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OMB APPROVAL
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OMB Number: 3235-0570
Expires: November 30, 2005
Estimated average burden
hours per response....... 5.0
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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
---------------------------------------------
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
RONALD E. ROBISON
1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020
-------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-221-6726
----------------------------
Date of fiscal year end: 12/31
--------------------------
Date of reporting period: 6/30/03
-------------------------
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, 2003
DIRECTORS OFFICERS
GAETAN BOUIC II RONALD E. ROBISON
PRESIDENT AND CHAIRMAN
CLIFFORD D'SOUZA
STEFANIE V. CHANG
NILESH JOSHI VICE PRESIDENT
JOSEPH J. KEARNS LORRAINE TRUTEN
VICE PRESIDENT
HAZAREESING RAVINDRANATH
SANTESH KUMAR JAMES W. GARRETT
TREASURER
MARIE JOSEPH RAYMOND
LAMUSSE MICHAEL LEARY
ASSISTANT TREASURER
FERGUS REID [MORGAN STANLEY LOGO]
MARY E. MULLIN
SECRETARY
INVESTMENT ADVISER
MORGAN STANLEY INVESTMENT MANAGEMENT INC. MORGAN STANLEY
1221 AVENUE OF THE AMERICAS INDIA INVESTMENT FUND, INC.
NEW YORK, NEW YORK 10020
ADMINISTRATOR
JPMORGAN INVESTOR SERVICES
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
(800) 278-4353
LEGAL COUNSEL
CLIFFORD CHANCE US LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
INDEPENDENT AUDITORS
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
INVESTMENT MANAGEMENT INC.
(C) 2003 MORGAN STANLEY INVESTMENT ADVISER
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
Overview
LETTER TO STOCKHOLDERS
PERFORMANCE
For the six months ended June 30, 2003, the Morgan Stanley India Investment
Fund, Inc. (the "Fund") had a total return of 15.19%, compared to 12.77% for the
Bombay Stock Exchange (BSE) National Index (the "Index"). On June 30, 2003, the
closing price of the Fund's shares on the New York Stock Exchange was $11.80,
representing a 14.4% discount to the Fund's net asset value per share.
FACTORS AFFECTING PERFORMANCE
- At a sector level, April saw a sharp downfall in the technology sector
on the back of weak guidance by leading technology companies. Towards
the end of the quarter, technology stocks did bounce back from their
lows, although they are still down for the year.
- Sentiment towards equities turned far more positive towards June. The
rally in global equities has been a contributor to the positive shift
in sentiment. Foreign Institutional Investor equity flows into India
in the last quarter at $925 million, have been the strongest compared
to any quarter in the last two years.
- In terms of sector allocations, our underweight in the technology and
overweight in the financial sectors contributed positively to relative
performance
MANAGEMENT STRATEGIES
- The construction industry is emerging as a strong support to an
agriculture dependent economy. Agriculture contributed 22% to gross
domestic product (GDP) last fiscal year and showed a negative growth
of 3.2%, causing overall GDP growth to slow down to 4.3%. The
construction sector, however, showed a robust growth of 7.2%. The
portfolio was overweight the materials and metals sectors during the
time period.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
President and Chairman
July 2003
2
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS
VALUE
SHARES (000)
----------------------------------------------------------------------------------
COMMON STOCKS(94.6%)
(UNLESS OTHERWISE NOTED)
==================================================================================
AUTO COMPONENTS(0.0%)
Apollo Tyres Ltd. 2,075 $ 8
Patheja Forgings & Auto Ltd. 450,000(a,b) --@
----------------------------------------------------------------------------------
8
==================================================================================
AUTOMOBILES(8.0%)
Hero Honda Motors Ltd. 1,999,822 10,911
Maruti Udyog Ltd. 262,300(a) 706
Tata Engineering & Locomotive Co., Ltd. 1,423,725 6,063
----------------------------------------------------------------------------------
17,680
==================================================================================
BANKS(15.4%)
Corporation Bank 618,485 2,090
HDFC Bank Ltd. 257,279 1,435
