<PAGE>
THE TURKISH INVESTMENT FUND, INC.
- -------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS
Michael F. Klein Stefanie V. Chang
PRESIDENT AND DIRECTOR VICE PRESIDENT
Peter J. Chase Harold J. Schaaff, Jr.
DIRECTOR VICE PRESIDENT
John W. Croghan Joseph P. Stadler
DIRECTOR VICE PRESIDENT
David B. Gill Valerie Y. Lewis
DIRECTOR SECRETARY
Graham E. Jones Joanna M. Haigney
DIRECTOR TREASURER
John A. Levin Belinda A. Brady
DIRECTOR ASSISTANT TREASURER
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Morgan Stanley Asset Management Limited
25 Cabot Square
Canary Wharf
London EI4 4QA
England
- -------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- -------------------------------------------------------------------------------
CUSTODIANS
Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, New York 11201
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Investors Bank and Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
(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, 1998
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- ----------
For the six month period ended April 30, 1998, The Turkish Investment Fund, Inc.
(the "Fund") had a total return, based on net asset value per share, of 14.98%
compared to 12.95% for the U.S. dollar adjusted MSCI Turkey Index (the "Index").
For the one year period and for the period since the Fund's commencement of
operations on December 5, 1989 through April 30, 1998, the Fund's total return,
based on net asset value per share, was 71.79% and -0.18%, respectively,
compared to 63.82% and 75.79%, respectively, for the Index. On April 30, 1998,
the closing price of the Fund's shares on the New York Stock Exchange was $8.00,
representing an 18.9% discount to the Fund's net asset value per share.
The Fund outperformed its benchmark owing to its relatively defensive
positioning at the beginning of the year, in particular to its overweight in the
retail and beverage industries, its overweight in privatization candidate and
steel company Erdemir, its overweight in Yapi Kredi Bank and sizable underweight
in the government-run Isbank.
Turkey demonstrated its typical volatility during the last six months, running
up in the end of 1997 on expectations of an IMF-package that never came to pass,
declining sharply in early 1998 in sympathy with Asia and concerns about a
domestic political impasse, and then subsequently rallying firmly on a
restoration of political stability.
In spite of all of the market volatility, the issues confronting the country
have remained basically the same: fragile political leadership, high inflation,
and a large fiscal deficit. The weak coalition government led by Prime Minister
Yilmaz is handicapped in its ability to implement reforms by the incessant
sniping of opposition-leader Baykal, who wields disproportionate power on
government policy given his swing vote in allowing the government to form a
majority. Baykal has threatened to call for early elections, and this
possibility has periodically rattled the market at different stages this year.
At the time of writing, Yilmaz and Baykal had reached a tentative agreement to
hold elections in March/April of next year, to install an "interim government"
sometime in December/January of this year, and to join forces to push through
critical reform measures currently at various stages in the parliamentary
legislative process. If this agreement holds, it would bode well for the equity
market for the balance of this year; at 10-11 times this year's earnings, which
are growing 12-15% in real terms, the equity market could do quite well under
this scenario.
Inflation continues high, but has been undergoing a noticeable decline in the
first part of this year. This decline stems from a government decision to
freeze public sector tariffs (e.g. electricity, gas, etc.), which in total
represent roughly 25% of the core CPI Index. Privately-influenced inflation
indicators, i.e. the balance of core CPI, have not witnessed a material decline
given the breakneck pace at which the economy is continuing to grow; trend-line
GDP growth was between 6.5-7% for the first four months of the calendar year.
Thus, this positive though "artificial" change in inflation should continue into
the summer months when seasonal factors engender a cyclical drop in inflation.
Taken together, we expect interest rates to continue their nominal decline
through the summer months, following the trend in inflation. However, we will
monitor events closely, as we are nervous that, absent fundamental reforms which
would take pressure off of the fiscal deficit, inflation will snap back in the
fall and disappoint an overly ebullient market.
On the reform side of things, there is not much tangible progress to report. A
minority government stake in Isbank was sold to the market in April, and this
was taken as a positive sign of progress on what the market refers to as
"privatization," even though this sale per se was not a privatization.
