administrator since 1994. The address of the administrator is 125 Broad Street,
New York, NY 10004.

The administrator performs various administrative services, including
providing the Fund with the services of persons to perform administrative and
clerical functions, maintenance of the Fund's books and records, preparation of
various filings, reports, statements and returns filed with government
authorities, and preparation of financial information for the Fund's proxy
statements and semiannual and annual reports to stockholders. The administrator
subcontracts certain of its responsibilities to PFPC Inc. The address of PFPC
Inc. is 103 Bellevue Parkway, Wilmington, Delaware 19809.

EXPENSES. Pursuant to the administration agreement, Oppenheimer & Co. Inc.
assumes all expenses incurred by it, except that the Fund reimburses Oppenheimer
& Co. Inc. for out-of-pocket expenses incurred by its employees in connection
with their attendance at meetings of the board of directors or any committee
thereof or any other meeting at which their attendance is required.

COMPENSATION. The Fund pays Oppenheimer & Co. Inc. a monthly fee at an
annual rate of .20% of the Fund's average monthly net assets. For the fiscal
years ended December 31, 2003, 2002 and 2001, the Fund paid administration fees
of $799,216, $731,299 and $790,704, respectively. Assuming that the value of the
Fund's assets remained constant prior to the offer at $593.9 million (its
approximate value as of November 26, 2004) and after the offer at $828.6 million
(which assumes that all rights are exercised at the estimated subscription
price, including the additional shares that may be issued under the
over-subscription privilege), the annual compensation received by Oppenheimer &
Co. Inc. would be increased by approximately $469,400. In 2001 and 2002, the
Fund's adminstrator was CIBC World Markets Corp.

MAURITIAN ADMINISTRATOR

The Fund is party to a Mauritian Administration Agreement dated April 11,
1994 between the Fund and Multiconsult Ltd., a company organized under the laws
of Mauritius. Multiconsult Ltd. has been the Fund's Mauritius administrator
since 1994. Multiconsult Ltd.'s address is De Chazal Du Mee (DDM) Building, 10,
Frere Felix de Valois Street, Port Louis, Mauritius.

The Mauritian administrator performs several administrative services,
including the maintenance of certain books, records and statements and the
calculation of net asset value, and also reports quarterly on behalf of the Fund
to the Mauritius Financial Services Commission.

EXPENSES. Pursuant to the Mauritian administration agreement, the Fund
reimburses Multiconsult Ltd. for all reasonable out-of-pocket expenses incurred
by it in the performance of its duties.

COMPENSATION. The Fund pays Multiconsult Ltd. a monthly fee of $1,500 and
a quarterly fee of $1,000 for its calculation of net asset value, and the Fund
also reimburses Multiconsult Ltd. for all reasonable out-of-pocket expenses
reasonably incurred by it in the performance of its duties. For the fiscal years
ended December 31, 2003, 2002 and 2001, the Fund paid the Mauritius
administrator $26,813, $23,713 and $25,502, respectively.

DURATION AND TERMINATION; NON-EXCLUSIVE SERVICES

Unless earlier terminated as described below, each of the management
agreement and the country advisory agreement will remain in effect until June 4,
2005, and from year to year thereafter if approved annually (i) by a majority of
the non-interested directors of the Fund and (ii) by the board of directors of
the Fund or by a majority of the outstanding voting securities of the Fund.

The management agreement may be terminated without penalty by the Fund's
board of directors or by vote of a majority of the outstanding voting securities
of the Fund or upon 60 days' written notice by the Investment Manager, and it
will also terminate in the event it is assigned (as defined in the U.S.
Investment Company Act of 1940, as amended). The country advisory agreement may
be terminated without penalty by the Fund's board of directors, by a vote of a
majority of the outstanding voting securities of the Fund, upon 60 days' written
notice by the Investment Manager or the Country Adviser, and it will also
terminate in the event it is assigned (as defined in the U.S. Investment Company
Act of 1940, as amended).

The administration agreement will remain in effect until the termination
thereof by Oppenheimer & Co. Inc. on 90 days' written notice or by the Fund on
60 days' written notice, without penalty. The Mauritian administration agreement
will remain in effect until the termination thereof by Multiconsult Ltd. on 3
months' written notice or by the Fund on 6 months' written notice.

The services of the Investment Manager, the Country Adviser, Oppenheimer &
Co. Inc. and Multiconsult Ltd. are not deemed to be exclusive, and nothing in
the relevant service agreements will prevent any of them or their affiliates
from providing similar services to other investment companies and other clients
(whether or not their investment objectives and policies are similar to those of
the Fund) or from engaging in other activities.

CUSTODIANS, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR

Deutsche Bank AG, whose address is Kodak House, 222, Dr. D. N. Road, Fort
Mumbai 400 001, India, acts as custodian of the assets of the Fund. Deutsche
Bank (Mauritius) Limited, whose address is 4th Floor, Barkly Wharf East, Le
Caudan Waterfront, Port Louis, Mauritius, acts as custodian of the cash assets
of the Fund.

PFPC Inc., whose address is 103 Bellevue Parkway, Wilmington Delaware
19809, acts as transfer agent and registrar for the Fund's shares. It also acts
as dividend paying agent under the dividend reinvestment and cash purchase plan.
PFPC Inc.'s address is P.O. Box 43027, Westborough, Massachusetts 43027.

EXPERTS

PricewaterhouseCoopers LLP, independent accountants, is the independent
registered public accounting firm of the Fund. The audited financial statements
of the Fund and certain of the information appearing under the caption
"Financial Highlights" included in this prospectus and appearing elsewhere
herein have been audited by PricewaterhouseCoopers LLP for the periods indicated
and are included in reliance upon such reports and upon the authority of such
firm as experts in accounting and auditing. PricewaterhouseCoopers LLP also
performs tax and other professional services for the Fund.
PricewaterhouseCoopers LLP's address is 300 Madison Avenue, New York, New York
10017.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for the Fund
by Simpson Thacher & Bartlett LLP, which will rely as to matters of Maryland law
on Piper Rudnick LLP. The Fund is represented with respect to matters of Indian
law by AZB & Partners, Mumbai, India.

ENFORCEABILITY OF CIVIL LIABILITIES

Some of the Fund's directors (J. Marc Hardy, Stephane R.F. Henry and Luis
Rubio) reside and maintain most of their assets outside the United States. These
directors have not appointed an agent for service of process in the United
States. In addition, the Country Adviser is organized under the laws of India,
and AZB & Partners, the Fund's Indian counsel, has its principal office in
India. It may not be possible, therefore, for investors to effect service of
process within the United States upon these persons or entities to enforce
against them, in United States courts or foreign courts, judgments obtained in
United States courts predicated upon the civil liability provisions of the
federal securities laws of the United States. In addition, it is not certain
that a foreign court would enforce, in original actions, liabilities against
these persons or entities predicated solely upon the U.S. securities laws.

OFFICIAL DOCUMENTS

Certain of the tabular and other statistical information set forth in this
prospectus is based upon or derived from official public documents of the Indian
government and its ministries, the Reserve Bank of India, the National Stock
Exchange and the Mumbai Stock Exchange.

ADDITIONAL INFORMATION

This registration statement and other information can be inspected and
copied at the Public Reference Room of the SEC located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549. Copies of such materials,
including copies of all or a portion of the Registration Statement can be
obtained from the Public Reference Room of the SEC at prescribed rates. You can
call the SEC at 1-800-SEC-0330 to obtain information on the operation of the
Public Reference Room. Such materials may also be accessed electronically by
means of the SEC's home page on the Internet at http://www.sec.gov.

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

PAGE
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PROXY VOTING PROCEDURES ................................. 1

FINANCIAL STATEMENTS

The audited financial statements for the year ended December 31, 2003 and
the unaudited financial statements for the six month period ended June 30, 2004
are included in the Fund's 2003 Annual Report and 2004 Semi-Annual Report,
respectively, and are incorporated by reference into this prospectus. These
statements include: the Report of Independent Auditors; Portfolio of Investments
as of December 31, 2003 and June 30, 2004; Statement of Assets and Liabilities
as of December 31, 2003 and June 30, 2004; Statement of Operations for the
fiscal year ended December 31, 2003 and six months ended June 30, 2004;
Statements of Changes in Net Assets for the fiscal years ended December 31, 2003
and December 31, 2002 and six months ended June 30, 2004; Notes to Financial
Statements; and Financial Highlights for a share of common stock outstanding
during each of the fiscal years ended December 31, 2003, 2002, 2001, 2000 and
1999 and six months ended June 30, 2004. Copies of our 2003 Annual Report and
2004 Semi-Annual Report were filed with the SEC on March 9, 2004 and August 31,
2004, respectively, and are available on the SEC's website at
http://www.sec.gov. They may also be obtained without charge upon written or
oral request from our information agent at (866) 297-1264.

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APPENDIX A

GENERAL CHARACTERISTICS AND RISKS OF HEDGING

A detailed discussion of the hedging (which we define below) that may be
done by the Investment Manager on behalf of the Fund follows below. The Fund
will not be obligated, however, to do any hedging and makes no representation as
to the availability of these techniques at this time or at any time in the
future. "Hedging," as used in this appendix, refers to entering into interest
rate, currency or stock index futures contracts, currency forward contracts and
currency swaps, the purchase and sale (or writing) of exchange listed and
over-the-counter put and call options on debt and equity securities, currencies,
interest rate, currency or stock index futures and fixed income and stock
indices and other financial instruments, entering into various interest rate
transactions such as swaps, caps, floors, collars, entering into equity swaps,
caps, floors or trading in other types of derivatives.

The Fund's ability to pursue certain of these strategies may be limited by
the federal income tax requirements applicable to regulated investment companies
that are not operated as commodity pools.

PUT AND CALL OPTIONS ON SECURITIES AND INDICES

The Fund may purchase and sell put and call options on debt and equity
securities and indices based upon the prices of debt or equity securities. A put
option on a security gives the purchaser of the option the right to sell, and
the writer the obligation to buy, the underlying security at the exercise price
during the option period. The Fund may also purchase and sell options on indices
based upon the prices of debt or equity securities ("index options"). Index
options are similar to options on securities except that, rather than taking or
making delivery of securities underlying the option at a specified price upon
exercise, an index option gives the holder the right to receive cash upon
exercise of the option if the level of the index upon which the option is based
is greater, in the case of a call, or less in the case of a put, than the
exercise price of the option. The purchase of a put option on a security would
be designed to protect against a substantial decline in the market value of a
security held by the Fund. A call option on a security gives the purchaser of
the option the right to buy and the writer the obligation to sell the underlying
security at the exercise price during the option period. The purchase of a call
option on a security would be intended to protect the Fund against an increase
in the price of a security that it intended to purchase in the future. In the
case of either put or call options that it has purchased, if the option expires
without being sold or exercised, the Fund will experience a loss in the amount
of the option premium plus any related commissions. When the Fund sells put and
call options, it receives a premium as the seller of the option. The premium
that the Fund receives for writing the option will serve as a partial hedge, in
the amount of the option premium, against changes in the value of the securities
in its portfolio. During the term of the option, however, a covered call seller
has, in return for the premium on the option, given up the opportunity for
capital appreciation above the exercise price of the option if the value of the
underlying security increases, but it has retained the risk of loss should the
price of the underlying security decline. Conversely, a secured put seller
retains the risk of loss should the market value of the underlying security
decline below the exercise price of the option, less the premium received on the
sale of the option. The Fund is authorized to purchase and sell exchange listed
options and over-the-counter options that are privately negotiated with the
counterparty to such contract. Listed options are issued by the Options Clearing
Corporation ("OCC"), which guarantees the performance of the obligations of the
parties to such options.

All such call options sold (written) by the Fund will be "covered" as long
as the call is outstanding (i.e., the Fund will own the instrument subject to
the call or other securities or assets acceptable under applicable segregation
and coverage rules). All such put options sold (written) by the Fund will be
secured by segregated assets consisting of cash or liquid debt securities having
a value not less than the exercise price.

The Fund's ability to close out its position as a purchaser or seller of
an exchange listed put or call option is dependent upon the existence of a
liquid secondary market. Among the possible reasons for the absence of a liquid
secondary market on an exchange are:

o insufficient trading interest in certain options;

o restrictions on transactions imposed by an exchange;

o trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying
securities;

A-1

o interruption of the normal operations on an exchange;

o inadequacy of the facilities of an exchange or the OCC to handle
current trading volume; or

o a decision by one or more exchanges to discontinue the trading
of options (or a particular class or series of options), in
which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although
outstanding options on that exchange that had been listed by the
OCC as a result of trades on that exchange would generally
continue to be exercisable in accordance with their terms.

Over-the-counter options are purchased from or sold to dealers, financial
institutions or other counterparties that have entered into direct agreements
with the Fund. With over-the-counter options, such variables as expiration date,
exercise price and premium will be agreed upon between the Fund and the
counterparty, without the intermediation of a third party such as the OCC. If
the counterparty fails to make or take delivery of the securities underlying an
option that it has written or otherwise settle the transaction in accordance
with the terms of that option as written, the Fund would lose the premium paid
for the option as well as any anticipated benefit of the transaction. As the
Fund must rely on the credit quality of the counterparty rather than the
guarantee of the OCC, it will only enter into OTC options with counterparties
with the highest long-term credit ratings and with primary U.S. government
securities dealers recognized by the Federal Reserve Bank of New York.

The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

CHARACTERISTICS. The Fund may purchase and sell futures contracts on
interest rates and indices of debt and equity securities and purchase and sell
(write) put and call options on such futures contracts traded on recognized
domestic exchanges as a hedge against anticipated interest rate changes or
movements in equity markets. The sale of a futures contract creates an
obligation by the Fund, as seller, to deliver the specific type of financial
instrument called for in the contract at a specified future time for a specified
price. Options on futures contracts are similar to options on securities except
that an option on a futures contract gives the purchaser the right in return for
the premium paid to assume a position in a futures contract. That position is a
"long" position if the option is a call and a "short" position if the option is
a put.

MARGIN REQUIREMENTS. At the time a futures contract is purchased or sold,
the Fund must allocate cash or securities as a deposit payment, or an "initial
margin." It is expected that the initial margin that the Fund will pay may range
from approximately 1% to approximately 5% of the value of the instruments
underlying the contract. In certain circumstances, however, such as during
periods of high volatility, the Fund may be required by an exchange to increase
the level of its initial margin payment. Additionally, initial margin
requirements may be increased in the future pursuant to regulatory action. An
outstanding futures contract is valued daily and the payment in cash of
"variation margin" may be required, a process known as "marking to the market."
Transactions in listed options and futures are usually settled by entering into
an offsetting transaction, and are subject to the risk that the position may not
be able to be closed if no offsetting transaction can be arranged.

NO REGULATORY LIMITATIONS ON USE OF FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS. The Fund's futures transactions will be entered into for
hedging purposes. There is, however, no limit on the amount of the Fund's assets
that can be put at risk through the use of futures contracts and options
thereon, and the value of the Fund's futures contracts and options thereon may
equal or exceed 100% of the Fund's total assets. When required, a segregated
account of cash or cash equivalents will be maintained and marked to market in
an amount equal to the market value of the contract. The Investment Manager
reserves the right to comply with such different standards as may be established
from time to time by rules and regulations of the U.S. Commodity Exchange
Commission ("CFTC") with respect to the purchase and sale of futures contracts
and options thereon.

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The Fund is operated by persons who have claimed exclusions from the
definition of the term "commodity pool operator" under the U.S. Commodity
Exchange Act and, therefore, are not subject to registration or regulation as
commodity pool operators under such Act.

CURRENCY TRANSACTIONS

The Fund may engage in currency transactions with counterparties to hedge
the value of portfolio securities denominated in particular currencies against
fluctuations in relative value. Currency transactions include currency forward
contracts, exchange listed currency futures contracts, exchange listed and
over-the-counter options on currencies and currency swaps. A forward currency
contract involves a privately negotiated obligation to purchase or sell (with
delivery generally required) a specific currency at a future date, which may be
any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. A currency swap is an
agreement to exchange cash flows based on the notional difference among two or
more currencies and operates similarly to an interest rate swap, which is
described below. The Fund may enter into currency transactions with
counterparties that have received (or the guarantors of the obligations of that
have received) a credit rating of P-1 or A-1 by Moody's Investors Service, Inc.
or Standard & Poor's Ratings Services, a division of the McGraw Hill Companies,
Inc., respectively, or that have an equivalent rating from an nationally
recognized statistical rating organization or (except for OTC currency options)
are determined to be of equivalent credit quality by the Investment Manager.

The Fund's dealings in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is entering into a currency transaction
with respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of the Fund's portfolio securities
or the receipt of income from them. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency. The Fund will not enter into a transaction to
hedge currency exposure to an extent greater, after netting all transactions
intended wholly or partially to offset other transactions, than the aggregate
market value (at the time of entering into the transaction) of the securities
held in the Fund's portfolio that are denominated or generally quoted in or
currently convertible into the currency, other than with respect to proxy
hedging as described below.

The Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure. To reduce the effect of currency fluctuations on the
value of existing or anticipated holdings of portfolio securities, the Fund may
also engage in proxy hedging. Proxy hedging is often used when the currency to
which the Fund's portfolio is exposed is difficult to hedge or to hedge against
the dollar. Proxy hedging entails entering into a forward contract to sell a
currency, the changes in the value of which are generally considered to be
linked to a currency or currencies in which some or all of the Fund's portfolio
securities are or are expected to be denominated, and to buy dollars. The amount
of the contract would not exceed the value of the Fund's securities denominated
in linked currencies. Currency hedging involves some of the same risks and
considerations as other transactions with similar instruments, Currency
transactions can result in losses to the Fund if the currency being hedged
fluctuates in value to a degree or in a direction that is not anticipated.
Further, the risk exists that the perceived linkage between various currencies
may not be present or may not be present during the particular time that the
Fund is engaging in proxy hedging. If the Fund enters into a currency hedging
transaction, the Fund will comply with the asset segregation requirements
described below.

Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency and manipulations or exchange restrictions imposed by governments.
These forms of governmental actions can result in losses to the Fund if it is
unable to deliver or receive currency or monies in settlement of obligations and
could also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs. Buyers and
sellers of currency futures are subject to the same risks that apply to the use
of futures generally. Further, settlement of a currency futures contract for the
purchase of most currencies must occur at a bank based in the issuing nation.
The ability to establish and close out positions on these options is subject to
the maintenance of a liquid market that may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.

A-3

INTEREST RATE TRANSACTIONS

The Fund may enter into interest rate swaps and may purchase or sell
interest rate caps and floors. The Fund would enter into these transactions to
preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of the securities the
Fund anticipates purchasing at a later date. The Fund will not sell interest
rate caps or floors that it does not own.

The Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or liabilities, and it will usually enter into interest rate swaps on a
net basis, i.e., the two payment streams are netted out, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments on the
payment date. The Fund will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is rated in the highest rating category of at least one
nationally recognized statistical rating organization at the time of entering
into such transaction. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. Caps and
floors are less liquid than swaps.

EQUITY SWAPS AND RELATED TRANSACTIONS

The Fund may enter into equity swaps and may purchase or sell equity caps
and floors. The Fund would enter into these transactions to preserve a return or
spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of the securities that the Fund anticipates
purchasing at a later date. The Fund will not sell equity caps or floors that it
does not own.

The Fund may enter into equity swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or liabilities, and it will usually enter into equity swaps on a net
basis, i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments on the
payment date. The Fund will not enter into any equity swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is rated in the highest rating category of at least one
nationally recognized statistical rating organization at the time of entering
into such transaction. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. Caps and
floors, as noted above, are less liquid than swaps.

RISKS OF HEDGING

Hedging involves special risks, including the possible default by the
other party to the transaction, illiquidity and, to the extent the Investment
Manager's view as to certain market movements is incorrect, the risk that the
use of hedging could result in losses greater than if such investment strategies
had not been used. Use of put and call options could result in losses to the
Fund, force the sale or purchase of portfolio securities at an inopportune time
or for prices higher than (in the case of put options) or lower than (in the
case of call options) current market values, or cause the Fund to hold a
security it might otherwise sell. The use of currency transactions could result
in the Fund's incurring losses as a result of the imposition of exchange
controls, suspension of settlements or the inability to deliver or receive a
specified currency. The use of options and futures transactions entails certain
special risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund could create the possibility that losses on the hedging
instrument are greater than gains in the value of the Fund's position. In
addition, futures and options markets could be illiquid in some circumstances
and certain over-the-counter options could have no markets. As a result, in
certain markets, the Fund might not be able to close out a position without
incurring substantial losses. Although the Fund's use of futures and options
transactions for hedging purposes should tend to minimize the risk of loss due
to a decline in the value of the hedged position, at the same time, it will tend
to limit any potential gain to the Fund that might result from an increase in
value of the position. There is, however, no limit on the amount of the Fund's
assets that can be put at risk through the use of futures contracts and options
thereon, an the value of the Fund's futures

A-4

contracts and options thereon may equal or exceed 100% of the Fund's total
assets. Finally, the daily variation margin requirements for futures contracts
create a greater ongoing potential financial risk than would purchases of
options, in which case the exposure is limited to the cost of the initial
premium and transaction costs. Losses resulting from hedging will reduce the
Fund's net asset value, and possibly its income, and the losses can be greater
than if the hedging had not been used.

When conducted outside the United States, hedging may not be regulated as
rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and will be subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies and other
instruments. The value of positions taken as part of non-U.S. hedging also could
be adversely affected by:

o other complex foreign political, legal and economic factors;

o lesser availability of data on which to make trading decisions
than in the United States;

o delays in the Fund's ability to act upon economic events
occurring in foreign markets during non-business hours in the
United States;

o the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States;
and

o lower trading volume and liquidity.

SEGREGATION AND COVER REQUIREMENTS

Much of the hedging that the Fund may enter into is subject to segregation
and coverage requirements established by either the CFTC or the SEC, with the
result that, if the Fund does not hold the instrument underlying the futures
contract or option, the Fund will be required to segregate on an ongoing basis
with its custodian cash, U.S. government securities or other liquid debt
obligations in an amount at least equal to the Fund's obligations with respect
to such instruments. Such amounts will fluctuate as the market value of the
obligations increases or decreases. The segregation requirement can result in
the Fund maintaining positions that it would otherwise liquidate and
consequently segregating assets with respect thereto at a time when it might be
disadvantageous to do so. In addition, with respect to futures contracts
purchased by the Fund, the Fund will also be subject to the segregation
requirements with respect to the value of the instruments underlying the futures
contracts. The Fund will accrue the net amount of the excess, if any, of the
Fund's obligations over its entitlements with respect to each swap on a daily
basis, and it will segregate with a custodian an amount of cash, U.S. government
securities, or other liquid debt obligations or liquid securities having an
aggregate net asset value at least equal the accrued excess.

OTHER LIMITATIONS

The degree of the Fund's use of hedging may be limited by certain
provisions of the U.S. Internal Revenue Code of 1986, as amended. See
"Taxation."

A-5

APPENDIX B

REPUBLIC OF INDIA

THE INFORMATION SET FORTH IN THIS APPENDIX B HAS BEEN EXTRACTED FROM
VARIOUS GOVERNMENT AND PRIVATE PUBLICATIONS. THE FUND, ITS BOARD OF DIRECTORS,
THE INVESTMENT MANAGER AND THE COUNTRY ADVISER MAKE NO REPRESENTATION AS TO THE
ACCURACY OF THE INFORMATION, NOR HAS THE FUND OR ITS BOARD OF DIRECTORS
ATTEMPTED TO VERIFY THE STATISTICAL INFORMATION PRESENTED IN THIS APPENDIX B.
FURTHERMORE, NO REPRESENTATION IS MADE THAT ANY CORRELATION EXISTS BETWEEN THE
REPUBLIC OF INDIA OR ITS ECONOMY IN GENERAL AND THE PERFORMANCE OF THE FUND.
REFERENCE IN THE TEXT BELOW TO CONSECUTIVE YEARS (FOR EXAMPLE, 2002/2003) MEANS
THE FISCAL YEAR BEGINNING APRIL 1 OF THE FIRST YEAR LISTED AND ENDING MARCH 31
OF THE SECOND YEAR LISTED.

THE COUNTRY

GEOGRAPHY

Situated in Southern Asia and covering an area of approximately 1.3
million square miles, India is the seventh largest country in the world. Bounded
by the Himalayas in the north, it stretches southwards into the Indian Ocean
between the Bay of Bengal to the southeast and the Arabian Sea to the west.
India is bordered by the People's Republic of China, Nepal and Bhutan to the
north, Pakistan to the west, and Myanmar and Bangladesh to the east. Sri Lanka
lies off its southern shores. The Andaman and Nicobar Islands in the Bay of
Bengal and the Lakshadweep Islands in the Arabian Sea are also part of India.

POPULATION

India is the world's second most populous country. The 2001 census
estimated the total population of India as approximately 1.03 billion, and that
figure is projected to increase to 1.11 billion by 2006, 1.19 billion by 2011
and 1.27 billion by 2016. Although migration from rural to urban centers has
increased steadily, India's population remains predominantly rural. The 2001
census reported that 72.2% of the total population still lives in rural areas.

