<PAGE>
MORGAN STANLEY
INDIA INVESTMENT FUND, INC.
- ---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
Barton M. Biggs James W. Grisham
CHAIRMAN OF THE BOARD VICE PRESIDENT
OF DIRECTORS Michael F. Klein
Warren J. Olsen VICE PRESIDENT
PRESIDENT AND DIRECTOR Harold J. Schaaff, Jr.
John Chu VICE PRESIDENT
DIRECTOR Joseph P. Stadler
Gerard la Hausse de Louviere VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
Gerard E. Jones SECRETARY
DIRECTOR James R. Rooney
John A. Levin TREASURER
DIRECTOR Belinda A. Brady
Fergus Reid ASSISTANT TREASURER
DIRECTOR
</TABLE>
- ---------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company (International)
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank (Domestic)
770 Broadway
New York, New York 10003
- --------------------------------------------------------
SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
- --------------------------------------------------------
LEGAL COUNSEL
Rogers & Wells
200 Park Avenue
New York, New York 10166
- --------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
------------------------
MORGAN STANLEY
INDIA INVESTMENT
FUND, INC.
---------------------
SEMI-ANNUAL REPORT
JUNE 30, 1996
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended June 30, 1996, the Morgan Stanley India Investment
Fund, Inc. (the "Fund") had a total return, based on a net asset value per
share, of 24.13% compared to 22.85% for the U.S. dollar adjusted Bombay Stock
Exchange (BSE) Sensitive Index. For the period since the Fund's inception on
February 25, 1994 through June 30, 1996, the Fund's total return, based on net
asset value per share, was -20.37% compared with -19.73% for the BSE Sensitive
Index. On June 28, 1996, the closing price of the Fund's shares on the New York
Stock Exchange was $11.25, representing a 1.7% premium to the Fund's net asset
value per share.
The six months just past saw the beginning of the long awaited rally in the
Indian stock market. Year-to-date India is in fact one of the better performing
emerging markets and the best market in Asia next to Taiwan.
These six months witnessed an election and a new 14 party coalition coming to
power. Domestically there is a great deal of skepticism on this government and
its durability. We, however, don't agree with this view and feel the government
should survive at least 18 months at the minimum. The biggest upside from these
elections is that for the first time we have a clear demonstrated national
consensus on reforms and liberalization. In a matter of 30 days we had the
opportunity to see governments headed by all the three major political
formations (Congress, Bharatiya Janatha Party, The United Front), and there was
a clear consensus on reforms/liberalization apparent in their economic policy
statements.
We retain our optimistic view on the Indian stock market and feel that the rally
has only just begun, and still has a long way to go.
Even today the market is trading at 11 times March 1997 estimated earnings with
earnings growth of 25%. The domestic liquidity situation is easing rapidly and
the reform program is restarting. Having been led by foreign buying, the next
stage of the rally will see the re-emergence of the local investor base of 20
million as a powerful force which should drive the markets forward.
The case for India remains that at 11 times March 1997 estimated earnings you
are buying a market at the bottom of its historical price earning trading range
wherein real interest rates having peaked out at 14% are declining, a dormant
reform program is restarting, and where corporations have shown earnings growth
of 30% for the last four years.
The Fund remains nearly fully invested. We have begun a process of switching out
of large capitalization companies into smaller faster growing mid-cap companies.
The big caps have significantly outperformed in this foreign institution led
rally, but the mid-caps should catch up once the domestic investor returns to
the market.
Sincerely,
[SIGNATURE]
Warren J. Olsen
PRESIDENT AND DIRECTOR
[SIGNATURE]
Vinod Sethi
PORTFOLIO MANAGER
July 11, 1996
2
<PAGE>
Morgan Stanley India Investment Fund, Inc.
Investment Summary as of June 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION (UNAUDITED)
TOTAL RETURN (%)
-----------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (1)(3)
------------------------- ------------------------ ------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C>
------------------------- ------------------------ ------------------------
FISCAL YEAR TO DATE 23.29% -- 24.13% -- 22.85% --
ONE YEAR 9.76 9.76% 0.55 0.55% 5.64 5.64%
SINCE INCEPTION* -19.01 -8.60 -20.37 -9.26 -19.73 -8.94
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31: SIX MONTHS ENDED
1994* 1995 JUNE 30, 1996 (UNAUDITED)
<S> <C> <C> <C>
Net Asset Value Per Share $13.99 $8.91 $11.06
Market Value Per Share $11.25 $9.13 $11.25
Premium/(Discount) -19.6% 2.5% 1.7%
Capital Gains Distributions $0.17 - -
Fund Total Return (2) 0.72% -36.31% 24.13%
Index Total Return (1)(3)** -8.03% -28.96% 22.85%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The US dollar adjusted Bombay Stock Exchange (BSE) Sensitive Index is an
index composed of 30 companies traded on the exchange which are weighted
with respect to market importance.
* The Fund commenced operations on February 25, 1994.
** Unaudited.
3
<PAGE>
Morgan Stanley India Investment Fund, Inc.
