morgan stanley india investment fund, inc. nyse: iif

Morgan Stanley India Investment Fund, Inc.

CEIIFSAN1560891

EXP8.31.17

I N V E S T M E N T M A N A G E M E N T

Morgan StanleyInvestment Management Inc.Adviser

Morgan Stanley India Investment Fund, Inc. NYSE: IIFSemi-Annual ReportJune 30, 2016

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For additional Fund information, including the Fund’s net asset value pershare and information regarding the investments comprising the Fund’sportfolio, please call toll free 1 (800) 231-2608 or visit our website atwww.morganstanley.com/im. All investments involve risks, including thepossible loss of principal.

© 2016 Morgan Stanley.

Adviser and AdministratorMorgan Stanley Investment Management Inc.522 Fifth AvenueNew York, New York 10036

Sub-AdviserMorgan Stanley Investment Management Company23 Church Street16-01 Capital Square, Singapore 049481

CustodianState Street Bank and Trust CompanyOne Lincoln StreetBoston, Massachusetts 02111

Stockholder Servicing AgentComputershare Trust Company, N.A.211 Quality Circle, Suite 210College Station, Texas 77845

Legal CounselDechert LLP1095 Avenue of the AmericasNew York, New York 10036

Counsel to the Independent DirectorsKramer Levin Naftalis & Frankel LLP1177 Avenue of the AmericasNew York, New York 10036

Independent Registered Public Accounting FirmErnst & Young LLP200 Clarendon StreetBoston, Massachusetts 02116

DirectorsM.J. Marcel VivianDescroizilles

Joseph J. Kearns

Ravindranath SantoshKumar Hazareesing

Mamode Izam Nathadkhan

Fergus Reid

OfficersJohn H. GernonPresident and Principal Executive Officer

Joseph C. BenedettiVice President

Francis J. SmithTreasurer and Principal Financial Officer

Stefanie V. Chang YuChief Compliance Officer

Mary E. MullinSecretary

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June 30, 2016

Table of ContentsLetter to Stockholders ................................................................................................................................................................... 3

Portfolio of Investments.................................................................................................................................................................. 5

Statement of Assets and Liabilities.................................................................................................................................................. 7

Statement of Operations ................................................................................................................................................................ 8

Statements of Changes in Net Assets.............................................................................................................................................. 9

Financial Highlights ........................................................................................................................................................................ 10

Notes to Financial Statements ........................................................................................................................................................ 11

Investment Advisory Agreement Approval ........................................................................................................................................ 20

Portfolio Management .................................................................................................................................................................... 23

Investment Policy........................................................................................................................................................................... 24

Dividend Reinvestment and Cash Purchase Plan ............................................................................................................................... 28

Privacy Notice ............................................................................................................................................................................... 29

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June 30, 2016

Letter to Stockholders (unaudited)PerformanceFor the six months ended June 30, 2016, the Morgan Stanley India Investment Fund, Inc. (the “Fund”) had total returns of 7.23%,based on net asset value, and 6.42% based on market value per share (including reinvestment of distributions), compared to itsbenchmark, the MSCI India Index (the “Index”)*, which returned 1.13%. On June 30, 2016, the closing price of the Fund’s shareson the New York Stock Exchange was $26.67, representing a 13.0% discount to the Fund’s net asset value per share. Pastperformance is no guarantee of future results.

Factors Affecting Performance• The first half of 2016 had its share of global macro events ranging from volatility in the Shanghai markets at the beginning of the

year to Brexit at the end of the June. We continue to maintain that India remains correlated to global markets particularly attimes of heightened volatility.

• In the six-month period, the Fund outperformed the Index. Both stock selection and sector allocation contributed to theoutperformance.

• At a stock level, selection in financials, energy, consumer staples and industrials contributed to performance, while stock selectionin information technology and health care detracted from performance.

• At a sector level, an overweight allocation to industrials, and underweight exposures to telecommunication services and healthcare were the largest contributors to performance, while an overweight position in financials and an underweight position inconsumer staples detracted from performance.

Management Strategies• In its first two years, the Modi government focused on financial inclusion and social security, simplifying and scrapping old laws,

the passage of a bankruptcy bill, restructuring debt for state electric boards and holding transparent coal auctions, which were vital.The goods and service tax (GST) reform has been held up in parliament for long and we are keenly waiting to see if this goesthrough in the near future. Also effective steps for the resolution of non-performing loans at state-owned banks need to be taken.

• The monsoon season has begun well, and if the rainfall is normal it could help control food price inflation.

• The decline in exports has moderated but the weak external demand will likely keep the exports growth subdued. The high-frequency economic indicators we track are showing mixed signals. Public capital expenditure, discretionary consumption,foreign direct investment and rail volumes are gaining strength, whereas the private sector capital expenditures are still lagging.

• We believe the economic recovery is going to be uneven and gradual so we continue to seek pockets of growth within theeconomy where the turnaround is visible.

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Letter to Stockholders (unaudited) (cont’d)• At the close of period, the Fund was overweight in financials (led by private sector banks) and industrials, which we think is a

good play on macro recovery and largely linked to the movement of goods in the country. The Fund was underweight in theconsumer staples, consumer discretionary and energy sectors.

Sincerely,

John H. GernonPresident and Principal Executive Officer July 2016

*The MSCI India Index is a free-float adjusted market capitalization weighted index that is designed to measure the performance of the large and mid capsegments of the Indian market. The performance of the Index is calculated in U.S. dollars and assumes reinvestment of net dividends. It is not possible toinvest directly in an index.

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June 30, 2016

Portfolio of Investments (unaudited)

Information Technology Services (12.0%)Cognizant Technology Solutions

Corp., Class A (a) 270,186 $ 15,466HCL Technologies Ltd. 776,271 8,431Infosys Ltd. 1,746,083 30,367

54,264Machinery (10.1%)

Ashok Leyland Ltd. 10,076,789 14,761Cummins India Ltd. 355,460 4,482Eicher Motors Ltd. 92,584 26,480

45,723Media (2.3%)

Zee Entertainment Enterprises Ltd. 1,525,338 10,358Oil, Gas & Consumable Fuels (4.2%)

Bharat Petroleum Corp., Ltd. 1,198,746 19,161Personal Products (1.4%)

Marico Ltd. 1,621,466 6,345Pharmaceuticals (6.7%)

Glenmark Pharmaceuticals Ltd. 818,931 9,699Lupin Ltd. 521,230 11,918Natco Pharma Ltd. 1,000,190 8,638

30,255Tobacco (2.1%)

ITC Ltd. 1,725,902 9,401Transportation Infrastructure (4.6%)

Gateway Distriparks Ltd. 2,898,647 13,399Gujarat Pipavav Port Ltd. (a) 3,062,788 7,431

20,830Water Utilities (0.8%)

VA Tech Wabag Ltd. 411,872 3,622TOTAL COMMON STOCKS (Cost $295,555) 445,923SHORT-TERM INVESTMENT (0.4%)Investment Company (0.4%)

Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class (See Note E) (Cost $1,888) 1,888,119 1,888

TOTAL INVESTMENTS (99.1%) (Cost $297,443) (b)(c) 447,811OTHER ASSETS IN EXCESS OF LIABILITIES (0.9%) 4,206NET ASSETS (100.0%) $452,017

COMMON STOCKS (98.7%)Auto Components (4.6%)

Bosch Ltd. 20,520 $ 6,909Motherson Sumi Systems Ltd. 3,203,391 13,776

20,685Automobiles (1.8%)

Maruti Suzuki India Ltd. 130,569 8,131Banks (18.9%)

Axis Bank Ltd. 1,746,506 13,893HDFC Bank Ltd. 739,332 14,987IndusInd Bank Ltd. 1,937,576 32,071Jammu & Kashmir Bank Ltd. (The) 3,890,969 3,971State Bank of India 3,982,966 13,026Yes Bank Ltd. 450,000 7,421

85,369Capital Markets (1.6%)

Motilal Oswal Financial Services Ltd. 1,362,724 7,072Construction & Engineering (5.1%)

Ashoka Buildcon Ltd. 2,638,621 6,207Larsen & Toubro Ltd. 745,861 16,617

22,824Construction Materials (7.4%)

Prism Cement Ltd. (a) 3,462,649 5,629Ramco Cements Ltd. (The) 1,100,579 9,081Shree Cement Ltd. 86,140 18,634

33,344Consumer Finance (9.7%)

Cholamandalam Investment and Finance Co., Ltd. 489,064 6,887

Shriram Transport Finance Co., Ltd. 1,394,117 24,907SKS Microfinance Ltd. (a) 1,106,583 12,217

44,011Electronic Equipment, Instruments & Components (2.1%)

Redington India Ltd. 6,139,235 9,436Gas Utilities (3.3%)

Gujarat State Petronet Ltd. 3,726,154 7,935Indraprastha Gas Ltd. 767,175 7,157

15,092

Value Shares (000)

Value Shares (000)

The accompanying notes are an integral part of the financial statements.

