<PAGE>
MORGAN STANLEY
INDIA INVESTMENT FUND, INC.
- ---------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Barton M. Biggs Samuel T. Reeves
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS James W. Grisham
Michael F. Klein 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 Joanna M. Haigney
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
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank
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, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended June 30, 1997, the Morgan Stanley India Investment
Fund, Inc. (the "Fund") had a total return, based on net asset value per share,
of 28.72% compared to 34.22% for the U.S. dollar adjusted Bombay Stock Exchange
(BSE) National Index (the "Index"). For the one year ended June 30, 1997, the
Fund had a total return, based on net asset value per share, of 2.62% compared
to 2.74% for the Index. For the period since the Fund's commencement of
operations on February 25, 1994 through June 30, 1997, the Fund had a total
return, based on net asset value per share, was -18.36% compared with -20.83%
for the Index. On June 30, 1997, the closing price of the Fund's shares on the
New York Stock Exchange was $12 15/16, representing a 14.1% premium to the net
asset value per share.
April - June has been probably one of the better quarters for the market in
recent times. Foreign index funds are getting overweight on India as an emerging
market because of its relative economic stability compared to other Asian
emerging markets like Thailand, Malaysia and Indonesia. With local institutions
like the Unit Trust of India turning buyers, there has been decline in supply of
stocks. The market rally which was focused on large cap pivotal stocks has been
driven more by fund flows rather than expectations of dramatic change in
fundamentals. Though the economy appears to have bottomed out there is still no
sign of robust revival. Economic indicators such as credit growth and external
trade are still depressed. The pick-up in industrial demand which was expected
in the second half of the current year may be shifted to the last quarter of the
fiscal year ending March 31. The bulk of earnings growth expected for FY 1998 is
expected to be generated in the second half.
The first two weeks of July have seen the market rally broadening out to some
extent with a number of mid-cap stocks showing revival signs. The broadening of
the market move will start impacting the bottom half of our portfolio and with
appreciation of these mid-cap stocks , the top-heavy concentration of the Fund
shall be diluted over time. Though the top ten holdings of our portfolio seem to
be well anchored to deliver longer term outperformance, we are reducing
concentration levels at the margin. From June 30, 1997 to July 30, 1997 the top
10 holdings of the Fund have moved from 55 % to 50 % of the Fund.
Over the past 12 months, interest rates have come down by almost 250 basis
points. With high yield fixed income avenues becoming fewer, equities have re-
emerged as the most attractive option. Domestic liquidity is expanding rapidly
with higher disposable incomes and strong rural incomes. This shall continue to
impact the market positively over the next 6 months.
Crippling interest costs was the prime reason for earnings disappointment in the
March fiscal year 1997. Lower interest will primarily cause the turnaround for
fiscal year 1998. Moreover earnings should get a boost from a cut in corporate
taxes. We expect that an earnings growth rate of 15 % for the current year would
deservedly result in a P/E re-rating and drive market performance.
Recently political factors have influenced market sentiment with attention being
focused on the arrest of the minister of a leading state, Bizarre and the
forming of a new fractional party within the United Front government.
Internal squabbles within the ruling United Front government and an uneasy
relationship with the Congress Party, do remain concerns on the political front.
Despite concerns of political instability, market participants of late have
viewed political developments as a constant negative and adequately discounted
it in stock prices. We are in the early stages of a bull market driven primarily
by expansionary monetary policy. Though there does not seem to be signs of an
immediate earnings growth revival , the easy liquidity conditions should buoy
markets till the first quarter of 1998, when the economy should stage a
turnaround.
We look forward to the rest of the financial year with optimism. The Fund is
well positioned to capture the full benefits of a broadbased market rally.
Sincerely,
[SIGNATURE]
Michael F. Klein
PRESIDENT AND DIRECTOR
[SIGNATURE]
Vinod Sethi
PORTFOLIO MANAGER
July 1997
2
<PAGE>
Morgan Stanley India Investment Fund, Inc.