Portfolio Summary as of June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Fixed Income Securities 0.4%
Equity Securities 97.9%
Short-Term Investments 1.7%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Automobiles 15.3%
Banking 6.0%
Building Materials & Components 5.0%
Chemicals 4.8%
Energy Equipment & Services 12.8%
Financial Services 5.8%
Health & Personal Care 8.5%
Machinery & Engineering 5.6%
Telecommunications 6.0%
Textiles & Apparel 5.7%
Other 24.5%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
---------------
<C> <S> <C>
1. Bharat Heavy Electricals Ltd. 8.5%
2. Housing Development Finance Ltd. 4.9
3. State Bank of India Ltd. 4.8
4. Mahanagar Telephone Nigam Ltd. 4.7
5. Tata Engineering & Locomotive
Ltd. 3.5
<CAPTION>
PERCENT OF
NET ASSETS
---------------
<C> <S> <C>
6. Container Corp. of India Ltd. 3.1%
7. Sundaram Fasteners Ltd. 2.3
8. Hindalco Industries Ltd. 2.2
9. Crompton Greaves Ltd. 2.2
10. Raymond Ltd. 2.1
---------------
38.3%
---------------
---------------
</TABLE>
4
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
INDIAN COMMON STOCKS (98.2%)
(Unless otherwise noted)
- --------------------------------------------------
- ----------
APPLIANCES & HOUSEHOLD DURABLES (1.7%)
+Bharat Pipes & Fittings Ltd. 512,020 U.S.$ 58
Blow Plast Ltd. 227,100 1,302
+Kelvinator Ltd. 26,050 65
+Kunstoffe Industries Ltd. -- New 178,600 33
Peico Electronics & Electric Ltd. 663,050 2,433
Punjab Anand Lamp Industries Ltd. 227,000 193
Supreme Industries Ltd. 220,950 2,079
Symphony Comfort Systems Ltd. 7,700 5
+TVS Whirlpool Ltd. 200,000 128
VIP Industries Ltd. 161,900 289
--------------
6,585
--------------
- -----------------------------------------------------------------
- -------------
AUTOMOBILES (15.3%)
Apollo Tyres Ltd. 511,275 2,630
+***Apollo Tyres Ltd. (Rights) 245 --
+***Apollo Tyres Ltd. (Warrants),
expiring 2/28/98 141,708 303
Ashok Leyland Ltd. 370,580 1,415
Autolec Industries Ltd. 241,045 698
Autolite Ltd. 132,670 718
+Ceat Tyres Ltd. 883,547 2,383
+Engine Valves Ltd. 24,300 434
Escorts Ltd. 121,200 479
+Harig Crankshafts Ltd. 189,400 43
Hero Honda Ltd. 168,203 1,343
+Hitech Gears Ltd. 94,000 163
Invel Transmissions Ltd. 600 1
Jay Bharat Maruti Ltd. 92,800 145
+LML Ltd. 261,000 509
Lumax Automatic Parts Industries Ltd. 295,300 956
Mahindra & Mahindra Ltd. 4 --
Modi Rubber Ltd. 450 1
+Motherson Sumi Systems Ltd. 165,200 666
+Motherson Sumi Systems Ltd. -- New 58,738 237
+***Motherson Sumi Systems Ltd. (Rights) 120 --
Motor Industries Co. Ltd. 18,405 3,996
MRF Ltd. 73,250 7,334
+Nippondenso India Ltd. 648,200 2,539
O.E.N. Connectors Ltd. 177,526 191
+Pan Auto Ltd. 300,000 43
Patheja Forgings and Auto 'B' Ltd. 325,000 729
Premier Instruments Ltd. 245,987 1,641
Punjab Tractors Ltd. 142,890 2,531
Rane Madras Ltd. 152,000 1,726
Rico Auto Industries Ltd. 221,000 848
S.K.F. Bearings Ltd. 18,755 1,560
Sona Steering System Ltd. 2,100 5
Subros Auto Ltd. 98,000 445
Subros Auto Ltd. -- New 61,395 279
Sundaram Abex Ltd. 24,700 207
+Sundaram Brake Ltd. 2,850 24
+***Sundaram Brake Ltd. (Warrants) 2,850 16
Sundaram Fasteners Ltd. 247,350 4,985
Sundaram Fasteners Ltd. -- New 194,200 3,914
Tata Engineering & Locomotive Ltd. 946,022 13,963
+VST Tillers & Tractors Ltd. 173,000 456
--------------
60,556
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
BANKING (6.0%)
Federal Bank Ltd. 600 U.S.$ 3
+Federal Bank Ltd. -- New 139,000 800
+***Federal Bank Ltd. (Rights) 100 --
+HDFC Bank Ltd. 518,400 574
Oriental Bank of Commerce Ltd. 1,132,100 3,149
State Bank of India Ltd. 2,239,420 19,086
--------------
23,612
--------------
- -----------------------------------------------------------------
- -------------
BEVERAGES (1.2%)
ITC Ltd. 524,728 4,644
McDowell & Co. Ltd. 500 --
--------------
4,644
--------------
- -----------------------------------------------------------------
- -------------
BROADCASTING & PUBLISHING (1.5%)
Navneet Publications Ltd. 233,100 1,126
+*New Delhi Television Ltd. 333,300 1,277
Srishti Videocorp Ltd. 225,000 154
+Tamil Nadu Newsprint & Paper Ltd. 450,000 1,827
Tata Press Ltd. 137,050 1,293
Zee Telefilms Ltd. 2,700 11
--------------
5,688
--------------
- -----------------------------------------------------------------
- -------------
BUILDING MATERIALS & COMPONENTS (5.0%)
Associated Cement Co. Ltd. 31,318 2,146
Bell Ceramics Ltd. 170,750 80
Bell Ceramics Ltd. -- New 254,770 119
+***Bell Ceramics Ltd. (Rights) 1,537 --
Dalmia Cement Ltd. 124,950 1,176
+Gujarat Sidhee Cement Ltd. 2,500,000 653
#India Cements Ltd. GDR 85,000 489
+ITW Signode India Ltd. 574,950 1,681
Madras Cements Ltd. 21,665 7,564
Murudeshwar Ceramics Ltd. 346,700 566
Mysore Cements Ltd. 200 --
Orissa Cement Ltd. 86,660 504
+Priyadarshini Cement Ltd. 240,750 186
Ramco Ltd. 113,800 4,070
Shree Cements Ltd. 224,050 275
+Somani Cement Co. Ltd. 200,000 104
--------------
19,613
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
CHEMICALS (4.8%)
Asian Paints Ltd. 235,980 U.S.$ 2,922
Atul Products Ltd. 255,471 341
Atul Products Ltd. -- New 90,000 120
Chemox Chemicals Ltd. 250,000 216
Chemplast Sanmar Ltd. 'B' 130,000 506
Colour Chem Ltd. 13,645 1,239
Gujarat Narmada Valley Fertilizers
Ltd. 477,400 525
Gujarat Narmada Valley Fertilizers
Ltd. GDR 212,000 1,405
Hindustan Organic Chemicals Ltd. 554,600 693
Hoechst Schering Agrevo Ltd. 201,900 2,751
ICI India Ltd. 484,400 2,832
Indian Dyestuff Industries Ltd. 99,945 50
Indian Organic Chemical Ltd. 679,050 395
Indian Petro Chemical Corp. Ltd. 611,400 2,703
#Indian Petro Chemical Corp. Ltd. GDR 22,000 368
Indo Gulf Fertilizer & Chemical Ltd.