HDFC Bank Ltd. ADR 135,300 2,537
Punjab National Bank 941,000(a) 3,145
State Bank of India Ltd. 2,734,016(b) 23,689
Union Bank of India 1,373,014 1,027
----------------------------------------------------------------------------------
33,923
==================================================================================
BIOTECHNOLOGY(0.3%)
Shantha Biotechnics PCL 500,000(b) 593
==================================================================================
CHEMICALS(1.8%)
Asian Paints (India) Ltd. 484,584 3,949
ICI (India) Ltd. 25,000 77
----------------------------------------------------------------------------------
4,026
==================================================================================
COMMERCIAL SERVICES & SUPPLIES(0.3%)
Xerox Modicorp Ltd. 718,225(a,b) 650
==================================================================================
CONSTRUCTION MATERIALS(3.7%)
Associated Cement Co., Ltd. 196,000 705
Grasim Industries, Ltd. 22,500 243
Grasim Industries, Ltd. GDR 58,000 638
Gujarat Ambuja Cements Ltd. 1,341,298 5,931
Gujarat Ambuja Cements Ltd. GDR 164,000 705
----------------------------------------------------------------------------------
8,222
==================================================================================
DIVERSIFIED TELECOMMUNICATION SERVICES(2.8%)
Bharti Tele-Ventures Ltd. 1,330,000(a) 1,116
Mahanagar Telephone Nigam Ltd. 1,912,831 4,676
Mahanagar Telephone Nigam Ltd. ADR 90,000 432
----------------------------------------------------------------------------------
6,224
==================================================================================
ELECTRIC UTILITIES(2.5%)
Neyveli Lignite Corp., Ltd. 2,621,481 $ 2,310
Tata Power Co., Ltd. 947,229 3,234
----------------------------------------------------------------------------------
5,544
==================================================================================
ELECTRICAL EQUIPMENT(6.8%)
Asea Brown Boveri Ltd. 456,126 3,624
Bharat Heavy Electricals Ltd. 1,976,848 11,456
----------------------------------------------------------------------------------
15,080
==================================================================================
FOOD PRODUCTS(2.7%)
GlaxoSmithKline Consumer Healthcare Ltd. 428,496 2,413
Nestle India Ltd. 286,254 3,621
----------------------------------------------------------------------------------
6,034
==================================================================================
HOUSEHOLD DURABLES(0.2%)
Samtel Colour Ltd. 636,707 396
==================================================================================
HOUSEHOLD PRODUCTS(5.6%)
Colgate-Palmolive (India) Ltd. 1,172,388 3,473
Hindustan Lever Ltd. 2,296,445 8,830
----------------------------------------------------------------------------------
12,303
==================================================================================
INTERNET SOFTWARE & SERVICES(0.0%)
IndiaInfo.com PCL 532,875(b,c) --@
==================================================================================
IT CONSULTING & SERVICES(7.9%)
HCL Technologies Ltd. 702,494 2,339
Infosys Technologies Ltd. 131,180 9,228
Wipro Ltd. 140,197 2,861
Wipro Ltd. ADR 125,710 2,898
----------------------------------------------------------------------------------
17,326
==================================================================================
MACHINERY(1.5%)
Cummins India Ltd. 1,752,174 2,575
Lakshmi Synthetic Machinery
Manufacturers Ltd. 137,700(a,b) 10
Punjab Tractors Ltd. 225,619 815
----------------------------------------------------------------------------------
3,400
==================================================================================
MEDIA(0.3%)
New Delhi Television Ltd. 333,300(b) 727
==================================================================================
METALS & MINING(8.7%)
Hindalco Industries Ltd. 452,938 7,270
Steel Authority of India Ltd. 17,853,286(a) 6,644
Tata Iron & Steel Co., Ltd. 1,422,400 5,184
----------------------------------------------------------------------------------
19,098
==================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
VALUE
SHARES (000)
----------------------------------------------------------------------------------
OIL & GAS(7.0%)
Oil & Natural Gas Corp., Ltd. 836,231 $ 8,699
Reliance Industries Ltd. 954,514 6,676
