<PAGE>
THE TURKISH INVESTMENT FUND, INC.
---------------------------------------------
OFFICERS AND DIRECTORS
<TABLE>
<S> <C>
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS James W. Grisham
Frederick B. Whittemore VICE PRESIDENT
VICE-CHAIRMAN OF THE BOARD Michael F. Klein
OF DIRECTORS VICE PRESIDENT
Warren J. Olsen Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR VICE PRESIDENT
Peter J. Chase Joseph P. Stadler
DIRECTOR VICE PRESIDENT
John W. Croghan Valerie Y. Lewis
DIRECTOR SECRETARY
David B. Gill James R. Rooney
DIRECTOR TREASURER
Graham E. Jones Joanna M. Haigney
DIRECTOR ASSISTANT TREASURER
John A. Levin
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, N.A.
73 Tremont Street
Boston, Massachusetts 02108
--------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company (International)
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank, N.A. (Domestic)
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, 1996
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- -------
For the six months ended April 30, 1996, The Turkish Investment Fund, Inc. had a
total return, based on net asset value per share, of -3.23% compared with -3.14%
for the Morgan Stanley Capital International ("MSCI") Turkey Index. For the
three months ended April 30, 1996, the Fund had a total return, based on net
asset value per share, of 7.87% compared with the 8.40% for the Index. On April
30, 1996 the closing price of the Fund's shares on the New York Stock Exchange
was $5.75, representing a 2.3% premium to the Fund's net asset value per share.
The Fund's underperformance compared to the Index for the first two strong
months of the quarter and outperformance for the weaker third month of the
quarter, was largely attributable to the Fund's defensive bias. Politics
continued to be the determining factor for the market with all attention now
being focused on the nascent coalition government between the two center-right
parties -- ANAP and DYP.
The market started the year on a strong note when ANAP and DYP decided at the
last moment to join forces to keep the party of the religious right, Refah, out
of power. Together, the two center-right parties polled 38.7% of the vote,
compared to Refah's 21.3%. Personal animosities, however, between the party
leaders, prevented any progress on reform despite their sharing of the same
reform-minded economic platform. The subsequent market weakness -- down 13% in
dollar terms from its year high -- reflects investors' disappointment with the
political situation in Ankara. Nevertheless, we believe the negative sentiment
has been exaggerated. From the beginning, an ANAP/DYP coalition was never going
to be smooth given the personalities involved.
On the positive side however, within the bureaucracy there is consensus on the
key issues of reform. Budgets are being made, the privatization process is
proceeding onward and the Central Bank, flush with $16 billion in reserves, is
keeping a firm hand on the currency. To ensure the long term success of the
reform process, Turkey obviously needs political unity and eventually pressures
from both within Turkey and without will produce the required reforms.
On the macroeconomic side, problems remain acute but not unsolvable. GDP growth
is expected to slow from last year's 8% to a more sustainable level of 4%.
Accordingly, there should be less pressure on the external account this year. A
current account deficit of 0.75% of GDP is forecast for 1996 -- again, a
sustainable figure. Unlike in late 1993, the current government understands the
importance of high real interest rates in such a situation as a means of
retaining currency stability. Tourism revenues this year are expected to be at
record levels -- approximately $5 billion -- which will further help finance the
current account deficit. The expectation is that an equilibrium of sorts will be
maintained until some form of renewed coalition government can take firm control
of the policy levers.
Meanwhile, we continue to focus on corporate fundamentals which continue to
impress us. We have recently increased our stakes in Eregli Demir Ve Celik, the
iron and steel concern, and Ege Biracilik, the leading beer manufacturer in
Turkey. Both of these companies are completing major capacity increases and will
be showing strong volume growth over the coming years. For the time being, we
have sold off our position in Tat, the tomato paste manufacturer. While the long
term prospects for the company are still excellent, increasing inventory levels
and price weakness will be hurting profits this year. We have also increased our
exposure to Garanti Bank. Having just acquired the mid-sized Ottoman Bank,
Garanti is rapidly expanding its core banking business -- unlike many of its
competitors which rely too much on the easy but elusive profits from T-bill
income. As we have recently seen in Brazil, inflation does not last forever and
the
2
<PAGE>
banks which relied too much on inflated trading income find themselves in big
trouble now. By concentrating on its core lending business, Garanti stands out
as the only major commercial bank in Turkey which is preparing itself for a
future without sky-high inflation -- regardless of how long that wait might be.
