<PAGE>
THE TURKISH INVESTMENT FUND, INC.
---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
Frederick B. Whittemore James W. Grisham
CHAIRMAN OF THE BOARD VICE PRESIDENT
OF DIRECTORS Harold J. Schaaff, Jr.
Warren J. Olsen VICE PRESIDENT
PRESIDENT AND DIRECTOR Joseph P. Stadler
Zafer Z. Basak VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
Gerard E. Jones SECRETARY
DIRECTOR Hilary D. Toole
Graham E. Jones ASSISTANT SECRETARY
DIRECTOR James R. Rooney
Frederick O. Robertshaw TREASURER
DIRECTOR Timothy F. Osborne
Oscar S. Schafer ASSISTANT TREASURER
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 United States Trust Company of New York
73 Tremont Street
Boston, Massachusetts 02108
--------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
The United States Trust Company of New York
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
--------------------------------------------------------
------------------------------------------------------
THE
TURKISH
INVESTMENT
FUND, INC.
------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1995
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- ------
After bottoming out in January of this year, the Turkish market finally had its
rally as local investors plunged heavily into stocks, making the Istanbul Stock
Exchange the best emerging market performer so far this year.
For the quarter ended April 30, 1995, the Fund's total return based on net asset
value was 52.29% compared with 83.45% for the Morgan Stanley Capital
International Turkish Index (Index). For the six months ended April 30, 1995,
the Fund is up 29.24% compared with an 86.14% gain for the Index. The reasons
for the underperformance are the following: the Fund is underweight in the
banking sector (2.0% compared to 22% for the Index) and especially Is Bank, a
highly speculative public sector bank included in the Index which has risen
sharply this year. In addition, the Fund's core holdings of Netas, Ege Bira and
Migros (comprising 19% of the Fund's weighting, compared to 12% for the Index)
have underperformed the Index this year despite their usual strong earnings
performance. Through April of this year, these three stocks have risen on
average 52% compared to a 75% gain in the Index. We believe strongly that these
core holdings will, in the long term, outperform the Index as they have done in
the past. The market's rally this year has not necessarily been blue chip led.
As some of the speculative excitement revolving around the smaller caps eases,
we expect to see renewed investor interest in the larger cap blue chips in which
the bulk of the Fund's weighting lies.
The three month rally in the Turkish market has been driven by a number of
factors. First, interest rates have come down sharply by over 30% to current
levels of 90%. Decreasing inflationary expectations have been paramount in
bringing down rates. While inflation peaked at 135% early this year,
year-on-year prices for April increased by only 95%. As the market expected such
a decrease, the government was able to increase the maturity of its paper while
also bringing down rates. When deposit rates declined as well, there was a major
shift of funds to the stock market.
What has distinguished the recent surge in equities has been the huge trading
volumes involved. At the peak, the market was turning over more than $600
million per day, an astonishing figure for a $33 billion market. The bulk of
this turnover has been domestic-retail generated as local investors -- always
aggressive even in the worst of times -- have returned with a vengeance to the
equity market.
There have been some important psychological factors as well. The signing of a
preliminary agreement with the European Union for Customs Union in 1996
contributed significantly to market confidence. While there is sure to be some
margin erosion due to increased competition, it is also true that many companies
in Turkey have been preparing for such a union for years now and have undertaken
the necessary investments as well as locking in productivity gains which will
allow them to go head to head with Europe. Within the Fund's portfolio, Aksa and
Tat, significant exporters of acrylic fiber and tomato paste, respectively,
should benefit from the freer access to Europe.
Also of importance has been the strengthening of Prime Minister Tansu Ciller's
political position during the year. By expanding her coalition and bringing some
senior, well respected public officials into her cabinet, she has added some
much needed political weight. Ms. Ciller has been demonstrating her growing
influence in a number of ways. On the economic front, she continues to stick to
the austerity program imposed upon Turkey a year ago, and it has had positive
results. While growth was down by 5.5% in 1994, this much needed stanching of
both public and private sector demand has had a deflationary effect while also
improving both the current account and the budget deficit pictures.
2
<PAGE>
The current account deficit of 4% of GDP in 1993 was erased in 1994 by a 1%
surplus. And the Public Sector Borrowing Requirement of 12% of GDP in 1993 came
in at 8% of GDP in 1994. Perhaps more important was the extremely tight monetary
policy followed by the Central Bank in line with IMF dictates. Inflation, after
having shot up to the 135% range, is declining towards the 80% level and
interest rates are following in line. 1995 will be another tough growth year for
Turkey, but there are indications that growth could be as high as 1.7%.