----------------------------------------------------------------------------------
15,375
==================================================================================
PHARMACEUTICALS(7.8%)
Cipla Ltd. 212,912 3,464
Dabur India Ltd. 1,767,946 1,819
Glaxosmithkline Pharmaceuticals, Ltd. 477,221 3,665
Ranbaxy Laboratories Ltd. 481,600 8,144
----------------------------------------------------------------------------------
17,092
==================================================================================
ROAD & RAIL(3.9%)
Container Corp. of India Ltd. 1,152,251 8,547
==================================================================================
SPECIALTY RETAIL(0.6%)
Titan Industries Ltd. 954,074 1,383
==================================================================================
THRIFTS & MORTGAGE FINANCE(2.1%)
Housing Development Finance Corp., Ltd. 520,355 4,588
==================================================================================
TOBACCO(4.7%)
ITC Ltd. 627,356 10,359
==================================================================================
TOTAL COMMON STOCKS
(Cost $187,089) 208,578
==================================================================================
FACE
AMOUNT
(000)
----------------------------------------------------------------------------------
CORPORATE BOND(0.1%)
==================================================================================
HOUSEHOLD DURABLES(0.1%)
Hindustan Lever Ltd.,
9.00%, 1/10/05
(Cost $--@) $ 2,296(b) 297
==================================================================================
SHORT-TERM INVESTMENTS(5.6%)
==================================================================================
REPURCHASE AGREEMENT(0.7%)
J.P. Morgan Securities, Inc.,
1.05%, dated 6/30/03, due 7/1/03 1,655(d) 1,655
==================================================================================
TREASURY BILLS(4.9%)
Indian Government Treasury
Bill, Zero Coupon, 8/16/03 INR 500,000 10,712
==================================================================================
TOTAL SHORT-TERM INVESTMENTS
(Cost $12,211) 501,655 12,367
==================================================================================
FACE
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN(0.3%)
==================================================================================
Indian Rupee
(Cost $545) INR 25,329 $ 546
==================================================================================
TOTAL INVESTMENTS(100.6%)
(Cost $199,845) 221,788
==================================================================================
AMOUNT
(000)
----------------------------------------------------------------------------------
OTHER ASSETS (0.4%)
Dividends Receivable $ 513
Tax Reclaim Receivable 353
Other 37 903
==================================================================================
LIABILITIES (-1.0%)
Payable For:
Investments Purchased (1,443)
Distribution Declared (301)
Investment Advisory Fees (191)
Custodian Fees (105)
Directors' Fees and Expenses (63)
Professional Fees (57)
Stockholder Reporting Expenses (19)
Administrative Fees (12)
Other Liabilities (26) (2,217)
==================================================================================
NET ASSETS (100.0%)
Applicable to 16,004,226, issued and
outstanding $ 0.01 par value shares
(100,000,000 shares authorized) $ 220,474
==================================================================================
NET ASSET VALUE PER SHARE $ 13.78
==================================================================================
AT JUNE 30, 2003, NET ASSETS CONSISTED OF:
Common Stock $ 160
Paid-in Capital 275,960
Undistributed (Distributions in Excess of) Net
Investment Income (2,454)
Accumulated Net Realized Gain (Loss) (74,729)
Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Translations 21,537
==================================================================================
TOTAL NET ASSETS $ 220,474
==================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2003 (unaudited)
STATEMENT OF NET ASSETS (CONT'D)
(a) -- Non-income producing
(b) -- Securities valued at fair value- see note A-1 to financial statements.
At June 30, 2003, the Fund held $25,966,000 of fair-valued securities,
representing 11.8% of net assets.
(c) -- Restricted security not registered under the Securities Act of 1933.
