<PAGE>
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MORGAN STANLEY
INDIA INVESTMENT
FUND, INC.
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FIRST QUARTER REPORT
MARCH 31, 1999
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
MORGAN STANLEY
INDIA INVESTMENT FUND, INC.
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DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
John S.Y. Chu
DIRECTOR
Gerard E. Jones
DIRECTOR
Gerard Lahausse de la Louviere
DIRECTOR
John A. Levin
DIRECTOR
Fergus Reid
DIRECTOR
Samuel T. Reeves
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT AND ACTING SECRETARY
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Joanna M. Haigney
TREASURER
Belinda A. Brady
ASSISTANT TREASURER
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INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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SHAREHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
(800) 278-4353
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LEGAL COUNSEL
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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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.msdw.com/institutional/
investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
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For the three months ended March 31, 1999, the Morgan Stanley India Investment
Fund, Inc. (the "Fund") had a total return, based on net asset value per share,
of 36.89% compared to 21.68% for the U.S. dollar adjusted Bombay Stock Exchange
(BSE) National Index (the "Index"). For the period since the Fund's inception on
February 25, 1994 through March 31, 1999, the Fund's total return, based on net
asset value per share, was -9.43% compared to -39.64% for the Index. On March
31, 1999, the closing price of the Fund's shares on the New York Stock Exchange
was $9 1/8 representing a 27.4% discount to the Fund's net asset value per
share.
In what's become typical over the past few years, the Indian equity market
managed to again stage a strong rally in the first quarter. Right through the
bear market, now in its fifth year, the stock market has registered its
strongest performance in the first quarter of the calendar year. The favorable
price move this time around was attributed to a significant fall in the rate of
inflation, a growing perception that the economic cycle may be close to a bottom
and, probably most importantly, a renewed attempt on the part of the government
to push ahead with key economic reforms. Also sentiment had become very bearish
late last year and in such circumstances it takes only marginal net buying to
liven price action.
The leadership to the market was provided by the technology sector, which has
for a fair while been operating in a bull-market zone of its own. While the
technology sector did grab the headlines, along with some consumer goods and
pharmaceutical stocks, the real story of the year-to-date in the Indian stock
market, in our minds, has been the stellar performance of stocks outside the
popular technology, pharmaceuticals and consumer good sectors. Even in some of
the most run-down sectors, certain large-cap stocks have managed to rise by
anywhere between 50%-500% over the past quarter.
So contrary to popular perception, the latest bull-run has not been confined to
just three sectors. Market breadth has widened considerably and is reflected in
the fact that the number of stocks traded this year has more than doubled from
900 to around 2,000. However, we do not think the rise can be attributed to the
market discounting of a broad-based economic recovery.
There is a growing perception that things have gotten as bad as they can
possibly get, so the risks on the economic front have to be on the upside. The
rally in the stocks outside the famed sectors has really been reflexive in
nature (sharp bounces on the back of incremental buying from a very cheap and
oversold state). Of course, the restructuring story has been the trigger and
that is why the leading names in the run-down sectors have benefited the most.
The grueling bear market conditions of the past four years and the recessionary
trend in the real economy of the past thirty months has forced the Indian
corporate sector to get into very lean shape. While its true that the hostile
environment continues to whittle away at even the emaciated structure, global
experience clearly shows that when the macro-economy turns around, the return on
equity in the micro-economy would stand to be very large. Here, even though
signs of any recovery remain far from apparent, there are signs that the economy
could be past its worst point in the current cycle.
The encouraging development on the macro-economic front in the first quarter was
the presentation of the budget - the annual event which always gets top billing
given the fact that alot of the macro-economic reforms for the year are loaded
into the finance minister's budget speech. Going into the budget, expectations
of market participants were very low and even though the finance minister did
not present a "breakthrough" budget, it was enough for the markets to get a
budget that seemed to carry the reform process even incrementally forward. For
the financial markets specifically, there were a number of proposals in the
budget that aimed to revive the capital markets. But while the budget did come
out better than what the market had discounted, it was still seen as being short
of a policy announcement that would decisively lift the Indian economy's growth
trajectory.