Such a two-year economic contraction is not easy for a country accustomed to
growth levels of 5% and above. Turks have suffered a 50% erosion in real wages
and it is not surprising that there have been some brief manifestations of
social discontent -- most specifically the riots in Istanbul in early March.
While there were other factors at work such as religious sectarianism and
political agitation, one can not deny the socioeconomic factor. To the
government's credit, Ms. Ciller reacted quickly, sending in the army to stop the
street fighting and promising some much needed democratic reforms. One sees a
similar strategy in her approach towards the Kurds. By sending troops into
northern Iraq -- a move which commanded broad public support at home despite the
condemnations abroad -- Ciller is hoping to preempt further incursions into
Turkey by the rebel group PKK. At the same time, she is suggesting further
political reforms with regard to increased freedom of expression for the Kurds.
Such a two-pronged approach is essential if definitive progress on the issue is
to be achieved.
On the corporate side, Turkish companies continue to show strong earnings
growth, despite the uncertain economic environment. For 1995, we are expecting
real earnings growth of 28%-30% and possibly more than that if lower interest
rates spur an economic revival during the second half of 1995. Accordingly, we
have increased our weighting in cyclical stocks such as Arcelik, the leading
consumer durables manufacturer in Turkey. In addition, we have taken a new
position in the soon to be privatized Eregli Demir Celik, the largest flat steel
producer in the country with a 74% market share. The company is in the midst of
a huge capacity expansion and is set to benefit substantially from
post-privatization efficiency gains and the revival in the domestic economy.
We have also increased our weighting in Netas, the main equipment supplier to
the Turkish telecommunications monopoly PTT. With 1996 shaping up to be an
election year, increased phone line installation is a certainty; additionally,
the company continues to demonstrate R&D innovation -- one of the few companies
in Turkey to do so.
Sincerely,
[SIGNATURE]
Warren J. Olsen
PRESIDENT
[SIGNATURE]
Marianne L. Hay
SENIOR PORTFOLIO MANAGER
[SIGNATURE]
Landon Thomas
PORTFOLIO MANAGER
May 16, 1995
3
<PAGE>
FINANCIAL STATEMENTS (UNAUDITED)
- ---------
STATEMENT OF NET ASSETS
- ---------
APRIL 30, 1995
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------
- -------------
TURKISH COMMON STOCKS (98.1%)
- --------------------------------------------------
- ----------
APPLIANCES & HOUSEHOLD DURABLES (2.9%)
Arcelik AS 4,689,062 U.S.$ 1,295
-----------
- -----------------------------------------------------------
- -------------
AUTOMOBILES (6.3%)
Otosan Otomobil Sanayii AS 3,200,000 1,109
Tofas Turk Otomobil Fabrikasi 1,869,000 1,713
-----------
2,822
-----------
- -----------------------------------------------------------
- -------------
BEVERAGES & TOBACCO (11.5%)
Ege Biracilik Ve Malt Sanayii 3,000,000 2,785
Guney Biracilik Ve Malt
Sanayii 4,583,200 2,316
-----------
5,101
-----------
- -----------------------------------------------------------
- -------------
BUILDING MATERIALS & COMPONENTS (14.4%)
Cimentas 1,240,000 918
+Izocam Ticaret Ve Sanayi AS 3,334,578 862
+Marshall Boya Ve Vernik
Sanayii 8,400,000 3,208
Turk Demir Dokum Fabrikalari
AS 6,000,000 1,410
-----------
6,398
-----------
- -----------------------------------------------------------
- -------------
FINANCIAL SERVICES (5.2%)
*Global Securities Ltd. 6,076,902 672
Koc Yatirim Ve Sanayi
Mamulleri 2,158,000 698
+Turkiye Garanti Bankasi AS 3,650,000 922
-----------
2,292
-----------
- -----------------------------------------------------------
- -------------
FOOD & HOUSEHOLD PRODUCTS (13.1%)
Dardanel Onentas Gida 400,000 620
Kerevitas Gida 750,000 916
Migros Turk TAS 1,039,000 2,686
+Tat Konserve Sanayii AS 910,000 1,583
-----------
5,805
-----------
- -----------------------------------------------------------