Control of population growth is a declared objective of government policy.
India's population growth rate has occurred despite an intensive birth control
program. The 2001 census reported a population growth rate of approximately
1.96% during the years from 1991 to 2001, which is lower than the 2.15% growth
rate from 1981 to 1991. Approximately 35.6% of the Indian population is below 14
years of age.

The following table sets forth information regarding the total population
and its rate of growth during the period from 1951 to 2001:

DYNAMICS OF POPULATION GROWTH
1951 - 2001

TOTAL POPULATION (MILLIONS) GROWTH RATE (%)
AT THE END OF THE PERIOD -----------------------
(AS OF MARCH 1) DECADAL ANNUAL
-------------------------- ------- ------

1951-1961 .................. 439 21.6 1.98
1961-1971 .................. 548 24.8 2.24
1971-1981 .................. 684 24.8 2.24
1981-1991 .................. 846 23.7 2.15
1991-2001 .................. 1,027 21.4 1.96

------------------
Source: ECONOMIC SURVEY 2002/2003, GOVERNMENT OF INDIA MINISTRY OF FINANCE AND
CENTRAL STATISTICAL ORGANISATION DATA

Life expectancy has increased from 32.5 years for males and 31.7 years for
females in 1950/1951 to 63.87 and 66.91 years, respectively, in 2000/2001.
Literacy during the same period increased from 18.33% to 65.38% of the
population, and the per capita net national product at factor cost (in 1993/94
prices) increased from Rs. 3,687 to Rs. 10,754. The Indian government estimated
that 26.10% of the population lived below the poverty line in 1999/2000, as
compared with 38.9% in 1987/88.

B-1

Hindi is the official national language and is spoken by approximately 40%
of the population. English is recognized as an "official language" under the
Indian Constitution and is widely used as the language of jurisprudence,
commercial transactions and higher and technical education.

ETHNIC AND CULTURAL DIVERSITY AND CONFLICT

India has a diverse mix of ethnic and cultural groups. The major line of
distinction is generally religion, which in some areas closely mirrors cultural
or ethnic divisions as well. Many religions are practiced in India, and Hinduism
is the principal religion, followed by an estimated 82% of the total population.
The other principal religious groups are Muslims, Christians, Sikhs, Buddhists
and Jains. Muslims constitute an estimated 12.12% of the total population.

Religious and ethnic differences are a recurring source of conflict in
India throughout its post-independence era and on several occasions have erupted
in violence. In 1992, Hindu fundamentalist groups, encouraged by elements within
the Bhartiya Janta Party, a fundamentalist Hindu party, were responsible for the
destruction of a 16th century mosque in Ayodhya. This incident led to a major
conflict between elements of the Hindu and Muslim populations and to widespread
communal rioting throughout the country. Related bombings in Mumbai in March
1993 killed more than 250 people and temporarily closed the Mumbai Stock
Exchange. Terrorist bombings occur from time to time in a number of other Indian
cities.

In March 2002, the state of Gujarat experienced communal violence between
Hindus and Muslims, and approximately 800 people died. The Indian government has
controlled the separatist movement in the state of Punjab and has achieved some
success at controlling the movement in the state of Assam. However, the states
of Nagaland, Mizoram and Manipur in the northeastern part of India continue to
experience insurgencies and separatist movements.

Since 1990, the Indian government has been involved in a struggle with
Muslim separatist guerilla groups in the states of Jammu and Kashmir, which has
strained India's relations with its neighbors. Recent peace initiatives led by
former Indian Prime Minister Atal Bihari Vajpayee and Pakistani President Pervez
Musharraf have improved relations between the two countries. See
"Politics--International Relations" in this Appendix B.

GOVERNMENT

CONSTITUTIONAL STRUCTURE

India gained its independence from the United Kingdom in August 1947, and
the Indian Constitution took effect on January 26, 1950. India is a federal
republic with certain powers reserved to its twenty-nine states and six "union
territories." The Indian Constitution separates the responsibilities of the
national and state governments and also provides for the separation of
executive, legislative and judicial powers. It also delineates areas where the
national and state governments exercise joint jurisdiction.

NATIONAL GOVERNMENT

The Indian Constitution vests legislative power in a bicameral parliament
consisting of the Lok Sabha (House of the People) and the Rajya Sabha (Council
of States). All but two members of the Lok Sabha (who are nominated by the
President to represent Anglo-Indians) are directly elected in single-member
constituencies for a term of five years on the basis of universal adult
suffrage. The Indian Constitution provides that the Rajya Sabha cannot consist
of more than 250 members, twelve of whom are nominated by the president and the
remainder of whom are elected indirectly by representatives of the states and
union territories. Elected members of the Rajya Sabha serve six-year terms, and
one-third of its members stand for election every two years.

The executive branch is headed by a president who, as the head of state,
exercises power under the Indian Constitution with the advice of the Council of
Ministers, which is headed by the prime minister. The president is elected for
five-year terms by an electoral college, which consists of elected members of
the national and state legislatures. The president performs a primarily
ceremonial function. Executive power in practice resides with the prime
minister, who is responsible to the Lok Sabha. The president appoints the prime
minister, and the president appoints other ministers on the advice of the prime
minister.

B-2

The highest appellate court is the Supreme Court of India. The judicial
system of India is based on the English system, and its jurisprudence derives
from the common law.

STATE GOVERNMENT AND UNION TERRITORIES

The system of state government closely resembles that of the national
government, with each state having a legislature, governor, chief minister and a
council of ministers. There are twenty-nine states in India. India has an
extensive system of local government that reaches down to the municipality and
village level. The national government administers the six union territories,
and rural and urban local bodies, which were empowered by 1993 amendments to the
Indian Constitution, serve as further institutions of self-government.

POLITICS

DOMESTIC

India is the largest democracy in the world. Since its independence in
1947, the Congress (I) Party and its prime ministers selected from its
leadership have dominated politics at the national level. Previous Congress (I)
Party prime ministers include: Jawaharlal Nehru (1947 to 1964); Lad Bahadur
Shastri (1964 to 1966); Mr. Nehru's daughter, Indira Gandhi (1966 to 1977 and
1980 to 1984); Ms. Gandhi's son, Rajiv Gandhi (1984 to 1989); P.V. Narasimha Rao
(1991 to 1996); H.D. Deva Gowda of Janata Dal (1996 to 1997); and I.K. Gujaral
(1997 to 1998). Atal Bihari Vajpayee of the Bhartiya Janta Party served as
India's prime minister from March 1998 until May 2004, at which time he led a
twenty-five party coalition called the National Democratic Alliance. Following
the Indian general elections held in April and May of 2004, the Congress (I)
Party again leads the Indian government under the leadership of Prime Minister
Manmohan Singh. The Congress (I) Party leads a coalition based on support from
leftist and other secular parties.

The Indian Constitution requires general elections to the Lok Sabha every
five years. There have been three different controlling parties since 1989. The
Janata Dal Party defeated the Congress (I) Party in a general election in 1989.
The Samajwadi Janata Party briefly replaced the Janata Dal Party less than one
year later, and the Congress (I) Party returned to power in 1991. Although the
Congress (I) Party was unable to gain a majority in the parliamentary elections
held that year, it formed a minority government under the leadership of
then-Prime Minister Rao.

The Congress (I) Party historically represents a secular, socialist
platform. However, since the formation of Prime Minister Rao's government in
1991, the party has promoted private sector and market-oriented reforms. These
economic reforms have received broad-based political support, including that of
the Bhartiya Janta Party. Nevertheless, the Indian government's political
position has been challenged by the aftermath of a 1992 financial scandal, its
failure to prevent the outbreak of countrywide communal violence, the continuing
challenges presented by insurgent separatist movements in several of the Indian
states and allegations of financial improprieties against certain members of the
Indian government. The Indian government narrowly survived a no-confidence vote
in July 1993. In 1996, Prime Minister Rao's government stepped down following a
corruption scandal.

INTERNATIONAL RELATIONS

India is one of the charter members of the United Nations and its
affiliated bodies and is a founding member of the International Monetary Fund,
the International Bank for Reconstruction and Development, the Asian Development
Bank and the African Development Bank. India is also a member of the British
Commonwealth of Nations, the Non-Aligned Movement, the South Asian Association
for Regional Cooperation and the World Trade Organization.

With the exception of Pakistan, India's foreign relations have generally
remained stable. In 1993, India renegotiated its foreign debt to Russia and
undertook to rebuild its trade ties with the Central Asian states emerging from
the break-up of the former Soviet Union. In addition, India and China in
September 1993 agreed to pursue a negotiated settlement of the two countries'
longstanding border dispute. India's external affairs minister visited China in
June 1999, which marked the resumption of high level dialogue, and both sides
agreed on the need for a bilateral security dialogue. The Indian president
visited China in 2001, and the Chinese premier visited India in 2002. India and
China agreed to establish a bilateral dialogue mechanism to fight terrorism and
to accelerate the process of clarification and confirmation of the "line of
actual control" along the India-China boundary. The execution of six memorandums
of understanding between

B-3

the two countries has also led to improvements in India-China relations.
Relations with the United States have also generally improved since the breakup
of the former Soviet Union.

India's relations with Pakistan have been tense for many years. The two
countries have fought three major wars since their partition in 1947. The
principal dispute between India and Pakistan relates to the claim on the Indian
border states of Jammu and Kashmir. India fought two wars with Pakistan (from
1947-1948 and in 1965) in order to retain its control over Jammu and Kashmir,
and a third war with Pakistan in 1971 resulted in the secession of Pakistan's
eastern province, which is now the People's Republic of Bangladesh. More
recently, India accused Pakistan of involvement in a terrorist attack on the
Indian parliament in December 2001, and another large-scale war was threatened.
Although that war was averted, the two countries downgraded their diplomatic
ties from an ambassadorial level to the level of CHARGE D'AFFAIRES and
discontinued their land and air links and trade ties. A massive troop build up
took place on the India-Pakistan border. The two summits whose purpose was to
improve relations failed.

Relations between India and Pakistan have improved in the past year. In
2003, former Prime Minister Vajpayee announced his willingness to commence a
dialogue between the countries, and the Pakistani prime minister responded
positively to Prime Minister Vajpayee's offer. Ambassadorial ties and land and
air-traffic ties have been restored. Pakistan announced a ceasefire along the
India-Pakistan border, and the ensuing truce between the two nations led to an
end to cross-border hostilities for the first time since an insurgency began in
1989. The Indian cricket team visited Pakistan in 2004 in yet another step
toward the thawing of relations between the two countries.

THE INDIAN ECONOMY

OVERVIEW

Following independence, India pursued a developmental policy based on
strong centralized planning, regulation and control of private enterprise, state
ownership, trade protectionism and strict limits on the penetration of foreign
capital and technology. This protectionist regime limited India's economic
development until the mid-1980s, at which time a movement towards liberalization
and market orientation of the economy began.

India experienced a crisis in its balance of payments in early 1991, which
threatened to destabilize the economy. At that time, India was running a current
account deficit of approximately $10 billion. Reserve levels were down to two
weeks of imports despite an International Monetary Fund loan of $1.8 billion.
India's financial credibility was very low; commercial borrowing was impossible;
inflation was high; and an inflow of foreign currency from non-resident Indians
had been reversed. A number of factors contributed to this crisis, including the
continuing drain of the government's deficit spending, an increase in petroleum
imports accompanied by increases in oil prices that resulted from tensions in
the Persian Gulf, the collapse of the Soviet and Eastern European economies and
the resulting pressures on India's exports, domestic political instability and
the reduction of workers' remittances from the Persian Gulf states at the time
of the Persian Gulf crisis. In response to this crisis, then-Prime Minister Rao
and Finance Minister Singh instituted a program of structural reforms aimed at
stabilizing the economy and promoting reliance on market mechanisms. The main
components of the structural reform program are exchange and trade
liberalization, financial sector reform and control of budget deficits,
inflation and currency supplies. The program promotes foreign technology
transfers and foreign investment in certain sectors of the economy as well as
further development of the private sector.

Despite political instability between 1996 and 1999, the Indian economy
grew by 6.6%. The Indian government instituted significant reform initiatives
such as deregulation of the petroleum sector and the rationalization of income
tax rates during this period. From 1999 to the present, India's politics have
largely stabilized, and further reform initiatives have been promoted. Among
other laws and programs:

o The Indian Electricity Act was passed in 2003, which aims at
introducing competition into the power sector;

o The Indian Fiscal Responsibility Act was passed in 2003, which
provides a legal and institutional framework for controlling
deficits and stabilizing debt; and

o The Indian National Highway Development Program was created,
under which the construction of 14,846 kilometers of highways
will be built.

B-4

In addition, foreign direct investment limits in the telecommunications,
refining and banking sectors have been raised, and the Indian government now
allows such investment in the insurance sector. The Indian privatization program
has also gained momentum, and India has surpassed its disinvestment target for
2003/2004.

The Indian government's policies have resulted in improved economic
performance. Average gross domestic product ("GDP") grew 6.1% from 1992/1993 to
2001/2002, and the Indian government aims for 8% growth in its Tenth Five-Year
Plan period. Inflation has been reduced from double to single digits, and fiscal
deficits as a proportion of GDP have also been reduced. Foreign exchange
reserves have increased substantially and, as of May 14, 2004, were
approximately $118.6 billion. The Indian rupee was made fully convertible on the
trade account in 1993 and has since been generally stable against the U.S.
dollar.

ECONOMIC PLANNING

India began the process of planned development with the start of the First
Five-Year Plan in 1951. The essential goals of Indian planning are the
elimination of poverty, development of self-reliance, growth in national and per
capita income, industrialization and expansion of employment opportunities.

The principal planning body is the Planning Commission, which was
established in 1950. The Planning Commission undertakes the formulation of a
five-year plan every five years in consultation with the various departments of
the national and state governments. After extensive debate and discussions, the
plan is made effective by parliamentary approval.

The Tenth Five-Year Plan, which covers the period from 2002 to 2007, aims
for 8% average GDP growth in order to double per capita income within the next
ten years and to create 100 million employment opportunities during the same
period. The Tenth Five-Year Plan anticipates further GDP growth to 9.3% per year
during the Eleventh Five-Year Plan period. The growth strategy relies upon a
combination of increased investment and improvement in economic efficiency,
policy constraints, procedural rigidities and price distortions. The Tenth
Five-Year Plan also emphasizes privatization of public enterprises and the
easing of legal and procedural barriers to transfers of assets. It also
emphasizes qualitative factors relating to poverty, employment, social issues
and the environment.

GROSS DOMESTIC PRODUCT

GDP Growth

Average yearly real GDP growth from 1998/1999 to 2002/2003 was 5.3%. The
deceleration of GDP growth in 2002/2003 was largely due to the poor performance
of the agricultural sector following that year's monsoon season. Overall
economic performance was offset though by strong industrial activity and a
resurgence of growth in the services sector. The Indian government estimates
that real GDP growth will be above 8% for 2003/2004 due to a stronger
agricultural sector and manufacturing and services sectors.

B-5

The following table sets forth changes in India's GDP for the period
1998/1999 through 2003/2004:

CHANGES IN GROSS DOMESTIC PRODUCT

ABSOLUTE VALUES % CHANGE OVER PREVIOUS YEAR
------------------------------------- --------------------------------------
CURRENT PRICES 1993/94 PRICES (a) CURRENT PRICES 1993/94 PRICES (a)
-------------- ------------------ -------------- ------------------
(RS. BILLION)

1998/1999 15,981 10,825 15.0 6.5
1999/2000 17,619 11,484 10.3 6.1
2000/2001 19,177 11,987 8.8 4.4
2001/2002 (b) 20,910 12,678 9.0 5.8
2002/2003 (c) 22,495 13,183 7.6 4.0
2003/2004 (d) 25,169 14,245 11.9 8.1

------------------
(a) At factor cost.

(b) Provisional.

(d) Advance estimates.

Source: ECONOMIC SURVEY 2002/2003, GOVERNMENT OF INDIA MINISTRY OF FINANCE AND
CENTRAL STATISTICAL ORGANISATION DATA

COMPOSITION OF GDP

Agriculture has been the largest historical contributor to GDP. However,
since the post-independence era, the Indian economy has progressively depended
less on agricultural output and more on the manufacturing and services sectors.

The following table sets forth changes in the Indian economy by economic
sector:

SECTORAL DISTRIBUTION OF GROSS DOMESTIC PRODUCT
(% OF TOTAL GDP)

1951/52 1956/57 1961/62 1966/67 1971/72 1976/77 1981/82 1986/87 1991/92 1996/97
TO TO TO TO TO TO TO TO TO TO
1955/56 1960/61 1965/66 1970/71 1975/76 1980/81 1985/86 1990/91 1995/96 2000/2001
------- ------- ------- ------- ------- ------- ------- ------- ------- ---------

Agriculture ................. 52.45 48.94 45.19 47.03 44.21 38.94 35.76 31.94 30.41 27.17
Mining and Quarrying ........ 0.83 0.98 1.11 1.07 1.13 1.57 2.91 2.80 2.51 2.31
Manufacturing ............... 11.31 12.69 14.47 13.20 14.80 16.30 16.34 16.69 16.67 16.22
Electricity Gas & Water
Supply ................... 0.31 0.48 0.67 0.92 1.06 1.59 1.80 2.09 2.47 2.50
Construction ................ 2.96 3.44 4.07 4.65 4.41 4.79 4.85 5.43 5.27 5.69
Trade Hotels & Restaurants .. 6.59 7.19 7.85 8.39 9.40 10.82 12.21 12.46 12.84 13.96
Transport, Storage &
Communications ........... 3.67 4.09 4.25 4.08 4.18 4.81 5.01 5.84 6.44 7.03
Finance. .................... 11.69 12.32 11.90 10.35 9.98 9.72 9.52 10.25 11.32 11.73
Public Administration and
Defense .................. 3.45 3.76 4.42 4.59 4.94 5.15 5.37 6.04 5.60 6.06
Other Services .............. 6.73 6.11 6.07 5.72 5.89 6.32 6.24 6.45 6.46 7.32

------------------
Source: NATIONAL ACCOUNTS STATISTICS, 2003

B-6

Growth rates of the various economic sectors (measured in 1993/94 prices)
during the period from 1998/1999 to 2003/2004 are set forth below.

GROWTH IN GDP BY SECTOR
(% ANNUAL REAL CHANGE)

1998/99 1999/00 2000/01 2001/02 (a) 2002/03 (b) 2003/04 (c)
------- ------- ------- ----------- ----------- -----------

Agriculture, forestry, logging,
fishing, mining and quarrying ......... 5.9 0.6 -0.1 6.4 -4.0 8.6
Manufacturing, construction,
electricity, gas and water supply ..... 3.8 5.0 7.0 3.4 6.2 6.7
Transport, communication and trade ....... 7.7 8.6 6.9 8.6 7.0 10.9
Banking, insurance, real estate and
business services ..................... 7.4 10.6 3.5 4.5 8.8 6.4
Community, social and personal
services .............................. 10.4 12.2 5.6 5.3 5.8 5.9
Total GDP ................................ 6.5 6.1 4.4 5.8 4.0 8.1

------------------
Source: CENTRAL STATISTICAL ORGANISATION DATA

(a) Provisional

(b) Quick estimate

PUBLIC SECTOR ENTERPRISES

The national and state governments own or control a substantial number of
enterprises that account for a significant portion of the country's
non-agricultural economic activity. State ownership is prevalent in the mining,
public utilities, railway, banking, insurance, communications, heavy
engineering, chemicals, shipbuilding, paper and financial services sectors.
Sectors of total GDP attributable to state ownership rose rapidly in the 1960s
and 1970s and less rapidly in the 1980s and the 1990s. State ownership accounted
for between 24% to 25% of GDP during the period from 1993/1994 to 2000/2001.
Nowadays, state ownership is less dominant in many critical sectors and is
likely to decline further in the future.

Through the 1990s, there has been an increasing consensus on the merits of
privatization. Beginning in 1991/1992, minority holders began to sell some of
their interests in state-owned industries, but the majority of those companies'
ownership was still state-owned. From 1990/2000 onwards, however, the emphasis
shifted to "strategic sales" whereby even those majority stakes have been
privatized. To date, the Indian central government controls 240 companies; since
1991, it has divested its equity in forty-eight companies and raised Rs. 450.66
billion from such sales. In 2003/2004, the Indian government collected Rs.
155.47 billion in divestiture sales, which exceeded its target of Rs. 132.00
billion.

INFLATION

Inflation has decreased over the past several years due to adequate food
stocks, adequate foreign exchange reserves and a stronger rupee in an
environment of subdued global inflationary expectations. Indian monetary policy
has also contained inflationary expectations.

From 1993/1994 to 1999/2000, the inflation rate was 4% per annum, as
compared to 7% per annum from 1993/1994 to 1998/1999. The inflation rate as
measured by the consumer price index for industrial workers, which measures
changes in prices for goods and services consumed by industrial workers, was
3.9% during 2003/2004, a decrease of 0.1% from 2002/2003. The wholesale price
index, which measures changes in prices of all commodities in India, declined to
4.47% in the last week of 2003/2004 and is within the target set by the Ministry
of Finance and the Reserve Bank of India. The Ministry of Finance aims to keep
the inflation rate below 5% during 2004/2005.

B-7

The following table sets forth annual percentage changes in the rate of
inflation during the period from 1998/1999 to 2003/2004:

ANNUAL RATES OF INFLATION
(% CHANGE OVER PREVIOUS YEAR)

1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004
--------- --------- --------- --------- --------- ---------

Wholesale Price Index ................. 5.9 3.3 7.1 3.6 3.4 5.5
Consumer Price Index for
Industrial Workers ................. 13.1 3.4 3.8 4.3 4.0 3.9

------------------
Source: MINISTRY OF INDUSTRY AND MINISTRY OF LABOUR

WAGES AND EMPLOYMENT

From 1982/1983 to 1999/2000, employment grew at an average annual rate of
2.02%, and the labor force grew at an average annual rate of 1.96%. The total
labor force is presently estimated to be 597.7 million, and the Indian
government expects the workforce to increase by approximately 49.99 million from
2002 to 2007 and another 59.18 million from 2007 to 2012. While the percentage
of the workforce employed in the agricultural sector has declined in recent
years, agriculture labor continues to account for approximately 57% of the work
force.

Estimates of unemployment are not readily available in India. Unemployment
figures are reported for urban areas only and only for laborers that register
with unemployment offices. Unemployment data also does not reflect those that
are under-employed in the Indian economy, which constitutes a large portion of
the workforce.

While unions attempt to increase wages through trade unions, their overall
effect on labor costs and prices is small due to their weak bargaining power in
a labor-surplus economy. Although India has a minimum wage, its rates vary from
state to state and are not applicable to small companies.

AGRICULTURE

The growth rate of GDP was in the past strongly influenced by the
agricultural sector. More recently, the sector's share of GDP has fallen
significantly, and, as a result, aggregate GDP has become less sensitive to
fluctuations in agricultural performance.

Nevertheless, agriculture remains a key sector of the Indian economy.
Agriculture accounts for approximately 14.7% of total export earnings and
provides raw material such as textiles, silk, sugar, rice and dairy products to
many Indian industries. Rural areas are the largest market for low and
mid-priced durable and non-durable consumer goods. The agricultural sector is
growing annually at approximately 2.2%.

Within the last forty years, India has expanded irrigation capabilities,
improved its technical and mechanical production capabilities and introduced an
extensive hybridization program. India figures prominently in the production of
many agricultural goods. For example:

o India is the largest producer of pulses in the world, the second
largest producer of rice and wheat and the fourth largest
producer of coarse grains;

o India is among the world's largest producers of cotton, sugar,
sugarcane, peanuts, jute, tea and spices;

o India accounts for about 10% of the world fruit production and
ranks first in the production of mangos, bananas, sapota and
acid lime;

o India's milk production, estimated at 84.6 million tons, is the
highest in the world;

B-8

o India is the fifth largest producer of eggs and seventh largest
producer of meat; and

o India is the largest producer of coconuts, areca nuts, cashew
nuts, ginger, turmeric and black pepper.

In recent years, there has been a considerable emphasis on crop
diversification, and horticulture (i.e., fruits, vegetables, ornamental crops,
medicinal and aromatic plants and spices) and plantation crops (i.e., coconut,
cashew nut and cocoa) have been promoted. Critical infrastructure for cold
storage, refrigerated transportation, rapid transit, grading, processing,
packaging and quality control has aided these new emphases.

The annual monsoon significantly affects the agricultural sector. The
country experienced a severe drought in July 2002, which is a crucial month for
sowing and plant growth, and the drought was followed by below average rainfall.
The events contributed to a decline of approximately 5.2% agricultural GDP.

