<PAGE>
THE TURKISH INVESTMENT FUND, INC.
---------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Barton M. Biggs James W. Grisham
CHAIRMAN OF THE BOARD VICE PRESIDENT
OF DIRECTORS Michael F. Klein
Warren J. Olsen VICE PRESIDENT
PRESIDENT AND DIRECTOR Harold J. Schaaff, Jr.
Peter J. Chase VICE PRESIDENT
DIRECTOR Joseph P. Stadler
John W. Croghan VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
David B. Gill SECRETARY
DIRECTOR Joanna M. Haigney
Graham E. Jones TREASURER
DIRECTOR Belinda A. Brady
John A. Levin ASSISTANT TREASURER
DIRECTOR
William G. Morton, Jr.
DIRECTOR
</TABLE>
---------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Morgan Stanley Asset Management Limited
25 Cabot Square
Canary Wharf
London EI4 4QA
England
--------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
--------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank
770 Broadway
New York, New York 10003
--------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Investors Bank and Trust Company
89 South Street
Boston, Massachusetts 02111
(800) 342-8756
--------------------------------------------------------
LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
--------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
--------------------------------------------------------
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.
------------------------------------------------------
THE
TURKISH
INVESTMENT
FUND, INC.
------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended April 30, 1997, The Turkish Investment Fund, Inc. (the
"Fund") had a total return, based on net asset value, of 7.60% compared to
29.41% for the MSCI Turkey Index (the "Index"). For the one year ended April 30,
1997, the Fund had a total return, based on net asset value per share, of 6.65%
compared with 27.93% for the Index. For the period since the Fund's commencement
of operations on December 5, 1989 through April 30, 1997, the Fund's total
return, based on net asset value per share, was -41.89% compared with 18.59% for
the Index. On April 30, 1997, the closing price of the Fund's shares on the New
York Stock Exchange was $5 5/8, representing a 3.8% discount to the Fund's net
asset value per share.
While our top holdings such as Garanti Bank, Yapi Kredi Bank, Arcelik and Pinar
Sut, representing almost thirty percent of our net assets, easily outpaced the
Index this quarter, our overweight position in Eregli Demir Celik, the
state-owned steel manufacturer, hurt the Fund this quarter. While we remain
strongly enthused with the operating performance of the company, the political
cloud hanging over the market had its effect, thus depressing the share price.
Nevertheless, we remain overweight in the stock with the expectation that the
company's improving financial position may become recognized by the market. Any
improvement on the political front should also drive the stock as well as the
broader market.
Having entered the new year with the lofty ambition of a privatization-driven
balanced budget, the coalition government of Necmettin Erbakan -- as is so often
the case in Turkey -- fell prey to the internecine vagaries of domestic Turkish
politics. The latest political imbroglio concerns the military's growing concern
with what it sees to be a creeping Islamicization of traditionally secular
Turkish society. As the first avowedly Islamist party to rule Turkey in the past
25 years, Refah has been the lightning rod for the long-brewing concerns of
secular institutions in Turkey.
Matters came to a head in early April when the military sent a list of demands
to the Refah government highlighting key social and educational issues that it
saw as too Islamist for its liking. Refah's partner, the always opportunistic
Tansu Ciller, was quick to support the military and the result has been
political gridlock. Refah has publicly agreed to the military's demands but will
have difficulty in implementing them. Ciller's party, DYP, feels increasingly
uncomfortable in the current coalition but with Ciller at the helm it has
nowhere else to go. The current political problems are not new to those who have
observed Turkey for many years. With the secular center left and center right
parties split due to personal animosities, parties such as Refah with a solid if
none-too-overwhelming 22% share of the political pie are able to slip though the
cracks. 22% does not a mandate make and Refah's admittedly ham-handed attempts
to push its social agenda have backfired, causing it to lose much of the
non-Islamist protest support that has helped it in the recent past.
