<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 Belinda A. Brady
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
73 Tremont Street
Boston, Massachusetts 02108
--------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company (International)
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank (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.
------------------------------------------------------
THIRD QUARTER REPORT
JULY 31, 1996
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- -------
For the three months ended July 31, 1996, The Turkish Investment Fund, Inc. (the
"Fund") had a total return based on net asset value per share of -7.83% compared
to -12.10% for the Morgan Stanley Capital International (MSCI) Turkey Index (the
"Index") return. For the nine months ended July 31, 1996 the Fund's total return
was -10.81% compared to -14.86% for the Index. On July 31, 1996, the closing
price of the Fund's shares on the New York Stock Exchange was $5.00,
representing a discount of 3.5% to the Fund's net asset value per share.
Relative outperformance has been due to overweight positions in defensive blue
chips as well as a high cash position.
In Turkey much can happen in three months. Once again we enter a new quarter
with a new government -- this one being a coalition between the Islamist party
of Necmettin Erbakan and the ever-present Tansu Ciller of the center-right DYP.
While the initial reaction to a religious conservative as prime minister may be
one of shock, a closer look suggests that the current status-quo is not as bad
as it seems.
The fact is that Erbakan and Ciller will share the premiership over the next
four years with Ciller's responsibilities encompassing foreign affairs and the
economy. Erbakan will start off as prime minister and also assume responsibility
for defense and internal affairs. Erbakan's government is now making it clear to
the local and foreign investment community that there will be no radical change
to Turkish foreign and economic policy-making. On the foreign affairs front,
this was demonstrated by the quick renewal of the U.S.-supported Provide Comfort
operation in Northern Iraq and the continuation of the newly-signed defense
agreement with Israel. Erbakan had aggressively condemned these two policies
while in opposition and his subsequent backtracking reflects his pragmatic
approach to governing as a minority in Turkey (remember, Refah gained only 21%
of the vote during last year's elections).
On the more important macro-economic front, Erbakan has also revealed pragmatic
tendencies. After a shaky start whereby some loose talk by bureaucratic
subordinates and some pseudo-populist policy measures
sharply rattled financial markets, Erbakan came forward with an economic
package, which, while short on specifics, at least focused on the most important
issue at hand: calming the local bond market. Over the past five years, the key
factor behind Turkey's ballooning budget deficit (now estimated to be around 9%
of GDP) has been spiraling domestic interest payments. Acute government
borrowing needs, combined with high inflation and political instability have
allowed domestic and foreign lenders to command real rates of 35% and above. In
fact, since the crisis of 1993, Turkey has been running a primary surplus
(factoring interest payments out of the budgetary balance) as discretionary
spending has for the most part been held in check.
Thus, while the jury is still out, the current government's focus on regaining
local bond market confidence (interest rates have decreased substantially since
announcement of the government program) is comforting. What is needed next are
some concrete accomplishments on the privatization front. Not surprisingly, the
market's initial reaction to the most recent privatization promises has been
cynical -- after all, Turkish governments have been notorious underperformers
when it comes to privatization. This government, however, may not have the
luxury to be coy on privatization. It is under considerable pressure to raise
revenues and calm a skeptical market; an aggressive privatization program would
do both.
What does it all mean for the Turkish market? The conventional wisdom has it
that the new government will soon self-destruct due to its own populist
tendencies, precipitating a currency crisis similar to that of 1994. We see it
differently however. Erbakan is the first Turkish leader since Turgut Ozal in
1983 to come to power with what passes for a solid base of popular support in
politically divided Turkey. Accordingly, he may be in a position to introduce
real austerity and reform to Turkey -- much like Carlos Menem did in Argentina
in the early 1990s. As a politician who has been out of the political limelight
since the early 1970s, Erbakan will not easily give up the gains he has so
assiduously fought for. If it becomes clear to him that a reform-based strategy
will keep him in power, that is indeed the strategy he will choose. And,
2
<PAGE>
while he has popular support in the figurative sense, he also realizes that his
21% share of the vote and the coalition status of his current government will
prevent him from playing the Islamic card too aggressively.
In the short run, the most recent bout of uncertainty has, not surprisingly,
been negative for the market. As a result, we have been raising cash over the
past quarter, and finish the third quarter of the year with a high cash position
of 13%. With much of the bad news now in the market, we have started to reinvest
again -- adding to our overweight positions in Netas and Eregli, and
establishing new positions in Usas, the airline caterer, Sise Cam, the glass
manufacturer and Arcelik, the consumer durables manufacturer.
Sincerely,
[SIG]
Warren J. Olsen
PRESIDENT AND DIRECTOR
[SIG]
Marianne L. Hay
SENIOR PORTFOLIO MANAGER
[SIG]
Landon Thomas
PORTFOLIO MANAGER
August 16, 1996
3
<PAGE>
The Turkish Investment Fund, Inc.