The following table sets forth the results of agricultural production
during the period 1999/2000 through 2003/2004:

PERFORMANCE OF AGRICULTURAL PRODUCTION

1999/2000 2000/2001 2001/2002 2002/2003 2003/2004(c)
--------- --------- --------- --------- ------------
(MILLION TONS)

Rice ........................ 89.68 84.98 93.08 72.66 87.94
Wheat ....................... 76.37 69.68 71.81 65.10 76.12
Coarse cereals .............. 30.34 31.08 33.94 25.29 33.72
Total Pulses ................ 13.41 11.07 13.19 11.14 14.42
Total food grains ........... 209.8 196.81 212.02 174.19 212.20
Total Nine Oilseeds ......... 207.1 184.40 208.00 150.58 249.75
Sugarcane (cane) ............ 2,993.2 2,959.60 3,001.00 2,815.75 2,554.56
Cotton (a) .................. 115.3 95.20 100.90 87.16 123.88
Jute and mesta (b) .......... 105.5 105.60 116.40 113.77 115.92

1999/2000 2000/2001 2001/2002 2002/2003 2003/2004(c)
--------- --------- --------- --------- ------------
(MILLION TONS)

(% CHANGE IN PRODUCTION OVER THE PREVIOUS YEAR)
----------------------------------------------------------------------

Rice ........................ 4.2 -5.2 9.5 -21.9 21.0
Wheat ....................... 7.1 -8.8 3.1 -9.3 16.9
Coarse cereals .............. -3.2 2.4 9.2 -25.5 33.3
Pulses ...................... -10.1 -17.4 19.2 -15.5 29.4
Total food grains ........... 3.0 -6.2 7.7 -17.8 21.8
Oilseeds .................... -16.3 -11.0 12.8 -27.6 65.9
Sugarcane ................... 3.7 -1.1 1.4 -6.2 -9.3
Cotton ...................... -6.2 -17.4 6.0 -13.6 42.1
Jute and mesta .............. 7.5 0.1 10.2 -2.3 1.9

------------------
(a) Million bales of 170 kilograms each.

(b) Million bales of 180 kilograms each.

Source: MINISTRY OF AGRICULTURE

B-9

INDUSTRY

The strategy of Indian industrialization did not change significantly
prior to 1990. It emphasized heavy industry, public ownership, and import
substitution. Most of India's industry during the early years of the
post-independence era revolved around the processing of primary goods such as
textiles. The government's import substitution policies have contributed to the
development of a large industrial base, which produces, among other items,
capital goods and components, cement, steel, consumer durables and consumer
products.

The Indian government introduced a new industrial policy in 1991 that was
designed to promote industrial expansion and greater participation by the
private sector. The new industrial policy has abolished a licensing system for
industrial activity that previously existed in all but fifteen strategic
industries, including industries relating to defense equipment, aerospace and
petroleum. In addition, since 1991, the Indian government has permitted the
private sector to participate in industrial activity relating to the core and
basic sectors of the economy (i.e., electricity, coal, petroleum, petroleum
refining, steel and cement), which were previously reserved for the public
sector enterprises only.

The following table sets forth changes in the Index of Industrial
Production, which is an index that measures the growth of industrial activity in
the Indian economy:

ANNUAL PERCENTAGE GROWTH RATES IN MAJOR SECTORS OF INDUSTRY

WEIGHTING(a) 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004
------------ --------- --------- --------- --------- --------- ---------

Mining ..................... 104.73 -0.79 1.00 2.84 1.26 5.80 4.52
Manufacturing .............. 793.58 4.40 7.16 5.35 2.85 6.01 6.75
Electricity ................ 101.69 6.43 7.34 3.97 3.10 3.22 4.31
General .................... 1,000 4.10 6.62 5.02 2.69 5.78 6.34

------------------
(a) % of General Index of Industrial Production accounted for by particular
industrial sector.

Source: CSO DATA

A modest increase in industrial activity beginning in March 2002 permeated
all economic segments during 2002/2003 and 2003/2004, and manufacturing
contributed more than 80% of the overall growth of industrial production during
that period. A sharp rise in the production and imports of capital goods
indicated greater investment demand. Business confidence improved in all sectors
against the backdrop of improved performance in the corporate sector, less
inventory accumulation and an expansion in capacity utilization and order books.
Industrial activity was also broadly insulated from the impact of the drought of
2002/2003, except for the durable consumer goods segment where the decreased
income adversely affected production.

TEXTILE

The textile industry is a labor intensive industry with a low cost of
labor. India is one of the largest producers of textiles in the world and
competes with countries like China, Bangladesh and Pakistan in this field.
Textiles contribute significantly to India's exports.

The textile industry was one of the first industries privatized in
connection with the Indian government's structural reform program, and the
industry has undergone a major restructuring in recent years. Specifically,
textile mills have modernized their plants and machinery and devoted greater
attention to exports. To promote garment exports, the Indian government has
begun a program called the Apparel Park for Exports, which subsidizes the
construction and development of apparel manufacturing facilities.

CHEMICALS

India is a major producer of fertilizer and produced 31 million tons in
the 2002/2003, as compared with 20 million tons during 1993/1994. It imported
approximately 3 million tons during 2002/2003 to meet its demand

B-10

requirement. India is largely self-sufficient in its requirements of caustic
soda, soda ash, potash, paints and varnishes, soaps, detergents and drugs,
pharmaceuticals and other chemicals. Its production of petrochemicals is not
sufficient to meet demand.

ELECTRONICS

The electronics industry has experienced high growth since the 1960s. From
1996/97 to 2001/2002, the industry experienced a 300% growth rate. Software
exports have become increasingly important to India's exports and international
image and rely upon public investments in human capital, decreased trade
barriers and a highly competitive private sector.

A unique feature of this industry is its emphasis on exports. Software
exports have grown at a compound growth rate of over 50% per year for the last
five years. Electronics hardware exports also grew sharply in 2000/2001 and
2001/2002 and reached a level of Rs. 58.71 billion in 2001/2002, a growth of
22.6% as compared with the previous year.

The Indian information technology market grew from Rs. 54.5 billion
(US$1.73 billion) in 1994/1995 to Rs. 793.4 billion (US$16.5 billion) in
2002/2003, accounting for 3% of India's GDP in 2002/2003. The industry employed
approximately 700,000 professionals in India in 2002/2003.

Other important electronic segments include the information
technology-enabled services sector and business process outsourcing. These
segments grew 59% and reached a level of Rs. 113 billion (US$2.3 billion) in
2002/2003.

STEEL

India's developmental policies have historically promoted the steel
industry, and those policies have resulted in the construction of a series of
integrated plants. In the late 1990s, the steel industry experienced slow output
growth due to a combination of weak domestic demand growth and competition from
imports. Over the past three years, the situation has improved. World steel
prices have risen since January 2002. Domestic steel demand has also risen due
in part to a highway construction project undertaken under the National Highway
Authority of India.

CEMENT

The cement industry has recovered since 2001/2002. It registered a growth
rate of 9.52% during 2001/2002 and maintained that trend in 2002/2003 due to an
increase in capital expenditures. The first phase of the highway project noted
above generated estimated demand for ten million tons of cement. The growth of
the housing sector has also increased demand for cement. Cement producers
exported 5.14 million tons in 2001/2002.

ENERGY

Energy is one of the major factors in Indian economic development. An
important recent development in the energy sector is the privatization of power
distribution in the Indian cities of Orissa and Delhi, which aimed to emulate
the success of private sector distribution in the Indian cities of Mumbai,
Kolkata and Ahmedabad.

ELECTRICITY

Total power generation in February 2004 was measured at 460.36 billion
kilowatt hours, an increase of 12.1% over the same period of the previous year.
Thermal and hydro-generation grew by 9.8 % and 47.2% respectively. Nuclear power
generation declined by 11.9%. Total electricity generation recorded a growth of
3.6% in 2002/2003 as compared with the previous year. On March 31, 2002, thermal
plants accounted for 71% of capacity and 82 % of generation. The "plant load
factor," which is a measure of operational efficiency of thermal power plants,
improved from 64.7% in 1997/1998 to 71.1% in 2002/2003.

The power sector has been delivering unsatisfactory performance in terms
of reliable access to electricity. The energy and peak shortages of power have
been around 7.5% and 12.1%, respectively. To address the problems, the Tenth
Five-Year Plan aims to increase generation capacity by 40%.

B-11

The basic problem faced by this sector is the gap between the cost of user
charges and the cost of supply. Despite reform efforts, the gap between the cost
of supply and the average tariff increased in recent years from a level of Rs.
0.23 in 1992/1993 to about Rs. 1.1 in 2001/2002. Revenues dropped from 82.2% of
costs to 68.6% during that same period.

The Indian parliament passed the Indian Electricity Act 2003 in 2003,
which replaced the predecessor Indian Electricity Act of 1910, the Indian
Electricity (Supply) Act of 1948 and the Indian Electricity Regulatory
Commissions Act of 1990. The Indian Electricity Act 2003 aims to encourage
competition and choice and reduce government regulation.

COAL

The total production of coal and lignite increased from 320.2 million tons
in 1997/1998 to 367.3 million tons in 2002/2003. The production of coal grew 5%
from April 2003 to February 2004 as compared with a growth of 4.2% in the
corresponding period of the previous year. India was a net exporter of coal
until 1978/1979, after which the import level increased significantly. The net
imports of coal increased from 8.8 million tons in 1995/1996 to 20.9 million
tons in 2002/2003.

PETROLEUM AND NATURAL GAS

The oil and natural gas industry has recently experienced major efforts at
liberalization. Refining capacity in late 2000/2001 increased such that India is
now a net exporter of the petroleum products. Net exports of petroleum products
were 3.08 million tons in 2001/2002, and 2.11 million tons from April to
November 2002. Three new refineries under construction will add a capacity of
twenty-four million tons.

Total crude petroleum production in 2002/2003 and 2001/2002 was at 30.2
and 29.2 million tons, respectively. From April 2003 to February 2004, crude
petroleum production grew by 0.9%, as compared with a growth of 3.4% in the same
period of the previous year. Net imports of crude oil registered grew from 20.7
million tons in 1990/1991 to 57.8 million tons in 1999/2000--an annual average
growth rate of 12.1% during the 1990s. Net imports of crude oil grew to 82
million tons in 2002-03. Offshore crude oil production accounted for
approximately 63% of the total production in 2001/2002.

Natural gas is an important alternative to liquid fuels, which have
increased in importance in the last decade. Natural gas production rose to 20.61
billion cubic meters from April to December 2002, which is 4.5% higher than the
corresponding period in the previous year. Total production during 2001/2002 was
29.71 billion cubic meters, which is an increase of 0.8% over the previous
year's period.

INFRASTRUCTURE

Indian government efforts have substantially improved some areas of Indian
infrastructure over the past decade. Its efforts involved new institutional
arrangements like a "build-operate-transfer" program whereby a private company
builds and operates a public infrastructure project and later sells it to the
government, user charges, new technologies, private sector production and a
regulatory framework that fosters competition. The Indian government implemented
the "Central Sector Projects" to promote infrastructure development in the
power, petroleum and coal sectors. Most projects relate to the railways and the
surface transport sectors.

Economic growth in the 1980s and 1990s highlighted weaknesses in Indian
infrastructure, especially gaps relating to power, roads, highways, ports and
telecommunications. Despite a diminishing demand-supply gap in the second half
of the 1990s, infrastructural weaknesses remain the major impediment to higher
growth. Financing continues to be a critical issue in the infrastructure
development.

Energy transport infrastructure will restrict significant acceleration in
GDP growth during the Tenth Five-Year Plan period. GDP growth of approximately
8% would require an industrial sector growth of over 10%.

B-12

RAILWAY

India's rail system is among the largest railway systems in the world.
India's railway system has an extensive network covering 63,140 kilometers, of
which approximately 25% is electrified. The railways had originating
revenue-earning freight loading of 555.74 million tons during 2003/2004,
representing an increase of 7.1% as compared with 2002/2003.

Indian railways have instituted several reforms in the face of competition
from other modes of transportation in an attempt to increase its share in the
transportation sector. Some of these initiatives include:

o a rationalization of its freight structure;

o undertaking operational improvements; and

o delegating more powers to railway general managers.

ROADS

The total road network in India spans more than 3.3 million kilometers.
National highways constitute 58,100 kilometers and carry approximately 45% of
the total road traffic.

The Indian government's creation of a Central Road Fund as a major new
source of funding for national, state and rural roads is an important recent
innovation. It is part of the National Highway Development Project that aims to
expand existing two-lane highways to four or six lanes as well as strengthen
existing lanes on nearly 13,000 kilometers of highway. The Indian government has
estimated the annual toll potential of the "Golden Quadrilateral," which
includes India's four major cities, to be Rs. 37.00 billion and of the
North-South and East-West corridors to be Rs. 45.00 billion.

PORTS

Twelve major and 184 minor and intermediate ports service the Indian
coastline. Major ports service approximately 75% of India's port traffic while
minor and intermediate ports service the remainder. During 2001/2002, major
ports serviced approximately 288 million tons of cargo out of a total capacity
of 344 million tons. The Tenth Five-Year Plan projects that the total capacity
of major Indian ports will reach 470 million tons. The total cargo serviced at
major ports registered 8.7% growth in from April to December 2002, as compared
with 1.6% in the previous year's corresponding period. The Indian government has
also proposed privatizing major Indian ports.

AIR TRANSPORT

The civil aviation sector has made significant improvements in coping with
the growth of international and domestic traffic. Two "scheduled" non-state
owned airlines provide regular domestic air services in addition to the
state-owned Indian Airlines. There are forty "non-scheduled" operators, which
are airlines that do not serve the public or operate under regular or published
schedules.

Private operators carry 52.6% of the domestic air-traffic. The number of
passengers using private sector air services in India has increased from 15,000
in 1990 to about 6.7 million in 2001. Although the Indian government sought to
privatize Indian Airlines and Air India, that privatization has been delayed due
to lack of bidder interest.

TELECOMMUNICATIONS

The telecommunications sector has grown since 1995. Total telephone
connections on March 31, 2004 numbered 76.16 million, consisting of 42.58
million fixed lines and 33.58 million cellular connections. Mobile connections
and fixed connections grew by 160% and 3%, respectively, in 2003/2004 as
compared with the previous year. Long distance and mobile phone tariffs
decreased by 25% and 74%, respectively, in 2003/2004 as compared with the
previous year. The number of phone lines per 100 persons of the population
increased from 3.6 in March 2001 to 4.9 by December 2002. The Indian government
aims to increase this figure to 9.91 by March 2007.

B-13

The Indian telecom sector ranked first in terms of actual foreign direct
investment inflow from August 1991 to February 2003. The sector attracted
foreign direct investment valued at Rs. 98.72 billion from August 1991 to
January 2004.

FISCAL POLICY

Indian fiscal policy plays a key role in the country's macroeconomic
stability. However, India's increasing competition and economic transparency
complicate its fiscal policy formulation because the government is unable to
predict certain economic elements, including the magnitude, speed and direction
of foreign trade and capital flows. In an increasingly privatized and open
economy, fiscal policy depends, among other things, upon the nature of India's
monetary and exchange rate policies, capital market transparency and prevailing
macroeconomic conditions.

Fiscal reforms in the 1990s substantially restructured the Indian tax
system. The reforms focused on the stability of tax rates, rationalization and
simplification of tax laws and tax compliance. Marginal income tax rates were
reduced substantially, and compliance costs have been reduced. The Indian
government reduced customs and input and output tariff rates in order to align
the tariff structure with that of the other developing countries in the region.
In 2003, a government task force also proposed removing tax exemptions, reducing
transaction costs for taxpayers and making the tax system neutral with respect
to the allocation of resources. The government has not yet implemented this
proposal but received it favorably.

High fiscal deficits continue to concern India's economic policy planners
due to declining taxes and increases in government expenditures. The fiscal
deficit increased from 6.8% of GDP in 1996/1997 and to 10.0% of GDP by the end
of 2002; in 2002/2003, it was 5.4% of GDP. The revenue deficit also increased
from 3.6% of GDP to 6.3% of GDP from 1996/1997 by the end of 2002. In 2003/2004,
the fiscal deficit has been contained at 4.8% of GDP (which is below the
budgetary estimate of 5.6%) due to government tax collections and because the
privatization proceeds received by the Indian government have exceeded
estimates.

Indian fiscal policy for 2003/2004 emphasizes:

o poverty eradication;

o infrastructure development;

o fiscal consolidation;

o development of agriculture processes, including irrigation; and

o increasing efficiency in the manufacturing sector.

The Indian government is effecting fiscal consolidation through tax
reforms and the elimination of budgetary drags such as the excise duty and the
service tax. Debt restructuring and cash management as part of expenditure
management are also integral elements of fiscal consolidation. Tax
rationalization measures announced in January 2004 are expected to further
strengthen Indian fiscal reform.

The Indian government aims to reduce deficits at both the central
government and state levels. The Indian government aims to increase the central
government's gross tax revenue to 9.9% of GDP by the end of 2006/2007, as
compared with 8.2% in the 2001/2002.

B-14

The following table sets forth government expenditures:

TOTAL EXPENDITURES OF THE NATIONAL GOVERNMENT

2000/2001 2001/2002 2002/2003* 2003/2004(a) 2004/2005(b)
--------- --------- ---------- ------------ ------------
(RS. BILLION)

Total Expenditures ....................... 3,255.92 3,624.53 4,003.96 4,742.55 4,574.34
Non-Plan Expenditures, including ......... 2,429.23 2,611.16 2,889.42 3,527.48 3,223.63
(a) Interest Payments** ............... 993.14 1,074.6 1,178.04 1,245.55 1,295
(b) Defense Expenditures*** ........... 496.22 542.66 556.62 603 660
(c) Subsidies ......................... 268.38 312.1 435.15 447.0726 451.7535
Tenth Five-Year Plan Expenditures ........ 826.69 1,011.94 1,114.55 1,215.07 1,350.71
Revenue Expenditures ..................... 2,778.39 3,016.11 3,396.27 3,628.87 3,807.42
Capital Expenditures ..................... 477.53 608.42 607.69 1,113.68 766.92

AS % OF TOTAL EXPENDITURES (%)
2000/2001 2001/2002 2002/2003 2003/2004 RE 2004/2005 BE
--------- --------- --------- ------------ ------------

Non-Plan Expenditures, including ......... 74.6 72.0 72.2 74.4 70.5
(a) Interest Payments ................. 30.5 29.6 29.4 26.3 28.3
(b) Defense Expenditures .............. 15.2 15.0 13.9 12.7 14.4
(c) Subsidies ......................... 8.2 8.6 10.9 9.4 9.9
Plan Expenditures ........................ 25.4 27.9 27.8 25.6 29.5
Revenue Expenditures ..................... 85.3 83.2 84.8 76.5 83.2
Capital Expenditures ..................... 14.7 16.8 15.2 23.5 16.8

------------------
(a) Revised estimate

(b) Budget estimate

* Actuals of 2002/2003 are provisional.

** RE 2003/2004 includes premium of Rs. 40.80 billion for prepayment of
foreign and internal debt.

*** Net of defense receipts. Includes defense capital expenditure

Source: ANNUAL BUDGET (INTERIM), 2004/2005

The Indian government's increasing reliance on borrowing has led to a
continuous growth in total outstanding debt. Internal liabilities increased from
54.6% of GDP in 1999/2000 to 68.3% in 2003/2004. Despite a reduction in external
debt as a percentage of GDP, total outstanding liabilities as a percentage of
GDP has increased from 57.9% in 1999/2000 to 70.7% in 2003/2004.

Greater internal liabilities have raised interest rates. The average rate
of interest on internal government debt rose from 7.35% in 1991/1992 to 9.08% in
1997/1998 and increased further to 10.82% in 2001/2002. More recently however,
the average interest rate on internal debt fell to 9.93% in 2002/2003 revised
estimates, and the average interest rate on the external debt declined from
9.55% in 1992/93 to 6.31% in 2002/2003 revised estimates.

OUTSTANDING LIABILITIES OF THE GOVERNMENT OF INDIA

1999/2000 2000/2001 2001/2002 2002/2003(a) 2003/2004(b)
--------- --------- --------- ------------ ------------
(RS. BILLION)

1. Internal liabilities ...................... 9625.92 11,025.95 12,948.63 15,042.26 17,191.33
a) Internal debt .......................... 7142.54 8,036.97 9,130.61 10,371.63 11,586.39
b) Other internal liabilities ............. 2483.38 2,988.98 3,818.02 4,670.63 5,604.94
2. External debt (outstanding)* .............. 584.37 659.45 715.46 576.5 609.31
3. Total outstanding liabilities (1+2) ....... 10,210.29 11,685.4 13,664.09 15,618.76 17,800.64
4. Amount due from Pakistan on
account of share of partition debt ........ 3.00 3.00 3.00 3.00 3.00
5. Net liabilities (3-4) ..................... 10,207.29 11,682.40 13,661.09 15,615.76 17,797.64
6. Total assets .............................. 6,077.10 6,765.80 7,605.90 8,547.60 9,564.40
7. Excess of liabilities over assets (5-6) ... 4,130.20 4,916.60 6,055.20 7,068.20 8,233.20

B-15

1999/2000 2000/2001 2001/2002 2002/2003(a) 2003/2004(b)
--------- --------- --------- ------------ ------------
(RS. BILLION)

AS % OF GDP AT CURRENT PRICES
1. Internal liabilities (outstanding) ........ 54.6 57.5 61.9 66.9 68.3
a) Internal debt .......................... 40.5 41.9 43.7 46.1 46.0
b) Other internal liabilities ............. 14.1 15.6 18.3 20.8 22.3
2. External debt (outstanding)* .............. 3.3 3.4 3.4 2.6 2.4
3. Total outstanding liabilities ............. 57.9 60.9 65.3 69.4 70.7
6. Total assets .............................. 34.5 35.3 36.4 38.0 38.0
7. Excess of liabilities over assets ......... 23.4 25.6 29.0 31.4 32.7

------------------
(a) Revised estimate

(b) Budget estimate

* External debt figures represent borrowings by the government from external
sources and are based upon historical rates of exchange

Source: ECONOMIC SURVEY 2002/2003, GOVERNMENT OF INDIA MINISTRY OF FINANCE

MONETARY POLICY

Indian monetary policy changed in recent years in response to financial
sector reforms and the growing external orientation of the Indian economy.
Current monetary policy aims to enhance financial sector efficiency, preserve
financial stability and improve transmission mechanisms by transitioning from
direct to indirect monetary instruments. Current monetary policy seeks to ensure
adequate monetary "liquidity" that can meet credit growth and support investment
demand while at the same time controlling inflation and promoting softer
interest rates and greater medium-term flexibility in India's interest rate
structure.

Bank rate changes, combined with the cash reserve ratio and repo-rate
changes, have emerged as important liquidity and monetary management tools.
India's "liquidity adjustment facility" has evolved as an effective mechanism
for absorbing and increasing day-to-day monetary liquidity, providing a corridor
for the "call" money market. During 2002/2003, government reforms in the banking
sector promoted a soft interest rate regime and greater bank operational
efficiency, as well as stronger bank regulatory mechanisms and better banking
technology.

The following table sets forth changes in the "M1" and "M3" money supply
from 1993/1994 to 2002/2003. "M1" includes all currency in circulation as well
as demand and other deposits with the public. "M3" includes all components of M1
as well as fixed deposits and savings deposits.

CHANGES IN THE MONEY SUPPLY

1998/1999 1999/2000 2000/2001 2001/2002 2002/2003
--------- --------- --------- --------- ---------
(RS. BILLION)

Currency in circulation .................. 1,758.5 1,970.6 2,182.1 2,509.7 2,824.7
Demand deposits .......................... 1,363.9 1,496.8 1,662.7 1,782.8 1,986.0
Money (M1) ............................... 3,090.7 3,418.0 3,794.5 4,225.3 4,728.3
M1 growth (%) ............................ 15.4 10.6 11.0 11.4 11.9
Time deposits with banks ................. 6,718.9 7,823.8 9,337.7 10,774.7 12,524.0
Broad money supply (M3) .................. 9,809.6 11,241.7 13,132.2 15,000.0 17,252.2
M3 growth (%) ............................ 19.4 14.6 16.8 14.2 15.0

------------------
Source: RESERVE BANK OF INDIA

B-16

BANKING AND FINANCE

THE RESERVE BANK OF INDIA

The Reserve Bank of India is the central bank of India and is entrusted
with monetary stability, currency management and supervision of the financial
and payments systems. It was established in 1935, and its functions and focus
have evolved in response to India's changing economic environment. As the
central bank of India, it acts as the banker to the state and national
governments, the lender of last resort and the controller of the country's money
supply and foreign exchange. The Reserve Bank of India is the sole authority for
the issue of bank notes and the supervisory body of all banking operations in
the country.

COMMERCIAL BANKS

Commercial banks in India provide term finance and working capital for
industry, agriculture and trade. Commercial banks are categorized as either
"scheduled" or "non-scheduled" banks. Of late, public sector banks have
contained their interest expenses within reasonable levels due to high liquidity
conditions. Declining interest rates also allowed banks to realize gains on the
sale of appreciated securities. Provisions and contingencies increased for most
domestic bank groups, reflecting their attempts to improve their credit
portfolio, but declined for most foreign banks, reflecting improvements in their
asset portfolio.

