UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08238
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MORGAN STANLEY INDIA INVESTMENT FUND, INC.
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(Exact name of registrant as specified in charter)
1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020
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(Address of principal executive offices) (Zip code)
RONALD E. ROBISON
1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-221-6726
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Date of fiscal year end: 12/31
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Date of reporting period: 6/30/04
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Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
SEMI-ANNUAL REPORT
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
JUNE 30, 2004
DIRECTORS OFFICERS
GAETAN BOUIC STEFANIE V. CHANG
VICE PRESIDENT
JOSEPH J. KEARNS
AMY R. DOBERMAN
HAZAREESING RAVINDRANATH VICE PRESIDENT
SANTOSH KUMAR
MARIE JOSEPH RAYMOND JAMES W. GARRETT
LAMUSSE TREASURER
MICHAEL J. LEARY
FERGUS REID ASSISTANT TREASURER
RONALD E. ROBISON
PRESIDENT AND DIRECTOR MARY E. MULLIN
SECRETARY
[MORGAN STANLEY LOGO]
INVESTMENT ADVISER
MORGAN STANLEY INVESTMENT MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
ADMINISTRATOR MORGAN STANLEY
JPMORGAN INVESTOR SERVICES COMPANY INDIA INVESTMENT FUND, INC.
73 TREMONT STREET
BOSTON, MASSACHUSETTS 02108
CUSTODIAN
JPMORGAN CHASE BANK
270 PARK AVENUE
NEW YORK, NEW YORK 10017
STOCKHOLDER SERVICING AGENT
AMERICAN STOCK TRANSFER & TRUST COMPANY
59 Maiden Lane
NEW YORK, NEW YORK 10030
1 (800) 278-4353
LEGAL COUNSEL
CLIFFORD CHANCE US LLP
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
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 OR VISIT OUR WEBSITE AT
www.morganstanley.com/im.
MORGAN STANLEY
(C) 2004 MORGAN STANLEY INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
LETTER TO STOCKHOLDERS
OVERVIEW
PERFORMANCE
For the six months ended June 30, 2004, the Morgan Stanley India Investment
Fund, Inc. (the "Fund") had a total return, based on net asset value per share
of -15.73%, compared to -17.49% for the U.S. dollar adjusted Bombay Stock
Exchange (BSE) National Index (the "Index"). On June 30, 2004, the closing price
of the Fund's shares on the New York Stock Exchange was $20.15, representing a
4.3% premium to the Fund's net asset value per share.
FACTORS AFFECTING PERFORMANCE
- Year-to-date, the popular BSE state-owned Index was down 22% in local
terms as compared to the Index which was down 16.7% in local terms.
- Stocks of state-owned companies fell sharply after the announcement of the
results of the general elections. As a result, some of the state-owned
banks and energy stocks that the Fund owned felt this impact.
- The Fund's overweight in industrials contributed positively towards
relative performance, while the underweight in technology detracted from
relative performance.
MANAGEMENT STRATEGIES
- A powerful combination of abundant global liquidity, a cyclical economic
upturn and ebullient foreign investor sentiment towards India made for
spectacular gains in 2003. In our opinion, 2004 will be different. Excess
liquidity can only take markets that far and the leading suppliers of
global liquidity, from the U.S. to China, are in the process of tightening
monetary policy. Coincidentally, global growth momentum may be waning.
This is exactly the opposite of the 'sweet spot' witnessed last year.
- While global factors continue to drive emerging markets, we believe the
Indian market faces the additional problem of the verdict from the general
elections. The results have been interpreted as a vote against traditional
economic reforms. While the Union Budget presented by the new government
did allay fears of foreign investors that India was going down the
socialistic path, there were few policy measures to suggest economic
reforms were accelerating.