Probably, the more important concern for the financial markets is the current
political situation, with only a caretaker government in place and elections
still a few months away. The composition of the just dissolved parliament was
such that it was virtually impossible for any party to form a stable government.
In short, we think the Indian stock market is on the edge of breaking out of a
bear market. The breakout is being held back somewhat by the moribund macro-
economy, fortunes of which are tied to the political situation. We remain
hopeful that both the political and economic cycle will
2
<PAGE>
start moving in sync in the right direction in the coming few months.
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. From that date through March 31, 1999,
the Fund repurchased 2,553,000 shares or 7.15% of its Common Stock at an average
price per share of $7.27 and an average discount of 25.88% 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.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
April 1999
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
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Daily net asset and market values, as well as monthly portfolio characteristics,
can now be accessed at WWW.MSDW.COM/INSTITUTIONAL/INVESTMENTMANAGEMENT.
3
<PAGE>
Morgan Stanley India Investment Fund, Inc.
Investment Summary as of March 31, 1999 (Unaudited)
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<TABLE>
<CAPTION>
HISTORICAL
INFORMATION TOTAL RETURN (%)
------------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
----------------------- ------------------------- -------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year to Date 35.19% -- 36.89% -- 21.68% --
One Year 14.96 14.96% 33.12 33.12% -9.44 -9.44%
Five Year -29.42 -6.73 -9.04 -1.88 -33.08 -7.72
Since Inception* -34.30 -7.91 -9.43 -1.92 -39.64 -9.44
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
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RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS
ENDED
MARCH 31,
1994* 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share. . . . . $ 13.99 $ 8.91 $ 8.81 $ 8.83 $ 9.19 $ 12.58
Market Value Per Share . . . . . . $ 11.25 $ 9.13 $ 9.50 $ 8.38 $ 6.75 $ 9.13
Premium/(Discount) . . . . . . . . -19.6% 2.5% 7.8% -5.1% -26.6% -27.4%
Capital Gains Distributions. . . . $ 0.17 -- -- -- -- --
Fund Total Return (2). . . . . . . 0.72% -36.31% -1.12% 0.23% 4.08% 36.89%
Index Total Return (3) . . . . . . -7.88% -31.53% -6.49% 6.43% -20.98% 21.68%
</TABLE>
(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.
(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.
* The Fund commenced operations on February 25, 1994.
4
<PAGE>
Morgan Stanley India Investment Fund, Inc.
Portfolio Summary as of March 31, 1999 (Unaudited)
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DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (98.6%)
Fixed Income Securities (0.1%)
Short-Term Investments (1.3%)
</TABLE>
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SECTORS
[CHART]
<TABLE>
<S> <C>
Automobiles (18.4%)
Beverages & Tobacco (7.6%)
Broadcasting and Publishing (5.1%)
Chemicals (5.9%)
Electronic Components -- Misc (20.6%)
Energy Equipment & Services (9.5%)
Financial Services (3.1%)
Health & Personal Care (14.1%)
Machinery & Engineering (2.1%)
Other (11.4%)
Transportation -- Road & Rail (2.2%)
</TABLE>
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TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Infosys Technology Ltd. 17.9%
2. Bharat Heavy Electricals Ltd. 9.1
3. Hero Honda Ltd. 5.2
4. Zee Telefilms Ltd. 4.4
5. Punjab Tractors Ltd. 4.3
6. ITC Ltd. 4.0
7. Agrevo India Ltd. 3.7
8. Tata Tea Ltd. 3.6
9. Novartis India Ltd. 3.3
10. Tata Engineering & Locomotive Ltd. 3.2
----
58.7%
----
----
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