However, dismal politics have disguised a surprisingly robust economic
performance of late. Growth of 7.9% in 1996 is likely to slow only marginally in
1997 and we should expect a figure of around 5%. Consumption and investment
remain buoyant, driven to a large degree by the 30% decrease in real interest
rates at the beginning of the year. While the equity market has sold off on
politics, the bond market has remained resilient as the government's borrowing
requirement over the next six months remains benign. Smartly, the government
took advantage of the strong bond market to refinance much of its domestic debt
at lower rates with longer maturities. Traditionally, it has been short-term
borrowing resulting in high interest costs that have driven budget deficits; for
the next six months this will not be the case.
On the privatization front, the progress remains gradual. The government has
raised close to $1 billion this year through a series of small sell-offs and
continues to work on the larger issues. Reserves remain healthy at $15.4 billion
and, surprisingly, in
2
<PAGE>
light of the strong domestic economy, import growth has been negligible of late.
For Turkey's always vulnerable current account deficit this is an important
development; rampant import growth has been the chief cause of past spiraling
deficits. For 1997 we forecast a current account deficit of 4% or so of GDP -- a
manageable figure given the strong invisibles and capital inflows. Perhaps most
importantly with regard to macro-economic maintenance has been the Central
Bank's ability to keep a lid on monetary growth, a notable achievement given the
always-present political pressures it faces. Much like Turkish corporates we
have begun to see mid-level technocrats at the Treasury and Central Bank succeed
in distancing themselves from day-to-day politics to keep a firm management grip
on the ever-daunting challenges that they face. This evolution should not be
underestimated: during the past financial crises in Turkey we saw policy errors
at the top flowing down to the bottom. Currently this is not the case. When the
political situation does start to improve, the economic fundamentals will, for
the most part, be in place.
We remain overweight Garanti and Yapi Kredi Bank, the two best managed private
sector banks in the market. Pinar Sut, a rapidly growing food and dairy
producer, has seen its share in the Fund increase dramatically this quarter due
to capital appreciation. In recognition of the strong demand in the commercial
vehicles market we have added two new companies to this sector: Anadolu Isuzu
and Otosan.
Sincerely,
[SIGNATURE]
Warren J. Olsen
PRESIDENT AND DIRECTOR
[SIGNATURE]
Marianne L. Hay
SENIOR PORTFOLIO MANAGER
[SIGNATURE]
Landon Thomas
PORTFOLIO MANAGER
May 1997
3
<PAGE>
The Turkish Investment Fund, Inc.
Investment Summary as of April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 7.22% -- 7.60% -- 29.41% --
ONE YEAR 0.23 0.23% 6.65 6.65% 27.93 27.93%
FIVE YEAR -6.13 -1.26 14.61 2.77 81.72 12.69
SINCE INCEPTION* -44.13 -7.56 -41.89 -7.07 18.59 2.33
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR GRAPH PRESENTING FUND TOTAL RETURN AND INDEX TOTAL RETURN, AS LISTED
BELOW, IS REFLECTED HERE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31:
SIX MONTHS
ENDED
APRIL 30,
1990* 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share $12.78 $5.16 $4.69 $9.41 $4.89 $5.93 $5.57 $5.85
Market Value Per Share $9.38 $7.00 $6.00 $10.38 $6.88 $5.88 $5.38 $5.63
Premium/(Discount) -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% -3.5% -3.8%
Income Dividends $0.03 - $0.07 $0.04 $0.12 - $0.12 $0.14
Capital Gains Distributions - $0.07 $0.17 - - - - -
Fund Total Return (2) 14.80% -59.27% -6.36% 102.39% -47.61% 21.27% -4.09% 7.60%
Index Total Return (3) 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -4.24% 29.41%
</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 MSCI Turkey Index is an unmanaged index of common stocks.
* The Fund commenced operations on December 5, 1989.
4
<PAGE>
The Turkish Investment Fund, Inc.
