MORGAN STANLEY INDIA INVESTMENT FUND, INC.
DIRECTORS AND OFFICERS
BARTON M. BIGGS
CHAIRMAN OF THE BOARD OF DIRECTORS
RONALD E. ROBISON
PRESIDENT AND DIRECTOR
GAETAN BOUIC II
DIRECTOR
JOHN S.Y. CHU
DIRECTOR
CLIFFORD D'SOUZA
DIRECTOR
GERARD E. JONES
DIRECTOR
NILESH JOSHI
DIRECTOR
MARIE JOSEPH RAYMOND LAMUSSE
DIRECTOR
FERGUS REID
DIRECTOR
STEFANIE V. CHANG
VICE PRESIDENT
LORRAINE TRUTEN
VICE PRESIDENT
JAMES W. GARRETT
TREASURER
MARY E. MULLIN
SECRETARY
BELINDA A. BRADY
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
STOCKHOLDER SERVICING AGENT
AMERICAN STOCK TRANSFER & TRUST COMPANY
59 MAIDEN LANE
NEW YORK, NEW YORK 10030
(800) 278-4353
LEGAL COUNSEL
CLIFFORD CHANCE ROGERS & WELLS LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
INDEPENDENT AUDITOR
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.
(C) 2002 MORGAN STANLEY
THIRD QUARTER REPORT
September 30, 2002
[MORGAN STANLEY LOGO]
Morgan Stanley India Investment Fund, Inc.
Morgan Stanley
Investment Management Inc.
Investment Adviser
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
Overview
LETTER TO STOCKHOLDERS
For the nine months ended September 30, 2002, the Morgan Stanley India
Investment Fund, Inc. (the "Fund") had a total return, based on net asset
value per share, of 1.94% compared to -5.61% for the U.S. dollar adjusted
Bombay Stock Exchange (BSE) National Index (the"Index"). On September 30,
2002, the closing price of the Fund's shares on the New York Stock Exchange
was $8.56, representing a 20.1% discount to the Fund's net asset value per
share.
MARKET REVIEW
The July-September period turned out to be the worst quarter for global
equities since the third quarter of 1974 - back when the last great momentum
bull market had collapsed. The nearly 30% decline in global equities
year-to-date puts 2002 on course (barring a fourth quarter miracle) to be the
third consecutive year of negative returns for global equities - the first
such sequence since the Great Depression.
The magnitude of the fall turned so severe in the third quarter that it was
virtually impossible for emerging markets not to be dragged down by the
general aversion towards equities. In fact, one of the defining features of
the past quarter was that the few winning strategies of the year were
unwound. Even the star performers like Korea saw the year-to-date gains
completely eliminated.
In the Indian context, this trend of a reversal in the winning strategies
manifested itself in share prices of public sector and automobile companies.
Though the sell-off in public sector stocks was triggered by the slowdown in
the privatization process, the extremely sharp negative reaction that
followed could partly be explained by nervous investors keen to cash out at
the slightest hint of trouble. Similarly, a negative shift at the margin in
the dynamics of the two-wheel industry following the poor monsoon and signs
of increased competition, led to a pronounced correction in the share prices
of all the companies in the sector. Like public sector companies, the
two-wheel sector had come to be popular with investors, being a source of
positive contribution to the performance of many a portfolio and so
vulnerable to any trend towards cashing in profits.
MARKET OUTLOOK
Still, in spite of such disappointments, at an overall level the Indian
market did manage to relatively outperform most other emerging markets.
Meanwhile, we do not see any reason to deviate from the strategy of buying
companies with supportive valuations, positive dynamics and high quality
management. This has helped the Fund consistently outperform the relevant
benchmarks over the years, and we think that when the markets do turn for the
better, the Fund should be positioned to take part in any potential upside.
Our outlook is that the market is finding meaningful support at current
levels and should be able to more than participate in any global equity
market revival.
OTHER DEVELOPMENTS
On August 10, 1998, the Fund commenced a share repurchase program for
purposes of enhancing stockholder value and reducing the discount at which
the Fund's shares traded from their net asset value. For the nine months
ended September 30, 2002, the Fund repurchased 517,410 of its shares at an
average discount of 17.34% from net asset value per share. Since the
inception of the program, the Fund has repurchased 8,352,210 of its shares at
an average discount of 30.18% 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.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
President and Director
October 2002
----------------------------------------------------------------------------
THE FUND ANNOUNCED IN SEPTEMBER 2002, THAT IT WILL BE MANAGED BY THE EMERGING
MARKETS EQUITY TEAM. CURRENT MEMBERS OF THE TEAM, ALL OF MORGAN STANLEY
INVESTMENT MANAGEMENT, INCLUDE RUCHIR SHARMA, AN EXECUTIVE DIRECTOR, SRIDHAR
SIVARAM, A VICE PRESIDENT AND AMAY HATTANGADI.
