<PAGE>
-------------------------------------------------------------
THE
TURKISH
INVESTMENT
FUND, INC.
-------------------------------------------------------------
THIRD QUARTER REPORT
JULY 31, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
THE TURKISH INVESTMENT FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
David B. Gill
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
ASSISTANT TREASURER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISERS
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Morgan Stanley Dean Witter Investment Management Limited
25 Cabot Square
Canary Wharf
London EI4 4QA
England
- --------------------------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- --------------------------------------------------------------------------------
CUSTODIAN
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
PricewaterhouseCoopers 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 or visit our website at
www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the nine months ended July 31, 1999, The Turkish Investment Fund, Inc. (the
"Fund") had a total return, based on net asset value per share, of 89.60%
compared to 76.03% for the U.S. dollar adjusted Morgan Stanley Capital
International (MSCI) Turkey Index (the "Index"). For the period since the Fund's
commencement of operations on December 5, 1989 through July 31, 1999, the Fund's
total return, based on net asset value per share, was -6.73% compared to 36.22%
for the Index. On July 31, 1999, the closing price of the Fund's shares on the
New York Stock Exchange was $7 1/2, representing an 18.0% discount to the Fund's
net asset value per share.
During the early morning hours of August 17, 1999, Turkey was struck by a major
earthquake (7.4 on the Richter scale) that leveled buildings and left thousands
dead or wounded. Although Turkey has been hit by earthquakes in the past, the
country was unprepared for the magnitude of this natural disaster, the worst
this century.
The quake struck the northwest Marmara region, centered around the industrial
town of Izmit and included eastern Istanbul. In the immediate aftermath,
international relief supplies poured into the country from around the world in
an effort to help the victims. As of this writing, a full account of the
situation remains unclear, but the human and economic toll is substantial. Due
to communication problems, and in order to allow companies to report damages,
the stock market was closed for several days. Most major listed companies
reported minimal damage with the exception of Tupras, the country's largest
refinery, which suffered a serious fire that took several days to bring under
control. The earthquake is a disaster for the country, reducing growth in the
short-term and pressuring the federal budget, but it could also serve to
galvanize the government to continue the reform process that until now had been
progressing at a rapid rate.
In the short-term, investors will focus on the economic impact of the disaster.
The area of the earthquake's direct impact, Turkey's most populated region,
accounts for some 12% of Turkey's GDP. The most severe physical damage inflicted
was on residential housing, much of which was not built to withstand such a
shock. Damage to the industrial zone appears to have been minimal. The main
economic impact is not just the immediate physical damage, but the wealth
effect. An estimated 18,000 residential buildings were hit by the quake and many
residents were uninsured. Therefore, losses are likely to be a drag on the
economy through reduced consumption in the short-term. After a steep fall in the
first quarter of the year, economic growth was forecasted to rebound and finish
the year up 1%. The earthquake will likely lead to a short drop in industrial
activity and growth for the year will likely be in negative territory. Physical
industrial capacity, however, remains intact and by the end of the year,
reconstruction efforts should be well underway, leading to a strong economic
rebound. Next year GDP growth should rebound to around 5%, closer to Turkey's
long-term average growth rate. It is unclear what the impact will be on
inflation. In July of this year, WPI (the wholesale price index) rose 54%
year-on-year, up slightly from the 50% rate registered at the beginning of the
year due to higher energy costs. Higher government spending and some shortages
of basic goods may temporarily drive prices higher.
The most important question facing investors is the impact to public finances.
Although it is too early to put a toll on the economic damage, there will be
substantial cost to the government to rebuild housing and repair infrastructure.
International aid is likely to be substantial. But the government will need to
increase revenue collection in order to compensate for new spending and possible
revenue shortfall. The government has already announced a bill that would
implement a series of one-time tax measures to cope with earthquake costs. A
combination of foreign aid and a substantial tax boost should help the
government cope with the crisis.
During the first half of 1999, Turkey made major progress towards structural
reform and reaching an agreement on a stand-by loan with the International
Monetary Fund (IMF). A deal with the IMF is critical for Turkish securities. A
new program endorsing new fiscal and monetary targets would markedly increase
investor confidence. The government must roll over significant amounts of
sovereign debt as real interest rates remain high following last year's Russia
crisis. The actual amount of the IMF loan is not critical--the cash injection is
likely to be modest. But the government hopes that the IMF seal of approval
could allow real interest rates to fall by half. With current real rates at
around 25%, a fall in the risk premium would likely be a significant boost to
Turkish assets.