-- New 600 1
ITC Agrotech Co. Ltd. 41,400 50
+***ITC Agrotech Co. Ltd. (Rights) 95,800 --
Jayant Agro Ltd. 13,000 37
Jaysynth Dyechem Ltd. 340,500 600
Metrochem Industries Ltd. 150,700 161
National Organic Chemical Industries
Ltd. 10 --
Reliance Industries Ltd. GDS 45,572 274
+**Sandoz Exports Ltd. 25,000 --
Sudarsha Chemicals Ltd. 234,957 934
Tainwala Chemicals & Plastics Ltd. 52,009 21
Tamil Nadu Petrochemicals Ltd. 200 --
--------------
19,144
--------------
- -----------------------------------------------------------------
- -------------
CONSTRUCTION & HOUSING (0.4%)
Hindustan Construction Ltd. 350,000 467
Hindustan Sanitaryware Ltd. 70,000 356
Nagarjuna Construction Co. Ltd. 156,100 450
+Nagarjuna Construction Co. Ltd. -- New 97,500 281
--------------
1,554
--------------
- -----------------------------------------------------------------
- -------------
ELECTRICAL & ELECTRONICS (1.4%)
+AKG Acoustics (India) Ltd. 81,300 50
Asian Electronics Ltd. 153,000 2,367
Bajaj Electricals Ltd. 132,750 2,088
BPL Ltd. 670,500 1,161
+Centrum Electronics Ltd. 200,000 41
--------------
5,707
--------------
- -----------------------------------------------------------------
- -------------
ELECTRONIC COMPONENTS & INSTRUMENTS (2.8%)
+Fujitsu ICIM Ltd. 648,460 828
Infosys Technology Ltd. 240,200 4,875
Mastek Ltd. 126,400 771
Modi Xerox Ltd. 778,550 3,204
Rolta India Ltd. 1,395,700 743
Samtel Colour Ltd. 759,250 668
Vikas Hybrids & Electronics Ltd. 175 --
--------------
11,089
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
ENERGY EQUIPMENT & SERVICES (12.8%)
Bharat Heavy Electricals Ltd. 6,620,000 U.S.$ 33,729
Crompton Greaves Ltd. 1,213,830 8,640
Datar Switchgear Ltd. 140,200 879
Jyoti Structure Ltd. 148,450 843
KEC International Ltd. 936,857 3,497
Kirloskar Oil Engine Ltd. 380,840 973
Modern Malleables Ltd. -- New 420,000 411
Shiram Honda Power Equipment Ltd. 302,665 1,415
Uniflex Cables Ltd. 137,700 145
Uniflex Cables Ltd. -- New 149,700 158
--------------
50,690
--------------
- -----------------------------------------------------------------
- -------------
ENERGY SOURCES (0.2%)
+*Residential Photovoltaics Ltd. 200,000 908
--------------
- -----------------------------------------------------------------
- -------------
FINANCIAL SERVICES (5.8%)
Canfin Homes Ltd. 1,011,050 631
Housing Development Finance Corp. Ltd. 229,682 19,154
+ICICI Ltd. 3,831 10
ICICI Ltd. -- New 11,333 29
+Industrial Finance Corp. India Ltd. 1,267,800 1,628
+SCICI Ltd. (Bonus Rights) 3,750 5
+UTI Master Gain Ltd. 1,829,700 667
UTI Master Shares Ltd. 1,619,780 644
UTI Master Shares Ltd. -- New 323,200 128
--------------
22,896
--------------
- -----------------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (0.7%)
American Dry Fruits Ltd. 538,500 242
Aruna Sugars & Enterprises Ltd. 12,150 8
Brooke Bond Lipton Ltd. 650 7
Dhampur Sugar Mills Ltd. 200,000 653
+Kothari Sugars & Chemicals Ltd. 191,700 159
Sakthi Sugar Ltd. 164,665 243
Satnan Overseas Ltd. 200 --
Thiru Arooran Sugars Ltd. 264,500 976
+Umred Agro Complex Ltd. 124,500 11
Vadilal Industries Ltd. 250,000 153
Western Hatcheries Ltd. 237,933 297
--------------
2,749
--------------
- -----------------------------------------------------------------
- -------------
FOREST PRODUCTS & PAPER (1.5%)
Andrah Paper Ltd. 19,625 1,036
Ballarpur Industries Ltd. 603,054 2,777
ITC Bhadrachalam Paperboards Ltd. --
New 200,000 602
Paper Products Ltd. 170,000 675
Paper Products Ltd. -- New 48,900 194
Pudumjee Ltd. 221,600 522
--------------
5,806
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
HEALTH & PERSONAL CARE (8.5%)
Apollo Hospitals Enterprises Ltd. 500,000 U.S.$ 525
Cipla Ltd. 231,550 2,716
*Clariant (India) Ltd. 25,000 319
Crossland Research Labs Ltd. 185,500 2,717