Nevertheless, the successful placement will likely assist the momentum for
follow-up, genuine privatizations. The most tangible one is oil refiner Petrol
Ofisi, which will be sold to a strategic investor, probably sometime in late
summer. Possible subsequent privatizations include monopoly telecommunications
provider Turk Telecom, and perhaps the steel company cited above, Erdemir.
In terms of reform measures that may improve the fiscal accounts, the two most
prominent are the tax reform and the social security reform. The tax reform's
goal is to widen the tax base while lowering marginal tax rates, and is
currently in the early stage of voting. The social security reform, whose goal
is to lower the fiscal drain in the system by primarily raising the retirement
age, is in the pre-voting committee stage. We are more optimistic on the
prospects for tax reform than for social security reform, but will closely
monitor progress of both to gauge whether the political will to lower inflation
by attacking its root causes has genuinely risen.
2
<PAGE>
For the time being we are staying put with our current portfolio positioning,
which essentially is underweight the banking sector and, in particular, Isbank
and to remain overweight selected preferred names in the retail, beverage, and
steel sectors. We recently have been adding a new name to the portfolio,
dominant insurance provider Aksigorta. We feel the insurance sector is ripe for
consolidation and Aksigorta is primed to buy weaker competitors at low prices
given its dominant position and large cash hoard. Further, the company's
investment portfolio is worth almost as much as its market capitalization, and
therefore we are getting the underlying insurance business almost for free.
Finally, beginning with this report, we are discontinuing our practice of
designating an individual portfolio manager to sign our reports to shareholders
in order to better reflect the "Team" investment approach of the Fund's
investment adviser, Morgan Stanley Asset Management Inc.(MSAM). The global
emerging markets team at MSAM, led by Madhav Dhar and Robert Meyer and
consisting of investment professionals specializing in countries and regions
throughout the developing world, continues to exercise both overall and
day-to-day responsibility of the investment management of the Fund. We would
also like to inform you that Landon Thomas, who has previously appeared in these
reports, has left MSAM's global emerging markets team and management of your
Fund.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
May 1998
3
<PAGE>
The Turkish Investment Fund, Inc.
Investment Summary as of April 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION TOTAL RETURN (%)
--------------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
------------------------- -------------------------- --------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
----------- ------- ------------ -------- -------------- --------
<S> <S> <S> <S> <S> <S> <S>
FISCAL YEAR TO DATE 6.93% -- 14.98% -- 12.95% --
ONE YEAR 44.95 44.95% 71.79 71.79% 63.82 63.82%
FIVE YEAR 18.61 3.47 49.07 8.31 111.10 16.12
SINCE INCEPTION* -19.01 -2.48 -0.18 -0.02 75.79 6.95
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- -------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31:
SIX MONTHS
ENDED
1990* 1991 1992 1993 1994 1995 1996 1997 APRIL 30, 1998
-------- -------- -------- -------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share. . . $ 12.78 $ 5.16 $ 4.69 $ 9.41 $ 4.89 $ 5.93 $ 5.57 $ 8.74 $ 9.86
Market Value Per Share . . . . $ 9.38 $ 7.00 $ 6.00 $ 10.38 $ 6.88 $ 5.88 $ 5.38 $ 7.63 $ 8.00
Premium/(Discount) . . . . . . -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% -3.5% -12.7% -18.9%
Income Dividends . . . . . . . $ 0.03 -- $ 0.07 $ 0.04 $ 0.12 -- $ 0.12 $ 0.14 $0.14
Capital Gains Distributions. . -- $ 0.07 $ 0.17 -- -- -- -- -- --
Fund Total Return (2). . . . . 14.80% -59.27% -6.36% 102.39% -47.61% 21.27% -4.09% 60.76% 14.98%
Index Total Return (3) . . . . 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -4.24% 87.70% 12.95%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The MSCI Turkey Index is an unmanaged index of common stocks.