Investment Summary as of June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
----------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
------------------------ ------------------------ ------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C>
------------------------ ------------------------ ------------------------
FISCAL YEAR TO DATE 36.18% -- 28.72% -- 34.22% --
ONE YEAR 15.00 15.00% 2.62 2.62% 2.74 2.74%
SINCE INCEPTION* -6.86 -2.15 -18.36 -5.88 -20.83 -6.74
</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:
TOTAL RETURN SIX MONTHS
1994* 1995 1996 ENDED JUNE 30, 1997
<S> <C> <C> <C> <C>
Net Asset Value Per Share $13.99 $8.91 $8.81 $11.34
Market Value Per Share $11.25 $9.13 $9.50 $12.94
Premium/(Discount) -19.6% 2.5% 7.8% 14.1%
Capital Gains Distributions $0.17 - - -
Fund Total Return (2) 0.72% -36.31% -1.12% 28.72%
Index Total Return (3) -7.88% -31.53% -6.49% 34.22%
Morgan Stanley India Investment Fund, Inc. (2)
Bombay Stock Exchange (BSE) National Index (3)
</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 Bombay Stock Exchange (BSE) National Index is a market capitalization
weighted index including the equity shares of 100 companies from the
"Specified" and the "Non-specified" list of the 5 major stock exchanges,
namely, Bombay, Calcutta, Delhi, Ahmedabad and Madras. Prior to fiscal year
1997, the Fund used the Bombay Stock Exchange Sensitive Index as its
benchmark for performance purposes. Beginning in 1997, the Fund is now using
the Bombay Stock Exchange National Index for the purpose of performance
comparisons. This index more closely represents the investment strategy of
the Fund.
* The Fund commenced operations on February 25, 1994.
3
<PAGE>
Morgan Stanley India Investment Fund, Inc.
Portfolio Summary as of June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENT DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 99.6%
Fixed Income Securi-
ties 0.2%
Short-Term Invest-
ments 0.2%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Automobiles 15.2%
Banking 5.9%
Chemicals 3.8%
Electronic Components & Instruments 5.2%
Energy Equipment & Services 20.6%
Financial Services 7.1%
Health & Personal Care 11.6%
Machinery & Engineering 5.8%
Telecommunications 3.9%
Transportation -- Road & Rail 7.4%
Other 13.5%
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS
PERCENT OF
NET ASSETS
---------------
<C> <S> <C>
1. Bharat Heavy Electricals Ltd. 19.1%
2. Container Corp. of India Ltd. 7.4
3. Housing Development Finance Corp., Ltd. 6.7
4. State Bank of India Ltd. 5.3
5. Mahanagar Telephone Nigam Ltd. 3.9
<CAPTION>
PERCENT OF
NET ASSETS
---------------
<C> <S> <C>
6. Infosys Technology Ltd. 3.6%
7. Hoechst 3.3
8. MRF Ltd. 2.2
9. Sundaram Fasteners Ltd. 2.0
10. Punjab Tractors Ltd. 1.7
---------------
55.2%
---------------
---------------
</TABLE>
4
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
COMMON STOCKS (98.0%)
(Unless otherwise noted)
- --------------------------------------------------
- ----------
APPLIANCES & HOUSEHOLD DURABLES (1.0%)
(a)Bharat Pipes & Fittings Ltd. 150 U.S.$ --@
(a)Blow Plast Ltd. 434,600 698
(a)Kelvinator Ltd. 25 --@
Phillips India Ltd. 692,150 1,682
Punjab Anand Lamp Industries Ltd. 227,000 114
Supreme Industries Ltd. 20,950 1,234
(a)VIP Industries Ltd. 161,900 140
--------------
3,868
--------------
- -----------------------------------------------------------------
- -------------
AUTOMOBILES (15.2%)
Apollo Tyres Ltd. 491,775 1,525
(a,c)Apollo Tyres Ltd. (Rights) 170 --@
(a,c)Apollo Tyres Ltd. (Warrants),
expiring 2/28/98 141,758 54
Ashok Leyland Ltd. 236,480 459
Autolec Industries Ltd. 241,045 290
Autolite Ltd. 132,670 195
(c)Bajaj Tempo Ltd. -- New 47,181 300
Bajaj Tempo Ltd. 2,700 18
(a,c)Bajaj Tempo Ltd. (Rights) 851 3
Castrol (India) Ltd. 9,286 135
Ceat Tyres Ltd. 833,547 716
(a)Denso India Ltd. 648,000 1,217
Elgi Tyres & Tread Ltd. 273,400 3,513
Engine Values Ltd. 185,700 1,118
Escorts Ltd. 150 --@
GKN Invel Transmissions Ltd. 100 --@
(a)Harig Crankshafts Ltd. 104,600 7
(a)Hero Honda Ltd. 315,550 4,522
(a)LML Ltd. 1,600 2
Lumax Automatic Parts Industries Ltd. 373,600 1,023
MRF Ltd. 109,280 9,005
Modi Rubber Ltd. 300 --@
(a)Motherson Sumi Systems Ltd. 223,938 538
(a,c)Motherson Sumi Systems Ltd.