E. Merck (India) Ltd. 406,400 2,584
Godrej Soaps Ltd. 476,000 709
Godrej Soaps Ltd.-New 130,650 195
Hoechst India Ltd. 560,200 5,565
+Indian Shaving Products Ltd. 196,700 1,555
Lakme Ltd. 253,350 3,351
+Marico Industries Ltd. 198,400 1,718
Nicholas Piramal India Ltd. 280,300 1,723
Pfizer Ltd. 342,250 2,618
+***Ranbaxy Labs Ltd. (Warrants) 40,000 547
Searle (India) Ltd. 300,000 871
SmithKline Beecham Pharmaceuticals
(India) Ltd. 183,000 1,678
Sun Pharmaceutical Industries Ltd. 371,500 2,927
TTK Biomed Ltd. 143,700 165
Unichem Labs Ltd. 162,700 1,155
--------------
33,638
--------------
- -----------------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (1.3%)
BOC India Ltd. 331,500 720
Carborondum Universal Ltd. 493,300 2,492
Chicago Pneumatic India Ltd. 257,090 1,934
--------------
5,146
--------------
- -----------------------------------------------------------------
- -------------
LEISURE & TOURISM (0.4%)
Asian Hotels Ltd. 2,600 23
Indian Hotels Co. Ltd. 50 1
ITC Hotels Ltd. 93,600 531
ITC Hotels Ltd. -- New 170,800 970
Kamata Hotels India Ltd. 300,000 226
--------------
1,751
--------------
- -----------------------------------------------------------------
- -------------
MACHINERY & ENGINEERING (5.5%)
Advani-Oerlikon Ltd. 300,700 1,562
+Ahmednagar Forgings Ltd. 83,000 187
Ahmednagar Forgings Ltd. -- New 83,100 188
Artson Engineering Ltd. 204,293 104
Bharat Forge Co. Ltd. 633,518 3,201
Esab India Ltd. 564,300 1,414
Graphite India Ltd. 272,500 723
Indian Seamless Metal Tubes Ltd. 285,000 554
Ingersoll Rand (India) Ltd. 6,650 66
Kabra Extrusion Technik Ltd. 153,000 460
Lakshmi Machine Works Ltd. 6,715 1,668
+Lakshmi Synthetic Machinery Ltd. 152,400 297
M.M. Forgings Ltd. 35,900 73
Praj Industries Ltd. 153,200 413
Revathi-CP Equipment Ltd. 55,650 821
Thermax Ltd. 472,500 5,368
Wartsila Diesel Ltd. 429,500 4,428
--------------
21,527
--------------
- -----------------------------------------------------------------
- -------------
METALS -- NON-FERROUS (2.4%)
Hindalco Industries Ltd. 247,850 8,831
+Pennar Aluminum Co. Ltd. 1,632,800 753
SKS Ltd. 100,000 38
--------------
9,622
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
METALS -- STEEL (0.7%)
+India Seamless Steel & Alloy Ltd. 905,800 U.S.$ 193
Isibars Ltd. 500,000 667
Mukand Iron & Steel Works Ltd. 181,416 721
Panchmahal Steels Ltd. 197,700 196
Sesa Goa Ltd. 2,020 24
Sesa Goa Ltd. -- New 4,864 57
+***Sesa Goa Ltd. (Rights) 10 --
Shri Ishar Alloy Steels Ltd. 369,500 222
Special Steels Ltd. 62,550 161
Tata Iron & Steel Co. Ltd. 3,807 26
Uttam Galva Steels Ltd. 653,550 367
--------------
2,634
--------------
- -----------------------------------------------------------------
- -------------
MISCELLANEOUS MATERIALS & COMMODITIES (1.4%)
Alpha Geo Ltd. 68,700 20
+Control Print (India) Ltd. 75,000 19
+Control Print (India) Ltd. -- New 27,500 7
Cosmo Films Ltd. 209,900 721
Essel Packaging Ltd. 368,150 1,797
Flex Industries Ltd. 518 2
+***Flex Industries Ltd. (Rights) 9,342 --
+***Flex Industries Ltd. (Warrants) 53,939 202
Garware Plastics & Polyester Ltd. 377 2
+Garware Plastics & Polyester
Ltd. -- New 397,412 2,205
Kitply Industries Ltd. 200 --
Pearl Polymers Ltd. 338,300 270
+PVD Plastic Mouldings Industries Ltd. 147,400 58
Sharp Industries Ltd. 800 --
Uniworth Internationa1 Ltd. 500 --
+Vesuvius (India) Ltd. 20,000 37
Vippy Solvex Products Ltd. 250,000 50
--------------
5,390
--------------
- -----------------------------------------------------------------
- -------------
MULTI-INDUSTRY (1.2%)
Birla VXL Ltd. 712,710 475
E.I.D. Parry Ltd. GDR 94,320 269
Grasim Industries Ltd. 30,255 491
Indian Rayon & Industries Ltd. 300 4
#Indian Rayon & Industries Ltd. GDS 50,000 743
Indian Rayon & Industries Ltd.