- -------------
HEALTH & PERSONAL CARE (2.1%)
Eczacibasi Ilac Sanayii Ve
Ticaret AS 4,491,750 950
-----------
- -----------------------------------------------------------
- -------------
INDUSTRIAL COMPONENTS (7.5%)
+Goodyear Lastikleri TAS 4,500,000 3,332
-----------
- -----------------------------------------------------------
- -------------
INSURANCE (3.3%)
Anadolu Sigoria 6,800,000 1,454
-----------
- -----------------------------------------------------------
- -------------
METALS -- NON-FERROUS (6.9%)
+Eregli Demir Ve Celik
Fabrikalari TAS 17,700,000 3,078
+Rabak Elektrolitik Bakir Ve
Mamulleri 3,272,280 0**
-----------
3,078
-----------
- -----------------------------------------------------------
- -------------
MULTI-INDUSTRY (13.4%)
Alarko Holding AS 2,320,000 2,045
Anadolu Bi Racilik 2,750,000 662
Enka Holding Yatirim AS 2,600,000 1,085
Usas Ucak Servisi AS 260,000 2,169
-----------
5,961
-----------
- -----------------------------------------------------------
- -------------
TELECOMMUNICATIONS (7.2%)
Netas Telekomunik 7,975,000 3,186
-----------
- -----------------------------------------------------------
- -------------
TEXTILES & APPAREL (4.3%)
+Aksa Akrilik Kimya Sanayii AS 2,160,000 1,929
+Mensucat Santral TAS 3,606,400 0**
-----------
1,929
-----------
- -----------------------------------------------------------
- -------------
<CAPTION>
VALUE
(000)
<S> <C> <C>
- -----------------------------------------------------------
- -------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S. $38,570) U.S.$ 43,603
-----------
- ---------------------------------------------------------
- ------------
FACE
AMOUNT
(000)
- ---------------------------------------------------------
- ------------
SHORT TERM INVESTMENT (5.3%)
REPURCHASE AGREEMENT (5.3%)
U.S. Trust, 5.70%, dated
4/28/95, due 5/1/95, to be
repurchased at $2,356,
collateralized by U.S.
Treasury Bills, due 5/11/95,
valued at $2,435 (Cost U.S.
$2,355) U.S.$ 2,355 2,355
-----------
- -----------------------------------------------------------
- -------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.1%)
(Interest Bearing Demand
Account)
Turkish Lira (Cost U.S. $51) TRL 2,150,391 51
-----------
- -----------------------------------------------------------
- -------------
TOTAL INVESTMENTS (103.5%)
(Cost U.S. $40,976) 46,009
-----------
- -----------------------------------------------------------
- -------------
OTHER ASSETS (0.7%)
Cash U.S.$ 2
Receivable for Investments
Sold 255
Dividends Receivable 26
Interest Receivable 1
Other Assets 11 295
------------ -----------
- -----------------------------------------------------------
- -------------
LIABILITIES (-4.2%)
Payable For:
Investments Purchased (1,660)
Custodian Fees (44)
Directors' Fees and Expenses (44)
Investment Advisory Fees (35)
Professional Fees (20)
Shareholder Reporting
Expenses (9)
Administrative Fees (13)
Other Liabilities (16) (1,841)
------------ -----------
- -----------------------------------------------------------
- -------------
NET ASSETS (100%)
Applicable to 7,039,767 issued and
outstanding U.S. $.01 par value shares
(30,000,000 shares authorized) U.S.$ 44,463
-----------
- -----------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 6.32
-----------
- -----------------------------------------------------------
- -------------
AT APRIL 30, 1995, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------
Common Stock U.S.$ 70
Capital Surplus 78,743
Accumulated Net Investment
Loss (365)
Accumulated Net Realized Loss (39,020)
Unrealized Appreciation on
Investments and Foreign
Currency 5,035
- -----------------------------------------------------------
TOTAL NET ASSETS U.S.$ 44,463
- -----------------------------------------------------------
- -----------------------------------------------------------
<FN>
+Non-incoming producing
*Security fair valued at cost -- see note A-1 to financial statements.
**Security carried at fair value of zero. The security has ceased trading on the
Istanbul Stock Exchange and has been delisted.