(Rights) 40 --@
Motor Industries Co., Ltd. 9,480 1,858
O.E.N. Connectors Ltd. 143,076 168
(c)Patheja Bros Forgings and Stamp
Ltd. 450,000 541
Patheja Forgings and Auto Ltd. 325,000 130
Premier Instruments Ltd. 245,987 1,122
Punjab Tractors Ltd. 368,420 6,921
Rane Madras Ltd. 213,100 1,516
(c)Rane Brakes and Lining Ltd. 7,500 46
Rico Auto Industries Ltd. 221,000 432
S.K.F. Bearings Ltd. 57,380 4,114
Subros Auto Ltd. 159,395 632
(a)Sundaram Brake Ltd. 2,850 14
Sundaram Fasteners Ltd. 481,100 8,161
TVS Suzuki Ltd. 376,550 4,891
Tata Engineering & Locomotive Ltd. 488,406 6,166
VST Tillers & Tractors Ltd. 173,000 150
--------------
61,502
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
BANKING (5.9%)
(c)Federal Bank Ltd. -- New 150 U.S.$ --@
HDFC Bank Ltd. 1,558,700 2,689
(a)Oriental Bank of Commerce Ltd. 500 1
State Bank of India Ltd. 2,239,370 21,283
--------------
23,973
--------------
- -----------------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (1.0%)
ITC Ltd. 251,566 3,955
McDowell & Co., Ltd. 300 --@
--------------
3,955
--------------
- -----------------------------------------------------------------
- -------------
BROADCASTING & PUBLISHING (1.5%)
(a)Cosmo Films Ltd. 209,900 150
Navneet Publications Ltd. 233,100 954
(c)New Delhi Television Ltd. 333,300 754
(c)Srishti Video corp Ltd. -- New 2,850 --@
(a)Tata Donnelley Ltd. 195,500 2,202
Zee Telefilms Ltd. 543,800 1,884
--------------
5,944
--------------
- -----------------------------------------------------------------
- -------------
BUILDING MATERIALS & COMPONENTS (0.6%)
Associated Cement Co. Ltd. 36 1
Bell Ceramics Ltd. 524,750 130
(a)Gujarat Sidhee Cement Ltd. 2,249,400 261
Hindustan Sanitaryware and Industries
Ltd. 70,000 328
ITW Signode India Ltd. 574,950 1,377
Murudeshwar Ceramics Ltd. 346,300 329
Shree Cements Ltd. 50 --@
--------------
2,426
--------------
- -----------------------------------------------------------------
- -------------
CHEMICALS (3.8%)
Atul Ltd. 808 1
Chemox Chemicals Ltd. 335,850 67
Clariant (India) Ltd. 68,750 353
Colour Chem Ltd. 36,977 3,202
E.I.D. Parry Ltd. GDR 94,320 236
Gujarat Narmada Valley Fertilizers
Ltd. GDR 212,000 530
Hindustan Organic Chemicals Ltd. 554,400 365
Hoechst Schering Agrevo Ltd. 374,880 7,068
ICI India Ltd. 484,400 2,463
Indian Organic Chemical Ltd. 679,050 85
Indian Petro Chemical Corp. Ltd. 400 2
Indo Gulf Fertilizer & Chemical Ltd.