* The Fund commenced operations on December 5, 1989.
4
<PAGE>
The Turkish Investment Fund, Inc.
Portfolio Summary as of April 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
Equity Securities (98.5%)
Short-Term Investments (1.5%)
- -------------------------------------------------------------------------------
SECTORS
[CHART]
Other (13.4%)
Utilities-Electrical & Gas (3.0%)
Metals-Steel (11.3%)
Merchandising (12.5%)
Food & Household Products (4.5%)
Electrical & Electronics (6.6%)
Appliances & Household Durables (6.0%)
Automobiles (4.7%)
Banking (20.9%)
Beverages & Tobacco (8.4%)
Building Materials & Components (8.7%)
- -------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
-------------
<S> <C>
1. Yapi Ve Kredi Bankasi 14.6%
2. Eregli Demir Ve Celik Fabrikalari TAS 11.3
3. Carsi Buyuk Magazacilik 8.2
4. Vestel Elektronik Sanayi Ve Ticaret AS 6.6
5. Arcelik 6.0
6. Goltas Cimento 4.9
7. Turkiye Garanti Bankasi 4.8
8. Pinar Sut 4.5
9. Migros Turk TAS 4.3
10. Ege Biracilik Ve Malt Sanayii 3.4
-------
68.6%
-------
-------
</TABLE>
* Excludes short-term investments.
5
<PAGE>
FINANCIAL STATEMENTS
- --------
STATEMENT OF NET ASSETS (UNAUDITED)
- --------
APRIL 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
TURKISH COMMON STOCKS (98.4%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES (6.0%)
Arcelik 37,068,000 U.S.$ 4,152
--------------
- --------------------------------------------------------------------------------
AUTOMOBILES (4.7%)
Tofas Turk Otomobil Fabrikasi AS 36,385,000 1,893
Uzel Makina Sanayii AS 8,715,000 1,412
--------------
3,305
--------------
- --------------------------------------------------------------------------------
BANKING (20.9%)
+Akbank T.A.S. 11,430,000 972
+Turkiye Garanti Bankasi 59,448,000 3,151
+Turkiye Garanti Bankasi GDS 38,801 211
Yapi Ve Kredi Bankasi 207,604,000 10,175
--------------
14,509
--------------
- --------------------------------------------------------------------------------
BEVERAGES & TOBACCO (8.4%)
Ege Biracilik Ve Malt Sanayii 17,755,000 2,344
Erciyas Biracilik 7,012,000 1,136
Guney Biracilik Ve Malt Sanayii 21,542,000 2,327
--------------
5,807
--------------
- --------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS (8.7%)
Adana Cimento 8,000,000 736
Goltas Cimento 16,045,000 3,402
Turk Sise Ve Cam Fabrikalari 38,841,000 1,904
--------------
6,042
--------------
- --------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS (6.6%)
Vestel Elektronik Sanayi Ve Ticaret AS 34,095,000 4,570
--------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (1.1%)
+Global Menkul Degerler S.A. 27,793,705 667
+Global Securities Services, Inc. Ltd. 4,242,500 102
+Global Securities Services, Inc. Ltd. - New 1,360 --@
--------------
769
--------------
- --------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS (4.5%)
Pinar Sut 55,933,500 3,133
--------------
- --------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER (2.6%)
Kartonsan 23,905,000 1,841
- --------------------------------------------------------------------------------
INSURANCE (0.6%)
Gunes Sigorta 17,369,000 431
--------------
- --------------------------------------------------------------------------------
MERCHANDISING (12.5%)
Carsi Buyuk Magazacilik 9,170,000 U.S.$ 5,686
Migros Turk TAS 3,084,000 3,023
--------------
8,709
--------------
- --------------------------------------------------------------------------------
METALS - NON-FERROUS (0.0%)
+*Rabak Elektrolitik Bakir Ve Mamulleri 3,272,280 --
- --------------------------------------------------------------------------------
METALS - STEEL (11.3%)
Eregli Demir Ve Celik Fabrikalari TAS 47,410,000 7,872
--------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (2.9%)
+Netas Telekomunik 5,350,000 1,991
--------------
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (1.6%)
Aksa Akrilik Kimya Sanayii AS-New 16,405,000 1,099
+*Mensucat Santral 3,606,400 --
--------------
1,099
--------------
- --------------------------------------------------------------------------------
TRANSPORTATION - AIRLINES (3.0%)
Usas Ucak Servisi 660,000 2,086
--------------