The administration that came to power following this year's April elections
entered into a compromise agreement with the opposition which unlocked the
required two-thirds majority in Parliament to approve constitu-
2
<PAGE>
tional changes and allowed the new pro-active government to pass more than 30
laws within weeks of taking power. Most importantly, the key reforms required by
the IMF passed through Parliament quickly by historical standards. After years
of controversy, the government finally passed a law on international
arbitration, an issue that has prevented large-scale foreign direct investment
into the country. Following the passage of the law, foreign investment is likely
to increase dramatically. New legislation also includes a constitutional
amendment to facilitate accelerated privatization and tariff reform that will
fully comply with the EU customs agreement. Perhaps the most important piece of
legislation, and the most controversial, is social security reform, including
pension reform, which has long been an IMF requisite. The debate over Turkey's
social security system, which has been a tremendous fiscal drag on the economy
for years, has caused an outcry among wide parts of the population.
Nevertheless, in the immediate aftermath of the earthquake, the government
passed historic legislation that will, over time, tackle social security and
raise the retirement age, currently only 38 for women and 43 for men to 58 and
60, respectively.
Fiscal policy is likely to be a key issue for the government and its relations
with the IMF. Pre-earthquake fiscal targets are clearly no longer viable. A new
budget for 2000 will be drafted during the next few months. If a budget can be
passed that satisfies IMF's amended targets, the probability of a formal
agreement before the end of the year would be substantial.
On September 15, 1998, the Fund commenced a share repurchase program for
purposes of enhancing shareholder value and reducing the discount at which the
Fund's shares trade from their net asset value. For the nine months ended July
31, 1999, the Fund repurchased 424,450 shares of its Common Stock at an average
price per share of $5.93 and an average discount of 15.33% from net asset value
per share. The Fund expects to continue to repurchase its outstanding shares at
such time and in such amounts as it believes will further the accomplishment of
the foregoing objectives, subject to review by the Board of Directors.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
September 1999
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
- --------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
WWW.MSDW.COM/INSTITUTIONAL/INVESTMENTMANAGEMENT.
3
<PAGE>
The Turkish Investment Fund, Inc.
Investment Summary as of July 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
-----------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
----------------------- ----------------------- -----------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year to Date 78.03% -- 89.60% -- 76.03% --
One Year -3.28 -3.28% -3.24 -3.24% -13.67 -13.67%
Five Year 14.89 2.81 89.86 13.68 100.22 14.89
Since Inception* -22.28 -2.58 -6.73 -0.72 36.22 3.25
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31: NINE MONTHS
ENDED
JULY 31,
1990* 1991 1992 1993 1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------ ------ ------ ------ -----------
<S> <C> <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 $ 4.94 $9.15
Market Value Per Share $ 9.38 $ 7.00 $ 6.00 $10.38 $ 6.88 $ 5.88 $ 5.38 $ 7.63 $ 4.31 $7.50
Premium/(Discount) -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% -3.5% -12.7% -12.8% -18.0%
Income Dividends $ 0.03 -- $ 0.07 $0.04 $ 0.12 -- $ 0.12 $ 0.14 $ 0.14 $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% -4.09% 60.76% -42.39% 89.60%
Index Total Return (3) 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -4.24% 87.70% -50.28% 76.03%
</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. As of July 31, 1999, the Index was 55.0%
weighted in the banking sector. Due to SEC requirements, the Fund is
allowed to invest no more than 25% of its net assets in any one sector.
* The Fund commenced operations on December 5, 1989.
4
<PAGE>
The Turkish Investment Fund, Inc.