-- New 100 --@
(a)ITC Agrotech Co., Ltd. 100 --@
(a)Jaysynth Dyechem Ltd. 340,500 204
(c)MSL Industries Ltd. 62,000 1
Metrochem Industries Ltd. 135,000 124
Reliance Industries Ltd. 24,316 252
Sudarshan Chemicals Ltd. 258,907 376
--------------
15,329
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
CONSTRUCTION & HOUSING (0.1%)
Hindustan Construction Ltd. 350,000 U.S.$ 266
Nagarjuna Construction Ltd. 156,100 130
(c)Nagarjuna Construction Ltd. -- New 195,000 146
--------------
542
--------------
- -----------------------------------------------------------------
- -------------
ELECTRICAL & ELECTRONICS (0.3%)
Asian Electronics Ltd. 306,000 1,064
BPL Ltd. 100 --@
(a)Centrum Electronics Ltd. 273,300 63
--------------
1,127
--------------
- -----------------------------------------------------------------
- -------------
ELECTRONIC COMPONENTS & INSTRUMENTS (5.2%)
Datar Switchgear Ltd. 275,900 385
(a)Fujitsu ICIM Ltd. 655,215 188
Infosys Technology Ltd. 279,800 14,537
Mastek Ltd. 171,400 752
Modi Xerox Ltd. 859,950 4,396
Rolta India Ltd. 5,000 2
S&S Power Switchgear Ltd. 226,055 415
Samtel Colour Ltd. 756,950 254
VHEL Industries Ltd. 100 --@
--------------
20,929
--------------
- -----------------------------------------------------------------
- -------------
ENERGY EQUIPMENT & SERVICES (20.6%)
Bharat Heavy Electricals Ltd. 7,157,600 77,324
Crompton Greaves Ltd. 904,080 1,881
Jyoti Structure Ltd. 167,750 600
KEC International Ltd. 536,857 724
Kirloskar Oil Engine Ltd. 380,440 627
Modern Malleables Ltd. -- New 420,000 44
Shiram Honda Power Equipment Ltd. 353,665 2,154
Uniflex Cables Ltd. 287,400 153
--------------
83,507
--------------
- -----------------------------------------------------------------
- -------------
ENERGY SOURCES (0.0%)
Renewable Energy Ltd. 247,800 160
--------------
- -----------------------------------------------------------------
- -------------
FINANCIAL SERVICES (7.1%)
(a)Canfin Homes Ltd. 975,350 395
Housing Development Finance Corp. Ltd. 237,252 27,057
ICICI Ltd. -- New 1,816 4
Industrial Finance Corp. (India) Ltd. 360,700 322
(a)Sundaram Finance Ltd. 83,950 728
UTI Master Gain 999,800 313
UTI MasterShares 262,020 97
--------------
28,916
--------------
- -----------------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (0.5%)
(a)American Dry Fruits Ltd. 538,500 96
(a)Aruna Sugars & Enterprises Ltd. 250 --@
Dhampur Sugar Mills Ltd. 100,000 230
Sakthi Sugar Ltd. 115 --@
Smithkline Beecham Consumer Health
Care Ltd. 19,120 147
Thiru Arooran Sugars Ltd. 264,500 592
(c)Thiru Arooran Sugars Ltd. -- New 204,813 444
(a)Umred Agro Complex Ltd. 124,500 2
Vadilal Industries Ltd. 184,100 28
Western Hatcheries Ltd. 237,933 121
--------------
1,660
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FOREST PRODUCTS & PAPER (0.7%)
(a)Ballarpur Industries Ltd. 603,042 U.S.$ 745
(c)ITC Bhadrachalam Paperboards Ltd.