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Portfolio of Investments (unaudited) (cont’d)

Portfolio Composition

Percentage ofClassification Total InvestmentsOther* 29.5%Banks 19.1Information Technology Services 12.1Machinery 10.2Consumer Finance 9.8Construction Materials 7.4Pharmaceuticals 6.8Construction & Engineering 5.1Total Investments 100.0%

* Industries and/or investment types representing less than 5% of totalinvestments.

(a) Non-income producing security.(b) The approximate fair value and percentage of net assets,

$430,457,000 and 95.2%, respectively, represent thesecurities that have been fair valued under the fair valuationpolicy for international investments as described inNote A-1 within the Notes to the Financial Statements.

(c) At June 30, 2016, the aggregate cost for Federal incometax purposes approximates the aggregate cost for bookpurposes. The aggregate gross unrealized appreciation isapproximately $165,177,000 and the aggregate grossunrealized depreciation is approximately $14,809,000resulting in net unrealized appreciation of approximately$150,368,000.


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June 30, 2016

Financial Statements June 30, 2016 (unaudited)

(000)

Assets:Investments in Securities of Unaffiliated Issuers, at Value (Cost $295,555) $445,923Investment in Security of Affiliated Issuer, at Value (Cost $1,888) 1,888

Total Investments in Securities, at Value (Cost $297,443) 447,811Foreign Currency, at Value (Cost $10,368) 10,318Cash 27Dividends Receivable 865Receivable for Investments Sold 315Receivable from Affiliate —@Other Assets 42

Total Assets 459,378

Liabilities:Dividends Declared 6,624Payable for Advisory Fees 403Payable for Directors’ Fees and Expenses 152Payable for Custodian Fees 111Payable for Professional Fees 55Payable for Administration Fees 10Payable for Stockholder Servicing Agent Fees 1Other Liabilities 5

Total Liabilities 7,361

Net AssetsApplicable to 14,738,252 Issued and Outstanding $0.01 Par Value Shares (100,000,000 Shares Authorized) $452,017

Net Asset Value Per Share $ 30.67

Net Assets Consist of:Common Stock $ 147Paid-in-Capital 303,014Accumulated Net Investment Loss (1,935)Net Realized Gain 944Unrealized Appreciation (Depreciation) on:

Investments 149,959Foreign Currency Translations (112)

Net Assets $452,017

@ Amount is less than $500.

Statement of Assets and Liabilities


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June 30, 2016

Financial Statements (cont’d) Six Months Ended June 30, 2016 (unaudited)

(000)

Investment Income:Dividends from Securities of Unaffiliated Issuers $ 2,803Dividends from Securities of Affiliated Issuer (Note E) 4

Total Investment Income 2,807

Expenses:Advisory Fees (Note B) 2,295Custodian Fees (Note D) 213Administration Fees (Note C) 187Professional Fees 118Directors’ Fees and Expenses 99Stockholder Reporting Expenses 26Stockholder Servicing Agent Fees 4Other Expenses 51

Total Expenses 2,993

Waiver of Administration Fees (Note C) (104)Rebate from Morgan Stanley Affiliate (Note E) (1)

Net Expenses 2,888

Net Investment Loss (81)

Realized Gain:Investments Sold 5,180Foreign Currency Transactions 47

Net Realized Gain 5,227

Change in Unrealized Appreciation (Depreciation):Investments 24,052Foreign Currency Translations (99)

Net Change in Unrealized Appreciation (Depreciation) 23,953

Net Realized Gain and Change in Unrealized Appreciation (Depreciation) 29,180

Net Increase in Net Assets Resulting from Operations $29,099

Statement of Operations




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June 30, 2016

Financial Statements (cont’d) Six Months Ended Year Ended June 30, 2016 December 31, (unaudited) 2015

(000) (000)

Increase (Decrease) in Net Assets:Operations:

Net Investment Loss $ (81) $ (2,403)Net Realized Gain 5,227 43,483Net Change in Unrealized Appreciation (Depreciation) 23,953 (43,759)

Net Increase (Decrease) in Net Assets Resulting from Operations 29,099 (2,679)

Distributions from and/or in Excess of:Net Realized Gain (6,624) (606)

Capital Share Transactions:Repurchase of Shares (213,107 and 444,246 shares) (5,099) (12,059)

Net Decrease in Net Assets Resulting from Capital Share Transactions (5,099) (12,059)

Total Increase (Decrease) 17,376 (15,344)

Net Assets:Beginning of Period 434,641 449,985

End of Period (Including Accumulated Net Investment Loss of $(1,935) and $(1,854)) $452,017 $434,641

Statements of Changes in Net Assets




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June 30, 2016

Financial HighlightsSelected Per Share Data and Ratios Six Months Ended June 30, 2016 Year Ended December 31, (unaudited) 2015 2014 2013 2012 2011Net Asset Value, Beginning of Period $ 29.07 $ 29.23 $ 20.08 $ 20.79 $ 15.67 $ 27.46

Net Investment Loss† (0.01) (0.16) (0.08) (0.07) (0.01) (0.06)Net Realized and Unrealized Gain (Loss) 2.01 (0.06) 9.13 (0.78) 5.04 (10.55)

Total from Investment Operations 2.00 (0.22) 9.05 (0.85) 5.03 (10.61)

Distributions from and/or in excess of:Net Realized Gain (0.45) (0.04) — — — (1.18)

Anti-Dilutive Effect of Share Repurchase Program 0.05 0.10 0.10 0.11 0.04 —

Anti-Dilutive Effect of Tender Offer — — — 0.03 0.05 —

Net Asset Value, End of Period $ 30.67 $ 29.07 $ 29.23 $ 20.08 $ 20.79 $ 15.67

Per Share Market Value, End of Period $ 26.67 $ 25.47 $ 26.88 $ 17.48 $ 18.53 $ 14.01

TOTAL INVESTMENT RETURN:Market Value 6.42%# (5.08)% 53.78% (5.67)% 32.26% (42.46)%Net Asset Value(1) 7.23%# (0.37)% 45.57% (3.42)% 32.67% (39.88)%

RATIOS, SUPPLEMENTAL DATA:

Net Assets, End of Period (Thousands) $452,017 $434,641 $449,985 $321,139 $387,069 $349,966

Ratio of Expenses to Average Net Assets(2) 1.38%+* 1.36%+ 1.44%+ 1.43%+ 1.40%+ 1.38%+Ratio of Net Investment Loss to Average

Net Assets(2) (0.04)%+* (0.52)%+ (0.31)%+ (0.37)%+ (0.07)%+ (0.28)%+Ratio of Rebate from Morgan Stanley Affiliates

to Average Net Assets 0.00%§* 0.00%§ 0.00%§ 0.00%§ 0.00%§ 0.00%§Portfolio Turnover Rate 5%# 47% 16% 46% 69% 45%

(2) Supplemental Information on the Ratios to Average Net Assets: Ratios Before Expenses Waived by Administrator:

Ratio of Expenses to Average Net Assets 1.43%* 1.41% 1.49% 1.48% 1.45% 1.43%Ratio of Net Investment Loss to Average

Net Assets (0.09)%* (0.57)% (0.36)% (0.42)% (0.12)% (0.33)%

(1) Total investment return based on net asset value per share reflects the effects of changes in net asset value on the performance of theFund during each period, and assumes dividends and distributions, if any, were reinvested. This percentage is not an indication of theperformance of a stockholder’s investment in the Fund based on market value due to differences between the market price of the stockand the net asset value per share of the Fund.