2
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
September 30, 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 (0.91)% -- 1.94% -- (5.61)% --
One Year 18.31 18.31% 18.79 18.79% 11.13 11.13%
Five Year (2.33) (0.47) 30.05 5.40 (34.85) (8.21)
Since Inception* (20.45) (2.63) (0.38) (0.04) (52.78) (8.36)
Past performance is not predictive of future performance.
[CHART]
Returns and Per Share Information
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------------------------------------- --------------
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 $ 10.72
Market Value Per Share $ 11.25 $ 9.13 $ 9.50 $ 8.38 $ 6.75 $ 16.50 $ 11.06 $ 8.65 $ 8.56
Premium/(Discount) (19.6)% 2.5% 7.8% (5.1)% (26.6)% (27.0)% (20.5)% (17.9)% (20.1)%
Income Dividends -- -- -- -- -- -- -- $ 0.23 $ 0.01
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)% 1.94%
Index Total Return(3) (7.88)% (31.53)% (6.49)% 6.43% (20.98)% 88.41% (27.73)% (25.82)% (5.61)%
(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
stockholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The Bombay Stock Exchange (BSE) National Index is a market capitalization
weighted index of 100 companies 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. IN ADDITION, INVESTING IN EMERGING MARKETS MAY INVOLVE A RELATIVELY
HIGHER DEGREE OF VOLATILITY.
3
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
September 30, 2002 (Unaudited)
PORTFOLIO SUMMARY
Allocation of Total Investments
[CHART]
Equity Securities 95.2%
Short-Term Investments 4.8%
Industries
[CHART]
IT Consulting & Services 14.6%
Banks 9.5%
Pharmaceuticals 9.1%
Automobiles 8.9%
Metals & Mining 5.6%
Other 52.3%
TEN LARGEST HOLDINGS*
PERCENT OF
NET ASSETS
--------------------------------------------------------------------
1. State Bank of India Ltd. 7.7%
2. Infosys Technologies Ltd. 7.1
3. Hero Honda Motors Ltd. 6.9
4. Wipro Ltd. 5.5
5. Container Corp. of India Ltd. 4.3
6. Housing Development Finance Corp., Ltd. 3.6
7. Ranbaxy Laboratories Ltd. 3.4
8. Bharat Heavy Electricals Ltd. 3.3
9. ITC Ltd. 3.3
10 Hindustan Lever Ltd. 3.0
-----
48.1%
=====
* Excludes Short-Term Investments
4
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS
September 30, 2002 (Unaudited)
STATEMENT OF NET ASSETS
VALUE
SHARES (000)
-------------------------------------------------------------------------
COMMON STOCKS (95.0%)
(UNLESS OTHERWISE NOTED)
-------------------------------------------------------------------------
AUTO COMPONENTS (0.0%)
Apollo Tyres Ltd. 2,075 $ 5
Patheja Forgings & Auto Ltd. 450,000 (a) --@
-------------------------------------------------------------------------
5
=========================================================================
AUTOMOBILES (8.9%)
Hero Honda Motors Ltd. 2,205,322 11,857
Tata Engineering & Locomotive
Co., Ltd. 1,274,725 3,490
-------------------------------------------------------------------------
15,347
=========================================================================
BANKS (9.5%)
HDFC Bank Ltd. 257,279 1,165
HDFC Bank Ltd. ADR 135,300 1,920
State Bank of India Ltd. 2,734,016 13,347
-------------------------------------------------------------------------
16,432
=========================================================================
BIOTECHNOLOGY (0.3%)
Shantha Biotechnics PCL 500,000 (a) 569
=========================================================================
CHEMICALS (4.3%)
Asian Paints (India) Ltd. 338,584 2,385
ICI (India) Ltd. 25,000 52
Indo Gulf Corp., Ltd. 1,577,190 1,473
Reliance Industries Ltd. 663,000 3,541
-------------------------------------------------------------------------
7,451
=========================================================================
COMMERCIAL SERVICES & SUPPLIES (0.4%)
Xerox Modicorp Ltd. 718,225 (a,b) 743
=========================================================================
CONSTRUCTION & ENGINEERING (1.1%)
Larsen & Toubro Ltd. 537,000 1,860
=========================================================================
CONSTRUCTION MATERIALS (2.6%)
Gujarat Ambuja Cements Ltd. 995,699 3,367
Gujarat Ambuja Cements Ltd. GDR 305,000 1,075
-------------------------------------------------------------------------
4,442
=========================================================================
DIVERSIFIED FINANCIALS (3.6%)
Housing Development Finance
Corp., Ltd. 500,876 6,230
=========================================================================
DIVERSIFIED TELECOMMUNICATION
SERVICES (3.3%)
Bharti Tele-Ventures Ltd. 1,330,000 (b) 860
Mahanagar Telephone Nigam Ltd. 1,912,831 4,348
Mahanagar Telephone Nigam Ltd.