-- New 200,000 243
Paper Products Ltd. -- New 299,900 1,139
Pudumjee Ltd. 221,600 254
Tamilnadu Newsprint and Paper Ltd. 385,000 645
--------------
3,026
--------------
- -----------------------------------------------------------------
- -------------
HEALTH & PERSONAL CARE (11.6%)
(a)Cheminor Drugs Ltd. 243,650 545
Cipla Ltd. 318,050 6,599
Crosland Research Labs Ltd. 66,200 444
E. Merck (India) Ltd. 406,275 2,082
Godrej Soaps Ltd. 573,850 369
Hindustan Ciba-Geigy Ltd. 28,145 2,505
Hindustan Lever Ltd. 292 12
Hoechst Marion Roussel India Ltd. 585,200 6,220
Indian Shaving Products Ltd. 195,764 2,997
Lakme Ltd. 540,984 6,230
Marico Industries Ltd. 283,200 2,579
(a)Nicholas Piramal India Ltd. 635,240 3,944
Pfizer Ltd. 182,560 1,257
(c)Ranbaxy Labs Ltd. -- New 40,000 759
Rhone Poulenc (India) Ltd. 68,250 1,105
(a)Sandoz (India) Ltd. 67,000 344
Searle (India) Ltd. 300,000 515
Smithkline Beecham Pharmaceutical Ltd. 420,550 4,511
Sun Pharmaceutical Industries Ltd. 443,900 3,074
TTK Biomed Ltd. 143,700 58
(a)Unichem Labs Ltd. 162,700 604
--------------
46,753
--------------
- -----------------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (0.8%)
Carborundum Universal Ltd. 493,300 1,609
Chicago Pneumatic India Ltd. 324,940 1,815
--------------
3,424
--------------
- -----------------------------------------------------------------
- -------------
LEISURE & TOURISM (0.2%)
(a)ITC Hotels Ltd. 252,100 982
(a)Indian Hotels Co., Ltd. 50 1
--------------
983
--------------
- -----------------------------------------------------------------
- -------------
MACHINERY & ENGINEERING (5.8%)
Advani-Oerlikon Ltd. 450,027 440
Ahmednagar Forgings Ltd. 166,100 151
Artson Engineering Ltd. 204,293 35
(a)Baharat Earth Movers Ltd. 476,700 2,183
Elgi Equipments Ltd. 76,050 852
Esab India Ltd. 564,850 1,661
Graphite India Ltd. 271,200 288
Indian Seamless Metal Tubes Ltd. 284,980 159
(c)Indian Seamless Metal Tubes Ltd. --
New 245,620 109
Ingersoll Rand (India) Ltd. 450 5
Kabra Extrusion Technik Ltd. 152,600 128
(a)Kirloskar Cummins Ltd. 307,350 3,964
Lakshmi Machine Works Ltd. 7,640 1,452
(a)Lakshmi Synthetic Machinery Ltd. 152,400 305
M.M. Forgings Ltd. 200 --@
Praj Industries Ltd. 221,600 291
Revathi-CP Equipment Ltd. 149,400 2,504
Siemens Ltd. 2,458 17
Thermax Ltd. 461,100 4,508
Wartsila Diesel Ltd. 391,500 4,347
--------------
23,399
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
METALS -- NON-FERROUS (0.0%)
Pennar Aluminum Co., Ltd. 1,632,800 U.S.$ 153
--------------
- -----------------------------------------------------------------
- -------------
METALS -- STEEL (0.2%)
(a)India Seamless Steel & Alloy Ltd. 897,100 54
Isibars Ltd. 500,000 349
Mukand Iron & Steel Works Ltd. 1,440 3
Panchmahal Steels Ltd. 197,700 121
Sesa Goa Ltd. 1,755 10
(a,c)Sesa Goa Ltd. (Rights) 30 --@
Shri Ishar Alloy Steels Ltd. 369,500 38
Tata Iron & Steel Co., Ltd. 648 3
(a)Tata SSL Ltd. 13,800 11
(a,c)Tata SSL Ltd. -- New 62,550 56
Uttam Galva Steels Ltd. 436,250 118
--------------
763
--------------
- -----------------------------------------------------------------
- -------------
MISCELLANEOUS MATERIALS & COMMODITIES (0.7%)
Essel Packaging Ltd. 368,100 1,337
Flex Industries Ltd. 50 --@
(a,c)Flex Industries Ltd. (Warrants) 62,039 59
Garware Plastics & Polyester Ltd. 377 1
(c)Garware Plastics & Polyester Ltd.
