FIRST QUARTER REPORT
MARCH 31, 2002
[MORGAN STANLEY LOGO]
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
MORGAN STANLEY
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
Morgan Stanley India Investment Fund, Inc.
DIRECTORS AND OFFICERS
Barton M. Biggs Marie Joseph Raymond
CHAIRMAN OF THE Lamusse
BOARD OF DIRECTORS DIRECTOR
Ronald E. Robison Fergus Reid
PRESIDENT AND DIRECTOR DIRECTOR
Gaetan Bouic II Stefanie V. Chang
DIRECTOR VICE PRESIDENT
John S.Y. Chu Lorraine Truten
DIRECTOR VICE PRESIDENT
Clifford D'Souza James W. Garrett
DIRECTOR TREASURER
Gerard E. Jones Mary E. Mullin
DIRECTOR SECRETARY
Nilesh Joshi Belinda A. Brady
DIRECTOR ASSISTANT TREASURER
INVESTMENT ADVISER
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
ADMINISTRATOR
JPMorgan Chase Bank
73 Tremont Street
Boston, Massachusetts 02108
CUSTODIAN
JPMorgan Chase Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
LEGAL COUNSEL
Clifford Chance Rogers & Wells 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 INDIA INVESTMENT FUND, INC.
OVERVIEW
LETTER TO SHAREHOLDERS
For the three months ended March 31, 2002, the Morgan Stanley India Investment
Fund, Inc. (the "Fund") had a total return, based on net asset value per share,
of 11.49% compared to 8.95% for the U.S. dollar adjusted Bombay Stock Exchange
(BSE) National Index (the"Index"). On March 31, 2002, the closing price of the
Fund's shares on the New York Stock Exchange was $9.99, representing a 17.5%
discount to the Fund's net asset value per share.
MARKET REVIEW
We have been repeatedly making the point that when a new bull market begins, and
India along with the rest of the world could well be in the midst of one, a new
set of stocks will propel the market higher. What worked in the bull market of
1999-00 will not necessarily work in 2002. We are increasingly seeing evidence
of such a change. This year's price action shows that the market can move higher
despite under-performance in the tech sector. In fact, the pulse of the market
is being determined by the direction of the public sector stocks. Investors
always knew there was value in such stocks but were waiting for some trigger and
found it once the privatization program showed signs of acceleration.
Our strategy has been to overweight undervalued but well run public sector
companies where privatization would only be a bonus and to avoid chasing names
hot off the privatization rumor list. This strategy has helped the portfolio
meaningfully outperform the Index and be at the top end of its peer group. One
of the biggest contributors to relative performance over the past few quarters
has been the underweight position in the technology sector. Conversely, our
overweight position in financials has worked well from both a relative
attribution and absolute return standpoint. We continue to believe in these
themes and hope it will generate further out-performance for the portfolio.
MARKET OUTLOOK
Privatization has come to be the most important theme in the marketplace because
it currently lies at the heart of India's macro-economic reform effort.
Therefore, the speed of the program has an effect on not just the directly
affected stocks. The Indian economy is at a stage where it needs further reforms
to move to the next stage of the development/growth cycle. It is otherwise
getting increasingly difficult for even some of the leading domestic-oriented
companies to generate top-line growth and in its absence there is a limit to
which corporate India can keep squeezing costs to improve profitability. So we
hope the privatization program continues to gather momentum and thereby keeps
the market going.
The strength of our portfolio though lies in its diversity where there are
sector preferences reflected at any point in time but no sector
over-concentration. The portfolio otherwise continues to be overweight in
sectors and stocks which we think have strong fundamentals to better the general
environment and is correspondingly underweight in sectors/stocks that carry much
baggage (e.g. excessive speculative fervor) from the previous cycle.