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STATEMENT OF NET ASSETS (UNAUDITED)
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MARCH 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
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<S> <C> <C>
COMMON STOCKS (98.8%)
(Unless otherwise noted)
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APPLIANCES & HOUSEHOLD DURABLES (1.7%)
Phillips India Ltd. 799,550 U.S.$ 3,002
Supreme Industries Ltd. 832,900 3,937
------------
6,939
------------
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AUTOMOBILES (18.4%)
Apollo Tyres Ltd. 2,325 3
Bajaj Tempo Ltd. 1,669 5
Castrol (India) Ltd. 1,150 23
Ceat Ltd. 135 -- @
Denso India Ltd. 400 -- @
Elgi Tyres & Tread Ltd. 410,100 2,794
Hero Honda Ltd. 1,046,080 21,581
Lumax Industries Ltd. 100 -- @
Motherson Sumi Systems Ltd. 2,488 4
Motor Industries Co., Ltd. 39,942 3,389
MRF Ltd. 109,280 4,992
Patheja Bros Forgings & Stamp Ltd. 450,000 -- @
Punjab Tractors Ltd. 550,670 18,091
Rane Brakes & Lining Ltd. 7,200 20
Rane Madras Ltd. 213,100 291
S.K.F. Bearings Ltd. 55,256 1,224
Subros Auto Ltd. 7,195 9
Sundaram Fasteners Ltd. 394,550 3,327
Tata Engineering & Locomotive Ltd. 3,328,723 13,276
TVS Suzuki Ltd. 671,450 7,697
VST Tillers & Tractors Ltd. 100 -- @
------------
76,726
------------
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BANKING (1.6%)
HDFC Bank Ltd. 1,558,700 2,541
State Bank of India Ltd. 848,920 4,270
------------
6,811
------------
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BEVERAGES & TOBACCO (7.6%)
ITC Ltd. 740,067 16,799
Tata Tea Ltd. 1,315,000 15,002
------------
31,801
------------
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BROADCASTING & PUBLISHING (5.1%)
New Delhi Television Ltd. 333,300 1,061
Tata Donnelley Ltd. 293,250 1,481
Zee Telefilms Ltd. 797,700 18,554
------------
21,096
------------
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BUILDING MATERIALS & COMPONENTS (0.6%)
Associated Cement Co., Ltd. 1 -- @
ITW Signode India Ltd. 1,077,500 2,654
------------
2,654
------------
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CHEMICALS (5.9%)
Agrevo India Ltd. 737,260 U.S.$ 15,475
Ciba Specialty Chemicals
(India) Ltd. 45 -- @
Colour-Chem Ltd. 64,602 3,638
ICI India Ltd. 402,078 2,062
Monsanto Chemicals of India 99,800 3,279
Reliance Industries Ltd. 700 2
Sudarshan Chemicals Ltd. 234,552 271
------------
24,727
------------
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DATA PROCESSING & REPRODUCTION (1.3%)
NIIT Ltd. 51,600 2,281
Tata Infotech Ltd. 77,050 3,062
------------
5,343
------------
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ELECTRONIC COMPONENTS -- MISC (20.6%)
Fujitsu ICIM Ltd. 584,865 6,283
Infosys Technology Ltd. 1,081,746 74,581
Mastek Ltd. 100 2
Modi Xerox Ltd. 1,077,400 5,092
------------
85,958
------------
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ENERGY EQUIPMENT & SERVICES (9.5%)
Bharat Heavy Electricals Ltd. 6,768,500 37,891
Jyoti Structures Ltd. 167,750 271
Shriram Honda Power Equipment Ltd. 318,330 1,296
------------
39,458
------------
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ENERGY SOURCES (0.0%)
Renewable Energy Ltd. 47,800 1
------------
- ---------------------------------------------------------------
FINANCIAL SERVICES (3.1%)
Canfin Homes Ltd. 950 -- @
Housing Development
Finance Corp., Ltd. 236,132 12,690
ICICI Ltd. - New 20 -- @
Sundaram Finance Ltd. 119,800 324
UTI Mastergain 46,500 11
UTI-MasterShares Ltd. 5,400 2
------------
13,027
------------
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FOOD & HOUSEHOLD PRODUCTS (0.3%)
Smithkline Beecham Consumer Health 69,420 1,109
Care Ltd. ------------
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HEALTH & PERSONAL CARE (14.1%)
Cipla Ltd. 237,350 7,832
Dr. Reddy's Laboratories Ltd. 255,000 5,181