-- New 397,412 633
Su-Raj Diamonds Ltd. 100 --@
(a)Titan Industries Ltd. 348,185 613
Uniworth International Ltd. 100 --@
--------------
2,643
--------------
- -----------------------------------------------------------------
- -------------
MULTI-INDUSTRY (0.5%)
Birla VXL Ltd. 712,680 269
JK Corp Ltd. 357,483 220
Larsen & Toubro Ltd. 1,345 9
Ramco Ltd. 42,800 1,542
S&S Industries & Enterprises Ltd. 36,800 7
Widia (India) Ltd. 500 49
--------------
2,096
--------------
- -----------------------------------------------------------------
- -------------
RECREATION, OTHER CONSUMER GOODS (0.8%)
Tube Investments of India Ltd. 283,316 463
Tube Investments of India Ltd. GDR 198,133 173
(a,c)Vashishti Detergents Ltd. -- New 1,957,567 2,420
--------------
3,056
--------------
- -----------------------------------------------------------------
- -------------
TELECOMMUNICATIONS (3.9%)
(a)Indian Telephone Industries Ltd. 36,700 17
Mahanagar Telephone Nigam Ltd. 1,877,700 15,932
Punjab Wire Ltd. 500 1
--------------
15,950
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
TEXTILES & APPAREL (2.6%)
(a)A.P. Rayon Ltd. 75 U.S.$ --@
(a)Arun Processors Ltd. 151,600 8
(a)Bata India Ltd. 197,650 560
(a,c)Bata India Ltd. -- New 197,952 561
(a)Century Textiles & Industries Ltd.
GDR 1,500 80
Coates of India Ltd. 238,150 1,058
(a)Coates of Viyella India Ltd. 131,300 301
(a,c)Coates of Viyella India Ltd. --
New 65,650 149
(a,c)Coates of Viyella India Ltd.
(Rights) 30 --@
(a)Cosmos Leather Exports Ltd. 325,000 6
(a)DCL Polyesters Ltd. 899,600 142
(a)Delta Industries Ltd. 380,000 106
G.T.N. Textiles Ltd. 257,500 374
Indo Rama Synthetics Ltd. GDR 116,000 580
Indo Rama Synthetics Ltd. 1,985,656 1,415
(c)Indo Rama Synthetics Ltd. -- New 309,684 201
(a)J.K. Synthetics Ltd. 2,091,958 336
Mahavir Spinning Mills Ltd. 491,000 1,015
Maral Overseas Ltd. 650,600 459
Precot Mills Ltd. 66,777 154
PSM Spg Mills Ltd. 4,000 2
Raymond Ltd. GDR 10,000 43
(a)Raymond Ltd. GDR 144A 59,500 258
Raymond Ltd. GDR -- New 12,500 54
(a,c)Raymond Ltd. -- New 220,258 369
Raymond Ltd. -- New 144A 7,500 33
SIV Industries Ltd. GDR 313,500 125
SRF Ltd. 665,119 362
(a)Sanotgen Exports Ltd. 100 --@
Shree Rajasthan Syntex Ltd. 216,550 110
Super Spinning Mills Ltd. 200,357 403
Vardhaman Polytex Ltd. 282,600 286
Vardhaman Spinning & General Mills
Ltd. 373,500 803
Viral Syntex Ltd. 209,200 45
Woolworth India Ltd. 1,100 1
--------------
10,399
--------------
- -----------------------------------------------------------------
- -------------
TRANSPORTATION -- ROAD & RAIL (7.4%)
Container Corp. of India Ltd. 2,061,600 30,118
--------------
- -----------------------------------------------------------------
- -------------
TRANSPORTATION -- SHIPPING (0.0%)
Great Eastern Shipping Ltd. 'A' 2,100 3
--------------
- -----------------------------------------------------------------
- -------------
UTILITIES -- ELECTRICAL & GAS (0.0%)
(a)Andhra Valley Power Supply Co.,
Ltd. 150 --@
(a)Tata Hydro Electric Power Supply
Co. Ltd. 50 --@
--------------
--@
--------------
- -----------------------------------------------------------------
- -------------
TOTAL COMMON STOCKS
(Cost U.S. $387,150)
396,604
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
FIXED INCOME SECURITIES (0.2%)
- ---------------------------------------------------------
- ------------
METALS -- STEEL (0.0%)
(c)Tata SSL Ltd. 14.00%, 12/6/02 U.S.$ 14 U.S.$ 14
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
MISCELLANEOUS MATERIALS & COMMODITIES (0.2%)
(c)Garware Plastics & Polyester
Ltd. 16.00%, 5/1/05 INR 277 U.S.$ 656
--------------
- -----------------------------------------------------------------
- -------------
TOTAL FIXED INCOME SECURITIES
(Cost U.S. $899) 670
--------------
- -----------------------------------------------------------------
- -------------
SHORT-TERM INVESTMENT (0.2%)
REPURCHASE AGREEMENT
Chase Securities, Inc. 5.70%, dated
6/30/97, due 7/1/97, to be
repurchased at U.S.$965,
collateralized by United States
Treasury Bonds 5.625%, due 2/15/06,
valued at U.S.$985
(Cost U.S. $965) U.S.$ 965 965
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (98.4%)
(Cost U.S. $389,014) 398,239
--------------
- -----------------------------------------------------------------
- -------------
OTHER ASSETS (2.9%)
Receivable for Investments Sold U.S.$ 8,866
Dividends Receivable 1,550
Foreign Withholding Tax Reclaim
Receivable 708
Deferred Organization Costs 22
Other Assets 503 11,649
--------------- --------------
- -----------------------------------------------------------------
- -------------
LIABILITIES (-1.3%)
Payable for:
Investments Purchased (3,386)
Custodian Fees (691)
Investment Advisory Fees (351)
Bank Overdraft (301)
Shareholder Reporting Expenses (92)
Professional Fees (70)
Administrative Fees (36)
Directors' Fees and Expenses (34)
Other Liabilities (175) (5,136)
--------------- --------------
- -----------------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 35,707,092, issued and outstanding
U.S. $0.01 par value shares (100,000,000 shares
authorized) U.S.$ 404,752
--------------
--------------
- -----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 11.34
--------------
--------------
- -----------------------------------------------------------------
- -------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------
Common Stock U.S.$ 357
Capital Surplus 492,574
Accumulated Net Investment Loss (2,547)
Accumulated Net Realized Loss (94,744)
Unrealized Appreciation on Investments and Foreign
Currency Translations 9,112
- -----------------------------------------------------------------
- -------------
TOTAL NET ASSETS U.S.$ 404,752
--------------
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
(a) -- Non-income producing.
(b) -- Security valued at cost -- see note A-1 to financial statements.
(c) -- Security valued at fair value -- see note A-1 to financial statements.
@ -- Value is less than U.S.$500
144A -- Certain conditions for public sale may exist.
GDR -- Global Depositary Receipt.
INR -- Indian Rupee
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................... U.S.$ 1,457
Interest................................................................................ 22
Less: Foreign Taxes Withheld............................................................ (199)
- ---------------------------------------------------------------------------------------------------------------
Total Income.......................................................................... 1,280
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees................................................................ 1,965
Custodian Fees.......................................................................... 1,272
Administrative Fees..................................................................... 199
Shareholder Reporting Expenses.......................................................... 143
Directors' Fees and Expenses............................................................ 71
Professional Fees....................................................................... 51
Transfer Agent Fees..................................................................... 16
Sub-Administrative Fees................................................................. 13
Other Expenses.......................................................................... 50
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................................................ 3,780
- ---------------------------------------------------------------------------------------------------------------
Net Investment Loss............................................................... (2,500)
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED LOSS
Investment Securities Sold.............................................................. (38,077)
Foreign Currency Transactions........................................................... (275)
- ---------------------------------------------------------------------------------------------------------------
Net Realized Loss................................................................. (38,352)
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Depreciation on Investments............................................................. 130,895
Depreciation on Foreign Currency Translations........................................... 286
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................... 131,181
- ---------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation.................. 92,829
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$ 90,329
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Loss................................................. U.S.$ (2,500) U.S.$ (2,958)
Net Realized Loss................................................... (38,352) (29,796)
Change in Unrealized Appreciaton/Depreciation....................... 131,181 29,132
- ---------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations..... 90,329 (3,622)
- ---------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period................................................. 314,423 318,045
- ---------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of U.S.