OTHER DEVELOPMENTS
On August 10, 1998, the Fund commenced a share repurchase program for purposes
of enhancing shareholder value and reducing the discount at which the Fund's
shares traded from their net asset value. During the three months ended March
31, 2002, the Fund repurchased 426,200 of its shares at an average discount of
16.61% from net asset value per share. Since the inception of the program, the
Fund has repurchased 8,261,000 of its shares at an average discount of 30.26%
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 December 13, 2001, the Board of Directors of the Fund authorized the Fund to
conduct a tender offer during the second quarter of 2002 for up to 15% of the
Funds shares, at a price equal to 95% of the Fund's net asset value per share
("NAV") on the last day of the tender period. The tender period commenced on
April 15, 2002 and is scheduled to terminate on May 17, 2002.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
President and Director
April 2002
2
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
MARCH 31, 2002
INVESTMENT SUMMARY
Historical Information (Unaudited)
TOTAL RETURN (%)
----------------------------------------------------------------------------------
MARKET VALUE(1) NET ASSET VALUE(2) INDEX(3)
----------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------------------------------------------------------------------------------------------------------
Year to Date 15.49% -- 11.49% -- 8.95% --
One Year 28.52 28.52% 13.92 13.92% -0.29 -0.29%
Five Year 32.08 5.72 60.82 9.97 -13.75 -2.92
Since Inception* -7.29 -0.93 8.95 1.07 -45.43 -7.21
Past performance is not predictive of future performance.
[CHART]
MORGAN STANLEY INDIA BOMBAY STOCK EXCHANGE
INVESTMENT FUND, INC.(2) (BSE) NATIONAL INDEX(3)
1994 0.72% -7.88%
1995 -36.31% -31.53%
1996 -1.12% -6.49%
1997 0.23% 6.43%
1998 4.08% -20.98%
1999 145.81% 88.41%
2000 -29.68% -27.73%
2001 -14.52% -25.82%
2002 11.49% 8.95%
Returns and Per Share Information
THREE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------------------------
1994* 1995 1996 1997 1998 1999 2000 2001 2002
-----------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $13.99 $ 8.91 $ 8.81 $8.83 $ 9.19 $ 22.59 $ 13.92 $ 10.53 $11.74
-----------------------------------------------------------------------------------------------------------
Market Value Per Share $11.25 $ 9.13 $ 9.50 $8.38 $ 6.75 $ 16.50 $ 11.06 $ 8.65 $ 9.99
-----------------------------------------------------------------------------------------------------------
Premium/(Discount) -19.6% 2.5% 7.8% -5.1% -26.6% -27.0% -20.5% -17.9% -17.5%
-----------------------------------------------------------------------------------------------------------
Income Dividends -- -- -- -- -- -- -- $ 0.23 --
-----------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ 0.17 -- -- -- -- -- $ 1.60 $ 0.84 --
-----------------------------------------------------------------------------------------------------------
Fund Total Return(2) 0.72% -36.31% -1.12% 0.23% 4.08% 145.81% -29.68% -14.52% 11.49%
-----------------------------------------------------------------------------------------------------------
Index Total Return(3) -7.88% -31.53% -6.49% 6.43% -20.98% 88.41% -27.73% -25.82% 8.95%
-----------------------------------------------------------------------------------------------------------
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund. Total returns for periods of less than one year are
not annualized.
(3) The Bombay Stock Exchange (BSE) National Index is a market capitalization
weighted index including the equity shares of 100 companies from the
"Specified" and the "Non-specified" list of the 5 major stock exchanges,
namely, Bombay, Calcutta, Delhi, Ahmedabad and Madras, expressed in U.S.
dollar terms.
* The Fund commenced operations on February 25, 1994.
FOREIGN INVESTING INVOLVES CERTAIN RISKS, INCLUDING CURRENCY FLUCTUATIONS
AND CONTROLS, RESTRICTIONS ON FOREIGN INVESTMENTS, LESS GOVERNMENTAL
SUPERVISION AND REGULATION, LESS LIQUIDITY AND THE POTENTIAL FOR MARKET
VOLATILITY AND POLITICAL INSTABILITY.