† Per share amount is based on average shares outstanding.+ The Ratios of Expenses and Net Investment Loss reflect the rebate of certain Fund expenses in connection with the investments in Morgan

Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as “Ratio of Rebate from MorganStanley Affiliates to Average Net Assets.”

§ Amount is less than 0.005%.# Not annualized.* Annualized.




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June 30, 2016

Notes to Financial Statements (unaudited)The Morgan Stanley India Investment Fund, Inc. (the “Fund”)was incorporated in Maryland on December 22, 1993, and isregistered as a non-diversified, closed-end managementinvestment company under the Investment Company Act of1940, as amended (the “Act”). The Fund applies investmentcompany accounting and reporting guidance. The adviser,Morgan Stanley Investment Management Inc. (the “Adviser”),and sub-adviser, Morgan Stanley Investment ManagementCompany (the “Sub-Adviser”), seek long-term capitalappreciation through investments primarily in equity securitiesof Indian issuers.

A. Significant Accounting Policies: The followingsignificant accounting policies are in conformity with U.S.generally accepted accounting principles (“GAAP”). Suchpolicies are consistently followed by the Fund in the preparationof its financial statements. GAAP may require management tomake estimates and assumptions that affect the reportedamounts and disclosures in the financial statements. Actualresults may differ from those estimates.

1. Security Valuation: (1) An equity portfolio security listedor traded on an exchange is valued at its latest reported salesprice (or at the exchange official closing price if suchexchange reports an official closing price), and if there wereno sales on a given day and if there is no official exchangeclosing price for that day, the security is valued at the meanbetween the last reported bid and asked prices if such bidand asked prices are available on the relevant exchanges;(2) all other equity portfolio securities for which over-the-counter (“OTC”) market quotations are readily available arevalued at the latest reported sales price (or at the marketofficial closing price if such market reports an officialclosing price), and if there was no trading in the security ona given day and if there is no official closing price fromrelevant markets for that day, the security is valued at themean between the last reported bid and asked prices if suchbid and asked prices are available on the relevant markets.

Listed equity securities not traded on the valuation datewith no reported bid and asked prices available on theexchange are valued at the mean between the current bidand asked prices obtained from one or more reputablebrokers or dealers. An unlisted equity security that does nottrade on the valuation date and for which bid and askedprices from the relevant markets are unavailable is valued atthe mean between the current bid and asked prices obtainedfrom one or more reputable brokers or dealers. In caseswhere a security is traded on more than one exchange, thesecurity is valued on the exchange designated as theprimary market; (3) when market quotations are notreadily available, including circumstances under which theAdviser or Sub-Adviser determines that the closing price,last sale price or the mean between the last reported bidand asked prices are not reflective of a security’s marketvalue, portfolio securities are valued at their fair value asdetermined in good faith under procedures established byand under the general supervision of the Fund’s Board ofDirectors (the “Directors”). Occasionally, developmentsaffecting the closing prices of securities and other assetsmay occur between the times at which valuations of suchsecurities are determined (that is, close of the foreignmarket on which the securities trade) and the close ofbusiness of the New York Stock Exchange (“NYSE”). Ifdevelopments occur during such periods that are expectedto materially affect the value of such securities, suchvaluations may be adjusted to reflect the estimated fairvalue of such securities as of the close of the NYSE, asdetermined in good faith by the Directors or by the Adviserusing a pricing service and/or procedures approved by theDirectors; (4) quotations of foreign portfolio securities,other assets and liabilities and forward contracts stated inforeign currency are translated into U.S. dollar equivalentsat the prevailing market rates prior to the close of theNYSE; (5) investments in mutual funds, including theMorgan Stanley Institutional Liquidity Funds, are valued at

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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)the net asset value (“NAV”) as of the close of each businessday; and (6) short-term debt securities with remainingmaturities of 60 days or less at the time of purchase may bevalued at amortized cost, unless the Adviser determinessuch valuation does not reflect the securities’ market value,in which case these securities will be valued at their fairmarket value determined by the Adviser.

The Directors have responsibility for determining in goodfaith the fair value of the investments, and the Directorsmay appoint others, such as the Fund’s Adviser or avaluation committee, to assist the Directors in determiningfair value and to make the actual calculations pursuant tothe fair valuation methodologies previously approved bythe Directors. Under procedures approved by the Directors,the Fund’s Adviser has formed a Valuation Committeewhose members are approved by the Directors. TheValuation Committee provides administration andoversight of the Fund’s valuation policies and procedures,which are reviewed at least annually by the Directors.These procedures allow the Fund to utilize independentpricing services, quotations from securities and financialinstrument dealers, and other market sources to determinefair value.

The Fund has procedures to determine the fair value ofsecurities and other financial instruments for which marketprices are not readily available. Under these procedures, theValuation Committee convenes on a regular and ad hocbasis to review such securities and considers a number offactors, including valuation methodologies and significantunobservable valuation inputs, when arriving at fair value.The Valuation Committee may employ a market-basedapproach which may use related or comparable assets orliabilities, recent transactions, market multiples, bookvalues, and other relevant information for the investmentto determine the fair value of the investment. An income-based valuation approach may also be used in which the

anticipated future cash flows of the investment arediscounted to calculate fair value. Discounts may also beapplied due to the nature or duration of any restrictions onthe disposition of the investments. Due to the inherentuncertainty of valuations of such investments, the fairvalues may differ significantly from the values that wouldhave been used had an active market existed. The ValuationCommittee employs various methods for calibrating thesevaluation approaches including a regular review ofvaluation methodologies, key inputs and assumptions,transactional back-testing or disposition analysis, andreviews of any related market activity.

2. Fair Value Measurement: Financial AccountingStandards Board (“FASB”) Accounting StandardsCodificationTM (“ASC”) 820, “Fair Value Measurement”(“ASC 820”), defines fair value as the value that the Fundwould receive to sell an investment or pay to transfer aliability in a timely transaction with an independent buyerin the principal market, or in the absence of a principalmarket the most advantageous market for the investmentor liability. ASC 820 establishes a three-tier hierarchy todistinguish between (1) inputs that reflect the assumptionsmarket participants would use in valuing an asset orliability developed based on market data obtained fromsources independent of the reporting entity (observableinputs) and (2) inputs that reflect the reporting entity’sown assumptions about the assumptions marketparticipants would use in valuing an asset or liabilitydeveloped based on the best information available in thecircumstances (unobservable inputs) and to establishclassification of fair value measurements for disclosurepurposes. Various inputs are used in determining the valueof the Fund’s investments. The inputs are summarized inthe three broad levels listed below.

• Level 1 – unadjusted quoted prices in active markets foridentical investments



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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)• Level 2 – other significant observable inputs (including

quoted prices for similar investments, interest rates,prepayment speeds, credit risk, etc.)

• Level 3 – significant unobservable inputs including theFund’s own assumptions in determining the fair value ofinvestments. Factors considered in making thisdetermination may include, but are not limited to,information obtained by contacting the issuer, analysts,or the appropriate stock exchange (for exchange-tradedsecurities), analysis of the issuer’s financial statements orother available documents and, if necessary, availableinformation concerning other securities in similarcircumstances

The inputs or methodology used for valuing securities arenot necessarily an indication of the risk associated withinvesting in those securities and the determination of thesignificance of a particular input to the fair valuemeasurement in its entirety requires judgment andconsiders factors specific to each security.

The following is a summary of the inputs used to value theFund’s investments as of June 30, 2016.