- --------------------------------------------------------------------------------
UTILITIES - ELECTRICAL & GAS (3.0%)
Turcas Petroculuk AS 70,022,000 2,101
--------------
- --------------------------------------------------------------------------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S.$45,768) 68,417
--------------
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.3%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.3%)
Chase Securities, Inc., 5.30%, dated
4/30/98, due 5/1/98, to be repurchased
at U.S.$911, collateralized by
U.S.$870 U.S. Treasury Bond 7.625%,
due 2/15/07, valued at U.S.$936
(Cost U.S.$911) U.S. $ 911 911
--------------
- --------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.2%)
(Interest Bearing Demand Account)
Turkish Lira (Cost U.S.$148) TRL 36,817,554 147
--------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<CAPTION>
AMOUNT AMOUNT
(000) (000)
- -------------------------------------------------------------------------------
<S> <S> <S>
TOTAL INVESTMENTS (99.9%)
(Cost U.S.$46,827) U.S. $69,475
--------------
- -------------------------------------------------------------------------------
OTHER ASSETS (1.7%)
Cash U.S. $1
Receivable for Investments Sold 911
Dividends Receivable 269
Other Assets 18 1,199
------------ --------------
- -------------------------------------------------------------------------------
LIABILITIES (-1.6%)
Payable For:
Investments Purchased (911)
Shareholder Reporting Expenses (61)
Investment Advisory Fees (47)
Custodian Fees (40)
Professional Fees (40)
Directors' Fees and Expenses
Administrative Fees (11)
Other Liabilities (17) (1,164)
------------ --------------
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 7,046,430 issued
and outstanding U.S.$0.01 par
value shares (30,000,000 shares
authorized) U.S.$ 69,510
--------------
- -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S. $9.86
- -------------------------------------------------------------------------------
AT APRIL 30, 1998, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------
Common Stock U.S. $71
Capital Surplus 78,780
Undistributed Net Investment Income 60
Accumulated Net Realized Loss (32,049)
Unrealized Appreciation on Investments and
Foreign Currency Translations 22,648
- -------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 69,510
--------------
- -------------------------------------------------------------------------------
</TABLE>
+-- Non-income producing.
@-- Value is less than U.S.$500.
*-- Security valued at fair value. See Note A-1 to financial statements.
GDS-- Global Depositary Shares.
April 30, 1998 exchange rate -- Turkish Lira (TRL) 249,950 = U.S.$1.00.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS SIX MONTHS
ENDED
APRIL 30, 1998
(UNAUDITED)
(000)
- --------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . U.S. $528
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 54
- --------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . 582
- --------------------------------------------------------------------------------
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Advisory Fees . . . . . . . . . . . . . . . . . . 266
Custodian Fees . . . . . . . . . . . . . . . . . . . . . . . 63
Administrative Fees . . . . . . . . . . . . . . . . . . . . 59
Professional Fees . . . . . . . . . . . . . . . . . . . . . 44
Shareholder Reporting Expenses . . . . . . . . . . . . . . . 35
Annual Meeting and Proxy Expenses . . . . . . . . . . . . . 15
Directors' Fees and Expenses . . . . . . . . . . . . . . . . 12
Transfer Agent Fees . . . . . . . . . . . . . . . . . . . . 5
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . 6
- --------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . 505
- --------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . 77
- --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . . . . . . 3,241
Foreign Currency Transactions . . . . . . . . . . . . . . . (17)
- --------------------------------------------------------------------------------
Net Realized Gain . . . . . . . . . . . . . . . . . . . . . 3,224
- --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION . . . . . . . .
Appreciation on Investments . . . . . . . . . . . . . . . . 5,564
Depreciation on Foreign Currency Translations . . . . . . . 1
- --------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation . . . . . . 5,565
- --------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized
Appreciation/Depreciation . . . . . . . . . . . . . . . . . . 8,789
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . U.S. $8,866
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1998 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1997
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income. . . . . . . . . . U.S. $77 U.S.$ 1,242
Net Realized Gain. . . . . . . . . . . . 3,224 2,344
Change in Unrealized
Appreciation/Depreciation . . . . . . . 5,565 19,716
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations . . . . . . . . . . . . 8,866 23,302
- --------------------------------------------------------------------------------
Distributions: . . . . . . . . . . . . . .
Net Investment Income. . . . . . . . . . (972) (959)
- --------------------------------------------------------------------------------
Capital Share Transactions:. . . . . . . .
Reinvestment of Distributions
(0 and 3,346 shares, respectively). . . - 19
- --------------------------------------------------------------------------------
Total Increase . . . . . . . . . . . . . 7,894 22,362
Net Assets:
Beginning of Period. . . . . . . . . . . 61,616 39,254
- --------------------------------------------------------------------------------
End of Period (including
undistributed net investment income
of U.S.$60 and U.S.$955,
respectively) . . . . . . . . . . . . . U.S.$69,510 U.S. $61,616
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED DECEMBER 31,
SELECTED PER SHARE DATA 1998 -------------------------------------------------------------------------
AND RATIOS: (UNAUDITED) 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . U.S.$ 8.74 U.S.$ 5.57 U.S.$ 5.93 U.S.$ 4.89 U.S.$ 9.41 U.S.$ 4.69
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . 0.01 0.18 0.17 0.13 0.07 0.22
Net Realized and Unrealized Gain
(Loss) on Investments . . . . . . . . 1.25 3.13 (0.41) 0.91 (4.47) 4.54
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations . . 1.26 3.31 (0.24) 1.04 (4.40) 4.76
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income . . . . . . . . (0.14) (0.14) (0.12) -- (0.12) (0.04)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . U.S.$ 9.86 U.S.$ 8.74 U.S.$ 5.57 U.S.$ 5.93 U.S.$ 4.89 U.S.$ 9.41
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD. . U.S.$ 8.00 U.S.$ 7.63 U.S.$ 5.38 U.S.$ 5.88 U.S.$ 6.88 U.S.$ 10.38
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value . . . . . . . . . . . . . 6.93% 45.34% (6.58)% (14.55)% (33.19)% 74.34%
Net Asset Value (1) . . . . . . . . . 14.98% 60.76% (4.09)% 21.27% (47.61)% 102.39%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS). . U.S.$ 69,510 U.S.$ 61,616 U.S.$ 39,254 U.S.$ 41,757 U.S.$ 34,447 U.S.$ 66,258
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.76%* 1.91% 2.07% 1.91% 2.16% 2.04%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . 0.27%* 2.57% 3.23% 2.18% 1.03% 3.20%
Portfolio Turnover Rate . . . . . . . . 19% 51% 60% 48% 68% 46%
Average Commission Rate (2):
Per Share . . . . . . . . . . . . . . . U.S.$ 0.0002 U.S.$ 0.0002 U.S.$ 0.0003 N/A N/A N/A
As a Percentage of Trade Amount . . . . 0.33% 0.33% 0.31% N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
</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
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 (UNAUDITED)
- ----------
The Turkish Investment Fund, Inc. (the "Fund") was incorporated in
Maryland on September 27, 1988 and is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective is long-term capital
appreciation through investments primarily in equity securities of Turkish
corporations.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all securities listed on
the Istanbul Stock Exchange are valued at the last quoted sales price.
Unlisted securities and listed securities not traded on valuation date for
which market quotations are readily available are valued at the average of
the mean of current bid and asked prices obtained from reputable brokers.