3
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
MARCH 31, 2002
PORTFOLIO SUMMARY
[CHART]
Allocation of Total Investments
----------------------------------
Equity Securities 94.7%
Short-Term Investments 5.3
----------------------------------
[CHART]
Industries
----------------------------------
IT Consulting & Services 12.2%
Banks 10.0
Automobiles 9.9
Pharmaceuticals 9.7
Oil & Gas 7.0
Metals & Mining 5.4
Household Products 5.2
Road & Rail 5.0
Chemicals 4.2
Diversified Financials 4.0
Other 27.4
----------------------------------
Ten Largest Holdings*
PERCENT OF
NET ASSETS
-------------------------------------------------------
1. Hero Honda Motors Ltd. 8.5%
2. State Bank of India Ltd. 6.0
3. Infosys Technologies Ltd. 5.6
4. Wipro Ltd. 5.4
5. Container Corporation of India Ltd. 5.0
6. HDFC Bank Ltd. 4.0%
7. Housing Development Finance Corp., Ltd. 4.0
8. Dr. Reddy's Laboratories Ltd. 3.3
9. Manhanager Telephone Nigam Ltd. 3.2
10. Hindustan Petroleum Corp., Ltd 3.1
----
48.1%
====
*Excludes short-term Investments
4
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
FINANCIAL STATEMENTS
MARCH 31, 2002 (UNAUDITED)
STATEMENT OF NET ASSETS
VALUE
SHARES (000)
--------------------------------------------------------------------------------
COMMON STOCKS (95.5%)
(UNLESS OTHERWISE NOTED)
================================================================================
AUTO COMPONENTS (0.0%)
Apollo Tyres Ltd. 2,075 $ 3
Rane (Madras) Ltd. 95,700 48
--------------------------------------------------------------------------------
51
================================================================================
AUTOMOBILES (9.9%)
Hero Honda Motors Ltd. 2,760,612 18,885
Patheja Forgings & Auto Parts Ltd. 450,000 --@
Tata Engineering & Locomotive Co., Ltd. 1,234,725 3,196
--------------------------------------------------------------------------------
22,081
================================================================================
BANKS (10.0%)
HDFC Bank Ltd. 1,329,124 6,407
HDFC Bank Ltd. ADR 168,700 2,590
State Bank of India Ltd. 2,955,054 13,315
--------------------------------------------------------------------------------
22,312
================================================================================
BIOTECHNOLOGY (0.5%)
Shantha Biotechnics Pvt. Ltd. 500,000 1,025
--------------------------------------------------------------------------------
CHEMICALS (4.2%)
Asian Paints (India) Ltd. 373,584 2,513
Aventis Cropscience India Ltd. 291,867 1,041
ICI (India) Ltd. 25,000 36
Indo Gulf Corp., Ltd. 1,829,545 1,615
Reliance Industries Ltd. 670,000 4,130
--------------------------------------------------------------------------------
9,335
================================================================================
COMMERCIAL SERVICES & SUPPLIES (0.3%)
Xerox Modicorp Ltd. 718,225 736
--------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (2.8%)
Gujarat Ambuja Cements Ltd. 1,164,597 4,782
Gujarat Ambuja Cements Ltd. GDR 355,000 1,509
--------------------------------------------------------------------------------
6,291
================================================================================
DIVERSIFIED FINANCIALS (4.0%)
Housing Development Finance Corp., Ltd. 632,876 8,882
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (3.7%)
Bharti Tele-Ventures Ltd. 1,525,000 1,201
Mahanagar Telephone Nigam Ltd. 2,147,831 6,492
Mahanagar Telephone Nigam Ltd. ADR 105,000 625
--------------------------------------------------------------------------------
8,318
================================================================================
ELECTRIC UTILITIES (1.5%)
Tata Power Co., Ltd. 1,408,040 3,276
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (3.3%)
Asea Brown Boveri, Ltd. 384,742 $ 2,094
Bharat Heavy Electricals Ltd. 1,550,184 5,366
--------------------------------------------------------------------------------
7,460
================================================================================
ENERGY EQUIPMENT & SERVICES (0.5%)
Oil and Natural Gas Corp., Ltd. 215,050 1,205
--------------------------------------------------------------------------------
FOOD PRODUCTS (3.4%)
Britannia Industries Ltd. 207,236 2,299
Nestle India Ltd. 141,824 1,490
SmithKline Beecham Consumer Healthcare Ltd. 495,927 3,838
--------------------------------------------------------------------------------
7,627
================================================================================
HOUSEHOLD DURABLES (0.1%)
Samtel Colour Ltd. 559,300 264
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (5.2%)
Colgate-Palmolive (India) Ltd. 1,007,351 2,910
Hindustan Lever Ltd. 1,402,729 6,480