GDS -- New 8,900 131
J.K. Corp. Ltd. 357,483 1,091
Larsen & Toubro Ltd. 2,000 16
S&S Industries & Enterprises Ltd. 580,640 162
S&S Power Switchgear Ltd. 226,105 1,078
+***Shriram Industrial Enterprises
Ltd. GDR (Warrants) 34,000 --
Standard Industries Ltd. 121,366 53
--------------
4,513
--------------
- -----------------------------------------------------------------
- -------------
RECREATION & OTHER CONSUMER GOODS (0.4%)
Titan Industries Ltd. 18,400 68
Tube Investments of India Ltd. 266,650 918
Tube Investments of India Ltd. -- New 16,666 57
Tube Investments of India Ltd. GDR 198,133 618
--------------
1,661
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
TELECOMMUNICATIONS (6.0%)
+Indian Telephone Industries Ltd. 832,700 U.S.$ 241
Mahanagar Telephone Nigam Ltd. 2,592,900 18,676
MSL Industries Ltd. 124,000 317
MSL Industries Ltd. -- New 62,000 158
Punjab Wire Ltd. 138,700 603
Videsh Sanchar Nigam Ltd. 95,000 3,640
--------------
23,635
--------------
- -----------------------------------------------------------------
- -------------
TEXTILES & APPAREL (5.7%)
A.P. Rayon Ltd. 420,600 1,015
+Arun Processors Ltd. 176,000 29
+***Baroda Rayon Corp. Ltd. (Rights) 15 --
+Bata India Ltd. 120,150 300
Century Textiles & Industries Ltd. GDR 6,500 1,037
Coates of India Ltd. 233,000 1,265
Cosmos Leather Exports Ltd. 325,000 78
DCL Polyesters Ltd. 899,650 421
Delta Industries Ltd. 380,000 375
G.T.N. Textiles Ltd. 257,500 678
Indo Rama Synthetics Ltd. 1,063,488 1,298
Indo Rama Synthetics Ltd. 'B' 1,100 1
Indo Rama Synthetics Ltd. -- New 309,684 378
+***Indo Rama Synthetics Ltd. (Rights) 347 --
+J.K. Synthetics Ltd. 2,093,220 1,292
Mahavir Spinning Mills Ltd. 441,000 1,127
Maral Overseas Ltd. 650,400 471
+Modi Threads Ltd. 662,300 39
Precot Mills Ltd. -- New 66,777 256
Priyadashini Spinning Ltd. 126,850 61
Raymond Ltd. 387,600 3,727
Raymond Ltd. GDR 25,000 522
#Raymond Ltd. GDR 177,000 3,696
Raymond Ltd. -- New 52,500 505
+Sanotgen Ltd. 272,800 46
Shree Rajasthan Syntex Ltd. 266,550 189
SIV Industries Ltd. GDR 313,500 940
+***SIV Industries Ltd. (Warrants) 104,500 --
SRF Ltd. 665,119 802
Super Spinning Mills Ltd. 200,357 711
Vardhaman Polytex Ltd. 283,400 274
Vardhaman Spinning & General Mills
Ltd. 135,900 415
Viral Syntex Ltd. 250,000 220
Woolworth India Ltd. 379,020 396
--------------
22,564
--------------
- -----------------------------------------------------------------
- -------------
TRANSPORTATION -- ROAD & RAIL (3.1%)
Container Corp. of India Ltd. 2,061,600 12,289
--------------
- -----------------------------------------------------------------
- -------------
TRANSPORTATION -- SHIPPING (0.5%)
Great Eastern Shipping Ltd. 1,204,500 1,727
Great Eastern Shipping Ltd. GDR 20,000 173
Mercator Lines Ltd. 188,200 75
--------------
1,975
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
UTILITIES -- ELECTRICAL & GAS (0.0%)
Andhra Valley Power Supply Co. Ltd. 250 U.S.$ 1
+***CESC Ltd. (Preferred Warrants) 353,000 --
Tata Hydro Electric Power Supply Co.
Ltd. 450 2
--------------
3
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INDIAN COMMON STOCKS
(Cost U.S. $437,481) 387,589
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FIXED INCOME SECURITIES (0.4%)
- ---------------------------------------------------------
- ------------
CHEMICALS (0.0%)
**Chemox Chemical Industries Ltd.
(Convertible) 14.00%, 12/31/00 INR 250 199
--------------
- -----------------------------------------------------------------
- -------------
CONSTRUCTION & HOUSING (0.1%)
**Nagarjuna Construction Part Ltd. 'B'
14.90%, 3/1/97 98 274
--------------
- -----------------------------------------------------------------
- -------------
CONSUMER GOODS (0.0%)
**Srishti Video Corp. Ltd.
(Convertible) 12.00%, 11/12/96 225 138
--------------
- -----------------------------------------------------------------
- -------------
MACHINERY & ENGINEERING (0.1%)
**Indian Seamless Metal Tubes Ltd.
(Convertible) 10.00%, 7/13/96 13,950 257
--------------
- -----------------------------------------------------------------
- -------------
METALS -- STEEL (0.0%)
**Special Steels Ltd. 14.00%, 12/6/02 14 50
--------------
- -----------------------------------------------------------------
- -------------
MISCELLANEOUS MATERIALS & COMMODITIES (0.2%)
**Garware Plastics & Polyester Ltd.
16.00%, 5/1/05 277 700
--------------
- -----------------------------------------------------------------
- -------------
TELECOMMUNICATIONS (0.0%)
**MSL Industries Ltd. 'B' 16.00%,
7/31/96 62 153
--------------
- -----------------------------------------------------------------
- -------------
TOTAL FIXED INCOME SECURITIES
(Cost U.S. $2,908) 1,771
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.3%)
REPURCHASE AGREEMENT
Chase Securities, Inc. 5.15%, dated
6/28/96, due 7/1/96, to be
repurchased at U.S.$1,334,
collateralized by U.S.$1,310 United
States Treasury Notes 7.125%, due
9/30/99, valued at U.S.$1,339 (Cost
U.S. $1,333) U.S.$ 1,333 U.S.$ 1,333
--------------
- -----------------------------------------------------------------
- -------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (1.4%)
Indian Rupee (Cost U.S. $5,450) INR 189,985 5,393
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (100.3%)
(Cost U.S. $447,172) 396,086
--------------
- -----------------------------------------------------------------
- -------------
OTHER ASSETS (3.5%)
Receivable for Investments Sold U.S.$ 8,281
Share Application Money 2,785
Dividends Receivable 1,363
Foreign Withholding Tax Reclaim
Receivable 1,287
Deferred Organization Costs 35
Other Assets 62 13,813
--------------- --------------
- -----------------------------------------------------------------
- -------------
LIABILITIES (-3.8%)
Payable for:
Investments Purchased (13,489)
Custodian Fees (766)
Investment Advisory Fees (357)
Shareholder Reporting Expenses (101)
Professional Fees (72)
Administrative Fees (38)
Directors' Fees and Expenses (26)
Other Liabilities (246) (15,095)
--------------- --------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
NET ASSETS (100%)
Applicable to 35,707,092, issued and outstanding U.S.