- In such an environment, our strategy will be more oriented towards stock
selection. India is a very diverse market and it has historically been
possible to generate positive returns even if the overall market is range
bound. In this regard, we continue to favor long-term growth stories, as
reflected in the Fund's top holdings. The only sector theme we remain
convinced about is the power equipment industry, as we believe that the
importance of this industry will continue to grow on the back of
governmental initiatives.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
President and Director
July 2004
2
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2004 (unaudited)
VALUE
SHARES (000)
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COMMON STOCKS (94.1%)
(UNLESS OTHERWISE NOTED)
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AUTO COMPONENTS (0.0%)
Apollo Tyres Ltd. 2,075 $ 8
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AUTOMOBILES PARTS & EQUIPMENT (2.6)%
Amtek Auto Ltd. 356,075 3,954
Motor Industries Co., Ltd. 13,844 4,041
Patheja Forgings & Auto Ltd. (a)(b)450,000 @--
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7,995
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AUTOMOBILES (6.7%)
Hero Honda Motors Ltd. 1,881,332 20,767
========================================================================================
BIOTECHNOLOGY (0.1%)
Shantha Biotechnics PCL (a)(b)500,000 435
========================================================================================
CHEMICALS (3.0%)
Asian Paints (India) Ltd. 726,876 4,949
ICI (India) Ltd. 25,000 96
Indian Petrochemicals Co. 1,365,000 4,357
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9,402
========================================================================================
COMMERCIAL BANKS (11.0%)
HDFC Bank Ltd. 788,750 6,343
HDFC Bank Ltd. ADR 135,300 3,634
Industrial Development
Bank of India Ltd. 6,405,000 5,830
Punjab National Bank Ltd. 655,000 4,017
State Bank of India Ltd. (b)1,420,016 14,011
----------------------------------------------------------------------------------------
33,835
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COMMERCIAL SERVICES & SUPPLIES (0.2%)
Xerox Modicorp Ltd. (a)(b)718,225 547
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CONSTRUCTION MATERIALS (2.9%)
Associated Cement Co., Ltd. 1,686,000 8,875
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DIVERSIFIED TELECOMMUNICATION SERVICES (2.1%)
Mahanagar Telephone Nigam
Ltd. 2,290,000 6,572
========================================================================================
ELECTRIC UTILITIES (1.1%)
Neyveli Lignite Corp., Ltd. 3,691,205 3,384
========================================================================================
ELECTRICAL EQUIPMENT (9.6%)
ABB Ltd. 651,491 9,525
Bharat Heavy Electricals Ltd. 1,843,848 20,127
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29,652
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FOOD PRODUCTS (1.1%)
Nestle (India) Ltd. 286,254 3,449
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CONSUMER STAPLES (2.2%)
Hindustan Lever Ltd. (a)2,496,445 6,912
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INDUSTRIAL CONGLOMERATES (6.0%)
Grasim Industries Ltd. 382,500 $ 8,416
Grasim Industries Ltd. GDR 58,000 1,247
Siemens India Ltd. 457,604 8,769
----------------------------------------------------------------------------------------
18,432
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INTERNET SOFTWARE & SERVICES (0.0%)
IndiaInfo.com PCL (a)(c)532,875 @--
========================================================================================
INFORMATION TECHNOLOGY SERVICES (7.5)%
Infosys Technologies Ltd. 108,975 13,091
Wipro Ltd. 689,591 7,980
Wipro Ltd. ADR 47,810 2,233
----------------------------------------------------------------------------------------
23,304
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MACHINERY (1.7%)
Cummins (India) Ltd. 1,752,174 3,750
Lakshmi Synthetic Machinery
Manufacturers Ltd. (a)(b)137,700 10
Punjab Tractors Ltd. 341,000 1,507
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5,267
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TEXTILES (1.1%)
Alok Industries Ltd. 3,065,700 3,344
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MEDIA (0.5%)
New Delhi Television Ltd. (a)(b)833,250 1,399
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METALS & MINING (6.7%)
Hindalco Industries Ltd. 318,938 6,923
Steel Authority of India Ltd. (a)12,193,286 7,254
Tata Iron & Steel Co., Ltd. 979,400 6,408
----------------------------------------------------------------------------------------
20,585
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OIL & GAS (10.0%)
Bharat Petroleum Corp., Ltd. 574,600 4,440
Hindustan Petroleum Corp., Ltd. 566,000 4,141
Indian Oil Corp., Ltd. 680,500 5,454
Mahindra & Mahindra Ltd. 469,000 4,508
Oil & Natural Gas Corp., Ltd. 910,254 12,459
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31,002
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PAPER & FOREST PRODUCTS (0.9%)
Ballarpur Industries Ltd. 1,812,000 2,428
Ballarpur Industries Ltd.