Sincerely,
[SIG]
Warren J. Olsen
PRESIDENT AND DIRECTOR
[SIG]
Marianne L. Hay
SENIOR PORTFOLIO MANAGER
[SIG]
Landon Thomas
PORTFOLIO MANAGER
June 4, 1996
3
<PAGE>
The Turkish Investment Fund, Inc.
Investment Summary as of April 30, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION (UNAUDITED)
TOTAL RETURN (%)
----------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (1)(3)
-------------------------- -------------------------- --------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C>
-------------------------- -------------------------- --------------------------
FISCAL YEAR TO DATE -0.07% -- -3.23% -- -3.14% --
ONE YEAR -17.60 -17.60% -9.20 -9.20% -22.02 -22.02%
FIVE YEAR -26.55 -5.99 -31.52 -7.29 -24.40 -5.44
SINCE INCEPTION* -44.25 -8.72 -45.51 -9.04 -7.30 -1.18
</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, 1996
1990* 1991 1992 1993 1994 1995 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share $12.78 $5.16 $4.69 $9.41 $4.89 $5.93 $5.62
Market Value Per Share $9.38 $7.00 $6.00 $10.38 $6.88 $5.88 $5.75
Premium/(Discount) -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% 2.3%
Income Dividends $0.03 - $0.07 $0.04 $0.12 - $0.12
Capital Gains Distributions - $0.07 $0.17 - - - -
Fund Total Return (2) 14.80% -59.27% -6.36% 102.39% -47.61% 21.27% -3.23%
Index Total Return (1)(3)** 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -3.14%
</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 Morgan Stanley Capital International (MSCI) Turkey Index is an unmanaged
index of common stocks.
* The Fund commenced operations on December 5, 1989.
** Unaudited.
4
<PAGE>
The Turkish Investment Fund, Inc.
Portfolio Summary as of April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 94.8%
Short-Term Investments 5.2%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Banking 11.4%
Beverages & Tobacco 18.6%
Broadcasting & Publishing 6.7%
Building Materials & Components 13.2%
Food & Household Products 12.9%
Insurance 2.2%
Metals--Non-Ferrous 7.3%
Multi-Industry 6.1%
Telecommunications 4.4%
Textiles & Apparel 6.6%
Other 10.6%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
1. Migros 10.8%
2. Ege Biracilik 8.8
3. Garanti Bankasi 8.1
4. Eregli Demir Ve Celik 7.3
5. Sabah 6.7
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
6. Guney Biracilik Ve Malt Sanayii 6.3%
7. Alarko Holding AS 6.1
8. Goltas Yeni 5.5
9. Trakya Cam Sanayii 4.5
10. Netas 4.4
----------
68.5%
----------
----------
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS (UNAUDITED)
- ---------
STATEMENT OF NET ASSETS
- ---------
APRIL 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
TURKISH COMMON STOCKS (95.1%)
(Unless otherwise noted)
- --------------------------------------------------------
- ------------
AUTOMOBILES (2.0%)
Tofas Turk Otomobil
Fabrikasi 7,476,000 U.S. $ 804
-------------
- --------------------------------------------------------
- ------------
BANKING (11.4%)
Demirbank 41,250,000 1,329
Garanti Bankasi 24,883,000 1,520
Garanti Bankasi ADR 30,000 183
+Garanti Bankasi RFD 12,441,500 693
*+Garanti Bankasi
(Rights), expiring
5/3/96 24,883,000 791
-------------
4,516
-------------
- --------------------------------------------------------
- ------------
BEVERAGES & TOBACCO (18.6%)
Ege Biracilik 9,686,000 3,474
Guney Biracilik Ve Malt
Sanayii 11,750,000 2,497
Turk Tuborg 2,480,000 1,384
-------------
7,355
-------------
- --------------------------------------------------------
- ------------
BROADCASTING & PUBLISHING (6.7%)
Sabah 97,501,000 2,623
-------------
- --------------------------------------------------------
- ------------
BUILDING MATERIALS & COMPONENTS (13.2%)
+CBS Boya Kimya Sanayii 36,000,000 1,244
+Goltas Yeni (New) 6,000,000 2,192
Trakya Cam Sanayii 12,800,000 1,785
-------------