$0.01 par value shares (100,000,000 shares
authorized) U.S.$ 394,804
--------------
--------------
- -----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 11.06
--------------
--------------
- -----------------------------------------------------------------
- -------------
AT JUNE 30, 1996 NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------
Common Stock U.S.$ 357
Capital Surplus 496,097
Accumulated Net Investment Loss (4,137)
Accumulated Net Realized Loss (46,334)
Unrealized Depreciation on Investments and Foreign
Currency Translations (51,179)
- -----------------------------------------------------------------
- -------------
TOTAL NET ASSETS U.S.$ 394,804
--------------
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
+ -- Non-income producing.
* -- Security valued at cost -- see note A-1 to financial statements.
** -- Security valued at fair value -- see note A-1 to financial statements.
*** -- Security valued at fair value as determined based on the market value of
the underlying security less subscription costs.
# -- 144A Security -- certain conditions for public sale may exist.
GDR -- Global Depositary Receipt.
GDS -- Global Depositary Shares.
June 30, 1996 exchange rate-Indian Rupee (INR) 35.230=U.S.$1.00
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................... U.S.$ 475
Interest................................................................................ 156
Less: Foreign Taxes Withheld............................................................ (186)
- ---------------------------------------------------------------------------------------------------------------
Total Income.......................................................................... 445
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Custodian Fees.......................................................................... 1,301
Investment Advisory Fees................................................................ 1,987
Administrative Fees..................................................................... 201
Professional Fees....................................................................... 101
Shareholder Reporting Expenses.......................................................... 56
Directors' Fees and Expenses............................................................ 41
Sub-Administrative Fees................................................................. 12
Transfer Agent Fees..................................................................... 8
Other Expenses.......................................................................... 117
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................................................ 3,824
- ---------------------------------------------------------------------------------------------------------------
Net Investment Loss............................................................... (3,379)
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold.............................................................. (19,959)
Foreign Currency Transactions........................................................... 75
- ---------------------------------------------------------------------------------------------------------------
Net Realized Loss................................................................. (19,884)
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Depreciation on Investments............................................................. 99,833
Depreciation on Foreign Currency Translations........................................... 189
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................... 100,022
- ---------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation.................. 80,138
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$ 76,759
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Loss................................................. U.S.$ (3,379) U.S.$ (5,816)
Net Realized Loss................................................... (19,884) (25,999)
Change in Unrealized Appreciation/Depreciation...................... 100,022 (149,621)
- ---------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations..... 76,759 (181,436)
- ---------------------------------------------------------------------------------------------------------------
Total Increase (Decrease)........................................... 76,759 (181,436)
Net Assets:
Beginning of Period................................................. 318,045 499,481
- ---------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of U.S.
$4,137 and U.S. $758, respectively)................................ U.S.$394,804 U.S.$318,045
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS FEBRUARY 25,
ENDED YEAR ENDED 1994*
JUNE 30, 1996 DECEMBER 31, TO DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS: (UNAUDITED) 1995 1994
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.... U.S.$ 8.91 U.S.$ 13.99 U.S.$ 14.10
- ---------------------------------------------------------------------------------------------
Offering Costs.......................... -- -- (0.03)
- ---------------------------------------------------------------------------------------------
Net Investment Income (Loss)............ (0.10) (0.16) 0.04
Net Realized and Unrealized Gain (Loss)
on Investments......................... 2.25 (4.92) 0.05
- ---------------------------------------------------------------------------------------------
Total from Investment Operations.... 2.15 (5.08) 0.09
- ---------------------------------------------------------------------------------------------
Distributions:
Net Realized Gain................... -- -- (0.09)
In Excess of Net Realized Gain...... -- -- (0.08)
- ---------------------------------------------------------------------------------------------
Total Distributions................. -- -- (0.17)
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... U.S.$ 11.06 U.S.$ 8.91 U.S.$ 13.99
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD... U.S.$ 11.25 U.S.$ 9.13 U.S.$ 11.25
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value........................ 23.29% (18.89)% (19.01)%
Net Asset Value (1)................. 24.13% (36.31)% 0.72%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)... U.S.$394,804 U.S.$318,045 U.S.$499,481
- ---------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets................................. 2.12%** 3.16% 1.61%**
Ratio of Net Investment Income (Loss) to
Average Net Assets..................... (1.87)%** (1.48)% 0.33%**
Portfolio Turnover Rate................. 15% 28% 19%
Average Commission Rate (2)............. U.S.$0.0493 N/A N/A
- ---------------------------------------------------------------------------------------------
*Commencement of Operations.
**Annualized.
(1)Total investment return based on net asset value per share reflects the effects of changes
in net asset value on the performance of the Fund during the period, and assumes dividends
and distributions, if any, were reinvested. This percentage is not an indication of the
performance of a shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value of the Fund.
(2)Beginning with fiscal year 1996, the Fund is required to disclose the average commission
rate per share it paid for portfolio trades on which commissions were charged during the
period.