GDR (Registered) 43,000 286
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2,714
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 3
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
VALUE
SHARES (000)
PHARMACEUTICALS (9.0%)
Cipla Ltd. 2,326,310 $ 10,747
Dabur (India) Ltd. 1,268,674 1,723
Dabur Pharma Ltd. (a)(b)634,337 316
GlaxoSmithkline Pharmaceuticals
Ltd 381,954 4,937
Matrix Laboratories Ltd. 191,000 5,670
Sun Pharmaceuticals Industries
Ltd. 550,104 4,382
----------------------------------------------------------------------------------------
27,775
========================================================================================
ROAD & RAIL (2.4%)
Container Corp. of India Ltd. 596,251 7,326
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SOFTWARE (2.0%)
I-Flex Solutions Ltd. 267,000 3,369
Mphasis BFL Ltd. (a)516,000 2,918
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6,287
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THRIFTS & MORTGAGE FINANCE (2.7)%
Housing Development
Finance Corp., Ltd. 746,507 8,397
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TRANSPORTATION INFRASTRUCTURE (1.0%)
Dredging Corp. of India Ltd. 326,723 3,056
========================================================================================
TOTAL COMMON STOCKS
(Cost $243,694) 290,721
========================================================================================
FACE
AMOUNT
(000)
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CORPORATE BOND (0.1%)
CONSUMER STAPLES (0.1%)
Hindustan Lever Ltd.,
9.00%, 1/1/05
(Cost $@--) INR 2,296 305
========================================================================================
SHORT-TERM INVESTMENT (2.3%)
========================================================================================
REPURCHASE AGREEMENT (2.3%)
J.P. Morgan Securities, Inc., 1.25%,
dated 6/30/04, due 7/1/04,
repurchase price $7,265
(Cost $7,265) $ (d)7,265 7,265
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TOTAL INVESTMENTS (96.5%)
(Cost $250,959) 298,291
========================================================================================
AMOUNT AMOUNT
(000) (000)
----------------------------------------------------------------------------------------
OTHER ASSETS (6.5%)
Foreign Currency
(Cost $17,175) $ 16,948
Receivable for Investments Sold 1,853
Dividends Receivable 775
Tax Reclaim Receivable 469
Interest Receivable 4
Other 14 $ 20,063
========================================================================================
LIABILITIES (-3.0%)
Payable For:
Investments Purchased (8,311)
Distribution Declared (322)
Investment Advisory Fees (280)
Directors' Fees and Expenses (89)
Custodian Fees (58)
Bank Overdraft (38)
Administrative Fees (14)
Other Liabilities (154) (9,266)
========================================================================================
NET ASSETS (100%)
Applicable to 15,997,623, issued and
outstanding $ 0.01 par value shares
(100,000,000 shares authorized) $309,088
========================================================================================
NET ASSET VALUE PER SHARE $ 19.32
========================================================================================
AT JUNE 30, 2004, NET ASSETS CONSISTED OF:
Common Stock $ 160
Paid-in Capital 275,923
Undistributed (Distributions in Excess of) Net
Investment Income (1,098)
Accumulated Net Realized Gain (Loss) (12,591)
Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Translations 46,694
========================================================================================
TOTAL NET ASSETS $309,088
========================================================================================
(a) Non-income producing.
(b) Securities valued at fair value -- At June 30, 2004, the Fund held
$16,718,000 of fair valued securities, representing 5.4% of net assets.
(c) Restricted security valued at fair value and not registered under the
Securities Act of 1933. IndiaInfo.com PCL was acquired 3/00 at a cost of
$2,347,000. At June 30, 2004, this security had an aggregate market value
of $0, representing 0.0% of net assets.
(d) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of this statement of
net assets. The investment in the repurchase agreement is through
participation in a joint account with affiliated funds.
@ Value is less than $500.