Capital levels of the banking sector improved with the overall capital
adequacy of scheduled banks rising from 10.4% in March 1997 to 12.6% in March
2003 due to the increased reinvestment of profits into reserves. All public
sector banks had capital above the stipulated minimum. At the aggregate level,
out of the 93 scheduled banks (and excluding regional rural banks), two did not
satisfy the stipulated 9.0% capital adequacy ratio.

Bank credit risk management has also improved due to improved risk
management practices, greater recovery efforts and the Indian Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act.
Overall non-performing assets in the banking sector declined in March 2003 by
over Rs. 20.00 billion, or 8.8% of gross advances. Indian banks recovered
approximately Rs. 5 billion through June 2003. Banks are also improving their
provisioning levels. Cumulative provisioning against gross non-performing assets
of public sector banks increased from 42.5% in 2001/2002 to 47.2% in 2002/2003.
Due to this increased provisioning, net non-performing assets to net advances of
public sector banks declined from 5.8% in 2001/2002 to 4.5% in 2002/2003.

Increased competition has also affected the Indian banking system.
Interest margin for scheduled banks, which is the excess of interest income over
interest expense normalized by total assets, has declined. Banks have also
curtailed expenditures, decreased operating expenses and increased worker
productivity.

OTHER FINANCIAL INSTITUTIONS

Most Indian financial institutions were initially established when Indian
capital markets were relatively underdeveloped and incapable of adequately
meeting the long-term financing needs of the economy. With the improvement of
the long-term funds market though and increased financial sector reform, the
subsidized credit from financial institutions that previously existed is no
longer as important. Further, as concessional sources of finance decrease and
Indian financial institutions and banks become more alike, Indian financial
institutions not only must raise funds at prevailing market rates but must also
compete in their asset and liability aspects. Structural changes in the Indian
financial system, coupled with the recent industrial slowdown, have diminished
the business volume and profitability of Indian financial institutions. As a
result, Indian financial institutions are adjusting their businesses,
diversifying their client bases, activities and products.

The Indian financial institution sector includes term-lending
institutions, investment institutions, specialized financial institutions and
refinance institutions. Nine financial institutions fall within the regulatory
and supervisory domain of the Reserve Bank of India. These are the Industrial
Development Bank of India, IFCI Ltd., the Industrial Investment Bank of India
Ltd., the Small Industries Development Bank of India, the Export-Import Bank of
India, the Tourism Finance Corporation of India Ltd., Infrastructure Development
Finance Company Ltd., the National Bank for Agriculture and Rural Development
and the National Housing Bank.

B-17

In contrast to the rising trend in financial assistance sanctioned and
disbursed by financial institutions from 1996 to 2000, a sharp decline in such
assistance occurred in 2001/2002 and 2002/2003. Lack of demand for new projects,
exhaustion of unutilized capacities for meeting the increased demand for
industrial products, competition from commercial banks and project delays have
all contributed to a substantial decline in financial assistance sanctioned and
disbursed by select financial institutions. This trend continued despite recent
growth in the services sector because service industries are generally human
capital-intensive and do not require long-term or project finance.

In 2002/2003, the financial performance of financial institutions declined
against the previous year due to declines in spread and non-interest income as
well as a rise in other expenses. IFCI Ltd. and Industrial Investment Bank of
India Ltd. accumulated high levels of non-performing assets and provisioning,
which led to decreased profitability and capital erosion. Excluding these two
institutions, financial institutions registered positive operating and net
profits in 2003/2003 against previous year. The increase in non-performing
assets at many Indian financial institutions is due, in part, to slow economic
recovery and non-efficient investment thresholds that exist in some economic
sectors.

Strengthening the financial sector and improving the financial markets are
the core objectives of financial reform in India. Specifically, the reforms aim
to create greater accountability and market discipline. They also promote
improved capital adequacy, asset classification and provisioning, accounting
standards, exposure and disclosure norms, investment and risk management and
asset liability management.

CREDIT ALLOCATION

India's cash reserve ratio, its bank rate and repo rate changes have
emerged as important tools of Indian monetary policy. Indian monetary policy has
traditionally reflected a policy bias for soft interest rates and a flexible
interest rate structure. The cash reserve ratio was reduced from 5.5% to 5.0% in
June 2002, then to 4.75% in November 2002 and to 4.5% in June 2003. As a
consequence, Indian banks' lendable resources increased by approximately Rs.
135.00 billion. India's bank rate and liquidity adjustment facility repo rate
were each reduced by .25% in October 2002, and the liquidity adjustment facility
repo rate was reduced by another 0.50% in March 2003. However, bank lending
rates exhibited somewhat sluggish downward movements.

CAPITAL MARKETS

The Indian government has instituted many measures since 1991 to promote
the development of the Indian capital markets, including the decontrol of
offering prices, the opening of an over-the-counter market and development of a
national stock exchange. Recent policies aim to enhance market efficiency and
improve investor protection by promoting greater transparency and improved
trading and settlement systems. The Indian government enacted the Indian
Companies (Second Amendment) Act, 2002, which provides for new insolvency laws
and requires insolvent companies to rehabilitate and wind up within two years.
The Securities and Exchange Board of India, which we refer to as "SEBI," was
vested with search and seizure powers in cases relating to insider trading and
market manipulations.

BALANCE OF PAYMENTS

India's foreign exchange reserves has improved substantially from a
reserve drawdown of US$1.28 billion in 1990/1991 to a reserve build-up of
US$16.9 billion in 2002/2003. The current account deficit, which signifies a
country's overall current liabilities, has decreased from 3.1% of GDP in
1990/1991 to a current account surplus of 0.7% of GDP in 2002/2003. Inflows have
generally remained buoyant. The country's overall balance of payments position
has improved significantly in the past decade.

The improvement in India's external sector position is in part due to an
openness in terms of the share of tradeables in the economy. The ratio of
exports to GDP has increased from 8.3% in 1998/1999 to 10.4% of GDP in
2002/2003. The share of imports to GDP has increased from 11.5% in 1998/1999 to
12.8% in 2002/2003. The rise in the overall current account surplus is due to
the increasing contribution of service sector exports, in particular information
technology-related exports. Software exports have surged from US$1.7 billion in
1997/1998 to an estimated US$9.6 billion in 2002/2003. The rise in current
receipts has had positive effects on debt service capabilities and on import
purchasing power. Bank capital movements, supported by stable non-resident
deposits, brought in higher net capital flows, notwithstanding substantial
pre-payments of multilateral debt in 2002/2003.

B-18

In 2003/2004, a combination of lower global interest rates and U.S. dollar
weakness resulted in a surge in external commercial borrowings and private
transfers. Buoyancy in equity markets resulted in record high foreign
institutional investor inflows. There was an unprecedented order of accumulation
of foreign exchange reserves. Reserves reached US$100 billion in December 2003.
At the end of March 2004, reserves were at levels equal to approximately 16
months of imports.

India initiated a gradual process of capital account liberalization in the
early 1990s. The government's initial reform measures following a balance of
payments crisis in 1991 were predominantly aimed at current account
convertibility. Thereafter, the government further liberalized its policies
regarding foreign direct investment, portfolio investment and long-term
commercial borrowings. As the external sector increasingly consolidates, the
government has also liberalized its restrictions on outflows.

Although restrictions still exist in several sectors, in January 2004, the
Indian government--in an attempt to encourage foreign direct investment inflows,
new technologies and improved management practices--revised its foreign direct
investment limits in several sectors, including the banking, petroleum and
natural gas sectors. Guidelines for external commercial borrowings and foreign
currency convertible bonds have been revised in respect of eligibility, end-use
restrictions and spreads.

The following table sets forth the main components of India's balance of
payments from 1998/1999 to 2002/2003:

BALANCE OF PAYMENTS: MAIN COMPONENTS

1998/1999 1999/2000 2000/2001 2001/2002 2002/2003(a)
--------- --------- --------- --------- ------------
(US$MILLION)

Exports, f.o.b. ............................ 34,298 37,542 44,894 44,915 53,000
Imports, c.i.f. ............................ 47,544 55,383 59,264 57,618 65,474
Trade Balance (1-2) ........................ -13,246 -17,841 -14,370 -12,703 -12,474
Invisibles, net ............................ 9,208 13,143 10,780 13,485 16,182
Current Account Balance (3+4) .............. -4,038 -4,698 -3,590 782 3,708
Foreign Investment, net .................... 2,412 5,191 5,862 6,692 4,555
External Assistance, Net ................... 820 901 410 1,117 -2,460
Commercial Borrowings, net ................. 4,362 313 3,737 -1,576 -1,698
Short Term Credit, net ..................... -748 377 105 -891 979
Banking Capital ............................ 698 2,127 811 5,592 8,243
Rupee Debt Service ......................... -802 -711 -617 -519 -474
Other Capital, net ......................... 1,693 2,246 -290 158 3,493
Total Capital Account (6 to 12) ............ 8,435 10,444 10,018 10,573 12,638
Errors & Omissions ......................... -175 656 -572 402 634
Overall Balance (5+13+14) .................. 4,222 6,402 5,856 11,757 16,980
International Monetary Fund, Net ........... -393 -260 -26 0 0
Reserves and Monetary Gold
(Increase (-), Decrease (+)) ............ -3,829 -6,142 -5,830 -11,757 -16,980

(% OF GDP)

Exports .................................... 8.3 8.4 9.8 9.3 10.4
Imports .................................... 11.5 12.4 12.9 12.0 12.8
Trade balance .............................. -3.2 -4.0 -3.0 -2.6 -2.4
Invisibles balance ......................... 2.2 2.9 2.4 2.8 3.1
Current account ............................ -1.0 -1.1 -0.8 0.2 0.7

------------------
(a) Provisional estimates

Source: ANNUAL REPORT, 2002/2003, RESERVE BANK OF INDIA

B-19

FOREIGN TRADE

India has experienced persistent trade deficits since the early 1980s.
Prior to the introduction of a structural reform program in 1991, India's
economic policy did not encourage exports and aimed instead for broad
self-sufficiency in most products through import substitution. The government
gradually recognized its need to correct this "anti-export" bias, and several
export promotion measures were instituted.

Apart from a move to a unified market-determined exchange rate system in
1993, India's new trade policy emphasizes lower nominal tariffs, less import
restrictions and the gradual removal of "import licensing" requirements. The
trade policy reforms also emphasize export incentives and move away from direct
subsidies toward indirect export promotion. The "peak" tariff rate decreased
from 150% in 1991/1992 to 25% in 2003/2004. In January 2004, the peak rate of
customs duty on non-agricultural goods was further reduced to 20%. The Indian
government has also recently established export promotion zones and trade
agreements with certain Asian countries and has provided assistance to Indian
states for infrastructure development to promote foreign exports.

The following table sets forth changes in the composition of India's trade
balance during the period 1998/1999 through 2003/2004:

FOREIGN TRADE BALANCE

% CHANGE IN TRADE
-------------------- DEFICIT AS %
IMPORTS EXPORTS BALANCE IMPORTS EXPORTS OF EXPORTS
------- ------- ------- ------- ------- ------------
(RS. BILLION) (%)

1998/1999 ............................. 1,783.3 1,397.5 -385.8 15.7 7.4 27.6
1999/2000 ............................. 2,152.4 1,595.6 -556.8 20.7 14.2 34.9
2000/2001 ............................. 2,308.7 2,035.7 -273.0 7.3 27.6 13.4
2001/2002 ............................. 2,419.3 2,090.2 -329.1 4.8 2.7 15.7
2002/2003 ............................. 2,911.3 2,551.4 -360.0 20.3 22.1 14.1
2003/2004 (a) ......................... 3,464.7 2,836.0 -628.7 19.0 11.2 22.2

(US$BILLION) (%)

1998/1999 ............................. 42.4 33.2 -9.2 2.2 -5.1 27.6
1999/2000 ............................. 49.7 36.8 -12.8 17.2 10.8 34.9
2000/2001 ............................. 50.5 44.6 -6.0 1.7 21.0 13.4
2001/2002 ............................. 50.7 43.8 -7.0 0.4 -1.7 15.9
2002/2003 ............................. 60.2 52.7 -7.4 18.6 20.4 14.1
2003/2004 (a) ......................... 75.2 61.8 -13.4 25.0 17.3 21.6

------------------
(a) Provisional estimates

Source: MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT OF INDIA

B-20

The following tables set forth the composition of India's imports and exports
during the indicated periods:

COMPOSITION OF IMPORTS

1999/2000 2000/2001 2001/2002 2002/2003P 1999/2000 2000/2001 2001/2002 2002/2003(a)
---------------------------------------------- -----------------------------------------------
(RS. BILLION) (US$MILLION)

I. BULK IMPORTS ................ 851.3 951.0 966.4 1,168.5 19,646.0 20,816.0 20,263.0 2,4145.0
A. Petroleum, Crude and
Products .................... 546.5 715.0 667.7 853.7 12,611.4 15,650.0 14,000.0 17,640.0
B. Bulk Consumption Goods ...... 104.7 65.9 97.5 114.6 2,416.9 1,443.0 2,043.0 2,368.0
C. Other Bulk Items ............ 200.1 170.1 201.2 200.2 4,617.8 3,722.0 4,220.0 4,137.0
1. Fertilizers .............. 60.6 34.4 32.4 28.4 1,399.1 752.0 679.0 588.0
2. Non Ferrous Metals ....... 23.7 24.4 30.9 31.2 546.9 534.0 647.0 645.0
3. Paper, Paperboards,
incl. News Prints ........ 19.4 20.6 21.3 21.3 447.2 451.0 447.0 440.0
4. Crude Rubber, incl
Synthetic and Reclaimed .. 6.2 6.9 8.3 8.8 143.3 152.0 174.0 181.0
5. Pulp and Waste Paper ..... 11.1 12.9 14.1 16.5 255.2 282.0 295.0 340.0
6. Metalliferrous Ores,
Metal Scrap, etc ............ 37.9 35.4 54.6 48.6 874.5 774.0 1,144.0 1,003.0
7. Iron and Steel .............. 41.2 35.5 39.8 45.5 951.7 778.0 834.0 940.0
II. NON-BULK IMPORTS ............ 1,301.0 1,357.8 1,485.6 1,797.5 30,025.0 29,721.0 31,150.0 37,142.0
A. Capital Goods ............... 388.5 408.5 471.3 616.9 8,965.5 8,941.0 9,882.0 12,746.0
1. Manufactures of Metals ... 17.6 17.8 19.4 23.2 405.0 390.0 407.0 480.0
2. Machine Tools ............ 11.3 10.0 9.2 11.3 261.5 219.0 193.0 233.0
3. Machinery except
Electrical and Electronic 118.9 123.8 141.7 166.5 2745.0 2709.0 2,971.0 3,441.0
4. Electrical Machinery
except Electronic ........ 19.0 22.0 28.4 31.0 437.8 481.0 594.0 641.0
5. Electronic Goods including
computer software ........ 129.7 168.8 190.7 272.9 2,993.6 3,695.0 3,999.0 5,638.0
6. Transport Equipment ...... 49.3 32.0 54.8 86.8 1,136.6 700.0 1,149.0 1,794.0
7. Project Goods ............ 42.7 34.1 27.1 25.2 986.0 747.0 569.0 520.0
B. Mainly Export Related
Items ....................... 395.1 368.2 393.9 495.1 9,117.3 8,059.0 8,260.0 10,230.0
1. Pearls, Precious and
Semi-Precious Stones ..... 235.6 219.6 220.5 293.0 5,436.0 4,808.0 4,623.0 6,054.0
2. Organic and Inorganic
Chemicals ................ 124.2 111.7 133.5 143.5 2,866.3 2,444.0 2,800.0 2,966.0
3. Textile Yarn, Fabrics,
Made-ups, etc ............ 23.3 27.3 35.7 46.3 538.4 597.0 747.0 956.0
4. Cashew Nuts .............. 12.0 9.6 4.3 12.3 276.5 210.0 90.0 254.0
C. Others ...................... 517.5 581.2 620.4 685.6 11,941.8 12,721.0 13,008.0 14,166.0
III. TOTAL IMPORTS (I+II) ........ 2,152.4 2,308.7 2,452.0 2,966.0 49,671.0 50,536.0 51,413.0 61,286.0

1999/2000 2000/2001 2001/2002 2002/2003(a)
------------------------------------------------
(%)

I. BULK IMPORTS ................ 39.6 41.2 39.4 39.4
A. Petroleum, Crude and
Products .................... 25.4 31.0 27.2 28.8
B. Bulk Consumption Goods ...... 4.9 2.9 4.0 3.9
C. Other Bulk Items ............ 9.3 7.4 8.2 6.8
1. Fertilizers .............. 2.8 1.5 1.3 1.0
2. Non Ferrous Metals ....... 1.1 1.1 1.3 1.1
3. Paper, Paperboards,
incl. News Prints ........ 0.9 0.9 0.9 0.7
4. Crude Rubber, incl
Synthetic and Reclaimed .. 0.3 0.3 0.3 0.3
5. Pulp and Waste Paper ..... 0.5 0.6 0.6 0.6
6. Metalliferrous Ores,
Metal Scrap, etc ............ 1.8 1.5 2.2 1.6
7. Iron and Steel .............. 1.9 1.5 1.6 1.5
II. NON-BULK IMPORTS ............ 60.4 58.8 60.6 60.6
A. Capital Goods ............... 18.0 17.7 19.2 20.8
1. Manufactures of Metals ... 0.8 0.8 0.8 0.8
2. Machine Tools ............ 0.5 0.4 0.4 0.4
3. Machinery except
Electrical and Electronic 5.5 5.4 5.8 5.6
4. Electrical Machinery
except Electronic ........ 0.9 1.0 1.2 1.0
5. Electronic Goods including
computer software ........ 6.0 7.3 7.8 9.2
6. Transport Equipment ...... 2.3 1.4 2.2 2.9
7. Project Goods ............ 2.0 1.5 1.1 0.8
B. Mainly Export Related
Items ....................... 18.4 15.9 16.1 16.7
1. Pearls, Precious and
Semi-Precious Stones ..... 10.9 9.5 9.0 9.9
2. Organic and Inorganic
Chemicals ................ 5.8 4.8 5.4 4.8
3. Textile Yarn, Fabrics,
Made-ups, etc ............ 1.1 1.2 1.5 1.6
4. Cashew Nuts .............. 0.6 0.4 0.2 0.4
C. Others ...................... 24.0 25.2 25.3 23.1
III. TOTAL IMPORTS (I+II) ........ 100.0 100.0 100.0 100.0

------------------
(a) Provisional estimates

Source: ANNUAL REPORT, 2002/2003, RESERVE BANK OF INDIA

B-21

COMPOSITION OF EXPORTS

1999/2000 2000/2001 2001/2002 2002/2003P 1999/2000 2000/2001 2001/2002 2002/2003(a)
----------------------------------------------- -----------------------------------------------
(RS. BILLION) (US$MILLION)

I. Primary Products ........... 283 326 342 402 6,524 7,126 7,164 8,312
A. Agricultural & Allied
Products ................... 243 273 281 310 5,608 5,973 5,901 6,412
1. Tea ..................... 18 18 17 16 412 392 360 335
2. Coffee .................. 14 12 11 10 331 259 230 201
3. Rice .................... 31 29 32 54 721 642 666 1,108
4. Oil Meal ................ 16 20 23 14 378 448 474 285
5. Marine Products ......... 51 64 59 67 1,183 1,394 1,237 1,381
B. Ores & Minerals ............ 40 53 60 92 916 1,153 1,262 1,900
II. Manufactured Goods ......... 1,288 1,569 1,591 1,856 29,714 34,335 33,370 38,353
A. Leather & Manufactures ..... 69 89 91 86 1,590 1,944 1,910 1,787
B. Chemicals & Related Products 204 269 289 340 4,707 5,886 6,052 7,031
C. Engineering Goods .......... 223 312 332 406 5,152 6,819 6,958 8,393
D. Textiles ................... 395 487 461 511 9,126 10,657 9,665 10,567
E. Gems and Jewellery ......... 325 337 348 428 7,502 7,384 7,306 8,854
F. Handicrafts ................ 29 30 26 35 669 662 549 721
G. Carpets .................... 28 27 24 24 645 582 510 497
III. Petroleum, Crude & Products 2 86 101 117 39 1,892 2,119 2,421
IV. Others .................... 24 55 56 152 545 1,206 1,174 3,149
TOTAL EXPORTS (I+II+III+IV) .... 1,596 2,036 2,090 2,528 36,822 44,560 43,827 52,234

1999/2000 2000/2001 2001/2002 2002/2003(a)
------------------------------------------------
(%)

I. Primary Products ........... 17.7 16.0 16.3 15.9
A. Agricultural & Allied
Products ................... 15.2 13.4 13.5 12.3
1. Tea ..................... 1.1 0.9 0.8 0.6
2. Coffee .................. 0.9 0.6 0.5 0.4
3. Rice .................... 2.0 1.4 1.5 2.1
4. Oil Meal ................ 1.0 1.0 1.1 0.5
5. Marine Products ......... 3.2 3.1 2.8 2.6
B. Ores & Minerals ............ 2.5 2.6 2.9 3.6
II. Manufactured Goods ......... 80.7 77.1 76.1 73.4
A. Leather & Manufactures ..... 4.3 4.4 4.4 3.4
B. Chemicals & Related Products 12.8 13.2 13.8 13.5
C. Engineering Goods .......... 14.0 15.3 15.9 16.1
D. Textiles ................... 24.8 23.9 22.1 20.2
E. Gems and Jewellery ......... 20.4 16.6 16.7 17.0
F. Handicrafts ................ 1.8 1.5 1.3 1.4
G. Carpets .................... 1.8 1.3 1.2 1.0
III. Petroleum, Crude & Products 0.1 4.2 4.8 4.6
IV. Others .................... 1.5 2.7 2.7 6.0
TOTAL EXPORTS (I+II+III+IV) .... 100.0 100.0 100.0 100.0

------------------
(a) Provisional estimates

Source: ANNUAL REPORT, 2002/2003, RESERVE BANK OF INDIA

B-22

During the 1990s, India was increasingly consistent in its exports to
Organization for Economic Cooperation and Development ("OECD countries") and the
European Union. India has also increased exports to OPEC countries, Eastern
Europe and other developing countries. The United States has remained India's
main trading partner, followed by the United Kingdom and Belgium.

DIRECTION OF FOREIGN TRADE

1998/1999 1999/2000 2000/2001 2001/2002
--------- --------- --------- ---------
(RS. BILLION)

OECD Countries
Exports ........................ 724.18 807.44 914.61 1,072.38
Imports ........................ 792.93 919.64 925.21 920.92
Balance ........................ -68.75 -112.20 -10.60 151.46
OPEC Members
Exports ........................ 131.38 149.92 169.10 222.23
Imports ........................ 350.07 327.11 483.94 123.85
Balance ........................ -218.69 -177.19 -314.84 98.38
Eastern Europe
Exports ........................ 42.04 38.11 48.94 49.64
Imports ........................ 28.8 28.64 33.54 29.68
Balance ........................ 13.24 9.47 15.40 19.96
Other Less Developed Countries (a)
Exports ........................ 273.24 342.18 409.06 542.82
Imports ........................ 275.89 376.30 445.85 403.47
Balance ........................ -2.65 -34.12 -36.79 139.35
Others
Exports ........................ 54.14 59.87 53.90 148.64
Imports ........................ 91.56 131.61 263.83 830.80
Balance ........................ -37.42 -71.74 -209.93 -682.16
Total
Exports ........................ 1,063.53 1,397.52 1,595.61 2,035.71
Imports ........................ 1,541.76 1,783.32 2,152.36 2,308.73
Balance ........................ -478.23 -385.80 -556.75 -273.02

------------------
(a) Figure excludes OPEC members.

Source: ECONOMIC SURVEY, 2002/2003, GOVERNMENT OF INDIA, MINISTRY OF FINANCE

DIRECTION OF FOREIGN TRADE

1997/1998 1998/1999 1999/2000 2000/2001 2001/2002
--------- --------- --------- --------- ---------
(% OF TOTAL)

EXPORTS
OECD Countries.................... 55.7 55.6 55.7 57.8 57.3
OPEC Members...................... 9.7 9.7 10.1 10.7 10.6
Eastern Europe.................... 3.8 2.9 3.2 2.7 3.1
Other Less Developed Countries (a) 25.7 27.1 26.2 24.5 25.6
Others............................ 5.1 4.7 4.8 4.3 3.4
IMPORTS
OECD Countries.................... 52.4 49.7 51.4 51.6 43.0
OPEC Members...................... 20.9 26.0 22.7 18.3 22.5
Eastern Europe.................... 3.4 4.8 2.0 1.6 1.6
Other Less Developed Countries (a) 18.3 16.7 17.9 21.1 20.7
Others............................ 5.0 2.7 5.9 7.4 12.2

------------------
(a) Figure excludes OPEC members.