Level 2 Level 1 Other Level 3 Unadjusted significant Significant quoted observable unobservable prices inputs inputs TotalInvestment Type (000) (000) (000) (000)Assets:

Common StocksAuto

Components $ — $ 20,685 $— $ 20,685Automobiles — 8,131 — 8,131Banks — 85,369 — 85,369Capital Markets — 7,072 — 7,072Construction &

Engineering — 22,824 — 22,824Construction

Materials — 33,344 — 33,344Consumer

Finance — 44,011 — 44,011

Level 2 Level 1 Other Level 3 Unadjusted significant Significant quoted observable unobservable prices inputs inputs TotalInvestment Type (000) (000) (000) (000)Assets: (cont’d)

Common Stocks (cont’d)Electronic

Equipment, Instruments & Components $ — $ 9,436 $— $ 9,436

Gas Utilities — 15,092 — 15,092Information

Technology Services 15,466 38,798 — 54,264

Machinery — 45,723 — 45,723Media — 10,358 — 10,358Oil, Gas &

Consumable Fuels — 19,161 — 19,161

Personal Products — 6,345 — 6,345

Pharmaceuticals — 30,255 — 30,255Tobacco — 9,401 — 9,401Transportation

Infrastructure — 20,830 — 20,830Water Utilities — 3,622 — 3,622

Total Common Stocks 15,466 430,457 — 445,923

Short-Term InvestmentInvestment

Company 1,888 — — 1,888Total Assets $17,354 $430,457 $— $447,811

Transfers between investment levels may occur as themarkets fluctuate and/or the availability of data used in aninvestment’s valuation changes. The Fund recognizestransfers between the levels as of the end of the period. As ofJune 30, 2016, the Fund did not have any investmentstransfer between investment levels. At June 30, 2016, thefair value of certain securities were adjusted due todevelopments which occurred between the time of the closeof the foreign markets on which they trade and the close of



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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)business on the NYSE which resulted in their Level 2classification.

3. Foreign Currency Translation and Foreign Investments:The books and records of the Fund are maintained inU.S. dollars. Amounts denominated in Indian rupees aretranslated into U.S. dollars as follows:

— investments, other assets and liabilities at theprevailing rate of exchange on the valuation date;

— investment transactions and investment income at theprevailing rates of exchange on the dates of suchtransactions.

Although the net assets of the Fund are presented at theforeign exchange rates and market values at the close of theperiod, the Fund does not isolate that portion of the resultsof operations arising as a result of changes in the foreignexchange rates from the fluctuations arising from changesin the market prices of securities held at period end.Similarly, the Fund does not isolate the effect of changes inforeign exchange rates from the fluctuations arising fromchanges in the market prices of securities sold during theperiod. Accordingly, realized and unrealized foreigncurrency gains (losses) on investments in securities areincluded in the reported net realized and unrealized gains(losses) on investment transactions and balances.

Net realized gains (losses) on foreign currency transactionsrepresent net foreign exchange gains (losses) from sales andmaturities of foreign currency forward exchange contracts,disposition of foreign currency, currency gains (losses)realized between the trade and settlement dates onsecurities transactions, and the difference between theamount of investment income and foreign withholdingtaxes recorded on the Fund’s books and the U.S. dollarequivalent amounts actually received or paid. Netunrealized currency gains (losses) from valuing foreign

currency denominated assets and liabilities at period endexchange rates are reflected as a component of unrealizedappreciation (depreciation) in investments and foreigncurrency translations in the Statement of Assets andLiabilities. The change in unrealized currency gains (losses)on foreign currency translations for the period is reflectedin the Statement of Operations.

A significant portion of the Fund’s net assets consist ofIndian securities which involve certain considerations andrisks not typically associated with investments in theUnited States. In addition to its smaller size, less liquidityand greater volatility, the Indian securities market is lessdeveloped than the U.S. securities market and there is oftensubstantially less publicly available information aboutIndian issuers than there is about U.S. issuers. Settlementmechanisms are also less developed and are accomplished,in certain cases, only through physical delivery, which maycause the Fund to experience delays or other difficulties ineffecting transactions.

4. Indemnifications: The Fund enters into contracts thatcontain a variety of indemnifications. The Fund’smaximum exposure under these arrangements is unknown.However, the Fund has not had prior claims or lossespursuant to these contracts and expects the risk of loss tobe remote.

5. Dividends and Distributions to Stockholders:Dividend income and distributions to stockholders arerecorded on the ex-dividend date. Dividends from netinvestment income, if any, are declared and paid annually.Net realized capital gains, if any, are distributed at leastannually.

6. Other: Security transactions are accounted for on thedate the securities are purchased or sold. Investments innew Indian securities are made by making applications inthe public offerings. The issue price, or a portion thereof, is



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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)paid at the time of application and reflected as shareapplication money on the Statement of Assets andLiabilities, if any. Upon allotment of the securities, thisamount plus any remaining amount of issue price isrecorded as cost of investments. Realized gains (losses) onthe sale of investment securities are determined on thespecific identified cost basis. Interest income is recognizedon the accrual basis, if any.

B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund withadvisory services under the terms of an Investment AdvisoryAgreement, calculated weekly and payable monthly, at an annualrate of 1.10% of the Fund’s average weekly net assets.

The Adviser has entered into a Sub-Advisory Agreement withthe Sub-Adviser, a wholly-owned subsidiary of Morgan Stanley.The Sub-Adviser provides the Fund with advisory servicessubject to the overall supervision of the Adviser and the Fund’sOfficers and Directors. The Adviser pays the Sub-Adviser on amonthly basis a portion of the net advisory fees the Adviserreceives from the Fund.

C. Administration Fees: The Adviser also serves asAdministrator to the Fund and provides administrative servicespursuant to an Administration Agreement for an annual fee,accrued daily and paid monthly, of 0.08% of the Fund’s averageweekly net assets. The Adviser has agreed to limit theadministration fee through a waiver so that it will be no greaterthan the previous administration fee of 0.02435% of the Fund’saverage weekly net assets plus $24,000 per annum. This waivermay be terminated at any time. For the six months endedJune 30, 2016, approximately $104,000 of administration feeswere waived pursuant to this arrangement.

Under a Sub-Administration Agreement between theAdministrator and State Street Bank and Trust Company (“StateStreet”), State Street provides certain administrative services tothe Fund. For such services, the Administrator pays State Streeta portion of the fee the Administrator receives from the Fund.

Cim Fund Services Ltd., whose registered office is in Mauritius,provides sub-administrative services to the Fund, includingmaintaining certain Fund records and preparing certain periodicfilings, under an agreement whereby Cim Fund Services Ltd. ispaid a fee of $30,000 per annum plus reimbursement for certainout-of-pocket expenses.

D. Custodian Fees: State Street (the “Custodian”) and itsaffiliates serve as Custodian for the Fund. The Custodian holdscash, securities, and other assets of the Fund as required by theAct. Custody fees are payable monthly based on assets held incustody, investment purchases and sales activity and accountmaintenance fees, plus reimbursement for certain out-of-pocketexpenses.

E. Security Transactions and Transactions with Affiliates:For the six months ended June 30, 2016, purchases and sales ofinvestment securities for the Fund, other than long-term U.S.Government securities and short-term investments, wereapproximately $22,405,000 and $30,568,000, respectively.There were no purchases and sales of long-term U.S.Government securities for the six months ended June 30, 2016.

The Fund invests in the Institutional Class of the MorganStanley Institutional Liquidity Funds (the “Liquidity Funds”),an open-end management investment company managed by theAdviser. Advisory fees paid by the Fund are reduced by anamount equal to its pro-rata share of the advisory andadministration fees paid by the Fund due to its investment inthe Liquidity Funds. For the six months ended June 30, 2016,advisory fees paid were reduced by approximately $1,000relating to the Fund’s investment in the Liquidity Funds.

A summary of the Fund’s transactions in shares of the LiquidityFunds during the six months ended June 30, 2016 is as follows:

Value ValueDecember 31, Purchases Dividend June 30, 2015 at Cost Sales Income 2016 (000) (000) (000) (000) (000)

$2,724 $11,733 $12,569 $4 $1,888



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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)During the six months ended June 30, 2016, the Fund incurredapproximately $7,000 in brokerage commissions withMorgan Stanley & Co., LLC, an affiliate of the Adviser/Administrator, for portfolio transactions executed on behalf ofthe Fund.