5,221
-------------
- --------------------------------------------------------
- ------------
FINANCIAL SERVICES (1.5%)
+Global Securities
Services, Inc. 9,475,000 579
@+Global Securities
Services, Inc. (New) 1,072 --
-------------
579
-------------
- --------------------------------------------------------
- ------------
FOOD & HOUSEHOLD PRODUCTS (12.9%)
Kerevitas Gida 11,785,725 830
Migros (Registered) 3,740,400 4,273
-------------
5,103
-------------
- --------------------------------------------------------
- ------------
HEALTH & PERSONAL CARE (2.2%)
+Deva Holdings (New) 25,845,000 875
-------------
- --------------------------------------------------------
- ------------
INSURANCE (2.2%)
+Gunes Sigorta 8,347,000 876
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
METALS -- NON-FERROUS (7.3%)
Eregli Demir Ve Celik 26,570,000 U.S.$ 2,894
**+Rabak Elektrolitik
Bakir 3,272,280 0
-------------
2,894
-------------
- --------------------------------------------------------
- ------------
MULTI-INDUSTRY (6.1%)
Alarko Holding AS 6,768,600 2,428
-------------
- --------------------------------------------------------
- ------------
TELECOMMUNICATIONS (4.4%)
Netas 6,700,000 1,736
-------------
- --------------------------------------------------------
- ------------
TEXTILES & APPAREL (6.6%)
Aksa 2,925,000 1,068
+Bossa 13,488,000 1,523
**+Mensucat Santral 3,606,400 0
-------------
2,591
-------------
- --------------------------------------------------------
- ------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S. $40,116) 37,601
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.1%)
(Interest Bearing Demand Account)
Turkish Lira
(Cost U.S. $52) TRL 3,869,857 52
-------------
- --------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (5.1%)
REPURCHASE AGREEMENT (5.1%)
Chase Securities, Inc.,
5.10%, dated 4/30/96,
due 5/1/96, to be
repurchased at $2,025,
collateralized by
$1,880 U.S. Treasury
Bond, 7.625%, due
11/15/22, valued at
$2,063 (Cost U.S.
$2,025) U.S. $ 2,025 2,025
-------------
- --------------------------------------------------------
- ------------
TOTAL INVESTMENTS (100.3%)
(Cost U.S. $42,193) 39,678
-------------
- --------------------------------------------------------
- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------
- ------------
<S> <C> <C>
OTHER ASSETS (0.6%)
Cash U.S.$ 203
Other Assets 15 U.S.$ 218
-------------- -------------
- --------------------------------------------------------
- ------------
LIABILITIES (-0.9%)
Payable for:
Investments Purchased (195)
Investment Advisory
Fees (32)
Professional Fees (25)
Custodian Fees (25)
Shareholder Reporting
Expenses (25)
Administrative Fees (9)
Directors' Fees and
Expenses (6)
Other Liabilities (21) (338)
-------------- -------------
- --------------------------------------------------------
- ------------
NET ASSETS (100%)
Applicable to 7,043,085 issued and
outstanding U.S. $0.01 par value
shares (30,000,000 shares authorized) U.S. $ 39,558
-------------
- --------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE U.S. $ 5.62
-------------
- --------------------------------------------------------
- ------------
AT APRIL 30, 1996, NET ASSETS CONSISTED OF:
- --------------------------------------------------------
Common Stock U.S. $ 70
Capital Surplus 78,762
Accumulated Net Investment Income 664
Accumulated Net Realized Loss (37,423)
Unrealized Depreciation on Investments
and
Foreign Currency Translations (2,515)
- --------------------------------------------------------
- ------------
TOTAL NET ASSETS U.S. $ 39,558
-------------
- --------------------------------------------------------
- ------------
</TABLE>
+ Non-income producing
* Security carried at fair value -- 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.