Securities purchased with remaining maturities of sixty days or less are
valued at amortized cost, if it approximates market value. All other
securities and assets for which market values are not readily available
(including investments which are subject to limitations as to their sale)
are valued at fair value as determined in good faith by the Board of
Directors, although the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly,
no provision for U.S. Federal income taxes is required in the financial
statements. Currently, the Fund is not subject to any Turkish taxes.
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 foreign currency
exchange contracts, disposition of foreign currency, currency gains or losses
realized between the trade and settlement dates on securities transactions, and
the difference between the amount of investment income and foreign withholding
taxes recorded on the Fund's books, if any, and the U.S. dollar equivalent
amounts actually received or paid. Net unrealized currency gains (losses) from
valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of unrealized appreciation
(depreciation) in the Statement of Net Assets. The change in net unrealized
currency gains (losses) for the period is reflected in the Statement of
Operations.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into
forward foreign currency exchange contracts to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates. A forward foreign currency exchange contract is an
agreement between two parties to buy or sell currency at a set price on a
future date. The market value of the contract will fluctuate with changes
in currency exchange rates. The contract
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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.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassification among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital.
B. Morgan Stanley Asset Management Inc. and Morgan Stanley Asset Management
Limited (collectively the "Advisers") provide investment advisory services to
the Fund under the terms of an Investment Advisory Agreement (the "Agreement").
Under the Agreement, the Advisers are paid a total fee computed weekly and
payable monthly at an annual rate of .95% of the Fund's first $50 million of
average weekly net assets, .75% of the next $50 million of average weekly net
assets and .55% of average weekly net assets in excess of $100 million.
C. The Chase Manhattan Bank, through its corporate affiliate Chase Global
Funds Services Company (the "Administrator"), provides administrative services
to the Fund under an Administration Agreement. Under the Administration
Agreement, the Administrator is paid a fee computed weekly and payable monthly
at an annual rate of .08% of the Fund's average weekly net assets, plus $65,000
per annum. In addition, the Fund is charged certain out-of-pocket expenses by
the Administrator.
D. Morgan Stanley Trust Company (the "International Custodian"), an affiliate
of the Advisers, acts as custodian for the Fund's assets held outside the United
States in accordance with a Custody Agreement. International Custody fees are
payable monthly based on assets under custody, investment purchase and sales
activity, an account maintenance fee, plus reimbursement for certain
out-of-pocket expenses. For the six months ended April 30, 1998, the Fund
incurred custodian fees of $58,146 with the International Custodian, of which
$34,915 was payable to the International Custodian at April 30, 1998. The Chase
Manhattan Bank serves as custodian for the Fund's assets held in the United
States.
E. During the six months ended April 30, 1998, the Fund made purchases and
sales totaling $12,390,158 and $10,913,937, respectively, of investment
securities other than long-term U.S. Government securities and short-term
investments. There were no purchases or sales of long-term U.S. Government
securities. At April 30, 1998, the U.S. Federal income tax cost basis of
securities was approximately $46,679,000 and accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $22,649,000, of which
$28,444,000 related to appreciated securities and $5,795,000 related to
depreciated securities. At October 31, 1997, the Fund had capital loss
carryforwards totaling approximately $35,273,000 available to offset future
capital gains of which $14,319,000, $17,765,000, $2,484,000 and $705,000 will
expire on October 31, 2000, 2001, 2002, and 2004, respectively. To the extent
that capital gains are so offset, such gains will not be distributed to
shareholders.
F. A substantial portion of the Fund's net assets consists of equity
securities of Turkish companies 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,
1998 totaled $35,000 and are included in Payable for Directors' Fees and
Expenses on the Statement of Net Assets.
H. During the six months ended April 30, 1998, the Fund incurred $8,394 of
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless Investors Bank and Trust
Company (the "Plan Agent") is otherwise instructed by the shareholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
The Turkish Investment Fund, Inc.
Investors Bank and Trust Company
Dividend Reinvestment and Cash Purchase Plan
P.O. Box 1537
Boston, MA 02205
1-800-730-6001
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