India Capital Growth Fund : Annual Report December 2021

India Capital Growth Fund 1 Royal Plaza

Royal Avenue St. Peter Port Guernsey GY1 2HL

www.indiacapitalgrowth.com

FOR THE YEAR ENDED 31 DECEMBER 2021

CONTENTS

Management & administration 1

Chair's statement 2

Investment Manager's report 4

Directors 9

Disclosure of directorships in public companies and other relevant entities 10

Directors' report 11

Sustainability and Environmental, Social and Governance ("ESG") matters 19

Statement of Directors' responsibilities 21

Unaudited Directors' remuneration report 22

Audit Committee report 23

Principal investments 26

Portfolio statement 27

Independent Auditor's report 29

Audited statement of comprehensive income 37

Audited statement of financial position 38

Audited statement of changes in equity 39

Audited statement of cash flows 40

Notes to the financial statements 41

MANAGEMENT & ADMINISTRATION

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CHAIR'S STATEMENT

2021 saw investors return to emerging markets with optimism that the woes of COVID were coming to an end with the deployment of vaccines and a greater understanding of the economic impact of the pandemic. This was illustrated by the impact of the second COVID wave suffered by India in April and May 2021, when, unlike the first major wave, economic activity was maintained, tax collections hit an all time high and fiscal discipline was maintained.

PERFORMANCE

Your Company reported strong absolute returns with the Net Asset Value (NAV) rising by 37.9% over the year and the share price by 42.7%. However, the Company's NAV underperformed its benchmark, the BSE MidCap Total Return Index, which rose by 39.7% over the same period. The underperformance can be explained by the recognition of the potential Capital Gains tax liability in the calculation of the NAV, equivalent to reducing the NAV by approximately 2.4%. Mid and small cap stocks outperformed large cap companies over the period.

The Investment Manager's Review will provide more detail on the Company's portfolio but I am pleased to report that the Manager's long term active style is benefiting performance. A number of stocks that have been present in the portfolio for some years, such as Welspun India and Ramkrishna Forgings, were key positive contributors.

REDEMPTION FACILITY

31 December 2021 saw the first redemption point at which shareholders in the Company could request redemption of part or all of their shareholding at an exit discount of 6%. Shareholders were reminded of this in the Interim Report and again in market announcements in early December. 15.6m shares were redeemed, representing 13.9% of shares in the Company.

The second redemption point will be on 31 December 2023. The Board has announced that the exit discount at this redemption point will be no more than 3%.

Further details of the Redemption Facility are available in the Redemption Facility EGM Circular dated 26 May 2020 which you can access in the Investor Relations/ Official Documents section of our website at www. indiacapitalgrowth.com.

DISCOUNT

The Company's share price discount to NAV began the period at 14.1% and closed the period at 11.1% as was expected as a consequence of the redemption point at year end.

In October the Board announced that it intended to use the authority given to it by shareholders to repurchase shares when it believes that the discount is inappropriately wide,unless in volatile conditions. Over the period 412,444 shares were repurchased and since the year end, a further 80,201 shares have been repurchased. The Board believes that it is in shareholders' interests that the Company's share price should more closely reflect the value of the Company's investments. The Board works with the Company's broker, Shore Capital, in this regard.

BOARD MATTERS

The Board continued to hold meetings virtually during 2021 as COVID frustrated efforts to meet in person. We do expect to be able to meet in person and with representatives of the Investment Manager and our other service providers at our meetings in 2022.

The Company is a member of the Association of Investment Companies and seeks to follow best practice regarding appropriate disclosure and governance. The governance principles that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders and treats all shareholders equally. All shareholders are encouraged to have an open dialogue with the Board throughout the year, and the Board can be contacted via our website or the Company Secretary.

We welcomed Lynne Duquemin to the Board in May 2021. As you will read in her biography later in this report, Lynne is an experienced financial services professional, based in Guernsey, and she has already demonstrated her considerable expertise in her contribution to the Board thus far.

Peter Niven will retire from the Board at the AGM. We have engaged a reputable recruitment firm, Fletcher Jones, to help us to identify his successor, whom we expect to have experience of investing in India and emerging markets in general.

INVESTMENT MANAGER

Ocean Dial continues to invest in its fund management team based in Mumbai, with two experienced fund managers (Gaurav Narain and Tridib Pathak) heading the team, which includes five analysts. If you would like to see examples of the team's research output, I would refer you to the House of Ocean Dial (HOOD) section of the Company's website, where you can read research notes written by the team on individual holdings in the Company's portfolio.

The Board engages with Ocean Dial's parent company, Avendus, regularly.

SUSTAINABILITY AND ESG MATTERS

Sustainability and ESG matters are covered in more detail later in this report. However, I thought I should highlight the Board recognises its responsibilities for reporting on ESG and intends to progress towards compliance with the Listing Requirements to report on the four pillars of

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