Source: ECONOMIC SURVEY, 2002/2003, GOVERNMENT OF INDIA, MINISTRY OF FINANCE

B-23

FOREIGN EXCHANGE RESERVES

The following table indicates India's foreign exchange reserves, which
have improved steadily since September 2000:

FOREIGN EXCHANGE RESERVES

FOREIGN FOREIGN
CURRENCY CURRENCY
END OF MONTH SDRS GOLD ASSETS TOTAL SDRS GOLD ASSETS TOTAL
------------ ---- ------ -------- -------- ----- ----- -------- -------
(RS. BILLION) (US$BILLION)

March 2000 .............. 0.16 129.73 1,529.24 1,659.13 0.004 2.974 35,058 38,036
June 2000 ............... 0.38 131.73 1,509.01 1,641.12 0.008 2.948 33,774 36,730
September 2000 .......... 0.08 130.57 1,501.95 1,632.60 0.002 2.834 32,602 35,438
December 2000 ........... 0.07 131.43 1,742.07 1,873.57 0.002 2.811 37,264 40,077
March 2001 .............. 0.11 127.11 1,844.82 1,972.04 0.002 2.725 39,554 42,281
June 2001 ............... 0.20 131.63 1,912.26 2,044.09 0.004 2.798 40,652 43,454
September 2001 .......... 0.21 139.98 2,007.62 2,147.81 0.004 2.925 41,948 44,877
December 2001 ........... 0.25 137.61 2,180.21 2,318.07 0.005 2.856 45,251 48,112
March 2002 .............. 0.50 148.68 2,491.18 2,640.36 0.010 3.047 51,049 54,106
June 2002 ............... 0.47 162.72 2,673.33 2,836.52 0.010 3.330 54,703 58,043
September 2002 .......... 0.48 159.64 2,886.48 3,046.60 0.010 3.300 59,663 62,973
December 2002 ........... 0.33 165.42 3,217.74 3,383.49 0.007 3.444 66,994 70,445
March 203 ............... 0.19 167.85 3,414.76 3,582.80 0.004 3.534 71,890 75,428
June 2003 ............... 0.06 171.82 3,650.01 3,821.89 0.001 3.698 78,546 82,245
September 2003 .......... 0.17 179.67 3,998.70 4,178.54 0.004 3.919 87,213 91,136
December 2003 ........... 0.13 192.25 4,452.32 4,644.70 0.003 4.215 97,617 101,835

------------------
Source: RESERVE BANK OF INDIA

FOREIGN INVESTMENT

Foreign investment has historically had a limited role in India's economic
development. However, after the Persian Gulf crisis in the early 1990s, India
government policy began emphasizing and encouraging non-debt creating capital
inflows over debt-creating capital inflows. Progressively liberal policies
related thereto have led to increasing inflows of foreign investment in India,
both in terms of foreign direct investment as well as portfolio investment.
Foreign investment is now allowed in all sectors, including the services sector,
but continues to be subject to government-imposed foreign investment limits that
still exist in certain industries.

To encourage foreign direct investment inflows, the Indian government has
also granted permission for 100% foreign direct investment in the development of
integrated townships and regional urban infrastructure, the tea sector and
advertising and film production. In January 2004, the Indian government revised
foreign direct investment limits in several sectors, including the banking,
petroleum and natural gas sectors. For example, in the private banking sector,
the Indian government raised the foreign direct investment limit (including both
direct and portfolio investment) to 74%. Foreign direct investment in India,
which was US$97.0 million in 1990/1991, reached a peak of US$6.1 billion in
2001/2002. Foreign direct investment from 1990/1991 to 2002/2003 was US$30.0
billion.

B-24

The table below sets forth trends in foreign direct investment in India
since 1992/1993:

TREND IN FOREIGN INSTITUTIONAL INVESTMENT

CUMULATIVE NET
INVESTMENT
(US$MILLION)
GROSS PURCHASES GROSS SALES NET INVESTMENT NET INVESTMENT AT MONTHLY
(RS. BILLION) (RS. BILLION) (RS. BILLION) (US$MILLION) EXCHANGE RATE
--------------- ------------- --------------- -------------- --------------

1992/1993 ........... 0.2 0.0 0.1 4.2 4.2
1993/1994 ........... 55.9 4.7 51.3 1,634.0 1,638.3
1994/1995 ........... 76.3 28.3 48.0 1,528.3 3,166.6
1995/1996 ........... 96.9 27.5 69.4 2,035.7 5,202.3
1996/1997 ........... 155.5 69.8 85.7 2,431.9 7,634.2
1997/1998 ........... 186.9 127.4 59.6 1,650.1 9,284.3
1998/1999 ........... 161.2 177.0 15.8(b) 386.1(b) 8,898.2
1999/2000 ........... 568.6 467.3 101.2 2,339.1 11,237.3
2000/2001 ........... 740.5 641.2 99.3 2,158.8 13,396.1
2001/2002 ........... 499.2 411.7 87.6 1,846.2 15,242.3
2002/2003(a) ........ 470.6 443.7 26.9 562.4 15,804.7
TOTAL ............... 3,011.9 2,398.6 613.3 15,804.6 91,508.5

------------------
(a) Provisional

(b) Figures represent outflow.

Source: ANNUAL REPORT, 2002/2003, SECURITIES AND EXCHANGE BOARD OF INDIA

Prior to 1992, only non-resident Indians and "overseas corporate bodies"
were allowed to make portfolio investments in India. In September 1992, the
Indian government issued guidelines which, subject to certain limits noted
above, allow foreign institutional investors, such as pension funds, mutual
funds, investment trusts, asset management companies, nominee companies and
incorporated/institutional portfolio managers or their agents, to invest in
securities traded on the primary and secondary markets. See "Investment in
India" in the prospectus. The Reserve Bank of India monitors foreign investment
limits for the companies to ensure compliance. When the total holdings of
foreign institutional investors is within 2% of the applicable limit, the
Reserve Bank of India issues a notice that any further investments in that
company require their approval.

As of March 31, 2004, approximately 540 foreign institutional investors
were registered with SEBI.

EXTERNAL DEBT

India's external debt situation has improved considerably since the crisis
in the early 1990s. India's external debt stock stood at US$104.2 billion in
2002/2003 as against US$98.2 billion in March 2000. Despite the trend toward
external debt in recent years, the key debt indicators have improved
considerably over time. The external debt to GDP ratio, signifying the extent of
external debt VIS-A-VIS domestic output, has almost halved from its peak of
38.7% in March 1992 to 20.3% in March 2003. Similarly, the debt service ratio
has more than halved from its peak of 35.3% in 1990/91 to 14.7% in 2002/2003.
The improvement in India's external debt position is attributable to a conscious
debt management policy that focused on high growth rate of current receipts,
encouraging non-debt creating flows, keeping the maturity structure as well as
the total amount of commercial debt under manageable limits and encouraging
stable non-resident deposits through interest rates close to international
levels. In the recent period, external debt has been further consolidated
through recourse to pre-payment by the Indian government as well as the Indian
corporations.

B-25

EXTERNAL DEBT

1999/2000 2000/2001 2001/2002 2002/2003(a)
--------- --------- --------- ------------
(US$MILLION)

1. Multilateral (a) .......................... 31,438 31,105 31,898 29,919
A. Government ............................ 27,584 27,417 28,289 27,234
B. Non-Government ........................ 3,854 3,691 3,609 2,685
2. Bilateral ................................. 18,175 15,974 15,323 16,826
A. Government ............................ 13,966 12,176 11,540 12,651
B. Non-Government ........................ 4,209 3,798 3,783 4,175
3. International Monetary Fund ............... 26 0 0 0
4. Trade Credit .............................. 6,780 5,923 5,351 5,003
5. Commercial Borrowing ...................... 19,943 24,215 23,248 22,157
6. Non-resident Indian deposits, foreign
currency deposits, bank and others deposits 13,559 16,568 17,154 23,423
7. Total Long-Term Debt (1 through 6) ........ 94,327 97,504 96,016 100,143
8. Short-Term Debt ........................... 3,936 3,628 2,745 4,093
9. Gross Total (7+8) ......................... 98,263 101,132 98,761 104,236

DEBT INDICATORS (%)
Total Debt/GDP Ratio (b) ..................... 21.1 22.4 21.0 20.3
Debt-Service Ratio (including debt service
on non-civilian credits) (c) ............. 16.2 17.3 13.9 14.7

------------------
(a) Multilateral loans do not include revaluation of World Bank pooled loans
and exchange rate adjustments.

(b) Debt-service ratio includes the revised private transfer contra-entry on
account of gold and silver imports.

Source: ANNUAL REPORT, 2002/2003, RESERVE BANK OF INDIA

FOREIGN EXCHANGE

EXCHANGE RATES

The exchange rate for the Indian rupee is market-based, except for
occasional counter-cyclical operations by the Reserve Bank of India. Indian
exchange rate management policy continues to emphasize exchange rate stability
without a fixed rate target and allows underlying demand and supply conditions
to determine exchange rate movements. The Reserve Bank of India monitors
financial market developments in India and abroad to coordinate market
operations with its regulatory measures.

The Indian rupee depreciated against the U.S. dollar from Rs. 31.366 per
U.S. dollar in 1993/94 to Rs. 48.395 per U.S. dollar in 2002/2003. In 2003/2004,
the Reserve Bank of India became a net purchaser of U.S. dollars in order to
maintain the exchange rate in the face of foreign investment inflows and private
remittances.

B-26

The following table sets forth changes in the Indian rupee-U.S. dollar
exchange rate during the indicated periods:

EXCHANGE RATES (a)
(RUPEES PER U.S. DOLLAR)

1993/1994.............................................. 31,366
1994/1995.............................................. 31,399
1995/1996.............................................. 33,450
1996/1997.............................................. 35,500
1997/1998.............................................. 37,165
1998/1999.............................................. 42,071
1999/2000.............................................. 43,333
2000/2001.............................................. 45,684
2001/2002.............................................. 47,692
2002/2003.............................................. 48,395
2003/2004(b)........................................... 45,967

------------------
(a) Annual/monthly averages

(b) Provisional

Source: ANNUAL REPORT, 2002/2003, RESERVE BANK OF INDIA
RESERVE BANK OF INDIA BULLETIN, RESERVE BANK OF INDIA

EXCHANGE CONTROLS

The Reserve Bank of India administers India's exchange control system and
has broad powers to regulate both inbound and outbound remittances of foreign
exchange. The central government may also, in consultation with the Reserve Bank
of India, impose reasonable restrictions on current account transactions.

The Reserve Bank of India promotes foreign currency exchange to resident
Indians and non-resident Indians. It has relaxed exchange limits for study
abroad, travel, medical treatment, employment and foreign currency denominated
accounts in India. In addition, a person residing in India is free to hold, own,
transfer or invest in foreign currency, foreign securities or any immovable
property situated outside India if such currency, security or property was
acquired, held or owned by that person when he resided outside India.

B-27

APPENDIX C

THE INDIAN SECURITIES MARKET

THE INFORMATION SET FORTH IN THIS APPENDIX C HAS BEEN EXTRACTED FROM
VARIOUS GOVERNMENT AND PRIVATE PUBLICATIONS, INCLUDING PUBLICATIONS ISSUED BY
THE INDIAN GOVERNMENT, THE SECURITIES AND EXCHANGE BOARD OF INDIA AND THE MUMBAI
STOCK EXCHANGE. INFORMATION WAS ALSO GATHERED FROM ACADEMIC LITERATURE AND
INTERVIEWS OF GOVERNMENT OFFICIALS, STOCK EXCHANGE OFFICIALS AND INDIAN
SECURITIES MARKETS PARTICIPANTS AND PROFESSIONALS. THE FUND, ITS BOARD OF
DIRECTORS, THE INVESTMENT MANAGER AND THE COUNTRY ADVISER MAKE NO REPRESENTATION
AS TO THE ACCURACY OF THE INFORMATION, NOR HAS THE FUND OR ITS BOARD OF
DIRECTORS ATTEMPTED TO VERIFY THE STATISTICAL INFORMATION PRESENTED IN THIS
APPENDIX C. REFERENCE IN THE TEXT BELOW TO CONSECUTIVE YEARS (FOR EXAMPLE,
2002/2003) MEANS THE FISCAL YEAR BEGINNING APRIL 1 OF THE FIRST YEAR LISTED AND
ENDING MARCH 31 OF THE SECOND YEAR LISTED.

BACKGROUND

The earliest recorded capital market dealings in India were transactions
in loan stocks of the East India Company at the end of the eighteenth century.
By 1830, a wide range of bank and cotton mill securities were traded in Bombay
and Calcutta. In 1875, the first stockbrokers' organization, which later became
the Mumbai Stock Exchange (the "BSE"), was formally established.

Growth in stock market activity in the two decades following independence
in 1947 was slow. Public sector enterprises played a primary role in Indian
government central planning during this period, and private sector growth
suffered. The enactment of the Indian Foreign Exchange Regulation Act of 1973
significantly affected the Indian securities market. Under the Act, Indian
corporations with foreign shareholders were generally required to reduce the
equity stake of foreign shareholders to less than 40%. As a result, many such
corporations offered equity to the Indian public, which diluted the interests of
foreign equity holders. These offerings, most of which were made by well-known
consumer goods manufacturers, were heavily oversubscribed and served to increase
the liquidity and broaden the investor base of the Indian securities market.

Activity and broad interest in the market have increased in recent years
compared to historical norms. This increase reflects the growth of the private
sector in the Indian economy and greater participation in the market by
individual investors. In addition, the Indian government has actively promoted
expanded capital market activity by both foreign and domestic investors and has
adopted policies designed to increase domestic companies' reliance on the
capital markets as a source of financing.

RECENT DEVELOPMENTS

To keep pace with the global markets, the financial markets in India have
gone through various stages of liberalization that have increased India's degree
of integration with global markets. Liberalization has included measures such as
opening up the economy for investment and trade, decontrolling interest and
exchange rates and creating regulatory institutions to ensure the safety and
integrity of the financial markets.

In an effort to improve the efficiency of Indian markets, the Indian
central authority discontinued its practice of allocating resources among
companies and instead allowed companies to issue their securities and raise
funds at market-determined rates. Screen-based trading began, and the secondary
markets were able to overcome previously existing geographical barriers.
Counter-party guarantees encouraged trading, derivative securities were allowed,
and trading cycles were shortened. All "deferral" products, which enabled
speculative brokers to borrow securities in amounts far in excess of their net
worth at pre-determined interest rates, were banned. Certificated securities are
now rare, and a variety of derivative securities are permitted. See "Regulatory
Structure--Secondary Markets" in this Appendix C.

In March 2001, the Indian government announced the demutualization of
Indian stock exchanges as a measure to improve institutional mechanisms and
trading practices, and it also "corporatized" Indian stock exchanges such that
ownership, management and trading membership are separate. It also instituted
"straight through processing," which Indian markets have adopted and which has
increased market efficiency. The Securities and Exchange Board of India ("SEBI")
has also instituted more rigorous corporate governance standards through company
listing agreements. To enhance market and investment decision transparency, in
July 2000, SEBI also advised all Indian mutual funds to create

C-1

records of their investment decisions. In September 2001, SEBI issued guidelines
that require the agents and distributors of mutual funds to receive
certification by the Indian Association of Mutual Funds.

The Indian government has recently amended many market regulations. It has
promoted disinvestment by state public sector units, created new corporate
disclosure requirements and eased restrictions on corporate changes in control.
With respect to the latter, the government now allows for changes of control by
special resolution instead of ordinary resolution and has eliminated the
requirement that acquiring companies submit public announcements to SEBI, the
Indian stock exchanges and target companies in advance of their release.

In 2002, the Indian government also enacted the Indian Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 and the Indian Security Interest (Enforcement) Rules, 2002. These laws
allow for the enforcement of security interests without the need for judicial
intervention and promote the creditors' ability to enforce their security
interests and recover amounts owing from borrowers. The concept of a "central
listing authority" has also been promoted so that issuers would be subject to a
more uniform application, review and delisting process.

RECENT BANKING AND SECURITIES MARKET SCANDALS

Despite a number of market reforms noted above, periodic financial and
banking scandals have nevertheless occurred. For example:

o In 1997, the CRB mutual fund, a SEBI-licensed fund, stole
invested funds.

o In 1998, Mr. Harshad Mehta was accused of manipulating stock
prices with the assistance of several companies' management and
the BSE.

o Between 1997 and 2001, according to a government-appointed
committee, the Unit Trust of India made unauthorized investments
equal to Rs. 30 billion in the securities of twenty-four
companies. This mismanagement and poor investment approval
process has allegedly contributed to its low net asset value.

o In 1998, the Unit Scheme 1964, which is an Indian savings and
retirement banking instrument, reported a significant net asset
value drop. Corruption was alleged, and the Indian government was
forced to contribute Rs. 18 billion to avoid its collapse. The
Unit Scheme 1964 paid a dividend yield of 18% in 1993/1994 and
now pays 7.5%.

CAPITAL STRUCTURE

PUBLIC AND PRIVATE COMPANIES

Indian law permits three types of companies--companies limited by shares,
companies limited by guarantees and companies with unlimited liability. Only
limited share companies may be publicly traded.

Indian law regulates public companies with respect to public offerings,
management, borrowing and interactions with shareholders and creditors. Public
companies must register with the Indian Registrar of Companies and distribute to
security holders audited annual financial statements that comply with the
minimum disclosure requirements and regulations that govern their manner of
presentation. Each company's listing agreement regulates corporate governance
and requires that listed companies submit quarterly financial statements to
their stock exchange as well as immediately notify their stock exchange
of any information that would affect their stock price.

The Indian accounting profession is self-regulated by the Institute of
Chartered Accountants of India, which follows the accounting system and
procedures prevalent in the United Kingdom. All accountants must comply with its
standards. The Institute and SEBI require Indian companies to account for
deferred taxation, consolidate their financial reports and disclose related
party transactions. They also require Indian companies to account for
intangible assets and impairments of assets.

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EQUITY

Under the Indian Companies Act, 1956, Indian companies may issue only
"ordinary (equity) shares" and "preference shares." Ordinary shares may have
voting rights or preferential rights to dividends or voting, and preferential
shares may have preferential rights to dividends or repayment of capital.
Preference shares have no voting rights except when their dividends are in
arrears for a period of two years or when a company proposal would affect their
rights.

Subject to its charter, Indian companies may also issue "redeemable
preference shares" that are redeemable within twenty years of their issuance. A
company may only redeem such shares out of its profits or from the proceeds of a
new share issuance designed specifically for the purposes of the redemption.
Moreover, a company may not redeem any redeemable preference share unless all
shares are fully paid in and the premium, if any, was provided for out of the
company's profits of or a "share premium account." In some instances, a company
must also transfer the redemption amount to a special "capital redemption
reserve account." Companies may also issue "sweat" equity shares to employees
and directors so long as the shareholders authorize the issue. Companies may not
issue such shares prior to the end of the first year after which they commenced
operations.

Shareholders of public Indian companies possess preemptive rights by
statute, which any shareholder may decline, and shares obtained pursuant to such
rights are known as "rights" shares, which are offered to existing and
registered shareholders in proportion to their paid-in capital as of a certain
date. Preference shareholders have no preemptive rights. In addition, neither
the issuance nor the conversion of convertible debenture will trigger a
preemptive right if the company's shareholders approved the issuance of the
debenture.

Indian companies may not make market purchases of their own shares, but
they may buy back their securities and reduce their share capital in compliance
with certain Indian laws.

DIVIDENDS

Under Indian law, shareholders have no power to declare a dividend without
recommendation of the board of directors. The dividend must be distributed and
paid to shareholders in proportion to their paid-in capital as of a certain
record date.

An Indian company may, pursuant to a shareholder resolution, issue "bonus
shares," or stock dividends, to existing stockholders. Bonus shares must be
issued pro rata to the shareholder's paid in capital, and no company shall,
pending the conversion of any convertible security, issue bonus shares unless it
confers a similar benefit to convertible security holders. In order to issue
such shares, a company may not be in payment default on any fixed deposits and
outstanding debentures. A company must also not have reason to believe that it
has defaulted in the payment of any statutory employee dues, i.e., contribution
to a provident fund, a gratuity or a bonus. Bonus shares must be issued within
six months of their approval by the company's board of directors or its
stockholders, whichever occurs later.

A company may also pay interim cash dividends. Under the Indian Companies
Act, such dividends may only be paid in cash to shareholders listed on the
register of shareholders as of a specified record date. A shareholder may not
receive dividends so long as any lien in respect of unpaid calls on any of their
shares remains outstanding. Cash dividends must be paid within thirty days from
the date that they are declared, and any dividend that remains unpaid or
unclaimed after that period will be transferred to a special "unpaid dividend"
account. Any money that remains unpaid or unclaimed for seven years thereafter
will be transferred to the Indian governments' Investor Education and Protection
Fund, and the shareholder will lose all rights or claims to the dividend.

Under the Indian Companies Act, an Indian company can only pay a cash
dividend in excess of 10% of its paid-in capital out of its profits and after it
has transferred to a reserve account a percentage of its profits ranging from
2.5% to 10%. The Indian Companies Act also provides that, if a company's profit
for a year is insufficient to meet the dividend, the dividend may be paid out of
the company's accumulated profits from prior years, subject to the following
conditions:

o the dividend rate may not exceed the lesser of (a) the average
dividend rate for the preceding five years or (b) 10% of paid-in
capital;

C-3

o the total amount to be paid out of accumulated profits from
previous years may not exceed an amount equal to 10% of paid-in
capital and reserves, and the amount to be paid must first be
used to offset any losses incurred in the prior financial year;
and

o the balance of reserves after withdrawals may not be below 15% of
paid-in capital.

SPECIFIED AND NON-SPECIFIED SECURITIES

Listed securities are classified into two categories: specified securities
and non-specified securities. Securities traded on the BSE are further
classified into three categories:

o an "A" group;

o a "B1" group; and

o a "B2," "F," "G" and "Z" group.

The BSE classification system is based on certain qualitative and quantitative
parameters that include, among other factors, the number of trades and the
market value of the security.

SPECIFIED SECURITIES

As of June 2003, equity shares of 198 "A" companies were classified as
specified shares. "A" companies have a large capital base with widespread
shareholding, pay regular dividends and have a good growth record and a large
trading volume in the secondary market. Specified shares account for
approximately 85% of the market capitalization of the BSE.

The "B1" group includes 790 relatively liquid specified securities, and
the "B2" group includes approximately 1,830 specified securities.

NON-SPECIFIED SECURITIES

Non-specified securities consist of all other listed equity shares,
debentures and permitted securities, and their settlement period is 7 days.

The "F," "G" and "Z" groups are classified as non-specified shares. The
"F" group represents BSE-traded fixed income securities and included 730
securities as of June 2003. The "G" group represents BSE-traded government
securities and included 85 such securities as of June 2003. The "Z" group
includes companies that have failed to comply with BSE listing requirements,
have failed to resolve investor complaints or have not made the required
arrangements with the Indian Central Depository Services (I) Ltd. and the Indian
National Securities Depository Ltd. for the issue of their securities in
uncertificated form. As of June 2003, the "Z" group included 2,776 companies.

CORPORATE DEBT

The Indian corporate sector relies heavily on raising capital through debt
issues, including bonds, debentures, fixed deposits and commercial paper. The
securitized debt market has grown at more than 60% in the last four years, and
more than 90% of recent Indian corporate debt bond issues have been effected
through private placements. Nevertheless, while some corporate debt securities
trade on the Indian stock exchanges, the Indian secondary market for such
securities is not yet mature.

Issuers with outstanding debt securities must make regular disclosures
pursuant to SEBI guidelines and their listing agreement with their securities
exchange. Issuers must also appoint a SEBI-registered debenture trustee in
respect of all debt securities, and their debt securities can be traded and
issued only in uncertificated form.

All listed debt securities, regardless of their maturity period, must
carry a credit rating from a SEBI-registered Indian credit rating agency that is
not below investment grade. Four credit rating agencies currently operate in
India: CRISIL Ltd., Indian Credit Rating Agency, Credit Analysis and Research
Limited and Fitch Rating India Pvt. Limited.

C-4

GOVERNMENT SECURITIES

Indian government securities form the oldest and most dominant part of the
debt market in India. The market for Indian government securities includes
securities issued by the Indian central government and the Indian state
governments. Recently, municipalities have also begun to access the Indian debt
markets. The Indian central government conducts its issues principally through
dated securities and treasury bills, and Indian state governments rely solely on
state development loans. The major investors in Indian government securities are
banks, insurance companies, primary dealers and financial institutions.

ISSUANCES OF GOVERNMENT SECURITIES
(RS. BILLIONS)

YEAR ENDED CENTRAL STATE OTHER
MARCH 31 GOVERNMENT GOVERNMENTS AGENCIES TOTAL
---------- ---------- ----------- -------- --------

1999..................................... 939.53 121.14 8.04 1,060.67
2000..................................... 996.30 137.06 3.67 1,133.36
2001..................................... 1,151.83 133.00 4.33 1,284.83
2002..................................... 1,338.01 187.07 5.84 1,525.08
2003(a).................................. 1,511.26 308.53 6.72 1,819.79
2004(b).................................. 1,662.30 281.45 0.00 1,943.75

------------------
(a) Revised Estimates

(b) Budget Estimates

Source: ANNUAL REPORT, 1999/2000 TO 2002/2003, RESERVE BANK OF INDIA

REGULATORY STRUCTURE

INTRODUCTION

Although the government's Department of Economic Affairs, its Department
of Company Affairs, the Reserve Bank of India and SEBI collectively regulate the
Indian securities markets, SEBI is the principal regulator.