ADR 90,000 418
-------------------------------------------------------------------------
5,626
=========================================================================
ELECTRIC UTILITIES (1.1%)
Tata Power Co., Ltd. 947,229 1,874
=========================================================================
ELECTRICAL EQUIPMENT (4.7%)
Asea Brown Boveri Ltd. 398,026 $ 2,313
Bharat Heavy Electricals Ltd. 1,732,848 5,722
-------------------------------------------------------------------------
8,035
=========================================================================
ENERGY EQUIPMENT & SERVICES (2.2%)
Oil & Natural Gas Corp., Ltd. 548,231 3,868
=========================================================================
FOOD PRODUCTS (4.5%)
Britannia Industries Ltd. 185,838 1,993
Glaxo SmithKline Consumer
Healthcare Ltd. 428,496 2,366
Nestle India Ltd. 286,254 (b) 3,377
-------------------------------------------------------------------------
7,736
=========================================================================
HOUSEHOLD DURABLES (0.2%)
Samtel Colour Ltd. 636,707 416
=========================================================================
HOUSEHOLD PRODUCTS (4.5%)
Colgate-Palmolive (India) Ltd. 975,743 2,657
Hindustan Lever Ltd. 1,428,847 5,102
-------------------------------------------------------------------------
7,759
=========================================================================
INTERNET SOFTWARE & SERVICES (0.0%)
India Info.com PCL 532,875 (a) --@
=========================================================================
IT CONSULTING & SERVICES (14.6%)
HCL Technologies Ltd. 771,494 3,330
Infosys Technologies Ltd. 174,680 12,285
Wipro Ltd. 220,197 6,028
Wipro Ltd. ADR 125,710 3,476
-------------------------------------------------------------------------
25,119
=========================================================================
MACHINERY (1.2%)
Cummins India Ltd. 1,478,725 1,467
Lakshmi Synthetic Machinery
Manufacturers Ltd. 137,700 (b) 17
Punjab Tractors Ltd. 225,619 593
Revathi Equipment Ltd. 18,595 51
-------------------------------------------------------------------------
2,128
=========================================================================
MEDIA (0.4%)
New Delhi Television Ltd. 333,300 (a) 698
=========================================================================
METALS & MINING (5.6%)
Hindalco Industries Ltd. 281,506 3,043
National Aluminum Co., Ltd. 747,467 1,389
Steel Authority of India Ltd. 17,853,286 2,381
Tata Iron & Steel Co., Ltd. 1,206,400 2,897
-------------------------------------------------------------------------
9,710
=========================================================================
OIL & GAS (4.6%)
Bharat Petroleum Corp., Ltd. 509,788 1,812
Hindustan Petroleum Corp.,
Ltd. 712,211 2,478
5
MORGAN STANLEY INDIA INVESTMENT FUND, INC.
STATEMENT OF NET ASSETS
September 30, 2002 (Unaudited)
STATEMENT OF NET ASSETS (CONT'D)
VALUE
SHARES (000)
-------------------------------------------------------------------
OIL & GAS (CONT'D)
Reliance Petroleum Ltd. 7,551,654 (b) $ 3,608
-------------------------------------------------------------------
7,898
===================================================================
PHARMACEUTICALS (9.1%)
Cipla Ltd. 212,912 4,166
Dabur India Ltd. 2,397,946 (b) 2,269
Dr. Reddy's Laboratories
Ltd. 194,300 3,352
Ranbaxy Laboratories Ltd. 313,500 5,941
-------------------------------------------------------------------
15,728
===================================================================
ROAD & RAIL (4.3%)
Container Corp. of India Ltd. 1,576,251 7,449
===================================================================
SPECIALTY RETAIL (0.7%)
Titan Industries Ltd. 954,074 1,126
===================================================================
TOBACCO (3.3%)
ITC Ltd. 420,856 5,656
===================================================================
TOTAL COMMON STOCKS
(Cost $187,674) 163,905
===================================================================
FACE
AMOUNT
(000)
-------------------------------------------------------------------
SHORT-TERM INVESTMENT (4.7%)
-------------------------------------------------------------------
REPURCHASE AGREEMENT (4.7%)
J.P. Morgan Securities Inc.,
1.87%, dated 9/30/02,
due 10/1/02
(Cost $8,046) $ 8,046 (c) 8,046
===================================================================
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.1%)
-------------------------------------------------------------------
Indian Rupee (Cost $248) INR 11,966 247
===================================================================
TOTAL INVESTMENTS (99.8%)
(Cost $195,968) 172,198
===================================================================
OTHER ASSETS AND LIABILITIES (0.2%)
-------------------------------------------------------------------
Other Assets $ 973
Liabilities (635) 338
===================================================================
NET ASSETS (100%)
Applicable to 16,092,480 issued and
outstanding $ 0.01 par value shares
(100,000,000 shares authorized) $ 172,536
===================================================================
NET ASSET VALUE PER SHARE $ 10.72
===================================================================
(a)--Investments valued at fair value. At September 30, 2002, the Fund held
$2,010,000 of fair-valued securities, representing 1.2% of net assets
(b)--Non-income producing.
(c)--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 Depository Receipts.
GDR--Global Depository Receipts.
PCL--Public Company Limited.
6