E. Merck (India) Ltd. 352,675 6,021
Glaxo India Ltd. 125,000 2,702
Hoechst Marion Roussel India Ltd. 475,450 7,318
Lakme Ltd. 75 -- @
Marico Industries Ltd. 283,200 4,925
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6
<PAGE>
VALUE
SHARES (000)
- ---------------------------------------------------------------
HEALTH & PERSONAL CARE (CONTINUED)
Novartis India Ltd. 631,600 U.S.$ 13,875
Pfizer Ltd. 100 3
Smithkline Beecham Pharmaceuticals
(India) Ltd. 479,940 6,047
Sun Pharmaceutical Industries Ltd. 400,700 4,958
TTK Biomed Ltd. 50 -- @
Unichem Labs Ltd. 14,350 83
------------
58,945
------------
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INDUSTRIAL COMPONENTS (0.3%)
Chicago Pneumatic India Ltd. 324,940 487
Rane Madras Ltd. 195,700 622
------------
1,109
------------
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LEISURE & TOURISM (0.3%)
EIH Ltd. 260,400 1,302
ITC Hotels Ltd. 400 1
------------
1,303
------------
- ---------------------------------------------------------------
MACHINERY & ENGINEERING (2.1%)
Advani-Oerlikon Ltd. 27 -- @
Cummins India Ltd. 398,440 3,327
Elgi Equipments Ltd. 50 -- @
Esab India Ltd. 564,850 1,320
Lakshmi Machine Works Ltd. 19,268 808
Lakshmi Synthetic Machinery Ltd. 137,700 51
Revathi-CP Equipment Ltd. 298,600 3,104
------------
8,610
------------
- ---------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES (0.8%)
Essel Packaging Ltd. 368,075 2,355
Titan Industries Ltd. 651,775 1,217
------------
3,572
------------
- ---------------------------------------------------------------
MULTI-INDUSTRY (1.4%)
Delta International 570,000 -- @
Larsen & Toubro Ltd. 924,000 5,096
Rajapalayam Mills 17,100 624
------------
5,720
------------
- ---------------------------------------------------------------
TEXTILES & APPAREL (1.9%)
Bata India Ltd. 1,018,561 6,734
Coates of India Ltd. 178,150 417
J.K. Synthetics Ltd. 2,895 -- @
Madura Coats Ltd. 379,550 460
Mahavir Spinning Mills Ltd. 10,050 10
Maral Overseas Ltd. 500 1
SRF Ltd. 350 @
Vardhaman Spinning &
General Mills Ltd. 332,450 462
------------
8,084
------------
- ---------------------------------------------------------------
TRANSPORTATION -- ROAD & RAIL (2.2%)
Container Corp. of India Ltd. 2,216,500 U.S.$ 9,190
------------
- ---------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$275,873) 412,183
------------
- ---------------------------------------------------------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------------
FIXED INCOME SECURITIES (0.1%)
- ---------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES (0.1%)
Garware Plastics & Polyester Ltd.
16.00%, 5/1/05
(Cost U.S.$626) INR 277 375
------------
- ---------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.6%)
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(0.6%)
Chase Securities, Inc. 4.65%,
dated 3/31/99, due 4/1/99,
to be repurchased at
U.S.$2,363, collateralized by
U.S.$1,805, United States
Treasury Bonds, 8.875%, due
8/15/17, valued at U.S.$2,383
(Cost U.S.$2,363) U.S.$ 2,363 2,363
------------
- ---------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.7%)
Indian Rupee
(Cost U.S.$3,028) INR 128,471 3,028
------------
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TOTAL INVESTMENTS (100.2%)
(Cost U.S.$281,890) 417,949
------------
- ---------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
Other Assets U.S.$ 9,581
Liabilities (10,573) (992)
------------- ------------
- ---------------------------------------------------------------
NET ASSETS (100%)
Applicable to 33,154,092 issued and
outstanding U.S.$0.01 par value shares
(100,000,000 shares authorized) U.S.$416,957
------------
------------
- ---------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 12.58
------------
------------
- ---------------------------------------------------------------
</TABLE>
@ -- Value is less than U.S.$500.
7