SEBI was established in 1988 and was given statutory authority to
promulgate and enforce regulations in April 1992. It was created because the
regulatory framework existing prior to its creation was fragmented, making
regulatory supervision of the markets and the enforcement of statutes and
regulations difficult and ineffective. SEBI's framework provides for investor
safeguards through disclosure requirements and accounting standards, arbitration
procedures and the establishment of a small investors' protection fund. It also
promulgates rules against insider trading and other market abuses.

Some of the principal legislation governing the Indian securities markets
includes the following:

o The Indian Companies Act, 1956, which is described in more detail
above under "Capital Structure."

o The Indian Depositories Act, 1996, which provides for the
electronic transfer of uncertificated securities and book-entry
recordkeeping. This Act provides for the establishment of
securities depositories and promotes the transfer of securities
with speed, accuracy and security by making securities of public
limited companies more freely transferable. By making the
securities of all public limited companies more freely
transferable, this Act has restricted a company's right to
exercise discretion in effecting transfers in its securities.

o The Indian SEBI Act, 1992, which establishes SEBI and its
objectives and powers. The Act empowers SEBI to protect the
investors' interests and promote and regulate the Indian
securities markets. SEBI's regulatory jurisdiction covers
corporations that issue equity or transfer securities as well as
all market intermediaries. In addition to the above, SEBI also
regulates self-regulatory organizations, merchant banks, mutual
funds, venture capital funds, foreign institutional investors,
custodians, underwriters, debenture trustees, share registrars
and transfer agents, portfolio managers, stockbrokers and
sub-brokers.

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PUBLIC OFFERINGS

Indian companies can raise capital in the primary market through initial
public offerings, rights issues or private placements, the latter of which is
discussed under "--Private Offerings" below. An issuer may conduct its initial
public offering through several methods, including the "fixed price" method, a
"book building" method or a combination thereof, and underwriting is mandatory
for all initial public offerings. Under the book building method, underwriters
must keep the "book" open for a specified period, during which time investors
submit bids at various prices above or equal to a set price floor. Once the book
closes, the issue price is determined based on certain criteria and
calculations. Under the fixed price method, the issue price is pre-determined.

Primary issues may be managed by domestic merchant bankers, which
generally are merchant banking divisions of commercial banks and major financial
institutions or affiliates of large brokerage houses or financial services
companies. All organizations that conduct merchant banking or underwriting
activities must register with SEBI and are subject to its regulations. SEBI will
review offering documentation before it is distributed to the investing public,
and an issuer's board of directors must approve all draft prospectuses and
related resolutions prior thereto.

The following table sets out the amount of new issues listed on the BSE
from 1999 through 2003:

NEW ISSUES LISTED ON THE MUMBAI STOCK EXCHANGE
(RS. BILLIONS)

YEAR ENDED MARCH 31, 1999 2000 2001 2002 2003
-------------------- ------ ------ ------ ------ ------

Initial Public Offerings
Common Stock .................... 18.22 14.00 27.48 25.45 9.63
Preferred Stock ................. -- 0.57 -- -- --
Debentures and Bonds (1) ........ -- 1.67 0.09 1.70 --
Total ........................ 18.22 16.24 27.57 27.15 9.63
Further Issues of Existing Companies
Common Stock (2) ................ 23.29 43.40 41.75 15.89 39.60
Preferred Stock ................. 5.64 1.00 0.51 0.26 0.10
Debentures and Bonds (l) ........ 75.49 45.16 32.18 16.55 35.68
Total ........................ 104.42 89.57 74.44 32.70 75.38
TOTAL .............................. 122.64 105.81 102.01 59.85 85.01

------------------
(1) Includes convertible debentures and equity-linked debentures.

(2) Includes rights offerings, public offerings and bonus offerings.

Source: BSE

PRIVATE OFFERINGS

Private placements involve the issue of debt or equity securities to no
more than 50 qualified subscribers, such as banks, financial institutions,
mutual funds and high net worth individuals. Merchant bankers arrange the
placements and act as agents of the issuer in soliciting potential investors. In
2002/2003, 171 institutional and corporate issuers raised Rs. 484.2 billion
through 485 privately placed debt issues. In 2002/2003, 22 NSE-listed companies
raised Rs. 0.6 billion through private placement equity issues.

INTERNATIONAL OFFERINGS

Indian companies also raise resources internationally through Foreign
Currency Convertible Bonds, Global Depository Receipts ("GDRs") and American
Depository Receipts ("ADRs"). ADRs and GDRs are foreign currency denominated
instruments traded on a stock exchange in Europe or the United States. In India,
GDRs and ADRs are considered foreign direct investment and thus must conform to
the existing foreign direct investment policies and limits. Since the 1990s,
Indian companies have increasingly raised funds through Euro issues by way of
Foreign Currency Convertible Bonds, GDRs and ADRs. During 2002/2003, Indian
companies raised Rs. 342.7 billion through Euro issues, as compared with Rs.
234.4 billion during 2001/2002.

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SECONDARY MARKETS

EQUITIES

The number of stock exchanges in India has increased from eleven in 1990
to twenty-three today, and all exchanges are fully computerized and offer full
on-line trading. As of March 30, 2003, the securities of 9,413 companies traded
on the Indian stock exchanges. In 2002/2003, the NSE accounted for approximately
64% of the trading volume among the 23 stock exchanges, and the BSE accounted
for approximately 32%.

CORPORATE DEBENTURES

While some corporate debentures trade on stock exchanges, the secondary
market for corporate debt debenture has yet to fully develop. Corporate
debentures are short and medium-term obligations issued by private sector
companies. The typical maturity of a corporate debenture is between three and
twelve years, and all public issues of debentures with maturities over eighteen
months must be rated by one of India's credit rating agencies, which are noted
above under "Capital Structure--Corporate Debt." Debentures with maturities of
less than three years are typically issued as debentures convertible partly or
fully into equity. Trading in such debentures is mainly over-the-counter, though
an increasing proportion is traded through the debt market segment of the NSE.

The Indian corporate sector relies in part on raising capital through debt
issues, including bonds and commercial paper, the former of which occurs
increasingly through private placements. Over the past few years, Indian issuers
have increasingly issued corporate bonds with embedded put and call options.

GOVERNMENT SECURITIES

As noted above under "Capital Structure--Government Securities," the
various levels of Indian government are regular issuers of fixed-income debt
securities. Since the 1990s, as the Indian capital markets have grown, the
investor base for government securities has also grown. In addition to banks and
insurance companies, which were the traditional investors in government
securities, Indian companies and individual investors are also now investing in
these securities. The increasing liberalization of the financial markets and the
gradual lowering of the statutory liquidity requirement and cash reserve ratio,
as described in "The Indian Economy--Monetary Policy" in Appendix B, enabled the
Indian government to borrow at near-market rates.

Trading in central and state government securities, including treasury
bills, through "subsidiary general ledger" transactions reached Rs. 19,557
billion in 2002/2003, or 24.3% growth as compared with the previous year.

PARTICIPANTS AND BROKERS

SEBI regulates the registration of stockbrokers. Under SEBI guidelines,
stockbrokers must be certified in order to buy, sell or deal in securities. SEBI
regulations also create broker codes of conduct and rules that require fair
treatment of each other and of investors and certain recordkeeping, and the
regulations also allow SEBI to inspect all stockbroker books. In the event of a
violation, SEBI may suspend of revoke the broker's license. As of March 31,
2004, there were 9,519 brokers and 13,291 sub-brokers (including multiple
registrations) registered with SEBI. The NSE and the BSE accounted for 87% of
total sub-broker registration.

LISTINGS

Under Indian law and the rules and the listing agreements of certain stock
exchanges, listed companies are subject to continuing disclosure requirements.
If a company breaches its disclosure or other listing obligations, the governing
body of the stock exchange may suspend that company's trading or delist the
company under certain circumstances. A company may also voluntarily delist in
certain instances.

NON-CERTIFICATED SECURITIES

While investors have a right to hold securities in either certificated or
uncertificated form, SEBI has required that trading and settlement in certain
securities occur only in uncertificated form. In addition, Indian companies
making initial public offerings in excess of Rs. 100 million must issue the
securities in uncertificated form.

C-7

As of March 2003, 4,761 and 4,628 companies transacted through the Central
Depository Services (I) Ltd. and National Securities Depository Ltd.,
respectively. The number of uncertificated securities increased from 56.5
billion in March 2002 to 76.9 billion in March 2003. During the same period, the
value of uncertificated securities increased from Rs. 4,669 billion to Rs. 5,875
billion.

DERIVATIVE TRADING

Indian law now includes derivatives in the definition of "securities," and
the regulatory framework now covers trading in derivatives securities. SEBI
allows the NSE, the BSE and their respective clearinghouses to trade and settle
in derivative contracts that it approves.

At present, SEBI has approved trading in index futures contracts based on
the S&P CNX Nifty Index and the BSE Sensitive Index (the "Sensex"). It has also
approved option trading based on these two indices and as well as option trading
in individual securities, future contracts on individual stocks, interest rate
derivatives, 91-day notional T-Bills and coupon bonds. Foreign institutional
investors may trade in all exchange-traded derivative contracts so long as they
comply with certain position limits. As of March 2003, the NSE "futures and
options" segment had 553 members.

SETTLEMENT PERIOD

Rolling settlement on T+5 basis was made compulsory in all stock exchanges
for 200 actively traded securities and was extended to cover all such securities
after December 2001. The settlement cycle was further shortened to T+3 after
April 2002 and T+2 in April 2003.

INSIDER TRADING REGULATIONS

SEBI promulgated India's first restrictions on insider trading in November
1992. The regulations prohibit an "insider" from dealing in listed securities on
the basis of "unpublished price sensitive information," the communication of
such information or the counsel or procurement of any other person to deal in
securities on the basis of such information. The term "insider" includes
directors, officers, certain employees, professionals affiliated with the
company, affiliated companies, members of the securities market community and
relatives of any of the foregoing. SEBI may initiate criminal proceedings if it
believes insider trading has occurred.

Any person who holds more than 5% of the equity or voting rights of any
listed company is required to regularly and promptly disclose to the company the
number of shares or voting rights held as well as any change in excess of 2% of
that person's shareholding or voting rights.

SEBI has also required listed companies to adopt codes of conduct that
address trading on price sensitive information, market rumors and the disclosure
of shareholder ownership.

DEPOSITORIES

In August 1996, the Indian Parliament enacted the Indian Depositories Act,
1996, which established securities depositories to record ownership and transfer
securities in book-entry form. The depository system has significantly improved
the operations of the Indian securities markets.

Trading in book-entry form commenced in December 1996. In January 1998,
SEBI required various companies to commence trading in uncertificated securities
only for certain categories of investors, including foreign institutional
investors and other institutional investors. Other investors are permitted to
trade in certificated securities outside stock exchanges in lots of less than
500 securities and when exchange reporting requirements are not imposed. SEBI
requires Indian companies to extend security holders the option to receive and
hold securities in uncertificated form with a depository.

Book-entry transfers require both the seller and the purchaser of security
to establish accounts with registered depository participants. Transaction and
custodian charges vary depending upon the practice of ethe depository
participant and are paid by the account holder.

C-8

Upon delivery, shares are registered in the name of the relevant
depository on the company's books, and the depository records the investor in
its records as the beneficial owner. All transfers in beneficial ownership are
effected through the depository. Beneficial owners are entitled to all rights
and benefits and subject to all liabilities of security holders.

TAKEOVER REGULATIONS

SEBI regulates certain disclosure and mandatory bid obligations for listed
Indian companies in the event of takeovers. The primary features of the SEBI
regulations are as follows:

o Any person who, directly or indirectly, acquires or agrees to acquire
shares or voting rights in a company that would entitle him to more
than 5% or 10% or 14% of the shares or voting rights in a company
must promptly disclose his aggregate holdings or voting rights to the
company and to each stock exchange on which the company's shares are
listed. The acquiring person must do so at each percentage threshold
in the preceding sentence.

o A person who holds 15% or more of the shares or voting rights of a
company must make annual disclosure of his holdings to that company.

o In addition to the requirement in the second bullet point above, any
person who holds more than 15% but less than 75% of the shares or
voting rights of a company must promptly disclose to the company and
to each stock exchange on which the company's shares are listed any
purchase or sale of shares that exceeds 2% of the share capital of
the company.

o An acquirer and those acting in concert with him that hold between
15% and 75% of the shares or voting rights of a company cannot
acquire additional shares or voting rights if that acquisition would
enable to exercise more than 5% of the voting rights of the company
in any financial year unless the acquirer makes a public tender offer
for an additional 20% of the shares of the target company. Similar
rules apply for acquisitions in any percentage by an acquirer that
holds more than 75% of the shares or voting rights of the target
company.

Regardless of the acquisition of shares or voting rights and except in the
event of an acquisition of control pursuant to a special shareholder resolution,
no acquirer may, directly or indirectly, acquire control of a company (i.e., the
right to appoint a majority of the board of directors or the power to control
the management or policy decisions of the company) unless the acquirer first
makes a public tender offer for at least 20% of the company's shares at
specified prices. The minimum price must be the higher of:

o the negotiated price under the acquisition agreement;

o the highest price paid by the acquirer or those acting in concert
with him for any acquisition during the 26-week period prior to the
public tender offer; or

o (a) the average of the weekly high and low closing price of the
company's shares on the stock exchange where the company's shares
traded most frequently during the 26-week period prior to the public
tender offer or (b) the average of the daily high and low closing
price of the company's shares on the stock exchange where the
company's shares traded most frequently during the 2-week period
preceding the public tender offer, whichever is greater.

Following such a public tender offer, a company whose public shareholding
is below 10% of the voting capital of the company must (a) delist itself and
make a second public tender offer to the remaining public shareholders, (b)
divest its shares through a public offer or (c) offer new shares to the public.

These takeover regulations do not apply to certain acquisitions,
including:

o certain initial public offerings and rights issues;

o shares acquired pursuant to an underwriting agreement;

C-9

o shares acquired by registered stockbrokers in the ordinary course of
their business on behalf of their clients;

o shares in unlisted companies;

o shares acquired pursuant to a scheme of reconstruction or
amalgamation; and

o shares acquired in the ordinary course of business by public
financial institutions for their own account or as a pledge.

STOCK EXCHANGES

BACKGROUND

The Indian stock markets are among the oldest in Asia. The BSE, which is
one of the principal exchanges in India, began its operations in 1875. There are
now twenty-three stock exchanges in India. The NSE, which was recognized as a
stock exchange in 1993, is India's leading stock exchange. In 2002/2003, the
capital market trading volume of Indian stock exchanges was Rs. 9,689.1 billion,
and the government security trading volume on the "wholesale debt market" and
"subsidized general ledger" segments of the NSE was Rs. 10,328.3 billion and Rs.
19,557.3 billion, respectively.

The NSE and the BSE now have trading stations in over 400 centers in
India, which has diminished the importance of India's 19 regional stock
exchanges. The nineteen regional stock exchanges, which accounted for as much as
Rs. 2,390 billion, or 45.6%, of Indian trading volume in 1995/1996, accounted
for Rs. 8,960 billion, or 8.4%, of trading volume in 2001/2002. Presently,
virtually no trading takes place on the regional stock exchanges.

In 1999, in an attempt to revive small stock exchanges, SEBI permitted the
regional stock exchanges to create subsidiaries that could acquire the
membership rights of other stock exchanges such that the regional stock
exchanges could benefit from wider market access and higher trading volumes. The
Delhi Stock Exchange has sought to gain membership on the NSE through this
method, and the Hyderabad Stock Exchange has sought to acquire membership on the
BSE. Members of the Bangalore Stock Exchange may now trade on the derivatives
segment of the NSE. The smaller, regional stock exchanges also attempted to
create the Interconnected Stock Exchange of India Ltd., which was not successful
and which is not discussed further herein.

India also has the "Over the Counter Exchange of India" that was
incorporated in 1990 and is modeled after the American Nasdaq market. It has
screen-based nationwide trading and presently has 115 listings. In 1993, it
became the first Indian exchange to open "investor grievance cells" that field
complaints and questions from investors regarding brokers and companies that
trade on its exchange. The Over the Counter of Exchange of India is not
discussed in detail herein.

INDIAN STOCK EXCHANGES*

TOTAL MARKET
YEAR LISTED CAPITALIZATION
ESTABLISHED MEMBERS (1) CORPORATIONS (RS. BILLION)
----------- ----------- ------------ --------------

BSE ............. 1,875 713 5,650 5,722.00
NSE ............. 1,994 872 818 5,371.33

-------------------
* All figures are as of March 31, 2003.

Source: BSE, NSE

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THE CENTRAL LISTING AUTHORITY

An Indian "central listing authority," which should commence operations in
the near future, will scrutinize all listing applications on any Indian stock
exchange in India. It seeks uniformity in the review and processing of listing
applications and addresses multiple listing of the same security on different
exchanges. More specifically, its functions include:

o processing listing applications made by any corporation, mutual fund or
collective investment scheme;

o making recommendations to the exchange regarding a company's conditions to
listing; and

o making recommendations to the exchange or SEBI with respect to investor
protection measures, market regulations and offering document disclosure.

INDIAN MARGIN PRACTICES

India historically had no system of margin trading due in part to concerns
that brokers were not permitted to lend funds for such trading under Indian law.
In 1997, SEBI reviewed these laws and stated that a broker could lend and borrow
funds if it is incidental to his overall securities transactions and so long as
the broker does not lend funds as a regular business activity. In light of the
SEBI pronouncement, some brokers now engage in margin trading.

To supplement brokers' resources for margin trading, the Indian government
opened a bank line of credit for brokers. Banks may now lend to brokers for
margin trading subject to, among other things, the following parameters:

o Bank exposure to fluctuations in Indian markets, including margin
trading, should not exceed 5% of total bank exposure;

o A minimum margin of 40% should be maintained on the funds lent for
margin trading;

o Shares purchased through margin trading should uncertificated and
pledged to the lending bank; and

o No individual may borrow in excess of Rs. 1 million for margin
trading certificated securities and Rs. 2 million for uncertificated
securities.

Despite these policies, margin trading has not significantly increased in
India due to legal and procedural ambiguities, uncertainty over the roles of
brokers, and the restrictions noted above.

In March 2004, SEBI began allowing brokers to provide margin trading
facilities to their clients in the BSE's cash segment. Margin trading is however
only allowed for certain types of securities and is subject to other
restrictions, including margin requirements, certain record maintenance
procedures and rules regarding the sources of broker funds and broker
eligibility.

THE MUMBAI STOCK EXCHANGE

The BSE was the first stock exchange recognized under Indian law. 5,650
companies had securities listed on the BSE as of March 31, 2003, and the BSE's
market capitalization on that date was approximately Rs. 12,012 billion. In
2002/2003, its average daily trading volume was Rs. 12.5 billion, and its
average daily number of trades executed was 563,000.

BSE GOVERNANCE AND MEMBERSHIP

The BSE is a self-regulatory organization owned by its members and
governed by a 20-person board of governors that decide the policies of and
regulate the exchange. The board of governors consists of nine elected directors
from the broking community, three SEBI nominees, six public representatives, an
executive director and chief executive and operating officer. The executive
director and chief executive and operating officer are responsible for the
day-to-day administration of the exchange.

C-11

Investors can trade at the exchange either through the members of the
exchange or through sub-brokers, who are registered with SEBI through the
members. An individual or a company formed in compliance with the provisions of
Section 12 or Section 322 of the Indian Companies Act, 1956 can become a member
of the exchange.

A Membership Committee reviews all applications for membership, and a
Governing Board then elects the applicants upon a recommendation from the
Membership Committee. After paying the requisite fees, the applicant is admitted
as a member of the exchange and the exchange then forwards the application to
SEBI for registration. After SEBI registration, a member is required to comply
with the requirements of network connectivity, insurance, maintenance of base
minimum capital and other requirements before commencing operations on the
exchange.

The following table sets forth the annual and average daily trading volume
on the BSE for the indicated period:

TRADING VOLUME ON THE MUMBAI STOCK EXCHANGE

CALENDAR YEAR* ANNUAL VOLUME AVERAGE DAILY VOLUME
-------------- ------------- --------------------
(RS. BILLION)
1998 .......................... 2,661.85 12.13
1999 .......................... 5,279.60 21.28
2000 .......................... 9,986.55 39.94
2001 .......................... 4,752.79 19.16
2002 .......................... 3,329.09 13.26
2003 .......................... 4,093.73 16.11

------------------
* For the period January 1 to December 31.

Source: BSE

LIQUIDITY OF THE BSE

The BSE has a high daily trading volume in terms of both number of
transactions and value. Nevertheless, the BSE is not extremely liquid because
BSE trading is highly concentrated in the securities of relatively few issuers
and the vast majority of securities listed on the BSE are traded infrequently or
not at all. In addition, only a limited portion of many companies' shares are
part of the public float.

The growing illiquidity of listed stocks also affects India's other stock
exchanges. India's top ten equities account for over 75% of the exchanges'
trading volume, and its top 100 equities account for approximately 99% of the
exchanges' trading volume. In March 2003, of 7,363 securities listed on the BSE,
only approximately 2,190 securities were traded. In 2002/2003, only 67.7% of
BSE-listed companies traded for more than 100 days. 8.8% of BSE-listed companies
traded for less than 10 days. A 1989 study indicated that liquidity is largely
determined by profitability and company size and that the securities of large,
profitable companies are the most liquid.

BSE INDICES

Several indices measure the performance of India's stock markets. While
each major Indian stock exchange has its own index, the most watched
exchange-sponsored indices are the Sensex and the BSE 100 Index, which are
described below. The Economic Times Index and the Financial Express index, which
are not discussed herein, are the principal non-exchange sponsored indices.

THE SENSEX

The Sensex is a market capitalization-weighted index of thirty stocks that
represent large, well-established and leading Indian companies. Its base year is
1978/1979, and, while its initial calculations were based on full market
capitalization, it shifted to the free-float methodology in September 2003. Its
equity review policy aims to be transparent, and the float of all Sensex
equities should represent at least 0.5% of the index.

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On March 31, 2003, the market capitalization of the Sensex was Rs. 3,047.7
billion, and, on March 31, 2004, Sensex securities represented approximately 25%
of the total BSE market capitalization. While it is widely followed, the Sensex
does not reflect broad market trends; five companies account for more than 50%
of the Sensex market capitalization.

SENSEX MARKET CAPITALIZATION
(RS. BILLION)

YEAR ENDED
MARCH 31, HIGH LOW AVERAGE (a)
---------- -------- ------- -----------
1999 .......................... 4,281 3,295 2,764
2000 .......................... 5,934 4,659 3,245
2001 .......................... 5,542 4,270 3,541
2002 .......................... 3,742 3,332 2,600
2003 .......................... 3,513 3,206 2,834

------------------
(a) Weighted average is calculated on a daily basis.

Source: BSE

THE BSE 100 INDEX

The BSE 100 Index is based on the prices of certain BSE-traded equities.
It is considered to be more representative of the overall Indian market than the
Sensex because it uses the share prices of 100 companies. All thirty Sensex
companies are included in the BSE 100 Index, and all major Indian industries are
represented.

Like the Sensex, the BSE 100 Index switched to a free-float methodology in
April 2004.

As of April 5, 2004, the BSE 100 Index consisted of equities from the
following sectors of the Indian economy:

INDUSTRY NO. OF COMPANIES
-------- ----------------
Power Generation and Supply ............................... 3
Banking and Financial Institutions ........................ 12
Transport and Transport Equipment ......................... 11
Textiles .................................................. 6
Oil and Gas ............................................... 6
Chemicals, Fertilizer, Pharmaceuticals, Paints and Dyes ... 15
Cement .................................................... 2
Software .................................................. 6
General Engineering ....................................... 5
Diversified ............................................... 2
Telecom ................................................... 5
Media and Entertainment ................................... 2
Iron and Steel ............................................ 2
Aluminum .................................................. 2
Fast Moving Consumer Goods ................................ 6
Electrical Equipment and Cables ........................... 4
Shipping .................................................. 2
Hotels, Travel and Tourism ................................ 2
Paper and Hardboard ....................................... 1
Miscellaneous ............................................. 6
TOTAL .................................................. 100

------------------
Source: BSE

C-13

As of March 31, 2003, the market capitalization of BSE 100 Index was Rs.
9,079.7 billion. On March 31, 2004, BSE 100 Index securities represented 75.5%
of the total BSE market capitalization.