$2,547 and U.S. $47, respectively)................................. U.S.$404,752 U.S.$314,423
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS FEBRUARY 25,
ENDED YEAR ENDED DECEMBER 31, 1994*
JUNE 30, 1997 --------------------------------- TO DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS: (UNAUDITED) 1996 1995 1994
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD.............. U.S.$ 8.81 U.S.$ 8.91 U.S.$ 13.99 U.S.$ 14.10
- -------------------------------------------------------------------------------------------------------------------------
Offering Costs.................................... -- -- -- (0.03)
- -------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss)...................... (0.07) (0.08) (0.16) 0.04
Net Realized and Unrealized Gain (Loss) on
Investments...................................... 2.60 (0.02) (4.92) 0.05
- -------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations.............. 2.53 (0.10) (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.$ 11.34 U.S.$ 8.81 U.S.$ 8.91 U.S.$ 13.99
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD............. U.S.$ 12.94 U.S.$ 9.50 U.S.$ 9.13 U.S.$ 11.25
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value.................................. 36.18% 4.11% (18.89)% (19.01)%
Net Asset Value (1)........................... 28.72% (1.12)% (36.31)% 0.72%
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS)............. U.S.$404,752 U.S.$314,423 U.S.$318,045 U.S.$499,481
- -------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets........... 2.11%** 2.10% 3.16% 1.61%**
Ratio of Net Investment Income (Loss) to Average
Net Assets....................................... (1.40)%** (0.85)% (1.48)% 0.33%**
Portfolio Turnover Rate........................... 12% 28% 28% 19%
Average Commission Rate (2):
Per Share....................................... U.S.$0.0214 U.S.$0.0476 N/A N/A
As a Percentage of Trade Amount................. 0.68% 0.82% N/A N/A
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*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 per share of the Fund.
(2)For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose the average commission rate per share it paid for portfolio
trades on which commission were charged during the period.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (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. Due to the Indian
securities markets smaller size, degree of liquidity and volatility, the
price which the Fund may realize upon sale of securities may not be equal to
the value presented in the financial statements.
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, 1997 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, 1998.
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.
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
11
<PAGE>
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 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) on investments and foreign currency translations
in the Statement of Net Assets. The change in unrealized currency gains
(losses) for the period is reflected in the Statement of Operations.
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts to attempt to protect securities and related
receivables and payables against changes in future foreign exchange rates. A
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 0.09% 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.
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
12
<PAGE>
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, 1997, the Fund incurred international custodian fees
of $1,268,000, of which $688,000 was payable to the International Custodian at
June 30, 1997.
E. During the six months ended June 30, 1997, the Fund made purchases and sales
totaling $40,144,000 and $41,665,000 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, 1997, the U.S. Federal income tax cost basis of securities was
$389,014,000, and, accordingly, net unrealized appreciation for U.S. Federal
income tax purposes was $9,225,000, of which $128,026,000 related to appreciated
securities and $118,801,000 related to depreciated securities. At December 31,
1996, the Fund had a capital loss carryforward for U.S. Federal income tax
purposes of approximately $50,985,000 available to offset future capital gains
of which $19,397,000 and $31,588,000 will expire on December 31, 2003 and 2004,
respectively. To the extent that capital gains are offset, such gains will not
be distributed to shareholders.
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, 1997, the Fund owned an
aggregate of approximately $20,182,000 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, 1997. 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, 1997 totaled
$20,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
I. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Morgan Stanley India Investment
Fund, Inc. was held on May 1, 1997. The following is a summary of each proposal
presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
PROPOSAL: FAVOR OF AGAINST ABSTAINED
---------- ------- ---------
<S> <C> <C> <C> <C>
1. To elect the following Directors: Gerard E. Jones 24,247,540 207,211 --
Gerard la Hausse de Louviere 24,247,540 207,211 --
Samuel T. Reeves 24,247,540 207,211 --
2. To ratify the selection of Price Waterhouse LLP as independent 24,331,003 80,678 43,070
public accountants of the Fund.
3. To approve an Investment Advisory and Management Agreement 24,114,516 151,781 188,454
between the Fund and Morgan Stanley Asset Management Inc.
</TABLE>
13
<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
14