The Fund is permitted to purchase and sell securities (“cross-trade”) from and to other Morgan Stanley Funds as well as otherfunds and client accounts for which the Adviser or an affiliate ofthe Adviser serves as investment adviser, pursuant to proceduresapproved by the Directors in compliance with Rule 17a-7 underthe Act (the “Rule”). Each cross-trade is executed at the currentmarket price in compliance with provisions of the Rule. For thesix months ended June 30, 2016, the Fund did not engage inany cross-trade transactions.

F. Federal Income Taxes: It is the Fund’s intention tocontinue to qualify as a regulated investment company anddistribute all of its taxable income. Accordingly, no provision forFederal income taxes is required in the financial statements.

Effective October 1, 2004 there is no capital gains tax in Indiafor long-term investments in specified securities executed on arecognized stock exchange on which securities transaction tax ispaid. The current rate of capital gains tax for short-terminvestments is 16.223% for transactions conducted through arecognized stock exchange and on which securities transactiontax is paid. The Fund invests in India through a registeredbranch office established in Mauritius. Further, the Fund’scentral management and control is in Mauritius and it obtains atax residency certificate from the Mauritian authorities and thusclaims the benefits under the double taxation treaty betweenMauritius and India. A fund which is a tax resident in Mauritiusunder the Treaty but has no branch or permanent establishmentin India will not be subject to capital gains tax in India on thesale of securities. A Protocol amending the Mauritius-IndiaDouble Tax Treaty was signed by both countries on May 10,2016. Among other items, the Protocol removes the exemptionon certain capital gains tax effective for sales of securities

purchased on or after April 1, 2017. At this time, the Adviser isevaluating the impact of this change on the Fund’s operations.The dividend income from Indian companies are exempt fromIndian income tax.

The Fund currently is subject to and accrues Indian tax oninterest earned on Indian securities at 21.63%. The Treatybenefits accorded to foreign investors were challenged by anongovernmental organization and the matter was litigatedbefore India’s Supreme Court (the highest court in India). InOctober 2003, India’s Supreme Court upheld the validity ofTreaty benefits accorded to foreign investors on the basis of acertificate of residence issued by Mauritian authorities (such asthe one obtained by the Fund).

The Finance Act 2012 had introduced the General AntiAvoidance Rules (“GAAR”) effective from April 1, 2013. AnExpert Committee was constituted by Prime Minister’s Office tocomment on the GAAR provisions. The Expert Committeepublished its recommendations/observations on September 1,2012. Along with other suggestions, the committee hadrecommended to defer the implementation of GAAR forthree years. A majority of the recommendations of thecommittee have been reflected in the 2013 Finance Act. As perthe amended GAAR provisions, GAAR is attracted if the mainpurpose (as opposed to one of the main purposes) of anarrangement or a part of the arrangement is to obtain a taxbenefit. Once an arrangement is held to be an “impermissibleavoidance arrangement”, the tax authorities can disregard,combine, or ignore a step in the arrangement, deny tax treatybenefits, etc. Further, applicability of the GAAR provisions hasbeen deferred until April 1, 2017. Any tax benefits obtainedfrom April 1, 2017 onwards, irrespective of the date ofarrangement will be subject to the GAAR provisions.

FASB ASC 740-10, “Income Taxes — Overall”, sets forth aminimum threshold for financial statement recognition of thebenefit of a tax position taken or expected to be taken in a taxreturn. Management has concluded there are no significant



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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)uncertain tax positions that would require recognition in thefinancial statements. If applicable, the Fund recognizes interestaccrued related to unrecognized tax benefits in “InterestExpense” and penalties in “Other Expenses” in the Statement ofOperations. The Fund files tax returns with the U.S. InternalRevenue Service, New York and various states. Generally, each ofthe tax years in the four-year period ended December 31, 2015remains subject to examination by taxing authorities.

The tax character of distributions paid may differ from thecharacter of distributions shown in the Statements of Changes inNet Assets due to short-term capital gains being treated asordinary income for tax purposes. The tax character ofdistributions paid during fiscal years 2015 and 2014 was asfollows:

2015 Distributions 2014 Distributions Paid From: Paid From:

Long-Term Long-Term Ordinary Capital Ordinary Capital Income Gain Income Gain (000) (000) (000) (000)

$— $606 $— $—

The amount and character of income and gains to be distributedare determined in accordance with income tax regulations whichmay differ from GAAP. These book/tax differences are eitherconsidered temporary or permanent in nature.

Temporary differences are attributable to differing book and taxtreatments for the timing of the recognition of gains (losses) oncertain investment transactions and the timing of thedeductibility of certain expenses.

Permanent differences, primarily due to differing treatments ofgains (losses) related to foreign currency transactions and a net

operating loss, resulted in the following reclassifications amongthe components of net assets at December 31, 2015:

Accumulated Accumulated Undistributed Net Investment Net Realized Paid-in- Loss Gain Capital (000) (000) (000)

$1,688 $1,000 $(2,688)

At December 31, 2015, the components of distributableearnings for the Fund on a tax basis were as follows:

Undistributed Ordinary Undistributed Income Long-Term Capital Gain (000) (000)

$— $6,624

To the extent that capital loss carryforwards are used to offsetany future capital gains realized, no capital gains tax liability willbe incurred by the Fund for gains realized and not distributed.To the extent that capital gains are offset, such gains will not bedistributed to the stockholders. During the year endedDecember 31, 2015, the Fund had utilized capital losscarryforwards for U.S. Federal income tax purposes ofapproximately $36,394,000.

G. Other: Future economic and political developments inIndia could adversely affect the liquidity or value, or both, ofsecurities in which the Fund is invested. In addition, the Fund’sability to hedge its currency risk is limited and accordingly, theFund may be exposed to currency devaluation and otherexchange rate fluctuations.

On August 10, 1998, the Fund commenced a share repurchaseprogram for purposes of enhancing stockholder value andreducing the discount at which the Fund’s shares trade fromtheir NAV. During the six months ended June 30, 2016, theFund repurchased 213,107 of its shares at an average discount of12.87% from NAV. Since the inception of the program, theFund has repurchased 11,401,420 of its shares at an average



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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)discount of 22.72% from NAV. The Directors regularly monitorthe Fund’s share repurchase program as part of their review andconsideration of the Fund’s premium/discount history. TheFund expects to continue to repurchase its outstanding shares atsuch time and in such amounts as it believes will further theaccomplishment of the foregoing objectives, subject to review bythe Directors.

At June 30, 2016, the Fund had record owners of 10% orgreater. Investment activities of these shareholders could have amaterial impact on the Fund. The aggregate percentage of suchowners was 28.7%.

H. Results of Annual Meeting of Stockholders: OnJune 21, 2016, an annual meeting of the Fund’s stockholderswas held for the purpose of voting on the following matter, theresults of which were as follows:

Election of Directors by all stockholders:

For Against

Fergus Reid 6,647,186 5,911,350

For More Information About Portfolio Holdings

The Fund provides a complete schedule of portfolio holdings inits semi-annual and annual reports within 60 days of the end ofthe Fund’s second and fourth fiscal quarters. The semi-annualreports and the annual reports are filed electronically with theSecurities and Exchange Commission (SEC) on Form N-CSRSand Form N-CSR, respectively. Morgan Stanley also delivers thesemi-annual and annual reports to Fund stockholders andmakes these reports available on its public website,www.morganstanley.com/im. Each Morgan Stanley fund alsofiles a complete schedule of portfolio holdings with the SEC forthe Fund’s first and third fiscal quarters on Form N-Q. MorganStanley does not deliver the reports for the first and third fiscalquarters to stockholders, nor are the reports posted to theMorgan Stanley public website. You may, however, obtain theForm N-Q filings (as well as the Form N-CSR and N-CSRSfilings) by accessing the SEC’s website, www.sec.gov. You mayalso review and copy them at the SEC’s Public ReferenceRoom in Washington, DC. Information on the operation of theSEC’s Public Reference Room may be obtained by calling theSEC toll free at 1(800) SEC-0330. You can also request copiesof these materials, upon payment of a duplicating fee, byelectronic request at the SEC’s e-mail address([email protected]) or by writing the public reference sectionof the SEC, Washington, DC 20549-0102.