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
- ----------
The Morgan Stanley India Investment Fund, Inc. (the "Fund") was incorporated
in Maryland on December 22, 1993, and is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective is long-term capital
appreciation through investments primarily in equity securities.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for
which market quotations are readily available are valued at the last sales
price on the valuation date, or if there was no sale on such date, at the
mean between the current bid and asked prices. Securities which are traded
over-the-counter are valued at the average of the mean of current bid and
asked prices obtained from brokers. Short-term securities which mature in 60
days or less are valued at amortized cost. All other securities and assets
for which market values are not readily available (including investments
which are subject to limitations as to their sale) are valued at fair value
as determined in good faith by the Board of Directors (the "Board"),
although the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
The Fund invests in India through a registered branch office established in
Mauritius and expects to obtain benefits under the double taxation treaty
between Mauritius and India. To obtain benefits under the double taxation
treaty the Fund must meet certain tests and conditions, including the
establishment of Mauritius tax residence and related requirements. The Fund
has obtained a tax residence certification from the Mauritian authorities
and believes such certification is determinative of its resident status for
treaty purposes. A fund which is a tax resident in Mauritius under the
treaty but has no branch or permanent establishment in India, will not be
subject to capital gains tax in India on the sale of securities but is
subject to a 15% withholding tax on dividends, which has been provided for
in these accounts. The Fund is subject to and accrues Indian withholding tax
on interest earned on Indian securities at the rate of 20%. A portion of
Foreign Withholding Tax Reclaim Receivable at June 30, 1996 relates to taxes
that will be refunded to the Fund upon the filing of the Fund's India tax
return for the fiscal year ended March 31, 1997.
In Mauritius, the Fund is liable to income tax under the current Mauritian
legislation at the rate of 0%. However, the Fund may, in any year, elect to
pay tax on its net investment income at any rate between 0% and 35%. As of
the date of these financial statements, no provision for Mauritius taxes is
considered necessary as a result of net investment losses incurred by the
Fund.
The foregoing is based on current interpretation and practice and is subject
to any future changes in Indian or Mauritan tax laws and in the tax treaty
between India and Mauritius.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, with a market value at least equal to the amount of
the repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value
of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the counter-party to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in Indian rupees are
translated into U.S. dollars at the mean of the bid and asked prices of such
currency against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the
prevailing rate of exchange on the valuation date;
- investment transactions and investment
income at the prevailing rate of exchange on the dates of such transactions.
12
<PAGE>
Although the net assets of the Fund are presented at the foreign exchange
rate and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rate from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund does
not isolate the effect of changes in the foreign exchange rate from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) are included in the reported net realized and unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of forward foreign
currency exchange contracts, disposition of foreign currency, currency gains
or losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains
(losses) from valuing foreign currency denominated assets and liabilities at
period end exchange rates are reflected as a component of unrealized
appreciation (depreciation) in the Statement of Net Assets. The change in
unrealized currency gains (losses) for the period is reflected in the
Statement of Operations.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into forward
foreign currency exchange contracts to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates. A forward foreign currency exchange contract is an agreement between
two parties to buy or sell currency at a set price on a future date. The
market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily and the change in
market value is recorded by the Fund as unrealized gain or loss. The Fund
records realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and is generally limited to the amount of unrealized gain
on the contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Investments in new Indian securities are made by
making applications in the public offerings. The issue price, or a portion
thereof, is paid at the time of application and reflected as share
application money on the Statement of Net Assets. Upon allotment of the
securities, this amount plus any remaining amount of issue price is recorded
as cost of investments. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is recorded on
the ex-dividend date (except certain dividends which may be recorded as soon
as the Fund is informed of such dividend) net of applicable withholding
taxes. Distributions to shareholders are recorded on the ex-date.
The amount and character of income and capital gain distributions to be paid
are determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments for foreign currency
transactions, net operating losses, gains on certain securities of
corporations designated as "passive foreign investment companies" and the
timing of the recognition of losses on securities.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and capital
surplus.
Adjustments for permanent book-tax differences, if any, are not reflected in
ending undistributed net investment income (loss) for the purposes of
calculating net investment income (loss) per share in the financial
highlights.
B. Morgan Stanley Asset Management Inc. (the "Adviser") provides investment
advisory services to the Fund under the terms of an Investment Advisory and
Management Agreement (the "Agreement"). Under the Agreement, the Adviser is paid
a fee computed weekly and payable monthly at an annual rate of 1.10% of the
Fund's average weekly net assets.
C. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services
Company (the "Administrator"), provides administrative services to the Fund
under an Administration Agreement. Under the Administration Agreement, the
Administrator is paid a fee computed weekly and payable monthly at an annual
rate of .09% of the Fund's average weekly net assets, plus $65,000 per annum. In
addition, the Fund is charged certain out-of-pocket expenses by the
Administrator. The Chase Manhattan Bank acts as custodian for the Fund's assets
held in the United States.
13
<PAGE>
Multiconsult, Ltd., whose registered office is in Mauritius, provides
sub-administrative services to the Fund, including maintaining certain Fund
records and preparing certain periodic filings, under an agreement whereby
Multiconsult is paid a fee of $22,000 per annum.
D. Morgan Stanley Trust Company (the "International Custodian"), an affiliate
of the Adviser, acts as custodian for the Fund's assets held outside the United
States in accordance with a Custody Agreement. International Custodian fees are
payable monthly based on Fund assets under custody plus an amount for each
transaction effected. For the six months ended June 30, 1996, the Fund incurred
international custodian fees of $1,297,000, of which $764,000 was payable to the
International Custodian at June 30, 1996.
E. During the six months ended June 30, 1996, the Fund made purchases and sales
totaling $55,391,000 and $52,984,000, respectively, of investment securities
other than long-term U.S. Government securities and short term investments.