Acquired 3/00 at a cost of $2,347,000. At June 30, 2003, this security
had a 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
PCL -- Public Company Limited
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Fund had the following foreign currency exchange contract(s) open at
period end:
CURRENCY IN NET
TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS)
(000) (000) DATE (000) (000) (000)
---------------------------------------------------------------------------
INR 20,000 $ 431 7/1/03 US$ 431 $ 431 $ --@
===========================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
Financial Statements
STATEMENT OF OPERATIONS
SIX MONTHS ENDED
JUNE 30, 2003
(UNAUDITED)
(000)
-------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of $106 of foreign taxes withheld) $ 1,040
Interest 458
=======================================================================================================
TOTAL INCOME 1,498
=======================================================================================================
EXPENSES
Investment Advisory Fees 1,042
Custodian Fees 162
Professional Fees 101
Administrative Fees 54
Directors' Fees and Expenses 36
Stockholder Reporting Expenses 15
Other Expenses 31
=======================================================================================================
TOTAL EXPENSES 1,441
=======================================================================================================
NET INVESTMENT INCOME (LOSS) 57
=======================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments 3,148
Foreign Currency Transactions 77
=======================================================================================================
NET REALIZED GAIN (LOSS) 3,225
=======================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments 25,635
Foreign Currency Translations 2
=======================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 25,637
=======================================================================================================
NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 28,862
=======================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 28,919
=======================================================================================================
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
(000) (000)
-------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 57 $ 556
Net Realized Gain (Loss) 3,225 922
Change in Unrealized Appreciation (Depreciation) 25,637 22,694
=======================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 28,919 24,172
=======================================================================================================
Distributions from and/or in excess of:
Net Investment Income (301) (214)
=======================================================================================================
Capital Share Transactions:
Repurchase of Shares (46,946 and
3,413,832 shares, respectively) (453) (36,668)
=======================================================================================================
TOTAL INCREASE (DECREASE) 28,165 (12,710)
=======================================================================================================
Net Assets:
Beginning of Period 192,309 205,019
=======================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED
(DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT
INCOME OF $(2,454) AND $(2,210), RESPECTIVELY) $ 220,474 $ 192,309
=======================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
Financial Highlights
SELECTED PER SHARE DATA AND RATIOS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 --------------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.98 $ 10.53 $ 13.92 $ 22.59 $ 9.19 $ 8.83
--------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.00#+ 0.03+ 0.10 0.02 (0.08) (0.04)
Net Realized and Unrealized Gain (Loss) on
Investments 1.82 1.39 (2.43) (7.93) 13.33 0.31
--------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.82 1.42 (2.33) (7.91) 13.25 0.27
--------------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in excess of:
Net Investment Income (0.02) (0.01) (0.23) -- -- --
Net Realized Gain -- -- (0.84) (1.60) -- --
--------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.02) (0.01) (1.07) (1.60) -- --
--------------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Share Repurchase Program 0.00# 0.04 0.01 0.84 0.15 0.09
--------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.78 $ 11.98 $ 10.53 $ 13.92 $ 22.59 $ 9.19
================================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 11.80 $ 9.94 $ 8.65 $ 11.06 $ 16.50 $ 6.75
================================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value 18.89%** 15.07% (11.68)% (23.49)% 144.44% (19.40)%
Net Asset Value (1) 15.19%** 13.94% (14.52)% (29.68)% 145.81% 4.08%
================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
--------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) $ 220,474 $ 192,309 $ 205,019 $ 390,190 $ 736,343 $ 314,701
--------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.52%* 1.56% 1.77% 1.48% 1.59% 1.97%
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.06%* 0.28% 0.60% 0.12% (0.55)% (0.44)%
Portfolio Turnover Rate 14%** 23% 56% 44% 34% 24%
--------------------------------------------------------------------------------------------------------------------------------
# Amount is less than $0.005 per share.
(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
stockolder'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.
* Annualized
** Not Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS
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. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with accounting principles generally accepted in the United States of
America. Such policies are consistently followed by the Fund in the preparation
of its financial statements. Accounting principles generally accepted in the
United States of America 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 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. For all other securities and investments
for which market values are not readily available, including restricted
securities, and where prices determined in accordance with the
aforementioned procedures are not reflective of fair market value, values
are determined in good faith, under fair valuation procedures adopted by
the Board of Directors, although actual calculations may be done by others.
Due to the Indian securities market's smaller size, degree of liquidity and
volatility, the prices which the Fund may realize upon sale of securities
may not be equal to the value presented in the financial statements.
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 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
8
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
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.
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.
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. Custody
fees are payable monthly based on assets held in custody, investment purchase
and sales activity and account maintenance fees, plus reimbursement for certain
out-of-pocket expenses.
E. FEDERAL INCOME TAXES: It is the Fund's intention to continue to qualify as
a regulated investment company and
9
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
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 10.5% for long-term investments and
30.5% for short-term investments (the capital gains rate 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 has been challenged by a
non-governmental organization and the matter is currently being litigated before
India's Supreme Court (the highest court in India) after an unfavorable ruling
by the Delhi High Court in May 2002. A final ruling in this matter is expected
to be issued shortly by the Supreme Court of India. The Fund believes it is not
probable that the outcome of this matter will be unfavorable. While the outcome
of this litigation is uncertain, an unfavorable ruling by India's Supreme Court
denying the benefits of the Treaty to foreign investors would materially impact
the operations of the Fund. To the extent that it is later determined that the
Fund would be unable to obtain the benefits of the Treaty, the Fund would be
subject to tax on capital gains in India on the sale of securities and also on
dividend income earned by the Fund prior to June 1, 1997 and for the period from
April 1, 2002 through March 31, 2003 at the higher rate, which is currently at
20.5%, instead of 15%. If the Treaty benefits were denied retroactively, the
Fund could potentially be subject to substantial Indian income tax as well as
interest and penalties. While such amounts cannot be currently determined, the
Fund estimates such taxes and interest could range from approximately $25
million to $39 million as of June 30, 2003, excluding penalties. Denial of
treaty benefits could also materially impact the future operations of the
Fund as well.