April 30, 1995 exchange rate -- Turkish Lira (TRL) 42,550 = U.S.$1.00
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1995
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
<S> <C>
- --------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................. U.S.$ 303
Interest.............................................................................. 28
- --------------------------------------------------------------------------------------------------------------
Total Income........................................................................ 331
- --------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees.............................................................. 168
Administrative Fees................................................................... 55
Directors' Fees and Expenses.......................................................... 51
Custodian Fees........................................................................ 48
Audit Fees............................................................................ 15
Shareholder Reporting Expenses........................................................ 13
Annual Meeting and Proxy Expenses..................................................... 13
Amortization of Organization Costs.................................................... 9
Legal Fees............................................................................ 6
Transfer Agent Fees................................................................... 4
- --------------------------------------------------------------------------------------------------------------
Total Expenses...................................................................... 382
- --------------------------------------------------------------------------------------------------------------
Net Investment Loss............................................................... (51)
- --------------------------------------------------------------------------------------------------------------
NET REALIZED LOSS
Investment Securities Sold............................................................ (778)
Foreign Currency Transactions......................................................... (115)
- --------------------------------------------------------------------------------------------------------------
Net Realized Loss................................................................... (893)
- --------------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS AND FOREIGN CURRENCY
Beginning of Period................................................................... (5,925)
End of Period......................................................................... 5,035
- --------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation................................................... 10,960
- --------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation............................. 10,067
- --------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... U.S.$ 10,016
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1995
OCTOBER 31, 1994 (UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss)................................................ U.S.$ 493 U.S.$ (51)
Net Realized Loss........................................................... (2,274) (893)
Change in Unrealized Appreciation (Depreciation)............................ (29,217) 10,960
- -----------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations............. (30,998) 10,016
- -----------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income....................................................... (813) --
- -----------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease)................................................... (31,811) 10,016
Net Assets:
Beginning of Period......................................................... 66,258 34,447
- -----------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of U.S. $314 and
U.S. $365, respectively)................................................... U.S.$ 34,447 U.S.$ 44,463
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 5,
FINANCIAL HIGHLIGHTS 1989* TO YEAR ENDED OCTOBER 31, SIX MONTHS ENDED
SELECTED PER SHARE OCTOBER 31, ----------------------------------------------------------------- APRIL 30, 1995
DATA AND RATIOS: 1990 1991 1992 1993 1994 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF
PERIOD............. U.S.$ 11.16 U.S.$ 12.78 U.S.$ 5.16 U.S.$ 4.69 U.S.$ 9.41 U.S.$ 4.89
- ---------------------------------------------------------------------------------------------------------------------------
Offering Costs...... (0.19) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment
Income (Loss)...... 0.12 0.28 0.18 0.22 0.07 (0.01)
Net Realized and
Unrealized Gain
(Loss) on
Investments........ 1.72 (7.83) (0.41) 4.54 (4.47) 1.44
- ---------------------------------------------------------------------------------------------------------------------------
Total from
Investment
Operations..... 1.84 (7.55) (0.23) 4.76 (4.40) 1.43
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment
Income......... (0.03) -- (0.07) (0.04) (0.12) --
Net Realized
Gains.......... -- (0.07) (0.17) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total
Distributions.... (0.03) (0.07) (0.24) (0.04) (0.12) --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD.......... U.S.$ 12.78 U.S.$ 5.16 U.S.$ 4.69 U.S.$ 9.41 U.S.$ 4.89 U.S.$ 6.32
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET
VALUE, END OF
PERIOD............. U.S.$ 9.38 U.S.$ 7.00 U.S.$ 6.00 U.S.$ 10.38 U.S.$ 6.88 U.S.$ 7.13
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT
RETURN:
Market Value.... (21.71)% (24.56)% (11.69)% 74.34% (33.19)% 3.64%
Net Asset Value
(1)............ 14.80% (59.27)% (6.36)% 102.39% (47.61)% 29.24%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL
DATA:
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF
PERIOD
(THOUSANDS)........ U.S.$ 89,754 U.S.$36,255 U.S.$32,957 U.S.$66,258 U.S.$34,447 U.S.$44,463
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net
Assets............. 1.65%** 2.42% 2.55% 2.04% 2.16% 2.15%**
Ratio of Net
Investment Income
(Loss) to Average
Net Assets......... 0.86%** 3.28% 3.00% 3.20% 1.03% (0.29)%**
Portfolio Turnover
Rate............... 1% 45% 28% 46% 68% 17%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
*Commencement of Operations
**Annualized
(1)Total investment return based on per share net asset value 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.
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1995
- ------------
The Turkish Investment Fund, Inc. (the "Fund") was incorporated 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.
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.
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 not 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 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. INCOME 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.
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 last 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
currency contracts, disposition of foreign currencies, 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 and the U.S. dollar
equivalent amounts actually received or paid. 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).
5. FORWARD FOREIGN CURRENCY CONTRACTS: The Fund may enter into forward foreign
currency contracts to protect securities and related receivables and
payables against changes in future foreign exchange rates. A forward
currency 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,
7
<PAGE>
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.