Investment Summary as of July 31, 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 -13.10% -- -10.81% -- -14.86% --
ONE YEAR -24.37 -24.37% -26.03 -26.03% -31.19 -31.19%
FIVE YEAR -28.68 -6.54 -13.55 -2.87 -8.71 -1.81
SINCE INCEPTION* -51.53 -10.31 -49.78 -9.83 -18.52 -3.03
</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:
NINE MONTHS ENDED
JULY 31, 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 $5.18
Market Value Per Share $9.38 $7.00 $6.00 $10.38 $6.88 $5.88 $5.00
Premium/(Discount) -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% -3.5%
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% -10.81%
Index Total Return (1)(3)** 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -14.86%
</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 July 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Common Stocks 87.3%
Short-Term Investments 12.7%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Appliances & Household Durables 3.0%
Banking 10.8%
Beverages 18.8%
Broadcasting & Publishing 4.4%
Building Materials & Components 7.7%
Food & Household Products 13.4%
Metals--Non-Ferrous 6.6%
Multi-Industry 6.1%
Telecommunications 5.4%
Textiles & Apparel 4.5%
Other 19.3%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
1. Migros 10.9%
2. Ege Biracilik 7.8
3. Garanti Bankasi 7.2
4. Guney Biracilik Ve Malt Sanayii 6.9
5. Eregli Demir Ve Celik 6.6
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
6. Alarko Holding 6.1%
7. Netas Telekomunik 5.4
8. Goltas Cimento 4.4
9. Sabah 4.4
10. Turk Tuborg 4.0
----------
63.7%
----------
----------
</TABLE>
5
<PAGE>
INVESTMENTS (UNAUDITED)
- ---------
JULY 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
TURKISH COMMON STOCKS (87.6%)
(Unless otherwise noted)
- --------------------------------------------------------
- ------------
APPLIANCES & HOUSEHOLD DURABLES (3.0%)
Arcelik 13,950,000 U.S.$ 1,105
-------------
- --------------------------------------------------------
- ------------
AUTOMOBILES (1.2%)
Tofas Turk Otomobil
Fabrikasi 11,063,000 445
-------------
- --------------------------------------------------------
- ------------
BANKING (10.8%)
Demirbank 41,250,000 1,312
Garanti Bankasi 55,986,750 2,486
Garanti Bankasi GDS 30,000 133
-------------
3,931
-------------
- --------------------------------------------------------
- ------------
BEVERAGES (18.8%)
Ege Biracilik 7,686,000 2,859
Guney Biracilik Ve Malt
Sanayii 11,540,000 2,527
Turk Tuborg 2,426,000 1,456
-------------
6,842
-------------
- --------------------------------------------------------
- ------------
BROADCASTING & PUBLISHING (4.4%)
Sabah 73,500,000 1,610
-------------
- --------------------------------------------------------
- ------------
BUILDING MATERIALS & COMPONENTS (7.7%)
CBS Boya Kimya Sanayii 7,000,000 174
Goltas Cimento 5,871,000 1,620
Turk Sise Ve Cam
Fabrikalari 11,500,000 1,007
-------------
2,801
-------------
- --------------------------------------------------------
- ------------
FINANCIAL SERVICES (1.3%)
Global Menkul Degerler 3,370,000 41
Global Menkul Degerler -- New
10,110,000 124
Global Securities
Services, Inc. Ltd. 6,106,072 75
Global Securities Services, Inc.
Ltd. -- New 18,318,216 224
-------------
464
-------------
- --------------------------------------------------------
- ------------
FOOD & HOUSEHOLD PRODUCTS (13.4%)
Kerevitas Gida 11,785,725 580
Konfrut Gida 7,340,000 344
Migros (Registered) 4,350,200 3,967
-------------
4,891
-------------
- --------------------------------------------------------
- ------------
INSURANCE (1.9%)
Gunes Sigorta 16,694,000 681
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
METALS -- NON-FERROUS (6.6%)
Eregli Demir Ve Celik 26,570,000 U.S.$ 2,423
Rabak Elektrolitik
Bakir 3,272,280 --
-------------
2,423
-------------
- --------------------------------------------------------
- ------------
MULTI-INDUSTRY (6.1%)
Alarko Holding 13,537,200 2,234
-------------
- --------------------------------------------------------
- ------------
TELECOMMUNICATIONS (5.4%)
Netas Telekomunik 9,400,000 1,974
-------------
- --------------------------------------------------------
- ------------
TEXTILES & APPAREL (4.5%)
Aksa 3,485,500 648
Bossa 13,488,000 987
Mensucat Santral 3,606,400 --
-------------
1,635
-------------
- --------------------------------------------------------
- ------------
TRANSPORTATION -- AIRLINES (2.5%)
Usas Ucak Servisi 700,000 924
-------------
- --------------------------------------------------------
- ------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S. $39,034) 31,960
-------------
- --------------------------------------------------------
- ------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- --------------------------------------------------------
- ------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.5%)
(Interest Bearing Demand Account)
Turkish Lira
(Cost U.S. $186) TRL 15,499,988 186
-------------
- --------------------------------------------------------
- ------------
SHORT-TERM INVESTMENT (12.2%)
REPURCHASE AGREEMENT
Chase Securities, Inc.
5.42%, dated 7/31/96,
due 8/1/96, to be
repurchased at
U.S.$4,457
collateralized by
U.S.$4,795 United
States Treasury Bills,
due 6/26/97, valued at
U.S.$4,565
(Cost U.S. $4,456) U.S.$ 4,456 4,456
-------------
- --------------------------------------------------------
- ------------
TOTAL INVESTMENTS (100.3%)
(Cost U.S. $43,676) 36,602
-------------
- --------------------------------------------------------
- ------------
OTHER ASSETS AND LIABILITIES (-0.3%)
Other Assets 45
Liabilities (163) (118)
-------------- -------------
- --------------------------------------------------------
- ------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
(000)
- --------------------------------------------------------
- ------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 7,043,085 issued and
outstanding U.S. $0.01 par value
shares (30,000,000 shares authorized) U.S.$ 36,484
-------------
- --------------------------------------------------------
- ------------
NET ASSET VALUE PER SHARE U.S.$ 5.18
-------------
- --------------------------------------------------------
- ------------
</TABLE>
<TABLE>
<CAPTION>
GDS -- Global Depositary Shares.
<S> <C> <C>
July 31, 1996 exchange rate -- Turkish Lira (TRL) 83,335 = U.S.$1.00
</TABLE>
7