ADR American Depositary Receipt
GDR Global Depositary Receipt
INR Indian Rupee
4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
Financial Statements
SIX MONTHS ENDED
JUNE 30, 2004
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
-----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 2,655
Interest 32
=================================================================================================================
TOTAL INCOME 2,687
=================================================================================================================
EXPENSES
Investment Advisory Fees 1,959
Custodian Fees 375
Professional Fees 86
Administrative Fees 77
Stockholder Reporting Expenses 23
Directors' Fees and Expenses 18
Country Tax Expense 14
Other Expenses 67
=================================================================================================================
TOTAL EXPENSES 2,619
=================================================================================================================
NET INVESTMENT INCOME (LOSS) 68
=================================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments 50,133
Foreign Currency Transactions 298
=================================================================================================================
NET REALIZED GAIN (LOSS) 50,431
=================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (107,949)
Foreign Currency Translations (238)
=================================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (108,187)
=================================================================================================================
NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) (57,756)
=================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (57,688)
=================================================================================================================
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
-----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 68 $ 2,640
Net Realized Gain (Loss) 50,431 16,827
Change in Unrealized Appreciation (Depreciation) (108,187) 158,981
=================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (57,688) 178,448
=================================================================================================================
Distributions from and/or in excess of:
Net Investment Income (322) (3,169)
=================================================================================================================
Capital Share Transactions:
Reinvestment of Shares (4,320 in 2004) 114 --
Repurchase of Shares (57,869 shares in 2003) -- (604)
=================================================================================================================
TOTAL INCREASE (DECREASE) (57,896) 174,675
=================================================================================================================
Net Assets:
Beginning of Period 366,984 192,309
=================================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET
INVESTMENT INCOME OF $(1,098) AND $(844), RESPECTIVELY) $ 309,088 $ 366,984
=================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
Financial Highlights
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 ------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.95 $ 11.98 $ 10.53 $ 13.92 $ 22.59 $ 9.19
Net Investment Income (Loss) 0.00#+ 0.16+ 0.03+ 0.10 0.02 (0.08)
Net Realized and Unrealized Gain (Loss) on
Investments (3.61) 11.01 1.39 (2.43) (7.93) 13.33
----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (3.61) 11.17 1.42 (2.33) (7.91) 13.25
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Distributions from and/or in excess of:
Net Investment Income (0.02) (0.20) (0.01) (0.23) -- --
Net Realized Gain -- -- -- (0.84) (1.60) --
----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.20) (0.01) (1.07) (1.60) --
----------------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Share Repurchase Program -- 0.00# 0.04 0.01 0.84 0.15
----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.32 $ 22.95 $ 11.98 $ 10.53 $ 13.92 $ 22.59
==================================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 20.15 $ 26.55 $ 9.94 $ 8.65 $ 11.06 $ 16.50
==================================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value (24.03)%** 169.33% 15.07% (11.68)% (23.49)% 144.44%
Net Asset Value (1) (15.73)%** 93.15% 13.94% (14.52)% (29.68)% 145.81%
==================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) $309,088 $366,984 192,309 $205,019 $390,190 $736,343
----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.46%* 1.56% 1.56% 1.77% 1.48% 1.59%
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.04%* 1.10% 0.28% 0.60% 0.12% (0.55)%
Portfolio Turnover Rate 32%** 36% 23% 56% 44% 34%
----------------------------------------------------------------------------------------------------------------------------------
(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
each period, and assumes dividends and distributions, if any, were
reinvested. This percentage is not an indication of the performance of a
stockholder'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.
+ Per share amounts are based on average shares outstanding.
# Amount is less than $0.005 per share.
* Annualized
** Not Annualized
6 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 (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 (the "1940 Act"), as amended. The Fund's investment
objective is long-term capital appreciation through investments primarily in
equity securities.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with accounting principles generally accepted in the United States.
Such policies are consistently followed by the Fund in the preparation of its
financial statements. Accounting principles generally accepted in the United
States 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: Equity securities listed on a U.S. exchange are valued
at the latest quoted sales price on the valuation date. Equity securities
listed or traded on NASDAQ, for which market quotations are available, are
valued at the NASDAQ Official Closing Price. Securities listed on a foreign
exchange are valued at their closing price. Unlisted securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean between the current bid and asked
prices obtained from reputable brokers. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
approximates value.
All other securities and investments for which market values are not
readily available, including restricted securities, and those securities
for which it is inappropriate to determine prices in accordance with the
aforementioned procedures, are valued at fair value as determined in good
faith under procedures adopted by the Board of Directors, although the
actual calculations may be done by others. Factors considered in making
this determination may include, but are not limited to, information
obtained by contacting the issuer, analysts, or the appropriate stock
exchange (for exchange-traded securities), analysis of the issuer's
financial statements or other available documents and, if necessary,
available information concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE).
Occasionally, developments that could affect the closing prices of
securities and other assets may occur between the times at which valuations
of such securities are determined (that is, close of the foreign market on
which the securities trade) and the close of business on the NYSE. If these
developments are expected to materially affect the value of the securities,
the valuations may be adjusted to reflect the estimated fair value as of
the close of the NYSE, as determined in good faith under procedures
established by the Board of Directors.
2. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
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 counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
The Fund, along with other affiliated investment companies, may utilize a
joint trading account for the purpose of entering into one or more
repurchase agreements.
3. 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
7
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
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) due to securities transactions 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) on foreign
currency translations for the period is reflected in the Statement of
Operations.
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,
less 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, in certain cases, only through physical delivery, which may
cause the Fund to experience delays or other difficulties in effecting
transactions.
The Fund may use derivatives to achieve its investment objectives. The Fund may
engage in transactions in futures contracts on foreign currencies, stock
indices, as well as in options, swaps and structured notes. Consistent with the
Fund's investment objectives and policies, the Fund may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund has utilized
and their associated risks:
4. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts generally to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates and, in certain situations, to gain exposure to a foreign currency. 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.
5. 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 an 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 dividends) net of
applicable withholding taxes, if any. Distributions to stockholders are
recorded on the ex-dividend date.
B. ADVISER: Morgan Stanley Investment 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.
8
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
C. ADMINISTRATOR: JPMorgan Chase Bank, through its corporate affiliate J.P.
Morgan Investor Services Co. (the "Administrator"), provides administrative
services to the Fund under an Administration Agreement. The Administrator is
paid a fee computed weekly and payable monthly at an annual rate of 0.02435% of
the Fund's average weekly net assets, plus $24,000 per annum. In addition, the
Fund is charged for certain out-of-pocket expenses incurred by the Administrator
on its behalf. An employee of the Administrator is an Officer of the Fund.
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. CUSTODIAN: JPMorgan Chase Bank serves as custodian for the Fund. The
Custodian holds cash, securities, and other assets of the Fund as required by
the 1940 Act. Custody fees are payable monthly based on assets held in custody,
investment purchases and sales activity and account maintenance fees, plus
reimbursement for certain out-of-pocket expenses.
E. DIRECTORS: The Fund pays each of its Mauritian Independent Directors an
annual fee of $7,500 and all other Independent Directors an annual fee of
$5,000. Additionally, each Mauritian Independent Director is paid a fee of $750
for each Board Meeting attended.
F. FEDERAL INCOME TAXES: It is the Fund's intention to continue to qualify as
a regulated investment company and distribute all its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to stockholders are recorded on
the ex-dividend date.
The rate of capital gains tax in India is 10.25% for long-term investments and
30.75% for short-term investments (the capital gains rates were 10.5% for
long-term investments and 31.5% for short-term investments for the financial
year ended March 31, 2003). The Fund invests in India through a registered
branch office established in Mauritius and, as a result, obtains the benefits
under the double taxation treaty between Mauritius and India ("Treaty"). 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 declared, distributed or paid
by an Indian company prior to June 1, 1997 and for the period from April 1, 2002
through March 31, 2003. During the period June 1, 1997 through March 31, 2002
and after April 1, 2003, dividend income from domestic companies was exempt from
Indian income tax. The Fund currently is subject to and accrues Indian
withholding tax on interest earned on Indian securities at 20.5% (21% for the
financial year ended March 31, 2003).
The Treaty benefits accorded to foreign investors were challenged by a
non-governmental organization and the matter was litigated before India's
Supreme Court (the highest court in India ). In October 2003, India's Supreme
Court upheld the validity of treaty benefits accorded to foreign investors on
the basis of a certificate of residence issued by Mauritian authorities (such as
the one obtained by the Fund).
The tax character of distributions paid may differ from the character of
distributions shown on the Statements of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2003 and 2002 were as follows:
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS
PAID FROM: PAID FROM:
(000) (000)
---------------------------- -----------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAIN INCOME GAIN
--------------------------------------------------------
$3,169 $-- $214 $--
The amount and character of income and capital gain distributions to be paid by
the Fund are determined in accordance with Federal income tax regulations, which
may differ from accounting principles generally accepted in the United States.
The book/tax differences are considered either temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for
the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassifications among
undistributed (distributions in excess of) net investment income (or accumulated
net investment loss), accumulated net realized gain (loss) and paid-in capital.
9
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
At December 31, 2003, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAIN
(000) (000)
-----------------------------------------------------------
$321 $--
-----------------------------------------------------------
At June 30, 2004, the U.S. Federal income tax cost basis of investments was
$250,959,000 and, accordingly, net unrealized appreciation for U.S. Federal
income tax purposes was $47,332,000 of which $75,098,000 related to appreciated
securities and $27,766,000 related to depreciated securities.