In addition to filing a complete schedule of portfolio holdingswith the SEC each fiscal quarter, the Fund makes portfolioholdings information available by providing the information onits public website, www.morganstanley.com/im. The Fundprovides a complete schedule of portfolio holdings on the publicwebsite on a monthly basis at least 15 calendar days aftermonth-end and under other conditions as described in theFund’s policy on portfolio holdings disclosure. You may obtaincopies of the Fund’s monthly website postings, by calling tollfree 1(800) 231-2608.



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June 30, 2016

Notes to Financial Statements (unaudited) (cont’d)Proxy Voting Policy and Procedures and Proxy VotingRecord

A copy of (1) the Fund’s policies and procedures with respect tothe voting of proxies relating to the Fund’s portfolio securities;and (2) how the Fund voted proxies relating to portfoliosecurities during the most recent twelve-month period endedJune 30, is available without charge, upon request, by calling tollfree 1(800) 231-2608 or by visiting our website atwww.morganstanley.com/im. This information is also availableon the SEC’s web site at www.sec.gov.



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June 30, 2016

Investment Advisory Agreement Approval (unaudited)Nature, Extent and Quality of ServicesThe Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser (as definedherein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securitiestrading. The Board reviewed similar information and factors regarding the Sub-Adviser (as defined herein), to the extent applicable.The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund’sAdviser under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, businessmanagement and planning, legal services and the provision of supplies, office space and utilities at the Adviser’s expense. The Boardalso considered the Adviser’s investment in personnel and infrastructure that benefits the Fund. (The Adviser and Sub-Advisertogether are referred to as the “Adviser” and the advisory, sub-advisory and administration agreements together are referred to as the“Management Agreement.”) The Board also considered that the Adviser serves a variety of other investment advisory clients and hasexperience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similarservices provided by non-affiliated advisers as reported to the Board by Broadridge Financial Solutions, Inc. (“Broadridge”).

The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other keypersonnel of the Adviser who provide the administrative and advisory services to the Fund. The Board determined that the Adviser’sportfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in anefficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative servicesprovided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported itsdecision to approve the Management Agreement.

Performance, Fees and Expenses of the FundThe Board reviewed the performance, fees and expenses of the Fund compared to its peers, as determined by Broadridge, and toappropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achievedin managing the Fund. When considering a fund’s performance, the Board and the Adviser place emphasis on trends and longer-termreturns (focusing on one-year, three-year and five-year performance, as of December 31, 2015, or since inception, as applicable).When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of suchunderperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Boardnoted that the Fund’s performance was better than its peer group average for the one-, three- and five-year periods. The Board alsonoted that the Fund outperformed its benchmark index for the one-, three- and five-year periods. The Board discussed with theAdviser the level of the advisory and administration fees (together, the “management fee”) for this Fund relative to comparable fundsand/or other accounts advised by the Adviser and/or compared to its peers as determined by Broadridge. In addition to themanagement fee, the Board also reviewed the Fund’s total expense ratio. When a fund’s management fee and/or its total expense ratioare higher than its peers, the Board and the Adviser discuss the reasons for this and, where appropriate, they discuss possible waiversand/or caps. The Board noted that while the Fund’s contractual management fee was higher than its peer group average, its actualmanagement fee and total expense ratio were higher than but close to its peer group averages. After discussion, the Board concludedthat the Fund’s (i) performance was competitive with its peer group average; and (ii) management fee and total expense ratio werecompetitive with its peer group averages.

Merrill Corp - MS India Investment Fund_ Inc. Semi-Annual Report [Funds] 06-30-2016 ED [AUX] | thunt | 24-Aug-16 14:41 | 16-14865-6.fa | Sequence: 1CHKSUM Content: 14286 Layout: 28862 Graphics: No Graphics CLEAN


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June 30, 2016

Investment Advisory Agreement Approval (unaudited) (cont’d)Economies of ScaleThe Board considered the size and growth prospects of the Fund and how that relates to the Fund’s total expense ratio and particularlythe Fund’s management fee rate, which does not include breakpoints. In conjunction with its review of the Adviser’s profitability, theBoard discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whetherthe management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structurereflects economies of scale as asset levels change. The Board considered that, with respect to closed-end funds, the assets are not likelyto grow with new sales or grow significantly as a result of capital appreciation. The Board concluded that economies of scale for theFund were not a factor that needed to be considered at the present time.

Profitability of the Adviser and AffiliatesThe Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the lastyear from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley FundComplex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser andaffiliates. The Board has determined that its review of the analysis of the Adviser’s expenses and profitability supports its decision toapprove the Management Agreement.

Other Benefits of the RelationshipThe Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with theFund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/orshareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received bythe Adviser generated from commission dollars spent on funds’ portfolio trading. The Board reviewed with the Adviser thesearrangements and the reasonableness of the Adviser’s costs relative to the services performed. The Board has determined that its reviewof the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.

Resources of the Adviser and Historical Relationship Between the Fund and the AdviserThe Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under theManagement Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser,including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managingthe Fund’s operations and the Board’s confidence in the competence and integrity of the senior managers and key personnel of theAdviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the ManagementAgreement and that it is beneficial for the Fund to continue its relationship with the Adviser.

Other Factors and Current TrendsThe Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund’s ChiefCompliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere tohigh ethical standards in the conduct of the Fund’s business.



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June 30, 2016

Investment Advisory Agreement Approval (unaudited) (cont’d)General ConclusionAfter considering and weighing all of the above factors, with various written materials and verbal information presented by theAdviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of theManagement Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece ofinformation or factor referenced above. The Board considered these factors and information over the course of the year and innumerous meetings, some of which were in executive session with only the independent Board members and their counsel present. Itis possible that individual Board members may have weighed these factors, and the information presented, differently in reaching theirindividual decisions to approve the Management Agreement.



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June 30, 2016

Portfolio Management (unaudited)The Fund is managed within the Emerging Markets Equity team. The team consists of portfolio managers and analysts. Currentmembers of the team jointly and primarily responsible for the day-to-day management of the Fund’s Portfolio are Ashutosh Sinha, aManaging Director of the Sub-Adviser, and Ruchir Sharma, a Managing Director of the Adviser.

Mr. Sinha has been most recently associated with the Sub-Adviser in an investment management capacity since March 2011 andbegan managing the Fund in May 2012. Mr. Sinha founded and served as the managing partner of Amoeba Capital Partners, Pte(from April 2006 to February 2011). He was previously associated with the Sub-Adviser in an investment management capacityfrom 1995 to 2006. Mr. Sharma has been associated with the Adviser in an investment management capacity since 1996 and beganmanaging the Fund in January 2001.



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June 30, 2016

Investment Policy (unaudited)DerivativesThe Fund may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management,portfolio management or to earn income. Derivatives are financial instruments whose value is based, in part, on the value of anunderlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, alsoaffect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may haveadditional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by thecounterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments,indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid and risks arising frommargin requirements. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated withother portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques andrisk analyses different from those associated with other portfolio investments. In addition, proposed regulatory changes by theSecurities and Exchange Commission (“SEC”) relating to a mutual fund’s use of derivatives could potentially limit or impact theFund’s ability to invest in derivatives and adversely affect the value or performance of the Fund or its derivative investments.

Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss.Leverage associated with derivative transactions may cause the Fund to liquidate portfolio positions when it may not be advantageousto do so to satisfy its obligations or to meet earmarking or segregation requirements, pursuant to applicable SEC rules and regulations,or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Adviser seeks to use derivatives tofurther the Fund’s investment objective, there is no assurance that the use of derivatives will achieve this result.