BSE 100 INDEX MARKET CAPITALIZATION
(RS. IN BILLIONS)

YEAR ENDED
MARCH 31, HIGH LOW AVERAGE (a)
---------- ---------- ----------- -------------
1999 ................... 1,889.9 1,234.6 1,457.1
2000 ................... 3,839.1 1,408.8 2,278.2
2001 ................... 3,044.8 1,678.0 2,170.5
2002 ................... 1,826.1 1,216.4 1,587.7
2003 ................... 1,793.0 1,413.6 1,597.8

------------------
(a) Weighted average calculated on a daily basis.

Source: BSE

MUMBAI STOCK EXCHANGE TRADING MECHANICS

TRADING HOURS

Trading on the BSE "online trading system" may occur Monday to Friday from
9:55 a.m. to 3:30 p.m. The BSE is closed on bank holidays and certain religious
holidays.

NON-CERTIFICATED SECURITIES

Due to the Indian government's emphasis on trading in uncertificated
securities in order to improve the markets' efficiency and transparency, the
movement toward "decertification" of equity securities has been swift. All
BSE-listed equity securities must now settle in uncertificated form. The market
capitalization of these companies is now 80% of the total BSE market
capitalization. As of March 31, 2002, 377 companies were depository participants
in the National Securities Depository Ltd. and Central Depository Services
(India) Ltd. Uncertificated securities represent 99.7% of all security
deliveries on the BSE and NSE.

TRADING PROCEDURES

Before March 1995, the BSE used a live trading floor where member-brokers
assembled in a trading ring to execute securities transactions. Since 1995, the
BSE has become fully automated through its online trading system. Member-brokers
now execute orders from work stations installed in their offices rather than a
live trading ring.

CLEARING HOUSE

Since December 2001, trading all BSE-traded equities trade on a so-called
"compulsory rolling settlement segment." All trades executed by member-brokers
in this segment are settled on a T+2 basis. Settlement is generally routed
through BSE's clearing house, which is BOI Shareholding Ltd. The Bank of India
is a 51% equity owner of BOI Shareholding Ltd. The BSE owns the remainder of the
BOI Shareholding Ltd.'s equity.

BASKET TRADING

Derivatives began trading on the BSE in June 2000 so that investors could
hedge risks. Although index futures were initially the only derivates traded,
index options and options and futures in select individual stocks now trade on
the BSE.

C-14

"Basket trading" began on the BSE in August 2000. In basket trading,
investors can trade all thirty Sensex securities at one time in proportion to
their respective Sensex weights without the need to calculate the quantity of
Sensex securities to be traded. Investors can also create their own "baskets" by
removing certain securities from their thirty Sensex securities or modifying the
weights assigned to each Sensex securitiy. This system allows arbitrageurs to
take advantage of the price differences in Sensex securities and their futures,
which the BSE hopes will balance prices in both the cash and futures markets.

All trades executed under the basket trading system on BSE's online
trading system are subject to intra-day trading and gross exposure limits.

TRANSACTION COSTS

The BSE has not established minimum brokerage fees for securities
transactions. The maximum brokerage fee cannot exceed 2.5% of the value of the
trade. Otherwise, brokerage fees are negotiable, and the average brokerage fee
charged by broker-members is typically below the 2.5% limit.

Stamp duties on trades involving certificated securities are imposed and
are typically paid by the buyer when registering the securities in his name. The
duty is Rs. 0.5 for every Rs. 100 traded. The stamp duty payable upon transfers
of debentures varies depending on the Indian state in which the issuer's
registered office is located.

CIRCUIT BREAKERS

Previously, "circuit breakers" in the Indian markets applied to specific
securities and restricted those securities from moving excessively in any
direction within a specified time period. Nowadays, only market-wide circuit
breakers exist, and all BSE trading is suspended for varying periods when the
Sensex's price volality exceeds a 10%, 15% or 20% threshold. For example:

o In the event of a 10% price movement before 1:00 p.m., the BSE
will suspend trading for one hour. If the movement occurs after
1:00 p.m. but before 2:30 p.m., the BSE will suspend trading for
thirty minutes. If the movement occurs at or after 2:30 p.m., the
BSE will not suspend trading.

o In the event of a 15% price movement before 1:00 p.m., the BSE
will suspend trading for two hours. If the movement occurs after
1:00 p.m. but before 2:00 p.m., the BSE will suspend trading for
one hour. If the movement occurs at or after 2:00 p.m., the BSE
will suspend trading for the remainder of the day.

o In the event of a 20% price movement, the BSE will suspend
trading for the remainder of the day.

THE NATIONAL STOCK EXCHANGE

The NSE was established in April 1993 with the following objectives:

o to establish a nationwide trading facility for all types of
securities;

o to provide a fair, efficient and transparent securities market
with an electronic trading system;

o to enable shorter settlement cycles and book-entry settlements;
and

o to meet the standards of other prominent international markets.

The securities of approximately 800 companies that represent a broad
spectrum of Indian companies trade on the NSE, and all trading data is
distributed worldwide through various news agencies. The NSE includes both a
capital market (equities) segment and a wholesale debt market segment, and all
NSE-listed companies must satisfy stringent financial, public distribution and
management requirements.

C-15

NSE LISTINGS

NO. OF MARKET CAPITALIZATION
YEAR* COMPANIES LISTED* (RS. BILLION)
--------- ----------------- ---------------------
1999/2000 .............. 720 10,204.26
2000/2001 .............. 785 6,578.47
2001/2002 .............. 793 6,368.61
2002/2003 .............. 818 5,371.33
2003/2004 .............. 909 11,209.76

------------------
* As of the end of the period indicated. This figure includes suspended
companies.

Source: NSE

NSE GOVERNANCE AND MEMBERSHIP

The NSE is one of the first demutualized stock exchanges in India. It is
organized as a public limited company and is owned by India's leading financial
institutions, including banks, insurance companies and financial intermediaries.
It is managed by professionals who do not directly or indirectly trade on its
exchange, and its board of directors includes senior executives from promoter
institutions, lawyers, economists, accountants, finance and tax experts, SEBI
nominees, representatives of the public and a full-time exchange executive.

Any prospective member that wishes to trade on the capital market,
wholesale debt market or futures and options portions of the NSE must have at
least two directors who are university graduates as well as dealers who have
passed a certification exam. Prospective members should have equity capital of
at least Rs. 3 million and net worth of at least Rs. 20 million. All prospective
members must be solely engaged in the securities business and not any fund-based
activity.

LIQUIDITY OF THE NSE

The following table sets forth the annual and average daily trading volume
on the NSE:

TRADING VOLUME ON THE NATIONAL STOCK EXCHANGE
(RS. IN BILLIONS)

YEAR ENDED
MARCH 31, ANNUAL VOLUME AVERAGE DAILY VOLUME
---------- ----------------- --------------------
1999/2000 .............. 8,390.52 33.03
2000/2001 .............. 13,395.10 53.37
2001/2002 .............. 5,131.67 20.78
2002/2003 .............. 6,179.89 24.62
2003/2004 .............. 7,133.01 519.5

------------------
Source: NSE

THE S&P CNX NIFTY INDEX

The S&P CNX Nifty Index is a well-diversified stock index of fifty
companies that includes twenty-three sectors of the Indian economy. It serves as
a benchmark for fund portfolios, index based derivatives and index funds. It is
owned and managed by India Index Services and Products Ltd., a joint venture
between the NSE and CRISIL Ltd. The trading value of S&P CNX Nifty stocks
represents 70% of the NSE's total trading value, and it represents approximately
59% of the NSE's total market capitalization.

C-16

VALUES OF THE S&P CNX NIFTY

YEAR ENDED
MARCH 31, HIGH LOW DAILY AVERAGE
---------- ------------ ------------- -------------
2000 ................... 1,818.15 916.00 1,368.62
2001 ................... 1,636.95 1,098.75 1,334.76
2002 ................... 1,207.00 849.95 1,077.03
2003 ................... 1,153.30 920.10 1,037.23
2004 ................... 2,014.65 920.00 1,427.50

------------------
Source: NSE

NATIONAL STOCK EXCHANGE TRADING MECHANICS

TRADING HOURS

The NSE is open from 9:55 a.m. until 3:30 p.m. Monday through Friday. The
NSE holds a "closing session" between 3:50 p.m. and 4:00 p.m on these days, and
it may extend, advance or reduce trading hours as it deems necessary.

UNCERTIFICATED SECURITIES

Since January 1998, all investors must trade securities on the NSE in
uncertificated form. Companies that fail to establish accounts with depositories
for such trading trade on a "trade for trade" settlement window. The NSE also
allows small investors to trade up to 500 certificated securities at specified
trading windows.

TRADING PROCEDURE

Securities are traded, cleared and settled under the NSE and SEBI
supervision, and the NSE is the first exchange in the world to use satellite
communication technology for trading. Its trading system, which is known as the
National Exchange for Automated Trading, is an online, fully-automated,
nationwide system screen that is anonymous and order driven. This system reduces
the time required to execute trades and increases the number of market
participants by making trading more accessible, thereby improving the depth and
liquidity of the market.

The NSE also has a back-up site in Chennai that includes a satellite
station and a high-speed optical fiber link with Mumbai in the event of an
emergency.

CLEARING HOUSE

The National Securities Clearing Corporation Ltd. clears and settles
equities and derivatives trades on the NSE through a well-defined settlement
cycle that aggregates trades over a trading period and then nets its members'
positions. Its eight clearing banks--Canara Bank, HDFC Bank, IndusInd Bank,
ICICI Bank Ltd., the Unit Trust of India Bank, the Bank of India, IDBI Bank and
Standard Chartered Bank--provide computerized banking services to its trading
members that include real-time account access and dedicated branch facilities.
The National Securities Clearing Corporation also provides working capital
funds, stock lending facilities and other capital market-related facilities.

SECURITIES SETTLEMENT

Members' securities obligations are downloaded daily after the close of
trading. For certificated securities, members' custodians must deliver
securities to the clearing house during business hours, and, for uncertificated
securities, custodians must make the securities available to pooled accounts.
All transactions must settle before 10:00 a.m. on the "pay in" day. All
recipients of certificated securities receive specific time slots on a "pay out"
day to collect their documents and securities from the clearing house.
Recipients of uncertificated securities receive their account credits after 2:30
p.m. on the "pay out" day.

C-17

MARGIN PRACTICES AND COSTS

NSE stocks are categorized into three groups for margin-trading purposes
"Group I" and "Group II" equities are equities that traded on at least 80% of
the NSE's trading days for the previous eighteen months, and equities that have
a "mean impact cost" of 1% or less are "Group I" equities, whereas those whose
mean impact cost is greater than 1% are "Group II" equities. All remaining
equities are "Group III." Mean impact cost is calculated on the fifteenth day of
every month. Equities may switch between groups based on their mean impact cost
on the first day of each month.

Members pay "daily margins" consisting of a "value at risk" ("VAR") margin
and a "mark to market" margin. The VAR margin is applicable for all securities
on a rolling settlement basis. Its calculation is based upon a security's daily
volatility and the index future market and depends upon whether the security is
classified as Group I, II or III. Mark to market margin is calculated by marking
each scrip transaction against the closing price at the end of the day's
trading. If the security has not traded on that day, the latest available
closing price is used.

See also "Stock Exchanges--Indian Margin Practices" above.

TRANSACTION COSTS

In addition to stamp fees that are imposed by the states, the NSE imposes
annual fees on all brokers that are based on their total turnover. Presently,
trading members must pay turnover fees equal to Rs. 4 for Rs. 100,000 of
turnover.

Brokers in turn charge their clients transaction fees that may not exceed
2.5% of the contract price. This ceiling does not include statutory levies such
as the turnover fee noted above but does include sub-broker fees, which may not
exceed 1.5% of the contract price.

CIRCUIT BREAKERS

In addition to price bands that exist for certain securities, the NSE has
index-based, market-wide circuit breakers. The circuit breakers apply when the
Sensex or S&P CNX Nifty index fluctuates in value more than 10%, 15% or 20%.
Once triggered, all equity and equity derivative markets cease to trade
nationwide.

See also "Mumbai Stock Exchange Trading Mechanics--Circuit Breakers" in
this Appendix C.

C-18

(This page intentionally left blank.)

THE INDIA FUND, INC.

7,546,991 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF NON-TRANSFERABLE
RIGHTS TO SUBSCRIBE FOR SHARES OF COMMON STOCK

------------------------

PROSPECTUS
December 9, 2004

------------------------

THE INDIA FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information does not constitute a
prospectus but should be read in conjunction with the Fund's prospectus relating
thereto dated December 9, 2004, as it may be supplemented. This Statement of
Additional Information does not include all information that a prospective
investor ought to know before investing in the Fund, and investors are advised
to read the Fund's prospectus and retain it for future reference. You may obtain
a copy of the Fund's prospectus or this Statement of Additional Information
without charge by contacting the Fund at (800) 421-4777.

This Statement of Additional Information is not complete and may be
changed. The Fund may not sell the securities offered by the prospectus until
the registration statement relating thereto that has been filed with the
Securities and Exchange Commission is effective.

This Statement of Additional Information is dated December 9, 2004.

TABLE OF CONTENTS

Page
----

PROXY VOTING PROCEDURES........................................................1

INTRODUCTION
------------

Rule 206(4)-6 (the "Rule") adopted under the Investment Advisers Act of 1940, as
amended (the "Advisers Act") requires all registered investment advisers that
exercise voting discretion over securities held in client portfolios to adopt
proxy voting policies and procedures.

Advantage Advisers, Inc., (the "Adviser") is a registered investment adviser
under the Advisers Act and is therefore required to adopt proxy voting policies
and procedures pursuant to the Rule.

When the Adviser has investment discretion over a client's investment portfolio,
then the Adviser votes proxies for the Account pursuant to the policies and
procedures set forth herein.

CHAPTER 1

BOARD OF DIRECTORS

VOTING ON DIRECTOR NOMINEES
---------------------------
IN UNCONTESTED ELECTIONS
------------------------

These proposals seek shareholder votes for persons who have been nominated by a
corporation's board of directors to stand for election to serve as members of
that board. No candidates are opposing these board nominees.

In each analysis of an uncontested election of directors you should review:

a) Company performance

b) Composition of the board and key board committees

c) Attendance at board meetings

d) Corporate governance provisions and takeover activity

We may also consider:

a) Board decisions concerning executive compensation
b) Number of other board seats held by the nominee
c) Interlocking directorships

VOTE RECOMMENDATION

It is our policy to vote IN
FAVOR of the candidates
proposed by the board.

We will look carefully at each candidate's background contained in the proxy
statement. In the absence of unusual circumstances suggesting a nominee is
clearly not qualified to serve as a member of the board, we will vote with
management.

CHAIRMAN AND CEO ARE THE SAME PERSON
------------------------------------

Shareholders may propose that different persons hold the positions of
the chairman and the CEO.

We would evaluate these proposals on a case by case basis depending on
the size of the company and performance of management.

INDEPENDENCE OF DIRECTORS
-------------------------

Shareholders may request that the board be comprised of a majority of
independent directors and that audit, compensation and nominating
committees of the Board consists exclusively of independent directors.
We believe that independent directors are important to corporate
governance.

VOTE RECOMMENDATION

It is our policy to vote FOR
proposals requesting that a
majority of the Board be
independent and that the
audit, compensation and
nominating committees of the
board include only
independent directors.

STOCK OWNERSHIP REQUIREMENTS
----------------------------

Shareholders may propose that directors be required to own a minimum
amount of company stock or that directors should be paid in company
stock, not cash. This proposal is based on the view that directors will
align themselves with the interest of shareholders if they are
shareholders themselves. We believe that directors are required to
exercise their fiduciary duty to the company and its shareholders
whether or not they own shares in the company and should be allowed to
invest in company stock based on their own personal considerations.

VOTE RECOMMENDATION

Vote AGAINST proposals that
require director stock
ownership.

CHARITABLE CONTRIBUTIONS
------------------------

Charitable contributions by companies are generally useful for
assisting worthwhile causes and for creating goodwill between the
company and its community. Moreover, there may be certain long-term
financial benefits to companies from certain charitable contributions
generated from, for example, movies spent helping educational efforts
in the firm's primary employment areas. Shareholders should not decide
what the most worthwhile charities are.

VOTE RECOMMENDATION

(Shareholders Proposals)
Vote AGAINST proposals
regarding charitable
contribution.

Shareholders have differing and equally sincere views as to which
charities the company should contribute to, and the amount it should
contribute. In the absence of bad faith, self-dealing, or gross
negligence, management should determine which contributions are in the
best interest of the company.

DIRECTOR AND OFFICER INDEMNIFICATION
------------------------------------
AND LIABILITY PROTECTION
------------------------

These proposals typically provide for protection (or additional protection)
which is to be afforded to the directors of a corporation in the form of
indemnification by the corporation, insurance coverage or limitations upon their
liability in connection with their responsibilities as directors.

When a corporation indemnifies its directors and officers, it means the
corporation promises to reimburse them for certain legal expenses, damages, and
judgements incurred as a result of lawsuits relating to their corporate actions.
The corporation becomes the insurer for its officers and directors.

VOTE RECOMMENDATION

Vote AGAINST proposals that
eliminate entirely director
and officers' liability for
monetary damages for
violating the duty of care.

Vote AGAINST
indemnification proposals
that would expand coverage
beyond just legal expenses
to acts, such as
negligence, that are more
serious violations of
fiduciary obligations than
mere carelessness.

Vote FOR only those
proposals providing such
expanded coverage in cases
when a director's or
officer's legal defense was
unsuccessful if: a) the
director was found to have
acted in good faith, and b)
only if the director's
legal expenses would be
covered.

The following factors should be considered:

1. The present environment in which directors operate provides substantial
risk of claims or suits against them in their individual capacities
arising out of the discharge of their duties.

2. Attracting and retaining the most qualified directors enhances
shareholder value.

SIZE OF THE BOARD
-----------------

Typically there are three reasons for changing the size of the board.
The first reason may be to permit inclusion into the board of
additional individuals who, by virtue of their ability and experience,
would benefit the corporation. The second reason may be to reduce the
size of the board due to expiration of terms, resignation of sitting
directors or, thirdly, to accommodate the corporation's changing needs.

VOTE RECOMMENDATION

Vote FOR the board's
recommendation to increase
or decrease the size of the
board.

The following factors should be considered:

1. These proposals may aim at reducing or increasing the influence of
certain groups of individuals.

2. This is an issue with which the board of directors is uniquely qualified
to deal, since they have the most experience in sitting on a board and
are up-to-date on the specific needs of the corporation.

VOTING ON DIRECTOR NOMINEES IN CONTESTED ELECTIONS
--------------------------------------------------

Votes in contested elections of directors are evaluated on a CASE-BY-CASE basis.

The following factors are considered:

1. management's track record

2. background to the proxy contest

3. qualifications of director nominees

TERM OF OFFICE
--------------

This is a shareholder's proposal to limit the tenure of outside directors. This
requirement may not be an appropriate one. It is an artificial imposition on the
board, and may have the result of removing knowledgeable directors from the
board.

VOTE RECOMMENDATION

Vote AGAINST shareholder
proposals to limit the
tenure of outside
directors.

The following factors should be considered:

1. An experienced director should not be disqualified because he or she has
served a certain number of years.

2. The nominating committee is in the best position to judge the directors'
terms in office due to their understanding of a corporation's needs and
a director's abilities and experience.

3. If shareholders are not satisfied with the job a director is doing, they
can vote him/her off the board when the term is up.

COMPENSATION DISCLOSURE
-----------------------

These proposals seek shareholder approval of a request that the board of
directors disclose the amount of compensation paid to officers and employees, in
addition to the disclosure of such information in the proxy statement as
required by the SEC regulations.

VOTE RECOMMENDATION

(shareholders policy)
Vote AGAINST these
proposals that require
disclosure, unless we have
reason to believe that
mandated disclosures are
insufficient to give an
accurate and meaningful
account of senior
management compensation.

The following factors should be considered:

1. Federal securities laws require disclosure in corporate proxy statements
of the compensation paid to corporate directors and officers.

2. Employees other than executive officers and directors are typically not
in policy-making roles where they have the ability to determine, in a
significant way, the amount of their own compensation.

3. The disclosure of compensation of lower-level officers and employees
infringes upon their privacy and might create morale problems.

CHAPTER 2

AUDITORS

RATIFYING AUDITORS
------------------

Shareholders must make certain that auditors are responsibly examining the
financial statements of a company, that their reports adequately express any
legitimate financial concerns, and that the auditor is independent of the
company it is serving.

VOTE RECOMMENDATION

Vote FOR proposal to ratify
auditors.

The following factors should be considered:

1. Although lawsuits are sometimes filed against accounting firms,
including those nationally recognized, these firms typically complete
their assignments in a lawful and professional manner.

2. Sometimes it may be appropriate for a corporation to change accounting
firms, but the board of directors is in the best position to judge the
advantages of any such change and any disagreements with former auditors
must be fully disclosed to shareholders.

3. If there is a reason to believe the independent auditor has rendered an
opinion which is neither accurate nor indicative of the company's
financial position, then in this case vote AGAINST ratification.

CHAPTER 3

TENDER OFFER DEFENSES

POISON PILLS
------------

Poison pills are corporate-sponsored financial devices that, when triggered by
potential acquirers, do one or more of the following: a) dilute the acquirer's
equity in the target company, b) dilute the acquirer's voting interests in the
target company, or c) dilute the acquirer's equity holdings in the post-merger
company. Generally, poison pills accomplish these tasks by issuing rights or
warrants to shareholders that are essentially worthless unless triggered by a
hostile acquisition attempt.

A poison pill should contain a redemption clause that would allow the board to
redeem it even after a potential acquirer has surpassed the ownership threshold.
Poison pills may be adopted by the board without shareholder approval. But
shareholders must have the opportunity to ratify or reject them at least every
two years.

VOTE RECOMMENDATION

Vote FOR shareholder
proposals asking that a
company submit its poison
pill for shareholder
ratification.

Vote on a CASE-BY-CASE
basis regarding shareholder
proposals to redeem a
company's poison pill.

Vote on a CASE-BY-CASE
basis regarding management
proposals to ratify a
poison pill.

GREENMAIL
---------

Greenmail payments are targeted share repurchases by management of company stock
from individuals or groups seeking control of the company. Since only the
hostile party receives payment, usually at a substantial premium over the
market, the practice discriminates against all other shareholders.

Greenmail payments usually expose the company to negative press and may result
in lawsuits by shareholders. When a company's name is associated with such a
practice, company customers may think twice about future purchases made at the
expense of the shareholders.

VOTE RECOMMENDATION

Vote FOR proposals to adopt
anti Greenmail or bylaw
amendments or otherwise
restrict a company's
ability to make Greenmail
payments

Vote on a CASE-BY-CASE
basis regarding
anti-Greenmail proposals
when they are bundled with
other charter or bylaw
amendments.

The following factors should be considered:

1. While studies by the SEC and others show that Greenmail devalues the
company's stock price, an argument can be made that a payment can enable
the company to pursue plans that may provide long-term gains to the
shareholders.

SUPERMAJORITY VOTE
------------------

Supermajority provisions violate the principle that a simple majority of voting
shares should be all that is necessary to effect change regarding a company and
its corporate governance provisions. These proposals seek shareholder approval
to exceed the normal level of shareholder participation and approval from a
simple majority of the outstanding shares to a much higher percentage.

VOTE RECOMMENDATIONS

Vote AGAINST management
proposals to require a
Supermajority shareholder
vote to approve mergers and
other significant business
combinations.

Vote FOR shareholder
proposals to lower
Supermajority vote
requirements for mergers
and other significant
business combinations.

The following factors should be considered:

1. Supermajority requirements ensure broad agreement on issues that may
have a significant impact on the future of the company.

2. Supermajority vote may make action all but impossible.

3. Supermajority requirements are counter to the principle of majority
rule.

CHAPTER 4

MERGERS
AND
CORPORATE
RESTRUCTURING

CHANGING CORPORATE NAME
-----------------------

This proposal seeks shareholder approval to change the corporation's name. It is
probably better to vote for the proposed name change before management goes back
to the drawing board and spends another small fortune attempting again to change
the name.

VOTE RECOMMENDATION

Vote FOR changing the
corporate name.

The following factors should be considered:

1. A name of a corporation symbolizes its substance.

2. There are many reasons a corporation may have for changing its name,
including an intention to change the direction of the business or to
have a contemporary corporate image.

3. The board of directors is well-positioned to determine the best name for
the corporation because, among other reasons, it usually seeks
professional advice on such matters.

REINCORPORATION
---------------

These proposals seek shareholder approval to change the state in which a company
is incorporated. Sometimes this is done to accommodate the company's most active
operations or headquarters. More often, however, the companies want to
reincorporate in a state with more stringent anti-takeover provisions.
Delaware's state laws, for instance, including liability and anti-takeover
provisions, are more favorable to corporations.

VOTE RECOMMENDATION

Vote on a CASE-BY-CASE
basis, carefully reviewing
the new state's laws and
any significant changes the
company makes in its
charter and by-laws.