@ Value is less than U.S.$500.
ADR American Depositary Receipt
RFD Ranked for Dividend
April 30, 1996 exchange rate -- Turkish Lira (TRL) 75,280=U.S.$1.00
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30,
1996
STATEMENT OF OPERATIONS (UNAUDITED) (000)
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends........................................................................................... U.S.$ 1,004
Interest............................................................................................ 34
- -----------------------------------------------------------------------------------------------------------------------
Total Income...................................................................................... 1,038
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees............................................................................ 177
Administrative Fees................................................................................. 51
Custodian Fees...................................................................................... 43
Audit Fees.......................................................................................... 32
Annual Meeting and Proxy Expenses................................................................... 19
Shareholder Reporting Expenses...................................................................... 17
Directors' Fees and Expenses........................................................................ 12
Legal Fees.......................................................................................... 7
Transfer Agent Fees................................................................................. 7
Other Expenses...................................................................................... 9
- -----------------------------------------------------------------------------------------------------------------------
Total Expenses.................................................................................... 374
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income........................................................................... 664
- -----------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold.......................................................................... 4
Foreign Currency Transactions....................................................................... (230)
- -----------------------------------------------------------------------------------------------------------------------
Net Realized Loss................................................................................. (226)
- -----------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Depreciation on Investments........................................................................... (1,812)
Depreciation on Foreign Currency Translations......................................................... 1
- -----------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................................... (1,811)
- -----------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation.............................. (2,037)
- -----------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................ U.S.$ (1,373)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED APRIL 30,
OCTOBER 31, 1996
1995 (UNAUDITED)
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income................................................................... U.S.$ 889 U.S.$ 664
Net Realized Gain (Loss)................................................................ 1,200 (226)
Change in Unrealized Appreciation/Depreciation.......................................... 5,221 (1,811)
- -------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations......................... 7,310 (1,373)
- -------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income................................................................... -- (845)
- -------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (3,318 shares)............................................ -- 19
- -------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease)............................................................... 7,310 (2,199)
Net Assets:
Beginning of Period..................................................................... 34,447 41,757
- -------------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated undistributed net investment income
of U.S. $845 and U.S. $664, respectively).............................................. U.S.$ 41,757 U.S.$ 39,558
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED OCTOBER 31, APRIL 30,
----------------------------------------------------------------------------- 1996
SELECTED PER SHARE DATA AND RATIOS: 1991 1992 1993 1994 1995 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. U.S.$ 12.78 U.S.$ 5.16 U.S.$ 4.69 U.S.$ 9.41 U.S.$ 4.89 U.S.$ 5.93
- -----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income............... 0.28 0.18 0.22 0.07 0.13 0.09
Net Realized and Unrealized Gain
(Loss) on Investments.............. (7.83) (0.41) 4.54 (4.47) 0.91 (0.28)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations..................... (7.55) (0.23) 4.76 (4.40) 1.04 (0.19)
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income............. -- (0.07) (0.04) (0.12) -- (0.12)
Net Realized Gain................. (0.07) (0.17) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions............. (0.07) (0.24) (0.04) (0.12) -- (0.12)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD...... U.S.$ 5.16 U.S.$ 4.69 U.S.$ 9.41 U.S.$ 4.89 U.S.$ 5.93 U.S.$ 5.62
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share Market Value, End of
Period............................. U.S.$ 7.00 U.S.$ 6.00 U.S.$ 10.38 U.S.$ 6.88 U.S.$ 5.88 U.S.$ 5.75
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value...................... (24.56)% (11.69)% 74.34% (33.19)% (14.55)% (0.07)%
Net Asset Value (1)............... (59.27)% (6.36)% 102.39% (47.61)% 21.27% (3.23)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(THOUSANDS)........................ U.S.$ 36,255 U.S.$ 32,957 U.S.$ 66,258 U.S.$ 34,447 U.S.$ 41,757 U.S.$ 39,558
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets............................. 2.42% 2.55% 2.04% 2.16% 1.91% 2.02%*
Ratio of Net Investment Income to
Average
Net Assets......................... 3.28% 3.00% 3.20% 1.03% 2.18% 3.58%*
Portfolio Turnover Rate............. 45% 28% 46% 68% 48% 22%
Average Commission Rate (2)......... N/A N/A N/A N/A N/A $0.0004
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose the average commission rate per share it paid for trades on
which commissions were charged.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 30, 1996
- ------------
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 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.