Following is a description of the derivative instruments and techniques that the Fund may use and their associated risks:

Foreign Currency Forward Exchange Contracts. In connection with its investments in foreign securities, the Fund also may enter intocontracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date. A foreign currency forwardexchange contract (“currency contract”) is a negotiated agreement between the contracting parties to exchange a specified amount ofcurrency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that arethe subject of the contract. The Fund may also invest in non-deliverable foreign currency forward exchange contracts (“NDFs”).NDFs are similar to other foreign currency forward exchange contracts, but do not require or permit physical delivery of currencyupon settlement. Instead, settlement is made in cash based on the difference between the contracted exchange rate and the spot foreignexchange rate at settlement. Currency contracts may be used to protect against uncertainty in the level of future foreign currencyexchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxyhedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency hedgesinvolve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or toestablish an active exposure to the exchange rate between any two currencies. To the extent hedged by the use of currency contracts,the precise matching of the currency contract amounts and the value of the securities involved will not generally be possible becausethe future value of such securities in foreign currencies will change as a consequence of market movements in the value of those



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June 30, 2016

Investment Policy (unaudited) (cont’d)securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions may reduceor preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There isadditional risk that such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in thedirection opposite to the position taken and that currency contracts create exposure to currencies in which the Fund’s securities arenot denominated. The use of currency contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to thecontract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

Futures. A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset,reference rate or index at a specific price at a specific future time. The value of a futures contract tends to increase and decrease intandem with the value of the underlying instrument. Depending on the terms of the particular contract, futures contracts are settledthrough either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount onthe settlement date. A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment andeven a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to thederivatives risks discussed above, the prices of futures contracts can be highly volatile, using futures contracts can lower total return,and the potential loss from futures contracts can exceed the Fund’s initial investment in such contracts. No assurance can be given thata liquid market will exist for any particular futures contract at any particular time. There is also the risk of loss by the Fund of margindeposits in the event of bankruptcy of a broker with which the Fund has open positions in the futures contract.

Structured Investments. The Fund also may invest a portion of its assets in structured investments. A structured investment is aderivative security designed to offer a return linked to a particular underlying security, currency, commodity or market. Structuredinvestments may come in various forms including notes (such as exchange-traded notes), warrants and options to purchase securities.The Fund will typically use structured investments to gain exposure to a permitted underlying security, currency, commodity ormarket when direct access to a market is limited or inefficient from a tax or cost standpoint. There can be no assurance that structuredinvestments will trade at the same price or have the same value as the underlying security, currency, commodity or market.Investments in structured investments involve risks including issuer risk, counterparty risk and market risk. Holders of structuredinvestments bear risks of the underlying investment and are subject to issuer or counterparty risk because the Fund is relying on thecreditworthiness of such issuer or counterparty and has no rights with respect to the underlying investment. Certain structuredinvestments may be thinly traded or have a limited trading market and may have the effect of increasing the Fund’s illiquidity to theextent that the Fund, at a particular point in time, may be unable to find qualified buyers for these securities.

Special Risks Related to Cyber SecurityThe Fund and its service providers are susceptible to cyber security risks that include, among other things, theft, unauthorizedmonitoring, release, misuse, loss, destruction or corruption of confidential and highly restricted data; denial of service attacks;unauthorized access to relevant systems; compromises to networks or devices that the Fund and its service providers use to service theFund’s operations; or operational disruption or failures in the physical infrastructure or operating systems that support the Fund andits service providers. Cyber attacks against or security breakdowns of the Fund or its service providers may adversely impact the Fundand its stockholders, potentially resulting in, among other things, financial losses; the inability of Fund stockholders to transact



26


June 30, 2016

Investment Policy (unaudited) (cont’d)business and the Fund to process transactions; inability to calculate the Fund’s NAV; violations of applicable privacy and other laws;regulatory fines, penalties, reputational damage, reimbursement or other compensation costs; and/or additional compliance costs. TheFund may incur additional costs for cyber security risk management and remediation purposes. In addition, cyber security risks mayalso impact issuers of securities in which the Fund invests, which may cause the Fund’s investment in such issuers to lose value. Therecan be no assurance that the Fund or its service providers will not suffer losses relating to cyber attacks or other information securitybreaches in the future.

Foreign and Emerging Market SecuritiesInvesting in the securities of foreign issuers, particularly those located in emerging market or developing countries, entails the risk thatnews and events unique to a country or region will affect those markets and their issuers. The value of the Fund’s shares may varywidely in response to political and economic factors affecting companies in foreign countries. These same events will not necessarilyhave an effect on the U.S. economy or similar issuers located in the United States. In addition, investments in certain foreign markets,which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developmentsand changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets hasincreased the probability that adverse developments and conditions in one country or region will affect the stability of economies andfinancial markets in other countries or regions.

Investments in foreign markets entail special risks such as currency, political, economic and market risks. There also may be greatermarket volatility, less reliable financial information, higher transaction and custody costs, decreased market liquidity and lessgovernment and exchange regulation associated with investments in foreign markets. In addition, investments in certain foreignmarkets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoingdevelopments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financialmarkets has increased the probability that adverse developments and conditions in one country or region will affect the stability ofeconomies and financial markets in other countries or regions. Certain foreign markets may rely heavily on particular industries orforeign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular countryor countries, organizations, entities and/or individuals, changes in international trading patterns, trade barriers, and other protectionistor retaliatory measures. Economic sanctions could, among other things, effectively restrict or eliminate the Fund’s ability to purchaseor sell securities or groups of securities for a substantial period of time, and may make the Fund’s investments in such securities harderto value. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capitalcontrols, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes. The governments ofcertain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors orindustries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which wouldadversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Certain foreign investments maybecome less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Fund,particularly during periods of market turmoil. When the Fund holds illiquid investments, its portfolio may be harder to value. The



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Investment Policy (unaudited) (cont’d)risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. Inaddition, the Fund’s investments in foreign issuers may be denominated in foreign currencies and therefore, to the extent unhedged,the value of the investment will fluctuate with the U.S. dollar exchange rates.

Determination of NAVThe Fund determines the NAV per share as of the close of the NYSE (normally 4:00p.m. Eastern time) on each day that the NYSE isopen for business. Shares generally will not be priced on days that the NYSE is closed. If the NYSE is closed due to inclement weather,technology problems or any other reason on a day it would normally be open for business, or the NYSE has an unscheduled earlyclosing on a day it has opened for business, the Fund reserves the right to treat such day as a business day and calculate its NAV as ofthe normally scheduled close of regular trading on the NYSE for that day, so long as the Adviser believes there generally remains anadequate market to obtain reliable and accurate market quotations. The Fund may elect to price its shares on days when the NYSE isclosed but the primary securities markets on which the Fund’s securities trade remain open.



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Dividend Reinvestment and Cash Purchase Plan (unaudited)Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the Plan), each stockholder will be deemed to have elected, unlessComputershare Trust Company, N.A. (the Plan Agent) is otherwise instructed by the stockholder in writing, to have all distributionsautomatically reinvested in Fund shares. Participants in the Plan have the option of making additional voluntary cash payments to thePlan Agent, annually, in any amount from $100 to $3,000, for investment in Fund shares.

Dividend and capital gain distributions (Distributions) will be reinvested on the reinvestment date in full and fractional shares. If themarket price per share equals or exceeds net asset value per share on the reinvestment date, the Fund will issue shares to participants atnet asset value or, if net asset value is less than 95% of the market price on the reinvestment date, shares will be issued at 95% of themarket 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 atthe discretion of the Board of Directors. Should the Fund declare a Distribution payable only in cash, the Plan Agent will purchaseFund shares for participants in the open market as agent for the participants.

