-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FDGSdtL4qHmCHUnUNFHwD2SS9bIh7ydfDuyd6+DzymIa2FPl2B3xgGVeO4hXzlVE a3mG9G7QWMn4ZndFQ5mtiw== 0000912057-96-019580.txt : 19960906 0000912057-96-019580.hdr.sgml : 19960906 ACCESSION NUMBER: 0000912057-96-019580 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960905 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY INDIA INVESTMENT FUND INC CENTRAL INDEX KEY: 0000916618 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 132838811 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08238 FILM NUMBER: 96626095 BUSINESS ADDRESS: STREET 1: 1221 AVENUE OF THE AMERICAS CITY: BOSTON STATE: MA ZIP: 10020 BUSINESS PHONE: 6175578742 MAIL ADDRESS: STREET 1: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: INDIA INVESTMENT FUND INC DATE OF NAME CHANGE: 19931228 N-30D 1 N-30D MORGAN STANLEY INDIA INVESTMENT FUND, INC. - --------------------------------------------- OFFICERS AND DIRECTORS 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
- --------------------------------------------- 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 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 Morgan Stanley India Investment Fund, Inc. Investment Summary as of June 30, 1996 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
HISTORICAL INFORMATION (UNAUDITED) TOTAL RETURN (%) ----------------------------------------------------------------------------- MARKET VALUE (1) NET ASSET VALUE (2) INDEX (1)(3) ------------------------- ------------------------ ------------------------ AVERAGE AVERAGE AVERAGE CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL ------------------------- ------------------------ ------------------------ 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
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. - -------------------------------------------------------------------------------- RETURNS AND PER SHARE INFORMATION A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
YEARS ENDED DECEMBER 31: SIX MONTHS ENDED 1994* 1995 JUNE 30, 1996 (UNAUDITED) 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%
(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 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 Fixed Income Securities 0.4% Equity Securities 97.9% Short-Term Investments 1.7%
- -------------------------------------------------------------------------------- SECTORS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC 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%
- -------------------------------------------------------------------------------- TEN LARGEST HOLDINGS
PERCENT OF NET ASSETS --------------- 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 PERCENT OF NET ASSETS --------------- 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% --------------- ---------------
4 FINANCIAL STATEMENTS - --------- STATEMENT OF NET ASSETS (UNAUDITED) - --------- JUNE 30, 1996
VALUE SHARES (000) - ----------------------------------------------------------------- - ------------- 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 -------------- - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 5
VALUE SHARES (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 6
VALUE SHARES (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 7
VALUE SHARES (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - ------------- FACE AMOUNT (000) - --------------------------------------------------------- - ------------ 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 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 8
FACE AMOUNT VALUE (000) (000) - --------------------------------------------------------- - ------------ 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) --------------- -------------- - ----------------------------------------------------------------- - ------------- AMOUNT (000) - --------------------------------------------------------- - ------------ 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 -------------- -------------- - ----------------------------------------------------------------- - -------------
+ -- 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.$1.00 The accompanying notes are an integral part of the financial statements. 9
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) STATEMENT OF OPERATIONS (000) - --------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends............................................................................... U.S.$ 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 - --------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 YEAR ENDED (UNAUDITED) DECEMBER 31, 1995 STATEMENT OF CHANGES IN NET ASSETS (000) (000) - --------------------------------------------------------------------------------------------------------------- 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.$318,045 - --------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 10 FINANCIAL HIGHLIGHTS
PERIOD FROM SIX MONTHS FEBRUARY 25, ENDED YEAR ENDED 1994* JUNE 30, 1996 DECEMBER 31, TO DECEMBER 31, SELECTED PER SHARE DATA AND RATIOS: (UNAUDITED) 1995 1994 - --------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.... U.S.$ 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.
The accompanying notes are an integral part of the financial statements. 11 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 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 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 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:
VOTES IN VOTES VOTES VOTES PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED - ------------------------------------------------------------------------------ ---------- ----------- ----------- ----------- 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
- -------------------------------------------------------------------------------- SUMMARY OF QUARTERLY RESULTS OF OPERATIONS* (UNAUDITED) - --------------------------------------------------------------------------------
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 - ---------------------------------- ----------- ----------- ----------- --------- ---------- --------- ---------- --------- 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 ----------- ----- ----------- --------- ---------- --------- ---------- --------- ----------- ----- ----------- --------- ---------- --------- ---------- --------- - ----------------------------------------------------------------------------------------------------------------------------------
* 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 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 16 -----END PRIVACY-ENHANCED MESSAGE-----