The foregoing is based on current interpretation and practice and is subject to
any future changes in Indian or Mauritian tax laws and in the tax treaty between
India and Mauritius.
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 2002 and 2001 were as follows:
2002 DISTRIBUTIONS 2001 DISTRIBUTIONS
PAID FROM: PAID FROM:
(000) (000)
----------------------------------------- ---------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAIN INCOME GAIN
-------------------------------------------------------------------------
$ 214 $ -- $ 4,398 $ 16,428
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 of
America. 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 differences may result in reclassifications among undistributed
(distributions in excess of) net investment income, accumulated net realized
gain (loss) and paid-in capital. Adjustments for permanent book-tax differences,
if any, are not reflected in ending undistributed (distributions in excess of)
net investment income for the purpose of calculating net investment income
(loss) per share in the financial highlights.
At December 31, 2002, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAIN
(000) (000)
------------------------------------------------------------------------
$ 299 $ --
------------------------------------------------------------------------
10
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
June 30, 2003 (unaudited)
NOTES TO FINANCIAL STATEMENTS (CONT'D)
At June 30, 2003, the U.S. Federal income tax cost basis of investments
(excluding foreign currency) was $199,300,000 and, accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $21,942,000 of which
$50,097,000 related to appreciated securities and $28,155,000 related to
depreciated securities.
At December 31, 2002, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $73,799,000 available to offset future
capital gains, of which $56,001,000 will expire on December 31, 2009 and
$17,798,000 will expire on December 31, 2010. 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 year ended December 31, 2002, the Fund deferred to January 1,
2003, for U.S. Federal income tax purposes, post-October capital losses of
$95,000.
F. OTHER: During the six months ended June 30, 2003, the Fund made purchases
and sales totaling $26,367,000 and $24,846,000 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.
For the six months ended June 30, 2003, the Fund incurred $4,000 of brokerage
commissions with Morgan Stanley & Co., an affiliate of the Adviser.
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.
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. At June 30, 2003, the deferred fees payable under the Plan totaled $54,000
and are included in Payable for Directors' Fees and Expenses on the Statement of
Net Assets. The deferred portion of Directors' Fees and Expenses shown on the
Statement of Operations is impacted by fluctuations in the market value of the
investments selected by each Director. For the six months ended June 30, 2003,
Director's Fees and Expenses were decreased by $2,550, due to these
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,
2003, the Fund repurchased 46,946 of its shares at an average discount of 17.69%
from net asset value per share. Since the inception of the program, the Fund has
repurchased 8,439,757 of its shares at an average discount of 30.08% 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 17, 2003 the Officers of the Fund, pursuant to authority granted by the
Board of Directors declared a distribution of $0.0188 per share, derived from
net investment income, payable on July 15, 2003, to stockholders of record on
June 30, 2003.
PROPOSAL:
1. To elect the following Directors, effective July 31, 2003:
VOTES IN VOTES
FAVOR OF AGAINST
---------------------------------------
1) Nilesh Joshi 10,505,927 476,331
2) Joseph J. Kearns 10,506,207 476,051
3) Marie Joseph Raymond Lamusse 10,506,207 476,051
2. That stockholders recommend that the Board of Directors act to adopt
interval-fund status for the Fund, under which the Fund will make repurchase
offers at three-month intervals for not less than 10% of the Fund's shares
outstanding at not less than 98% of net asset value (NAV), and to effect the
first such repurchase offer not later than September 20, 2003:
VOTES IN VOTES VOTES
FAVOR OF AGAINST ABSTAINED
---------------------------------------------------
2,546,309 64,699,814 56,120
11
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
12
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. [RESERVED.]
ITEM 9. CONTROLS AND PROCEDURES.
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.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
ITEM 10. 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: Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2003
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: Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 2003
By: James W. Garrett
Name: James W. Garrett
Title: Principal Financial Officer
Date: August 19, 2003