Portfolio Summary as of April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 94.9%
Short-Term Investments 5.1%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Appliances & Household Durables 5.6%
Automobiles 4.4%
Banking 9.1%
Beverages & Tobacco 12.4%
Building Materials & Components 8.5%
Financial Services 10.2%
Food & Household Products 8.9%
Merchandising 11.5%
Metals - Steel 6.1%
Transportation - Airlines 4.5%
Other 18.8%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
------------
<C> <S> <C>
1. Yapi Kredi Bankasi 9.1%
2. Turkiye Garanti Bankasi 8.3
3. Migros 7.1
4. Pinar Sut 6.9
5. Eregli Demir Ve Celik 6.1
<CAPTION>
PERCENT OF
NET ASSETS
------------
<C> <S> <C>
6. Arcelik 5.6%
7. Ege Biracilik 4.6
8. Usas Ucak Servisi 4.5
9. Carsi Buyuk Magazacilik 4.4
10. Turk Sise Ve Cam Fabrikalari 4.3
-----
60.9%
-----
-----
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
APRIL 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ----------------------------------------------------------------
- -------------
TURKISH COMMON STOCKS (95.3%)
(Unless otherwise noted)
- --------------------------------------------------
- ----------
APPLIANCES & HOUSEHOLD DURABLES (5.6%)
Arcelik 19,268,000 U.S.$ 2,309
-------------
- ----------------------------------------------------------------
- -------------
AUTOMOBILES (4.4%)
Anadolu Isuzu 1,600,000 814
Otosan Otomobil 2,140,000 995
-------------
1,809
-------------
- ----------------------------------------------------------------
- -------------
BANKING (9.1%)
Yapi Kredi Bankasi 89,150,000 3,748
-------------
- ----------------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (12.4%)
Ege Biracilik 6,913,350 1,887
Erciyas Biracilik 7,012,000 582
Guney Biracilik Ve Malt Sanayii 20,195,000 1,370
Turk Tuborg 34,377,000 1,255
-------------
5,094
-------------
- ----------------------------------------------------------------
- -------------
BROADCASTING & PUBLISHING (1.6%)
Sabah 61,145,000 643
-------------
- ----------------------------------------------------------------
- -------------
BUILDING MATERIALS & COMPONENTS (8.5%)
Goltas Cimento 7,915,000 1,751
+Turk Sise Ve Cam Fabrikalari 16,165,000 1,759
-------------
3,510
-------------
- ----------------------------------------------------------------
- -------------
FINANCIAL SERVICES (10.2%)
Global Menkul Degerler SA 42,794,000 718
Global Securities Private Placement 4,585,000 77
Global Securities Services, Inc. Ltd.
(New) 1,360 --@
Turkiye Garanti Bankasi 58,525,000 3,238
Turkiye Garanti Bankasi GDS 30,000 171
-------------
4,204
-------------
- ----------------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (8.9%)
Kerevitas Gida 6,402,725 326
Konfrut Gida 5,978,000 529
+Pinar Sut 51,793,500 2,827
-------------
3,682
-------------
- ----------------------------------------------------------------
- -------------
FOREST PRODUCTS & PAPER (2.0%)
+Kartonsan 9,070,000 836
-------------
- ----------------------------------------------------------------
- -------------
INSURANCE (3.3%)
Gunes Sigorta 19,950,000 1,368
-------------
</TABLE>
- ----------------------------------------------------------------
- -------------
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ----------------------------------------------------------------
- -------------
<S> <C> <C>
MERCHANDISING (11.5%)
Carsi Buyuk Magazacilik 4,140,000 U.S.$ 1,832
Migros 2,880,000 2,921
-------------
4,753
-------------
- ----------------------------------------------------------------
- -------------
METALS -- STEEL (6.1%)
Eregli Demir Ve Celik 25,600,000 2,502
-------------
- ----------------------------------------------------------------
- -------------
MULTI-INDUSTRY (1.5%)
Alarko Holding 4,537,200 627
-------------
- ----------------------------------------------------------------
- -------------
TELECOMMUNICATIONS (3.1%)
Netas Telekomunik 4,650,000 1,286
-------------
- ----------------------------------------------------------------
- -------------
TEXTILES & APPAREL (2.6%)
Bossa 15,147,000 1,084
-------------
- ----------------------------------------------------------------
- -------------
TRANSPORTATION -- AIRLINES (4.5%)
Usas Ucak Servisi 825,000 1,856
-------------
- ----------------------------------------------------------------
- -------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S. $39,444) 39,311
-------------
- ----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (1.0%)
(Interest Bearing Demand Account)
Turkish Lira (Cost U.S. $396) TRL 53,097,679 391
-------------
- ----------------------------------------------------------------
- -------------
SHORT-TERM INVESTMENT (4.1%)
REPURCHASE AGREEMENT (4.1%)
Chase Securities, Inc., 5.15%, dated
4/30/97, due 5/1/97, to be
repurchased at U.S. $1,703,
collateralized by U.S. $1,705 U.S.