The Plan Agent’s fees for the reinvestment of a Distribution will be paid by the Fund. However, each participant’s account will becharged a pro rata share of brokerage commissions incurred on any open market purchases effected on such participant’s behalf. Aparticipant will also pay brokerage commissions incurred on purchases made by voluntary cash payments. Although stockholders inthe Plan may receive no cash distributions, participation in the Plan will not relieve participants of any income tax which may bepayable 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 PlanAgent will administer the Plan on the basis of the number of shares certified from time to time by the stockholder as representing thetotal 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 nopenalty for non-participation or withdrawal from the Plan, and stockholders who have previously withdrawn from the Plan may rejoinat 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.Computershare Trust Company, N.A.P.O. Box 30170College Station, Texas 778421 (800) 231-2608Monday–Friday between 8:30 a.m. and 6:00 p.m. (EDT)



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Privacy Notice (unaudited)Morgan Stanley Investment Management Inc.An Important Notice Concerning Our U.S. Privacy PolicyWe are required by federal law to provide you with a copy of our privacy policy annually. This policy applies to current and formerindividual investors in funds managed or sponsored by Morgan Stanley Investment Management Inc. (“MSIM”) as well as currentand former individual clients of MSIM. This policy is not applicable to partnerships, corporations, trusts or other non-individualclients or investors. Please note that we may amend this policy at any time, and will inform you of any changes as required by law.

We Respect Your PrivacyWe appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of suchinformation while we help you achieve your financial objectives. This Notice describes what non-public personal information wecollect about you, why we collect it, when we may share it with others and how certain others may use it. It discusses the steps youmay take to limit our sharing of certain information about you to affiliated companies in the Morgan Stanley family of companies(“other Morgan Stanley companies”). It also discloses how you may limit use of certain shared information for marketing purposes byother Morgan Stanley branded companies. Throughout this policy, we refer to the non-public information that personally identifiesyou or your accounts as “personal information.”

1. What Personal Information Do We Collect About You?We obtain personal information from applications and other forms you submit to us, from your dealings with us, from consumerreporting agencies, from our Web sites and from third parties and other sources.

For example:• We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment

objectives through subscription documents, applications and other forms you submit to us.

• We may obtain information about account balances, your use of account(s) and the types of products and services you prefer toreceive from us through your dealings and transactions with us and other sources.

• We may obtain information about your creditworthiness and credit history from consumer reporting agencies.

• We may collect background information from and through third-party vendors to verify representations you have made and tocomply with various regulatory requirements.

• If you interact with us through our public and private Web sites, we may collect information that you provide directly throughonline communications (such as an e-mail address). We may also collect information about your Internet service provider, yourdomain name, your computer’s operating system and Web browser, your use of our Web sites and your product and servicepreferences, through the use of “cookies.” Please consult the Terms of Use of these sites for more details.



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Privacy Notice (unaudited) (cont’d)2. When Do We Disclose Personal Information We Collect About You?We may disclose personal information we collect about you to other Morgan Stanley companies and to non-affiliated third parties.

a. Information We Disclose to Other Morgan Stanley Companies. We may disclose personal information to other MorganStanley companies for a variety of reasons, including to manage your account(s) effectively, to service and process yourtransactions, to let you know about products and services offered by us and other Morgan Stanley companies, to manage ourbusiness, and as otherwise required or permitted by law. Offers for products and services from other Morgan Stanley companiesare developed under conditions designed to safeguard your personal information.

b. Information We Disclose to Non-affiliated Third Parties. We do not disclose personal information that we collect about youto non-affiliated third parties except to those who provide marketing services on our behalf, to financial institutions with whomwe have joint marketing agreements, and as otherwise required or permitted by law. For example, we may disclose personalinformation to nonaffiliated third parties for servicing and processing transactions, to offer our own products and services, toprotect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When weshare personal information with a non-affiliated third party, they are required to limit their use of personal information to theparticular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill thatlimited purpose or as may be permitted or required by law.

3. How Do We Protect the Security and Confidentiality of Personal Information We Collect About You?We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you.We have internal policies governing the proper handling of client information. Third parties that provide support or marketingservices on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respectto such information.

4. How Can You Limit the Sharing of Certain Types of Personal Information With Other MorganStanley Companies?We offer you choices as to whether we share with other Morgan Stanley companies the personal information that was collected todetermine your eligibility for products and services you request (“eligibility information”). Eligibility information does not includeyour identification information or personal information pertaining to our transactions or experiences with you. Please note that, evenif you direct us not to share eligibility information with other Morgan Stanley companies (“opt-out”), we may still share personalinformation, including eligibility information, with those companies in circumstances excluded from the opt-out under applicable law,such as to process transactions or to service your account.



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Privacy Notice (unaudited) (cont’d)5. How Can You Limit the Use of Certain Types of Personal Information by Other Morgan StanleyCompanies for Marketing?By following the opt-out instructions in Section 6 below, you may limit other Morgan Stanley branded companies from marketingtheir products or services to you based on personal information we disclose to them. This information may include, for example, yourincome and account history with us. Please note that, even if you choose to limit Other Morgan Stanley Companies from usingpersonal information about you that we may share with them for marketing their products and services to you, Other Morgan StanleyCompanies may use your personal information that they obtain from us to market to you in circumstances permitted by law, such as ifthe Other Morgan Stanley Company has its own relationship with you.

6. How Can You Send Us an Opt-Out Instruction?If you wish to limit our sharing of eligibility information about you with other Morgan Stanley companies or other Morgan Stanleycompanies’ use of personal information for marketing purposes, as described in this notice, you may do so by:

• Calling us at (800) 231-2608Monday–Friday between 8a.m. and 6p.m.(EST)

• Writing to us at the following address:

Computershare Trust Company, N.A.c/o Privacy CoordinatorP.O. Box 30170College Station, Texas 77842

Your written request should include your name, address, telephone number and account number(s) to which the opt-out applies andwhether you are opting out with respect to sharing of eligibility information (Section 4 above), or if information used for Marketing(Section 5 above) or both. Written opt-out requests should not be sent with any other correspondence. In order to process yourrequest, we require that the request be provided by you directly and not through a third party.

Your opt-out preference will remain in effect with respect to this policy (as it may be amended) until you notify us otherwise. If youhave a joint account, your direction for us not to share this information with other Morgan Stanley companies and for those otherMorgan Stanley companies not to use your personal information for marketing will be applied to all account holders on that account.Please understand that if you limit our sharing or our affiliated companies’ use of personal information, you and any joint accountholder(s) may not receive information about Morgan Stanley products and services, including products or services that could help youmanage your financial resources and achieve your investment objectives.



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Privacy Notice (unaudited) (cont’d)7. What if an Affiliated Company Becomes a Non-affiliated Third Party?If, at any time in the future, an affiliated company becomes a non-affiliated third party, further disclosures of personal informationmade to the former affiliated company will be limited to those described in Section 2(b) above relating to non-affiliated third parties.If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliatedcompanies, your election will not apply to use by any former affiliated company of your personal information in their possession onceit becomes a non-affiliated third party.

SPECIAL NOTICE TO RESIDENTS OF VERMONTThe following section supplements our policy with respect to our individual clients who have a Vermont address andsupersedes anything to the contrary in the above policy with respect to those clients only.

The state of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collectabout you with affiliated companies and non-affiliated third parties other than in certain limited circumstances. Except aspermitted by law, we will not share personal information we collect about you with non-affiliated third parties or other MorganStanley companies unless you provide us with your written consent to share such information (“opt-in”).

If you wish to receive offers for investment products and services offered by or through other Morgan Stanley companies, pleasenotify us in writing at the following address:

Computershare Trust Company, N.A.c/o Privacy CoordinatorP.O. Box 30170College Station, Texas 77842

Your authorization should include your name, address, telephone number and account number(s) to which the opt-in applies andshould not be sent with any other correspondence. In order to process your authorization, we require that the authorization beprovided by you directly and not through a third party.

SPECIAL NOTICE TO RESIDENTS OF CALIFORNIAThe following section supplements our policy with respect to our individual clients who have a California address andsupersedes anything to the contrary in the above policy with respect to those clients only.

In response to a California law, if your account has a California home address, your personal information will not be disclosed tononaffiliated third parties except as permitted by applicable California law, and we will limit sharing such information with ouraffiliates to comply with California privacy laws that apply to us.



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Merrill Corp - Merrill Corporation ED True Blanks 7.5x8.75 Prospectus [Funds] Style Only | rradatz | 05-Aug-10 13:03 | 07-28247-18.tb1 | Sequence: 1CHKSUM Content: No Content Layout: 0 Graphics: No Graphics CLEAN

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