At December 31, 2003, the Fund had a capital loss carryforwards for U.S. Federal
income tax purposes of approximately $61,101,000 available to offset future
capital gains, of which $43,303,000 will expire on December 31, 2009 and
$17,798,000 will expire on December 31, 2010.
To the extent that capital loss carryforwards are used to offset any future
capital gains realized during the carryforward period as provided by U.S.
Federal income tax regulations, no capital gains tax liability will be incurred
by the Fund for gains realized and not distributed. To the extent that capital
gains are offset, such gains will not be distributed to the stockholders.
Net capital and currency losses incurred after October 31, and within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the year ended December 31, 2003, the Fund did not defer any
capital losses to January 1, 2004, for U.S. Federal income tax purposes.
G. CONTRACTUAL OBLIGATIONS: The Fund enters into contracts that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
H. OTHER: During the six months ended June 30, 2004, the Fund made purchases and
sales totaling $110,849,000 and $122,037,000 respectively, of investment
securities other than long-term U.S. Government securities and short-term
investments. There were no purchases or sales of long-term U.S. Government
securities.
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.
On August 10, 1998, the Fund commenced a share repurchase program for purposes
of enhancing stockholder value and reducing the discount at which the Fund's
shares trade from their net asset value. During the six months ended June 30,
2004, the Fund did not repurchase any of its shares. Since the inception of the
program, the Fund has repurchased 8,450,680 of its shares at an average discount
of 30.06% from net asset value per share. The Fund expects to continue to
repurchase its outstanding shares at such time and in such amounts as it
believes will further the accomplishment of the foregoing objectives, subject to
review by the Board of Directors.
On June 21, 2004 the Officers of the Fund, pursuant to authority granted by the
Board of Directors declared a distribution of $0.0201 per share, derived from
net investment income, payable on July 15, 2004, to stockholders of record on
June 30, 2004.
I. SUPPLEMENTAL PROXY INFORMATION:
The Annual Meeting of the Stockholders of the Fund was held on June 22, 2004.
The following is a summary of the proposal presented and the total number of
shares voted:
PROPOSAL:
1. To elect the following Directors:
VOTES IN VOTES
FAVOR OF AGAINST
----------------------------------------------------------------------
Fergus Reid 11,692,883 422,801
Ronald E. Robison 11,692,751 422,933
Hazareesing Ravindranath Santosh
Kumar 11,692,753 422,931
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A copy of (1) the Fund's policies and procedures with respect to the voting of
proxies relating to the Fund's portfolio securities; and (2) how the Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30, 2004 is available without charge, upon request, by calling
1-800-548-7786 or by visiting our website at www.morganstanley.com/im. This
information is also available on the Securities and Exchange Commission's
website at www.sec.gov.
10
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each stockholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the stockholder 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
stockholders 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 or distributions.
In the case of stockholders, such as banks, brokers or nominees, that 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
stockholder as representing the total amount registered in the stockholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Stockholders 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 stockholders 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
59 Maiden Lane
New York, New York 10030
1-800-278-4353
11
ITEM 2. CODE OF ETHICS. Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semi-annual
reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semi-annual
reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable for semi-annual
reports.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. Not applicable for semi-annual reports.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
MORGAN STANLEY CLOSED-END FUNDS SHARE REPURCHASE PROGRAM
Morgan Stanley India Investment Fund, Inc.*
1/1/04-6/30/04
Total Number of Shares Maximum Number of
Purchased as Part of Shares that May Yet Be
Total Number of Shares Average Price Paid Publicly Announced Plans Purchased Under the
Period Purchased per Share or Programs Plans or Programs
-------------------------------------------------------------------------------------------------------------
January -- -- -- Unlimited
February -- -- -- Unlimited
March -- -- -- Unlimited
April -- -- -- Unlimited
May -- -- -- Unlimited
June -- -- -- Unlimited
*The Share Repurchase Program commenced on 8/10/1998
**The Fund expects to continue to repurchase its outstanding shares at such
time and in such amounts as it believes will further the accomplishment of
the foregoing objectives, subject to review by the Board of Directors.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Morgan Stanley India Investment Fund, Inc.
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2004
By: /s/ James W. Garrett
Name: James W. Garrett
Title: Principal Financial Officer
Date: August 19, 2004