Treasury Note, 6.25%, due 4/30/01,
valued at U.S. $1,742 (Cost U.S.
$1,703) U.S.$ 1,703 1,703
-------------
- ----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------
- ------------
<S> <C> <C>
TOTAL INVESTMENTS (100.4%)
(Cost U.S. $41,543) U.S.$ 41,405
-------------
- ----------------------------------------------------------------
- -------------
OTHER ASSETS (0.9%)
Dividends Receivable U.S.$ 314
Receivable for Investments Sold 28
Other Assets 16 358
---------------- -------------
- ----------------------------------------------------------------
- -------------
LIABILITIES (-1.3%)
Payable for:
Investments Purchased (301)
Shareholder Reporting Expenses (62)
Investment Advisory Fees (35)
Professional Fees (33)
Custodian Fees (30)
Directors' Fees and Expenses (16)
Administrative Fees (9)
Other Liabilities (28) (514)
---------------- -------------
- ----------------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 7,046,430 issued and outstanding
$0.01 par value shares (30,000,000 shares
authorized) U.S.$ 41,249
-------------
-------------
- ----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 5.85
-------------
-------------
- ----------------------------------------------------------------
- -------------
AT APRIL 30, 1997, NET ASSETS CONSISTED OF:
- ----------------------------------------------------------------
Common Stock U.S.$ 70
Capital Surplus 78,780
Undistributed Net Investment Income 520
Accumulated Net Realized Loss (37,985)
Unrealized Depreciation on Investments and
Foreign Currency Translations (136)
-------------
- ----------------------------------------------------------------
- -------------
TOTAL NET ASSETS U.S.$ 41,249
-------------
-------------
- ----------------------------------------------------------------
- -------------
</TABLE>
+ Non-income producing.
@ Value is less than $500.
GDS Global Depositary Shares.
April 30, 1997 exchange rate -- Turkish Lira (TRL) 135,580 = U.S.$1.00
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1997
STATEMENT OF OPERATIONS (UNAUDITED) (000)
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................... U.S.$ 896
Interest................................................................................ 57
- ---------------------------------------------------------------------------------------------------------------
Total Income.......................................................................... 953
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees................................................................ 207
Administrative Fees..................................................................... 53
Custodian Fees.......................................................................... 45
Professional Fees....................................................................... 36
Shareholder Reporting Expenses.......................................................... 32
Annual Meeting and Proxy Expenses....................................................... 26
Directors' Fees and Expenses............................................................ 14
Transfer Agent Fees..................................................................... 10
Other Expenses.......................................................................... 10
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................................................ 433
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income............................................................. 520
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold.............................................................. (24)
Foreign Currency Transactions........................................................... (58)
- ---------------------------------------------------------------------------------------------------------------
Net Realized Loss................................................................. (82)
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments............................................................. 2,503
Depreciation on Foreign Currency Translations........................................... (6)
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................... 2,497
- ---------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation.................. 2,415
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$ 2,935
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30, 1997
OCTOBER 31, 1996 (UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income................................................................... U.S.$ 1,217 U.S.$ 520
Net Realized Loss....................................................................... (965) (82)
Change in Unrealized Appreciation/Depreciation.......................................... (1,929) 2,497
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations......................... (1,677) 2,935
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income................................................................... (845) (958)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (3,318 and 3,346 shares, respectively).................... 19 18
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease)............................................................... (2,503) 1,995
Net Assets:
Beginning of Period..................................................................... 41,757 39,254
- -----------------------------------------------------------------------------------------------------------------------------------
End of Period (including undistributed net investment income of U.S.$958 and U.S.$520,