Reckitt Benckiser (India) Ltd. 446,971 2,211
--------------------------------------------------------------------------------
11,601
================================================================================
INTERNET SOFTWARE & SERVICES (0.0%)
India Info.com pcl 532,875 --@
--------------------------------------------------------------------------------
IT CONSULTING & SERVICES (12.2%)
HCL Technologies Ltd. 531,494 2,764
Infosys Technologies Ltd. 164,645 12,608
Wipro Ltd. 196,697 6,861
Wipro Ltd. ADR 137,310 5,112
--------------------------------------------------------------------------------
27,345
================================================================================
MACHINERY (1.5%)
Cummins India Ltd. 1,736,523 1,879
Lakshmi Synthetic Machinery Manufacturers Ltd. 137,700 17
Punjab Tractors Ltd. 264,862 822
Revathi-CP Equipment Ltd. 162,850 573
--------------------------------------------------------------------------------
3,291
================================================================================
MEDIA (1.9%)
New Dehli Television Ltd. 333,300 692
Zee Telefilms Ltd. 1,038,419 3,572
--------------------------------------------------------------------------------
4,264
================================================================================
METALS & MINING (5.4%)
Hindalco Industries Ltd. 316,506 4,996
National Aluminum Co., Ltd. 1,520,876 2,569
Steel Authority of India Ltd. 20,955,208 2,105
Tata Iron & Steel Co., Ltd. 1,206,400 2,415
--------------------------------------------------------------------------------
12,085
================================================================================
5
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
FINANCIAL STATEMENTS
MARCH 31, 2002 (UNAUDITED)
STATEMENT OF NET ASSETS
VALUE
SHARES (000)
--------------------------------------------------------------------------------
OIL & GAS (7.0%)
Bharat Petroleum Corp., Ltd. 703,788 $ 4,758
Hindustan Petroleum Corp., Ltd. 1,159,211 6,906
Reliance Petroleum Ltd. 7,631,654 4,044
--------------------------------------------------------------------------------
15,708
================================================================================
PHARMACEUTICALS (9.7%)
Cipla Ltd. 196,656 4,104
Dabur India Ltd. 2,685,708 3,061
Dr. Reddy's Laboratories Ltd. 261,000 5,874
Dr. Reddy's Laboratories Ltd. ADR 62,800 1,389
E. Merck (India) Ltd. 61,599 382
Ranbaxy Laboratories Ltd. 363,500 6,545
Strides Arcolab Ltd. 245,400 307
--------------------------------------------------------------------------------
21,662
================================================================================
ROAD & RAIL (5.0%)
Container Corporation of India Ltd. 2,177,507 11,129
--------------------------------------------------------------------------------
SPECIALTY RETAIL (0.6%)
Titan Industries Ltd. 1,218,376 1,284
--------------------------------------------------------------------------------
TOBACCO (2.8%)
ITC Ltd. 415,741 5,938
ITC Ltd. GDR 27,500 409
--------------------------------------------------------------------------------
6,347
================================================================================
TOTAL COMMON STOCKS
(Cost $214,229) 213,579
================================================================================
FACE
AMOUNT
(000)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.7%)
================================================================================
REPURCHASE AGREEMENT (4.7%)
J.P. Morgan Securities, Inc.,
1.76%, dated 3/28/02, due 4/1/02
(Cost $10,451) 10,451(a) 10,451
================================================================================
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.6%)
================================================================================
Indian Rupee
(Cost $1,294) INR 63,092 1,293
================================================================================
AMOUNT AMOUNT
(000) (000)
--------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.8%)
(Cost $225,974) $ 225,323
================================================================================
OTHER ASSETS AND LIABILITIES (-0.8%)
Other Assets $ 775
Liabilities (2,525) (1,750)
================================================================================
NET ASSETS (100.0%)
Applicable to 19,038,804, issued and
outstanding $ 0.01 par value shares
(100,000,000 shares authorized) $ 223,573
================================================================================
NET ASSET VALUE PER SHARE $ 11.74
================================================================================
(a) -- 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
6