Portfolio Summary as of July 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (98.4%)
Short-Term Investments (1.6%)
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
[CHART]
<TABLE>
<S> <C>
Appliances & Household Durables (9.7%)
Banking (25.4%)
Beverages & Tobacco (9.6%)
Building Materials & Components (6.0%)
Business & Public Services (6.6%)
Financial Services (4.9%)
Insurance (9.0%)
Merchandising (8.5%)
Metals -- Steel (6.8%)
Utilities -- Electrical & Gas (5.1%)
Other (8.4%)
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Aksigorta AS 9.0%
2. Turkiye Garanti Bankasi 8.8
3. Migros Turk TAS 7.7
4. Yapi Ve Kredi Bankasi 7.4
5. Turkiye Is Bankasi 7.0
6. Eregli Demir ve Celik
Fabrikalari 6.8
7. Dogan Yayin Holding 6.6
8. Akcansa Cimento AS 5.2
9. Vestel Elektronik Sanayi
Ve Ticaret AS 5.0
10. Alarko Holding AS 4.9
----
68.4%
----
----
</TABLE>
5
<PAGE>
INVESTMENTS (UNAUDITED)
- ---------
JULY 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
TURKISH COMMON STOCKS (99.9%)
(UNLESS OTHERWISE NOTED)
- --------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES (9.7%)
Arcelik AS 54,613,000 U.S.$ 2,798
Vestel Elektronik Sanayi Ve
Ticaret AS 20,292,032 3,024
--------------
5,822
--------------
- -------------------------------------------------------------------------------
AUTOMOBILES (2.5%)
Ford Otomotiv Sanayi AS 97,380,000 1,497
--------------
- -------------------------------------------------------------------------------
BANKING (25.4%)
Akbank TAS 73,000,000 1,275
Turkiye Garanti Bankasi 614,648,000 5,224
Turkiye Garanti Bankasi GDS 93,319 77
Turkiye Is Bankasi 221,561,000 4,230
Yapi Ve Kredi Bankasi 273,663,657 4,460
--------------
15,266
--------------
- -------------------------------------------------------------------------------
BEVERAGES & TOBACCO (9.6%)
Ege Biracilik Ve Malt
Sanayii 30,650,000 2,248
Erciyas Biracilik Ve Malt 93,947,668 2,188
Guney Biracilik Ve Malt Sanayii 36,293,250 1,331
--------------
5,767
--------------
- -------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (1.0%)
Hurriyet Gazetecilik ve 76,500,000 606
Matbaacilik A.S. --------------
- -------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS (6.0%)
Adana Cimento 28,879,200 511
Akcansa Cimento AS 265,018,000 3,116
--------------
3,627
--------------
- -------------------------------------------------------------------------------
BUSINESS & PUBLIC SERVICES (6.6%)
Dogan Yayin Holding 270,530,500 3,968
--------------
- -------------------------------------------------------------------------------
ENERGY SOURCES (2.1%)
Turcas Petroculuk AS 65,484,000 1,281
--------------
- -------------------------------------------------------------------------------
FINANCIAL SERVICES (4.9%)
Alarko Holding AS 112,890,000 2,957
--------------
- -------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS (2.2%)
Tat Konserve Sanayii AS 23,107,000 753
Usas Ucak Servisi AS 614,000 572
--------------
1,325
--------------
- -------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS (0.5%)
Brisa Bridgestone Sabanci
Lastik San. Ve Tic A.S. 10,200,000 279
--------------
- -------------------------------------------------------------------------------
INSURANCE (9.0%)
Aksigorta AS 162,814,000 5,402
--------------
MERCHANDISING (8.5%)
Carsi Buyuk Magazacilik AS 12,193,000 U.S.$ 461
Migros Turk TAS 10,572,000 4,616
--------------
5,077
--------------
METALS STEEL (6.8%)
Eregli Demir ve Celik
Fabrikalari TAS 227,590,000 4,080
--------------
UTILITIES ELECTRICAL & GAS (5.1%)
Aygaz AS 13,306,000 1,332
Cukurova Elektrik AS 2,557,000 1,727
--------------
3,059
--------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S.$50,531) 60,013
--------------
- -------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (1.6%)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.6%)
Chase Securities, Inc., 4.87%,
dated 7/30/99, due 8/2/99,
to be repurchased at
U.S.$965, collateralized by
U.S.$960 U.S. Treasury Note
6.25%, due 10/31/01, valued
at U.S.$986
(Cost U.S.$965) U.S.$ 965 965
--------------
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.5%)
(Cost U.S.$51,496) 60,978
--------------
- -------------------------------------------------------------------------------
AMOUNT
(000)
- -------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-1.5%)
Other Assets 2,506
Liabilities (3,386) (880)
-------------- --------------
- -------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 6,564,680 issued
and outstanding U.S.$0.01
par value shares (30,000,000
shares authorized) U.S.$ 60,098
--------------
--------------
- -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S. $9.15
--------------
--------------
- -------------------------------------------------------------------------------
</TABLE>
GDS -- Global Depositary Shares
July 31, 1999 exchange rate -- Turkish Lira (TRL)
429,470 = U.S.$1.00
6