Capital surplus, accumulated 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 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 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 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 foreign
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
10
<PAGE>
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, N.A., through its affiliate Chase Global Funds
Services Company (the "Administrator"), provides administrative services to the
Fund under an Administration Agreement. Under the Administration Agreement,
Chase Global Funds Services Company 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.
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 months ended April 30, 1996, the Fund
incurred International Custodian fees of $41,000 of which $24,000 was payable to
the International Custodian at April 30, 1996.
E. During the six months ended April 30, 1996, the Fund made purchases and
sales totaling $8,071,000, and $8,797,000, respectively, of investment
securities other than long-term U.S. Government Securities and short term
investments. There were no purchases and sales of long-term U.S. Government
Securities. At April 30, 1996, the U.S. Federal income tax cost basis of
securities was $42,141,000 and accordingly, net unrealized depreciation for U.S.
Federal income tax purposes was $2,515,000 of which $9,396,000 related to
appreciated securities and $11,911,000 related to depreciated securities. At
October 31, 1995, the Fund had capital loss carryforwards totaling approximately
$37,198,000 available to offset future capital gains of which $16,949,000,
$17,765,000 and $2,484,000 will expire on October 31, 2000, 2001 and 2002,
respectively.
F. At April 30, 1996, approximately 95% 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.
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, 1996
totaled $3,000 and are included in Payable for Directors' Fees and Expenses on
the Statement of Net Assets.
11
<PAGE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS* (UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN
(LOSS) AND CHANGE IN NET INCREASE (DECREASE)
NET INVESTMENT UNREALIZED APPRECIATION/ IN NET ASSETS RESULTING
INVESTMENT INCOME INCOME (LOSS) DEPRECIATION FROM OPERATIONS
---------------------- ---------------------- ------------------------ ------------------------
QUARTER ENDED AMOUNT PER SHARE AMOUNT PER SHARE AMOUNT PER SHARE AMOUNT PER SHARE
- -------------------------- -------- ----------- -------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, 1996.......... $ 114 $ 0.02 $ (70) $ (0.01) $ (4,161) $ (0.59) $ (4,231) $ (0.60)
April 30, 1996............ 924 0.13 734 0.10 2,124 0.31 2,858 0.41
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
Total................. $ 1,038 $ 0.15 $ 664 $ 0.09 $ (2,037) $ (0.28) $ (1,373) $ (0.19)
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
January 31, 1995.......... $ 12 $ 0.00 $ (177) $ (0.03) $ (5,064) $ (0.71) $ (5,241) $ (0.74)
April 30, 1995............ 319 0.05 126 0.02 15,131 2.15 15,257 2.17
July 31, 1995............. 931 0.13 699 0.10 5,153 0.73 5,852 0.83
October 31, 1995.......... 407 0.06 241 0.04 (8,799) (1.26) (8,558) (1.22)
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
Total................. $ 1,669 $ 0.24 $ 889 $ 0.13 $ 6,421 $ 0.91 $ 7,310 $ 1.04
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
January 31, 1994.......... $ 260 $ 0.04 $ (66) $ (0.01) $ 3,080 $ 0.44 $ 3,014 $ 0.43
April 30, 1994............ 486 0.07 264 0.04 (41,484) (5.89) (41,220) (5.85)
July 31, 1994............. 351 0.05 136 0.02 9,635 1.37 9,771 1.39
October 31, 1994.......... 429 0.06 159 0.02 (2,722) (0.39) (2,563) (0.37)
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
Total................. $ 1,526 $ 0.22 $ 493 $ 0.07 $ (31,491) $ (4.47) $ (30,998) $ (4.40)
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
-------- ----- -------- ----------- ---------- ----------- ---------- -----------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Expressed in thousands of U.S. dollars except per share amounts.
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.
12
<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
13