There were no purchases and sales of long-term U.S. Government securities. At
June 30, 1996, the U.S. Federal income tax cost basis of securities was
$441,722,000, and, accordingly, net unrealized depreciation for U.S. Federal
income tax purposes was $51,029,000, of which $55,299,000 related to appreciated
securities and $106,328,000 related to depreciated securities. At December 31,
1995, the Fund had a capital loss carryforward for U.S. Federal income tax
purposes of approximately $19,397,000 available to offset future capital gains
which will expire on December 31, 2003. To the extent that capital gains are
offset, such gains will not be distributed to shareholders. For the year ended
December 31, 1995, the Fund expects to defer, to January 1, 1996 for U.S.
Federal income tax purposes post-October capital losses of $6,770,000 and
post-October currency losses of $517,000.
F. In connection with its organization and initial public offering of shares,
the Fund incurred $65,000 and $1,164,000 of organization and offering costs,
respectively. The organization costs are being amortized on a straight-line
basis over a five year period beginning February 25, 1994, the date the Fund
commenced operations. The offering costs were charged to capital.
G. A significant portion of the Fund's net assets consist of Indian securities
which involve certain considerations and risks not typically associated with
investments in the United States. In addition to its smaller size, lesser
liquidity and greater volatility, the Indian securities market is less developed
than the U.S. securities market and there is often substantially less publicly
available information about Indian issuers than there is about U.S. issuers.
Settlement mechanisms are also less developed and are accomplished only through
physical delivery, which may cause the Fund to experience delays or other
difficulties in effecting transactions. At June 30, 1996, the Fund owned an
aggregate of approximately $30,661,000 in securities which were either out for
transfer in the name of the Fund, were under objection for transfer in the name
of the Fund, or were due from companies and/or brokers for various capital
changes. Such securities are valued in accordance with the Fund's security
valuation policy as described in Note A-1, but may not be saleable at the value
shown in the Statement of Net Assets at June 30, 1996. The Fund has no intention
of selling such securities until they are transferred in the name of the Fund.
Future economic and political developments in India could adversely affect the
liquidity or value, or both, of securities in which the Fund is invested. In
addition, the Fund's ability to hedge its currency risk is limited and
accordingly, the Fund may be exposed to currency devaluation and other exchange
rate fluctuations.
H. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. The deferred fees payable, under the Plan, at June 30, 1996 totaled
$12,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
14
<PAGE>
I. SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of the Stockholders of the Morgan Stanley India
Investment Fund, Inc., was held on June 19, 1996. The following is a summary of
each proposal presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- ------------------------------------------------------------------------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. To elect the following Directors: Barton M. Biggs.......................... 20,306,517 -- 264,009 --
John A. Levin.................................. 20,306,775 -- 263,752 --
2.To ratify the selection of Price Waterhouse LLP as independent public
accountants of the Fund..................................................... 20,334,926 44,544 -- 191,053
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS* (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED GAIN NET INCREASE
(LOSS) AND CHANGE IN
(DECREASE)
UNREALIZED IN NET ASSETS
INVESTMENT NET INVESTMENT APPRECIATION/ RESULTING
INCOME INCOME (LOSS) DEPRECIATION FROM OPERATIONS
------------------------ ---------------------- --------------------- ---------------------
PER PER PER PER
QUARTER ENDED AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ---------------------------------- ----------- ----------- ----------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1996..................... $ 345 $ 0.01 $ (1,677) $ (0.05) $ 26,207 $ 0.74 $ 24,530 $ 0.69
March 31, 1996.................... 100 0.00 (1,702) (0.05) 53,931 1.51 52,229 1.46
----------- ----- ----------- --------- ---------- --------- ---------- ---------
Total........................... $ 445 $ 0.01 $ (3,379) $ (0.10) $ 80,138 $ 2.25 $ 76,759 $ 2.15
----------- ----- ----------- --------- ---------- --------- ---------- ---------
----------- ----- ----------- --------- ---------- --------- ---------- ---------
December 31, 1995................. $ 1,292 $ 0.04 $ (3,659) $ (0.10) $ (47,546) $ (1.27) $ (51,205) $ (1.37)
September 30, 1995................ 3,655 0.10 955 0.03 (24,475) (0.75) (23,520) (0.72)
June 30, 1995..................... 1,391 0.04 (1,590) (0.04) (26,496) (0.68) (28,086) (0.72)
March 31, 1995.................... 273 0.01 (1,522) (0.05) (77,103) (2.22) (78,625) (2.27)
----------- ----- ----------- --------- ---------- --------- ---------- ---------
Total........................... $ 6,611 $ 0.19 $ (5,816) $ (0.16) $ (175,620) $ (4.92) $ (181,436) $ (5.08)
----------- ----- ----------- --------- ---------- --------- ---------- ---------
----------- ----- ----------- --------- ---------- --------- ---------- ---------
December 31, 1994................. $ 1,878 $ 0.05 $ (839) $ (0.02) $ (28,027) $ (0.78) $ (28,866) $ (0.80)
September 30, 1994................ 1,733 0.05 (301) (0.01) 7,079 0.20 6,778 0.19
June 30, 1994..................... 3,531 0.10 1,681 0.05 24,585 0.68 26,266 0.73
March 31, 1994**.................. 1,541 0.04 937 0.02 (1,995) (0.05) (1,058) (0.03)
----------- ----- ----------- --------- ---------- --------- ---------- ---------
Total........................... $ 8,683 $ 0.24 $ 1,478 $ 0.04 $ 1,642 $ 0.05 $ 3,120 $ 0.09
----------- ----- ----------- --------- ---------- --------- ---------- ---------
----------- ----- ----------- --------- ---------- --------- ---------- ---------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Expressed in thousands of U.S. dollars except per share amounts.
**The Fund commenced operations on February 25, 1994.
The Fund may purchase shares of its Common Stock in the open market at such
prices and in such amounts as the Board of Directors may deem advisable.
15
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the shareholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends and distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
Morgan Stanley India Investment Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
40 Wall Street
New York, NY 10005
1-800-278-4353
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