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 United States Trust Company of New York ("U.S. Trust"), through its
wholly owned subsidiary Mutual Funds Service Company, provides administrative
services to the Fund under an Administration Agreement. Under the Administration
Agreement, U.S. Trust 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. U.S. Trust acts as custodian for the Fund's assets held in the United
States. For the six-month period ended April 30, 1995, U.S. custodian fees
incurred by the Fund totaled $4,000, of which $1,000 was payable to U.S. Trust
at April 30, 1995.
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. International Custodian 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-month period ended April 30, 1995, the Fund
incurred International Custodian fees of $44,000 of which $43,000 was payable to
the International Custodian at April 30, 1995.
E. During the six-month period ended April 30, 1995, the Fund made purchases
and sales totaling $6,144,000, and $6,022,000, respectively, of investment
securities other than short term investments. At April 30, 1995, the U.S.
Federal income tax cost basis of securities was $40,925,000 and accordingly, net
unrealized appreciation for U.S. Federal income tax purposes was $5,033,000 of
which $15,363,000 related to appreciated securities and $10,330,000 related to
depreciated securities. At October 31, 1994, the Fund had capital loss
carryforwards totaling approximately $38,034,000 available to offset future
capital gains of which $17,785,000, $17,765,000 and $2,484,000 will expire on
October 31, 2000, 2001 and 2002, respectively.
F. In connection with its organization the Fund incurred $469,000 of
organization costs. The organization costs are being amortized on a
straight-line basis over a five-year period beginning December 5, 1989, the date
the Fund commenced operations.
G. At April 30, 1995, approximately 98% of the Fund's net assets consist of
equity securities and currency denominated in Turkish lira which may subject the
Fund to investment risks not 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.
H. Effective January 1, 1995, 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, 1995 totaled $3,400 and are included in Payable for
Directors' Fees and Expenses on the Statement of Net Assets.
8
<PAGE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
U.S. AMOUNTS IN THOUSANDS EXCEPT PER
SHARE AMOUNTS
THREE MONTHS ENDED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
1995 1995
----------------- -------------------
PER PER
TOTAL SHARE TOTAL SHARE
------- ------- --------- -------
<S> <C> <C> <C> <C>
Investment Income............. $ 12 $ 0.00 $ 319 $ 0.05
Net Investment Income
(Loss)....................... $ (177) $ (0.03) $ 126 $ 0.02
Net Realized Gain (Loss) and
Change in Unrealized
Appreciation
(Depreciation)............... $(5,064) $ (0.71) $ 15,131 $ 2.15
Net Increase (Decrease) in Net
Assets Resulting from
Operations................... $(5,241) $ (0.74) $ 15,257 $ 2.17
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31,
1994 1994 1994 1994
---------------------- ---------------------- ---------------------- ----------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
--------- ----------- --------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income............. $ 260 $ 0.04 $ 486 $ 0.07 $ 351 $ 0.05 $ 429 $ 0.06
Net Investment Income
(Loss)....................... $ (66) $ (0.01) $ 264 $ 0.04 $ 136 $ 0.02 $ 159 $ 0.02
Net Realized Gain (Loss) and
Change in Unrealized
Appreciation
(Depreciation)............... $ 3,080 $ 0.44 $ (41,484) $ (5.89) $ 9,635 $ 1.37 $ (2,722) $ (0.39)
Net Increase (Decrease) in Net
Assets Resulting from
Operations................... $ 3,014 $ 0.43 $ (41,220) $ (5.85) $ 9,771 $ 1.39 $ (2,563) $ (0.37)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31,
1993 1993 1993 1993
----------------- ------------------- ----------------- -----------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
------- ------- --------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income............. $ 172 $ 0.02 $ 691 $ 0.10 $ 591 $ 0.08 $ 1,092 $ 0.16
Net Investment Income
(Loss)....................... $ (57) $ (0.01) $ 467 $ 0.07 $ 377 $ 0.05 $ 767 $ 0.11
Net Realized Loss and Change
in Unrealized Appreciation... $ 1,198 $ 0.17 $ 15,712 $ 2.23 $ 3,580 $ 0.51 $11,502 $ 1.63
Net Increase in Net Assets
Resulting from Operations.... $ 1,141 $ 0.16 $ 16,179 $ 2.30 $ 3,957 $ 0.56 $12,269 $ 1.74
</TABLE>
- --------------------------------------------------------------------------------
The Fund may purchase shares of its Common Stock in the open market at such
prices and in such amounts as the Board of Directors may deem advisable.
9
<PAGE>
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 by 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
10