The following factors should be considered:

1. The board is in the best position to determine the company's need to
incorporate.

2. Reincorporation may have considerable implications for shareholders,
affecting a company's takeover defenses, its corporate structure or
governance features.

3. Reincorporation in a state with stronger anti-takeover laws may harm
shareholder value.

CHAPTER 5

PROXY
CONTEST
DEFENSES

BOARD STRUCTURE: STAGGERED VS. ANNUAL ELECTIONS
-----------------------------------------------

A company that has a classified, or staggered, board is one in which directors
are typically divided into three classes, with each class serving three-year
terms; each class's reelection occurs in different years. In contrast, all
directors of an annually elected board serve one year and the entire board
stands for election each year.

Classifying the board makes it more difficult to change control of a company
through a proxy contest involving election of directors. Because only a minority
of the directors are elected each year, it will be more difficult to win control
of the board in a single election.

VOTE RECOMMENDATIONS

Vote AGAINST proposals to
classify the board. Vote
FOR proposals to repeal
classified boards and to
elect all directors
annually.

The following factors should be considered:

1. The annual election of directors provides an extra check on management's
performance. A director who is doing a good job should not fear an
annual review of his/her directorship.

CUMULATIVE VOTING
-----------------

Most companies provide that shareholders are entitled to cast one vote for each
share owned, the so-called "one share, one vote" standard. This proposal seeks
to allow each shareholder to cast votes in the election of directors
proportionate to the number of directors times the number of shares owned by
each shareholder for one nominee.

VOTE RECOMMENDATION

Vote AGAINST proposals that
permit cumulative voting.

The following factors should be considered:

1. Cumulative voting would allow a minority owner to create an impact
disproportionate to his/her holdings.

2. Cumulative voting can be used to elect a director who would represent
special interests and not those of the corporation and its shareholders.

3. Cumulative voting can allow a minority to have representation.

4. Cumulative Voting can lead to a conflict within the board which could
interfere with its ability to serve the shareholders' best interests.

SHAREHOLDERS' ABILITY TO CALL SPECIAL MEETING
---------------------------------------------

Most state corporation statutes allow shareholders to call a special meeting
when they want to take action on certain matters that arise between regularly
scheduled annual meetings.

VOTE RECOMMENDATION

Vote AGAINST proposals to
restrict or prohibit
shareholder ability to call
special meetings.

Vote FOR proposals that
remove restrictions on the
right of shareholders to
act independently of
management.

SHAREHOLDERS' ABILITY TO ALTER SIZE OF THE BOARD
------------------------------------------------

Proposals which would allow management to increase or decrease the size of the
board at its own discretion are often used by companies as a takeover defense.

Shareholders should support management proposals to fix the size of the board at
a specific number of directors, preventing management from increasing the size
of the board without shareholder approval. By increasing the size of the board,
management can make it more difficult for dissidents to gain control of the
board.

VOTE RECOMMENDATIONS

Vote FOR proposal which
seek to fix the size of the
board.

Vote AGAINST proposals
which give management the
ability to alter the size
of the board without
shareholder approval.

CHAPTER 6

MISCELLANEOUS
CORPORATE
GOVERNANCE
PROVISIONS

CONFIDENTIAL VOTING
-------------------

Confidential voting, also known as voting by secret ballot, is one of the key
structural issues in the proxy system. All proxies, ballots, and voting
tabulations that identify individual shareholders are kept confidential.

VOTE RECOMMENDATIONS

Vote FOR shareholder
proposals requesting that
corporations adopt
confidential voting.

Vote FOR management
proposals to adopt
confidential voting.

The following factors should be considered:

1. Some shareholders elect to have the board not know how they voted on
certain issues.

2. Should the board be aware of how a shareholder voted, the board could
attempt to influence the shareholder to change his/her vote, giving
itself an advantage over those that do not have access to this
information.

3. Confidential voting is an important element of corporate democracy which
should be available to the shareholder.

SHAREHOLDER ADVISORY COMMITTEES
-------------------------------

These proposals request that the corporation establish a shareholder advisory
committee to review the board's performance. In some instances, it would have a
budget funded by the corporation and would be composed of salaried committee
members with authority to hire outside experts and to include reports in the
annual proxy statement.

VOTE RECOMMENDATION

Vote AGAINST proposals to
establish a shareholder
advisory committee.

The following factors should be considered:

1. Directors already have fiduciary responsibility to represent
shareholders and are accountable to them by law, thus rendering
shareholder advisory committees unnecessary.

2. Adding another layer to the current corporate governance system would be
expensive and unproductive.

FOREIGN CORPORATE MATTERS
-------------------------

These proposals are usually submitted by companies incorporated outside of the
United States seeking shareholder approval for actions which are considered
ordinary business and do not require shareholder approval in the United States
(i.e., declaration of dividends, approval of financial statements, etc.).

VOTE RECOMMENDATION

Vote FOR proposals that
concern foreign companies
incorporated outside of the
United States.

The following factors should be considered:

1. The laws and regulations of various countries differ widely as to those
issues on which shareholder approval is needed, usually requiring
consent for actions which are considered routine in the United States.

2. The board of directors is well positioned to determine whether or not
these types of actions are in the best interest of the corporation's
shareholders.

GOVERNMENT SERVICE LIST
-----------------------

This proposal requests that the board of directors prepare a list of employees
or consultants to the company who have been employed by the government within a
specified period of time and the substance of their involvement.

Solicitation of customers and negotiation of contractual or other business
relationships is traditionally the responsibility of management. Compilation of
such a list does not seem to serve a useful purpose, primarily because existing
laws and regulations serve as a checklist on conflicts of interest.

VOTE RECOMMENDATION

Vote AGAINST these
proposals which request a
list of employees having
been employed by the
government.

The following factors should be considered:

1. For certain companies, employing individuals familiar with the
regulatory agencies and procedures is essential and, therefore, is in
the best interests of the shareholders.

2. Existing laws and regulations require enough disclosure and serve as a
check on conflicts of interest.

3. Additional disclosure would be an unreasonable invasion of such
individual's privacy.

CHAPTER 7

SOCIAL
AND
ENVIRONMENTAL
ISSUES

ENERGY AND ENVIRONMENTAL ISSUES
-------------------------------
(CERES PRINCIPLES)
------------------

CERES proposals ask management to sign or report on process toward compliance
with ten principles committing the company to environmental stewardship.
Principle 10 directs companies to fill out the CERES report. This report
requires companies to disclose information about environmental policies, toxic
emissions, hazardous waste management, workplace safety, energy use, and
environmental audits.

VOTE RECOMMENDATION

Vote AGAINST proposals
requesting that companies
sign the CERES Principles.

The following factors should be considered:

1. We do not believe a concrete business case is made for this proposal. In
our opinion, the company will be best served by continuing to carry on
its business as it did before the proposal was made.

NORTHERN IRELAND
----------------
(MACBRIDE PRINCIPLES)
---------------------

It is well documented that Northern Ireland's Catholic community faces much
higher unemployment figures then the Protestant community. Most proposals ask
companies to endorse or report on progress with respect to the MacBride
Principles.

In evaluating a proposal to adopt the MacBride Principles, you must decide if
the principles will cause the company to divest, and worsen unemployment
problems.

VOTE RECOMMENDATION

REFRAIN from voting on
proposals that request
companies to adopt the
MacBride Principles.

The following factors should be considered:

1. We believe that human and political rights are of the utmost importance
for their own sake as well as for the enhancement of economic potential
of a nation.

2. We do not believe a concrete business case has been made for this
proposal. We will refrain from making social or political statements by
voting for these proposals. We will only vote on proposals that maximize
the value of the issuers' status without regard to (i.e., we will not
pass judgement upon) the non-economic considerations.

MAQUILADORA STANDARDS AND
-------------------------
INTERNATIONAL OPERATIONS AND POLICIES
-------------------------------------

Proposals in this area generally request companies to report on or to adopt
certain principles regarding their operations in foreign countries.

The Maquiladora Standards are a set of guidelines that outline how U.S.
companies should conduct operations in Maquiladora facilities just across the
U.S.-Mexican border. These standards cover such topics as community development,
environmental policies, health and safety policies, and fair employment
practices.

VOTE RECOMMENDATION

ABSTAIN from providing a
Vote Recommendation on
proposals regarding the
Maquiladora Standards and
international operating
policies.

The following factors should be considered:

1. We believe that human rights are of the utmost importance for their own
sake as well as for the enhancement of economic potential of a nation.

2. We do not believe that a concrete business case has been made for these
proposals. We will refrain from making social statements by voting for
these proposals. We will not only vote on proposals that maximize the
value of the issuers' securities without regard to (i.e., we will not
pass judgement upon) the non-economic considerations.

EQUAL EMPLOYMENT OPPORTUNITY
----------------------------
AND DISCRIMINATION
------------------

In regards to equal employment and discrimination, companies without
comprehensive EEO programs will find it hard to recruit qualified employees and
find them at a long-term competitive disadvantage. Companies who are not
carefully watching their human resource practices could also face lawsuits.

VOTE RECOMMENDATION

REFRAIN from voting on any
proposals regarding equal
employment opportunities
and discrimination.

The following factors should be considered:

1. We feel that the hiring and promotion of employees should be free from
prohibited discriminatory practices. We also feel that many of these
issues are already subject to significant state and federal regulations.

ANIMAL RIGHTS
-------------

A Corporation is requested to issue a report on its progress towards reducing
reliance on animal tests for consumer product safety.

VOTE RECOMMENDATION

REFRAIN from making Vote
Recommendations on
proposals regarding animal
rights.

The following factors should be considered:

1. Needless cruelty to animals should never be tolerated. However, the
testing of products on animals may be very important to the health and
safety of consumers.

2. We also feel that this issue is already subject to significant state and
federal regulation.

CHAPTER 8

CAPITAL
STRUCTURE

COMMON STOCK AUTHORIZATION
--------------------------

The ability to increase the number of authorized shares could accommodate the
sale of equity, stock splits, dividends, compensation-based plans, etc. The
board can usually be trusted to use additional shares for capital-raising and
other transactions that are in the corporation's best interests.

However, excessive escalation in the number of authorized shares may allow the
board to radically change the corporation's direction without shareholder
approval. Be careful to view that the increased number of shares will not enable
the company to activate a poison pill.

VOTE RECOMMENDATION

Vote CASE-BY-CASE on
proposals to increase the
number of shares of common
stock authorized for issue.

Vote AGAINST proposed
common share authorization
that increase existing
authorization by more then
100 percent unless a clear
need for the excess shares
is presented by the
company.

The following factors should be considered:

1. Is this company going to make frequent business acquisitions over a
period of time?

2. Is the company expanding its operations?

3. Within the company, are there any debt structuring or prepackaged
bankruptcy plans?

BLANK CHECK PREFERRED STOCK
---------------------------

The terms of blank check preferred stock give the board of directors the power
to issue shares of preferred stock at their discretion, with voting, conversion,
distribution and other rights to be determined by the board at the time of the
issue.

Blank check preferred stock can provide corporations with the flexibility to
meet changing financial conditions. However, once the blank check preferred
stock has been authorized, the shareholders have no further power over how or
when it will be allocated.

VOTE RECOMMENDATION

Vote AGAINST proposals
authorizing the creation of
new classes of preferred
stock with unspecified
voting, conversion,
dividend distribution, and
other rights.

The following factors should be considered:

1. Blank check preferred stock can be used as the vehicle for a poison pill
defense against hostile suitors, or it may be placed in friendly hands
to help block a takeover bid.

PREEMPTIVE RIGHTS
-----------------

These proposals request that the corporation provide existing shareholders with
an opportunity to acquire additional shares in proportion to their existing
holdings whenever new shares are issued. In companies with a large shareholder
base and ease in which shareholders could preserve their relative interest
through purchases of shares on the open market, the cost of implementing
preemptive rights does not seem justifiable in relation to the benefits.

VOTE RECOMMENDATION

Vote AGAINST proposals
seeking preemptive rights.

The following factors should be considered:

1. The existence of preemptive rights can considerably slow down the
process of issuing new shares due to the logistics involved in
protecting such rights.

2. Preemptive rights are not necessary for the shareholder in today's
corporations, whose stock is held by a wide range of owners and is, in
most cases, highly liquid.

STOCK DISTRIBUTIONS: SPLITS AND DIVIDENDS
-----------------------------------------

STOCK SPLITS
------------

The corporation requests authorization for a stock split.

VOTE RECOMMENDATION

Vote FOR management
proposal to authorize stock
splits unless the split
will result in an increase
of authorized but unissued
shares of more than 100%
after giving effect to the
shares needed for the
split.

REVERSE STOCK SPLITS
--------------------

VOTE RECOMMENDATION

Vote FOR management
proposal to authorize
reverse stock split unless
the reverse stock split
results in an increase of
authorized but unissued
shares of more than 100%
after giving effect to the
shares needed for the
reverse split.

ADJUSTMENTS TO PAR VALUE OF COMMON STOCK
----------------------------------------

The purpose of par value stock is to establish the maximum responsibility of
stockholder in the event that a corporation becomes insolvent. It represents the
maximum amount that a shareholder must pay the corporation if the stock is to be
fully paid when issued.

The corporation requests permission to reduce the par value of its stock. In
most cases, adjusting par value is a routine financing decision and should be
supported.

VOTE RECOMMENDATION

Vote FOR management
proposals to reduce the par
value of common stock.

The following factors should be considered:

1. State laws sometimes prohibit issuance of new stock priced below that of
the outstanding shares.

2. A corporation may be unable to raise capital if the par value is
overstated.

DEBT RESTRUCTURINGS
-------------------

The corporation may propose to increase common and/or preferred shares and to
issue shares as part of a debt restructuring plan.

VOTE RECOMMENDATION

It is our policy to vote
CASE-BY-CASE on debt
restructuring.

The following factors should be considered:

1. Dilution - How much will ownership interest of existing shareholders be
reduced and how extreme will dilution to future earnings be?

2. Change in Control - Will the transaction result in a change of control
of the company?

3. Bankruptcy - Is the threat of bankruptcy, which would result in severe
losses in shareholder value, the main factor driving the debt
restructuring?

CHAPTER 9

EXECUTIVE
AND
DIRECTOR
COMPENSATION

DIRECTOR COMPENSATION
---------------------

Directors represent shareholders and are responsible for protecting shareholder
interests. Companies state in the proxy material that they pay directors well in
order to attract the most qualified candidates. All compensation packages for
any executive, director or employee should include a pay-for-performance
component.

VOTE RECOMMENDATION

Vote on a CASE-BY-CASE
basis for director
compensation.

The following factors should be considered:

1. As directors take an increasingly active role in corporate
decision-making and governance, their compensation is becoming more
performance-based.

SHAREHOLDER PROPOSAL TO LIMIT EXECUTIVE AND DIRECTOR PAY
--------------------------------------------------------

Shareholder compensation proposals that set limits or reduce executive
compensation should be closely scrutinized. Many of these proposals may be
flawed in their emphasis on an absolute dollar figure in compensation.

VOTE RECOMMENDATION

Vote on a CASE-BY-CASE
basis.

The following factors should be considered:

1. Executive compensation is established by a committee that consists of
independent directors who have fiduciary responsibility to act in the
best interest of the shareholders and who are best placed to make
compensation decisions.

EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS)
--------------------------------------

These proposals ask for stockholder endorsement of compensation plans for key
employees which involve the issuance of company shares by granting of stock
options, SARs, restricted stock, etc. These plans help attract and retain
best-qualified corporate personnel and tie their interests more closely to those
of the shareholders.

VOTE RECOMMENDATION

Vote FOR proposals to adopt
share-based compensation
plans when the following
items are involved:

1. The exercise price for stock options is less than 85% of fair market
value on the date of the grant.

2. It is an omnibus stock plan which gives directors broad discretion in
deciding how much and what kind of stock to award, when and to whom.

3. The shares for issue exceed 8% of the company's outstanding shares; or,
in the case of the evergreen plans, the amount of increase exceeds 1.5%
of the total number of shares outstanding.

Vote AGAINST proposals
adopting share based
compensation plans when the
following items are
involved:

o Re-load options (new options issued for any exercised).

o The plan would allow for management to pyramid their holdings by
using stock to purchase more stock, without having to lay out cash.
Vote YES if this is for directors.

OPTIONS EXPENSING
-----------------

Shareholder proposal to expense options.

VOTE RECOMMENDATION

It is our policy to vote
FOR proposals to expense
options.

GOLDEN PARACHUTES
-----------------

Golden parachutes are designed to protect the employees of a corporation in the
event of a change in control. The change in control agreement will specify the
exact payments to be made under the golden parachutes. The calculation for
payout is usually based on some multiple of an employee's annual or monthly
compensation. Golden parachutes are generally given to employees whose annual
compensation exceeds $112,000.

Recent experience has shown a willingness of many managements to treat severance
agreements as equal to equity investments and to reward themselves as if
substantial amounts of equity were at risk.

VOTE RECOMMENDATION

Vote FOR proposals which
seek to limit additional
compensation payments.

Vote FOR shareholder
proposals to have golden
parachutes submitted for
shareholder ratification.

The following factors should be considered:

1. The stability of management may be affected by an attempted acquisition
of the corporation.

2. There is a tendency on the part of an entrenched management to overstate
the value of their continuing control of and influence on the day-to-day
functions of a corporation.

PROPOSAL TO BAN GOLDEN PARACHUTES
---------------------------------

Based on the foregoing information:

VOTE RECOMMENDATION

We are FOR this proposal,
which essentially bans
golden parachutes, because
we feel management's
compensation should be
solely based on real-time
contributions to the
corporation while they are
serving it. Deferred
current compensation is
viewed differently than
future, contingent
compensation for current
services.

OUTSIDE DIRECTORS' RETIREMENT COMPENSATION
------------------------------------------

We believe that directors should only be compensated while serving the company.

VOTE RECOMMENDATIONS

Vote AGAINST proposals
establishing outside
directors' retirement
compensation.

Vote FOR proposals that
revoke outside directors'
retirement compensation.

CHAPTER 10

STATE
OF
INCORPORATION

CONTROL SHARE ACQUISITION STATUTES
----------------------------------

These proposals suggest that the board of directors solicit shareholder approval
before committing acquisitions or divestiture of a business exceeding stipulated
threshold levels. Such statutes function by denying shares their voting rights
when they contribute to ownership in excess of certain thresholds.

VOTE RECOMMENDATION

Vote AGAINST proposals
which request the board to
seek shareholder approval
before committing to an
acquisition.

The following factors should be considered:

1. These proposals deprive the board of directors of its ability to act
quickly in propitious circumstances.

2. Conforming to these requirements can be expensive.

3. The board of directors is uniquely qualified and positioned to be able
to make these decisions without prior shareholder approval.

4. The threshold levels usually imposed by these proposals are much more
stringent than required by law.

OPT-OUT OF STATE TAKEOVER STATUTES
----------------------------------

These proposals seek shareholder approval to opt-out (not be governed by)
certain provisions of the anti-takeover laws of various states. Delaware law,
for instance, dictates that a bidder has to acquire at least 85% of a company's
stock before exercising control, unless he or she has board approval. This means
that a company may thwart an otherwise successful bidder by securing 15% of its
stock in friendly hands.

VOTE RECOMMENDATION

Vote on a CASE-BY-CASE
basis for these proposals.

The following factors should be considered:

1. It is the directors' responsibility to act on behalf of the shareholders
in opposing coercive takeover attempts.

2. Creating deterrents to corporate takeovers may allow for entrenchment of
inefficient management.

3. These statutes strengthen the board's ability to deal with potential
buyers on fair and reasonable terms.

4. Shareholders should have the final say on whether the company should be
merged or acquired.

CORPORATE RESTRUCTURING, SPIN-OFFS ASSET SALES, LIQUIDATIONS
------------------------------------------------------------

Votes on corporate restructuring, spin-offs, asset sales and liquidations are
evaluated on a CASE BY CASE basis.

CHAPTER 11

CONFLICTS
OF
INTEREST

CONFLICTS
---------

From time to time, proxy voting proposals may raise conflicts between the
interests of the Advisers clients and the interests of the Adviser, its
affiliates and its employees. Conflicts of interest may arise when:

1. Proxy votes regarding non-routine matters are solicited by an issuer
that may have a separate account relationship with an affiliate of the
Adviser or an investment banking relationship with Fahnestock & Co. Inc.

2. A proponent of a proxy proposal has a business relationship with the
Adviser or one of its affiliates or the Adviser or one of its affiliates
has a business relationship with participants in proxy contests,
corporate directors or director candidates.

3. An employee of the Adviser has a personal interest in the outcome of a
particular matter before shareholders. If the Adviser receives a proxy
that to the knowledge of the Proxy Manager raises a conflict of
interest, the Proxy Manager shall advise the Governance Committee which
shall determine whether the conflict is "material" to any specific
proposal involved in the proxy. The Governance Committee will determine
whether the proposal is material as follows:

a. Routine proxy proposals are presumed not to involve a material
conflict of interest.

b. Non-routine proxy proposals. Proxy proposals that are "non-routine"
will be presumed to involve a material conflict of interest unless
the Governance Committee determines that the conflict is unrelated to
the proposal. Non-routine proposals would include a merger,
compensation matters for management and contested elections of
directors.

CONFLICTS CONT'D
----------------

c. The Governance Committee may determine on a case-by-case basis that
particular non-routine proposals do not involve a material conflict
of interest because the proposal is not directly related to the
Adviser's conflict vis-a-vis the issue. The Governance Committee will
record the basis for any such determination. With respect to any
proposal that the Governance Committee determines presents a material
conflict of interest, the Adviser may vote regarding that proposal in
any of the following ways:

a) Obtain instructions from the client on how to vote.

b) Use existing proxy guidelines if the policy with respect to the
proposal is specifically addressed and does not involve a
case-by-case analysis.

c) Vote the proposal that involves the conflict according to the
recommendations of an independent third party such as
Institutional Share Services Inc. or Investor Responsibility
Research Center.

CHAPTER 12

GOVERNANCE COMMITTEE
AND
PROXY MANAGERS

GOVERNANCE COMMITTEE
--------------------

The Governance Committee is responsible for the maintenance of the Proxy Voting
Policies and Procedures and will determine whether any conflict between the
interest of clients and the Advisers in voting proxies is material. The
Governance Committee includes the following: (1) Bryan McKigney, (2) Barbara
Pires, and (3) Punita Kumar-Sinha.

PROXY MANAGERS
--------------

The Proxy Manager for the Adviser is Punita Kumar-Sinha, Portfolio Manager. The
Proxy Manager will determine how votes will be cast on proposals that are
evaluated on a case-by case basis.

CHAPTER 13

SPECIAL ISSUES WITH VOTING
FOREIGN PROXIES

SPECIAL ISSUES WITH VOTING FOREIGN PROXIES
------------------------------------------

Voting proxies with respect to shares of foreign stock may involve significantly
greater effort and corresponding cost than voting proxies in the U.S domestic
market. Issues in voting foreign proxies include the following:

1. Each country has its own rules and practices regarding shareholder
notification, voting restrictions, registration conditions and share
blocking.

2. In some foreign countries shares may be "blocked" by custodian or
depository or bearer shares deposited with specific financial
institutions for a certain number of days before or after the
shareholders meeting. When blocked, shares typically may not be traded
until the day after the blocking period. Advantage may refrain from
voting shares of foreign stocks subject to blocking restrictions where
in the Adviser's judgment the benefit from voting the shares is
outweighed by the interest in maintaining client liquidity in the
shares. This decision is made on a case-by-case basis based on a
relevant factors including the length of the blocking period, the
significance of the holding and whether the stock is considered by a
long-term holding.

3. Time frames between shareholder notification, distribution of proxy
materials, book closures and the actual meeting date may be too short to
allow timely action.

4. In certain countries, applicable regulations require that votes must be
made in person at the shareholder meeting. The Adviser will weigh the
costs and benefits of voting on proxy proposals in countries that
require in-person voting on a case-by-case basis and make decisions on
whether voting on a given proxy proposal is prudent. Generally, the
Adviser will not vote shares in countries that require in person voting
on routine matters such as uncontested elections of directors,
ratification of auditors.

CHAPTER 14

RECORD KEEPING

RECORD KEEPING
--------------

Advantage will maintain the following records:

1. Copies of these policies

2. A copy of each proxy statement that the Adviser receives regarding
client securities. The Adviser may satisfy this requirement by relying
on a third party to keep copies of proxy statements provided that the
Adviser has an undertaking from the third party to provide a copy of the
proxy statement promptly upon request.

3. A record of each vote cast on behalf of a client. A third party may keep
these voting records provided that the Adviser has an undertaking from
the third party to provide a copy of the record promptly upon request.

4. A copy of any document created by the Adviser that was material to
making a decision on how to vote proxies or that memorializes the basis
for that decision.

5. A copy of each written client request for information on how an Adviser
voted proxies on behalf of the client and a copy of written response by
the Adviser to any client request for information on how the Adviser
voted proxies on behalf of the client.

The above records shall be maintained for five years from the end of the fiscal
year during which the last entry was made on such record, the first two years in
an appropriate office of the Adviser.