respectively).......................................................................... U.S.$ 39,254 U.S.$ 41,249
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
SELECTED PER SHARE DATA AND 1997 -----------------------------------------------------------------------------
RATIOS: (UNAUDITED) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD....................... U.S.$5.57 U.S.$5.93 U.S.$4.89 U.S.$9.41 U.S.$4.69 U.S.$5.16
- -----------------------------------------------------------------------------------------------------------------------------
Net Investment Income......... 0.07 0.17 0.13 0.07 0.22 0.18
Net Realized and Unrealized
Gain (Loss) on Investments... 0.35 (0.41) 0.91 (4.47) 4.54 (0.41)
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations.............. 0.42 (0.24) 1.04 (4.40) 4.76 (0.23)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income..... (0.14) (0.12) -- (0.12) (0.04) (0.07)
Net Realized Gains........ -- -- -- -- -- (0.17)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions....... (0.14) (0.12) -- (0.12) (0.04) (0.24)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD....................... U.S.$5.85 U.S.$5.57 U.S.$5.93 U.S.$4.89 U.S.$9.41 U.S.$4.69
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF
PERIOD....................... U.S.$5.63 U.S.$5.38 U.S.$5.88 U.S.$6.88 U.S.$10.38 U.S.$6.00
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value.............. 7.22%** (6.58)% (14.55)% (33.19)% 74.34% (11.69)%
Net Asset Value (1)....... 7.60%** (4.09)% 21.27% (47.61)% 102.39% (6.36)%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(THOUSANDS).................. U.S.$41,249 U.S.$39,254 U.S.$41,757 U.S.$34,447 U.S.$66,258 U.S.$32,957
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average
Net Assets................... 1.99%* 2.07% 1.91% 2.16% 2.04% 2.55%
Ratio of Net Investment Income
to Average
Net Assets................... 2.39%* 3.23% 2.18% 1.03% 3.20% 3.00%
Portfolio Turnover Rate....... 22% 60% 48% 68% 46% 28%
Average Commission Rate (2)... U.S.$0.0003 U.S.$0.0003 N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
* Annualized.
** Not Annualized.
(1) Total investment return based on net asset value per share reflects the effects of changes in net asset value on the
performance of the Fund during each period, and assumes dividends and distributions, if any, were reinvested. 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 of the Fund.
(2) Beginning with fiscal year 1996, the Fund is required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged. For the year ended October 31, 1996, and the six months ended April
30, 1997, the average commission rates paid on trades on which commissions were charged were 0.31% and 0.33%,
respectively, of the trade amounts.
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1997
- ---------
The Turkish Investment Fund, Inc. (the "Fund") was incorporated in Maryland
on September 27, 1988 and is registered as a non-diversified, closed-end
management investment company under the Investment Company Act of 1940, as
amended. The Fund's investment objective is long-term capital appreciation
through investments primarily in equity securities of Turkish corporations.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all securities listed on
the Istanbul Stock Exchange are valued at the last quoted sales price.
Unlisted securities and listed securities not traded on valuation date for
which market quotations are readily available are valued at the average of
the mean of current bid and asked prices obtained from reputable brokers.
Securities purchased with remaining maturities of sixty days or less are
valued at amortized cost, if it approximates the market value. All other
securities and assets for which market values are not readily available
(including investments which are subject to limitations as to their sale)
are valued at fair value as determined in good faith by the Board of
Directors, although the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
Capital surplus undistributed net investment income and accumulated net
realized loss have been adjusted for prior year permanent book-tax
differences.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, the value of which equals or exceeds the principal
amount of the repurchase transaction, including accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value
of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. To the extent that proceeds from
the sale of the underlying securities are less than the repurchase price
under the agreement, the Fund may incur a loss. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention
of the collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in Turkish lira are
translated into U.S. dollars at the mean of the bid and asked prices of such
currency against U.S. dollars quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rate of
exchange on valuation date;
- investment transactions and investment income at the prevailing rate of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rate and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rate from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund does
not isolate the effect of changes in the foreign exchange rate from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) are included in the reported net realized and unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of forward foreign
currency exchange contracts, disposition of foreign currency, currency gains
or losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income and
foreign withholding taxes recorded on the Fund's books, if any, and the U.S.
dollar equivalent amounts actually received or paid.
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Net unrealized currency gains (losses) from valuing foreign currency
denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation) in the
Statement of Net Assets. The change in net unrealized currency gains
(losses) for the period is reflected in the Statement of Operations.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into
forward foreign currency exchange contracts to attempt to protect securities
and related receivables and payables against changes in future foreign
exchange rates. A forward foreign currency exchange contract is an agreement
between two parties to buy or sell currency at a set price on a future date.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is marked-to-market daily and the change in
market value is recorded by the Fund as unrealized gain or loss. The Fund
records realized gains or losses when the contract is closed equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and is generally limited to the amount of unrealized gain
on the contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income and distributions
to shareholders are recorded on the ex-date. Income distributions and
capital gain distributions are determined in accordance with U.S. Federal
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatment for
foreign currency transactions and securities designated as "passive foreign
investment companies" for tax purposes.
B. Morgan Stanley Asset Management Inc. and Morgan Stanley Asset Management
Limited (collectively the "Advisers") provide investment advisory services to
the Fund under the terms of an Investment Advisory Agreement (the "Agreement").
Under the Agreement, the Advisers are paid a total fee computed weekly and
payable monthly at an annual rate of .95% of the Fund's first $50 million of
average weekly net assets, .75% of the next $50 million of average weekly net
assets and .55% of average weekly net assets in excess of $100 million.
C. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services
Company (the "Administrator"), provides administrative services to the Fund
under an Administration Agreement. Under the Administration Agreement, the
Administrator is paid a fee computed weekly and payable monthly at an annual
rate of .08% of the Fund's average weekly net assets, plus $65,000 per annum. In
addition, the Fund is charged certain out-of-pocket expenses by the
Administrator.
D. Morgan Stanley Trust Company (the "International Custodian"), an affiliate
of the Advisers, acts as custodian for the Fund's assets held outside the United
States in accordance with a Custody Agreement. Custody fees are payable monthly
based on assets under custody, investment purchase and sales activity, an
account maintenance fee, plus reimbursement for certain out-of-pocket expenses.
For the six months ended April 30, 1997, the Fund incurred custodian fees of
$40,777 with the International Custodian, of which $27,600 was payable to the
International Custodian at April 30, 1997. The Chase Manhattan Bank serves as
custodian for the Fund's assets held in the United States.
E. During the six months ended April 30, 1997, the Fund made purchases and
sales totaling $9,402,712 and $9,893,667, respectively, of investment securities
other than long-term U.S. Government securities and short-term investments.
There were no purchases or sales of long-term U.S. Government securities. At
April 30, 1997, the U.S. Federal income tax cost basis of securities was
$41,147,000 and accordingly, net unrealized depreciation for U.S. Federal income
tax purposes was $133,000, of which $8,379,000 related to appreciated securities
and $8,512,000 related to depreciated securities. At October 31, 1996, the Fund
had capital loss carryforwards totaling approximately $37,903,000 available to
offset future capital gains of which $16,949,000, $17,764,000, $2,484,000 and
$706,000 will expire on October 31, 2000, 2001, 2002, and 2004, respectively. To
the extent that capital gains are so offset, such gains will not be distributed
to shareholders.
F. A substantial portion of the Fund's net assets consists of equity securities
and currency denominated in Turkish lira which may subject the Fund to
investment risks not
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normally associated with investing in securities of U.S. corporations, including
volatility and illiquidity of the Turkish securities markets and fluctuation in
the value of the Turkish lira against the U.S. dollar which are influenced in
part by the high inflation rate in Turkey.
G. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions will
be treated, based on an election by the Director, as if they were either
invested in the Fund's shares or invested in U.S. Treasury Bills, as defined
under the Plan. The deferred fees payable, under the Plan, at April 30, 1997
totaled $15,000 and are included in Payable for Directors' Fees and Expenses on
the Statement of Net Assets.
H. During the six months ended April 30, 1997 the Fund incurred $5,320 of
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless Investors Bank and Trust
Company (the "Plan Agent") is otherwise instructed by the shareholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
The Turkish Investment Fund, Inc.
Investors Bank and Trust Company
Dividend Reinvestment and Cash Purchase Plan
P.O. Box 1537
Boston, MA 02205
1-800-342-8756
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