<PAGE>
-----------------------------------------------------------------
THE
TURKISH
INVESTMENT
FUND, INC.
-----------------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 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 AND ACTING SECRETARY
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Joanna M. Haigney
TREASURER
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 six months ended April 30, 1999, The Turkish Investment Fund, Inc. (the
"Fund") had a total return, based on net asset value per share, of 86.49%
compared to 85.28% 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 April 30, 1999, the
Fund's total return, based on net asset value per share, was -6.73% compared to
43.38% for the Index. On April 30, 1999, the closing price of the Fund's shares
on the New York Stock Exchange was $7 5/8, representing a 15.2% discount to the
Fund's net asset value per share.
The Fund's strong performance for the six months ending April 30, 1999 was
attributable, in part, to a large position in Aksigorta AS, Turkey's largest
non-life insurance provider and an overweight position in Yapi Ve Kredi Bankasi,
one of Turkey's top banks with a strong retail franchise.
Since last year's collapse of Turkey's coalition government, financial markets
have remained focused on the country's political developments and the build up
to parliamentary elections in April. Despite the efforts of some disgruntled
members of parliament in March to prevent the elections, the process went
smoothly. Although the campaigning period was relatively short, by the time
elections were held, most market participants anticipated a generally positive
outcome, namely the return to power of a two-party ANAP-DSP (center- right,
center-left) coalition. In anticipation of a return to political stability and
the resumption of last year's reform process, the market rallied 47% through
April 19, the day of the elections. The rally was led by the banking sector,
with most banks rising over 50%.
The market's rally was brought to a temporary halt by the surprising results;
the most important of which was the significant jump in support for the MHP
party (the Nationalist Action Party, considered far-right). The MHP, which
received 8% of the vote during the last parliamentary elections in 1995, won 18%
of the electorate. The votes for the MHP came at the expense of several parties.
The CHP party, which helped bring down the coalition government last year,
received only 8% of the vote and thus won no seats. ANAP, the center right
party and formerly one of the largest in the parliament, received only 13% of
the vote. In all, five parties reached the necessary 10% threshold. The
center-left Democratic Left Party (DSP) won the most seats, receiving 22% of
the vote and 136 seats. The DSP is led by Bulent Ecevit, whose popularity had
been significantly boosted by the capture of Kurdish terrorist leader Abdullah
Ocalan during his interim leadership. In accordance with Parliamentary
procedure, President Demiral promptly handed the mandate to Ecevit to form a
government.
Due to the diffuse election results, a strong two party coalition is not likely
to be formed. Few political analysts expected the MHP to post a strong showing
and thus the market was caught unprepared. The day after the elections, the
market focused on the MHP's economic and political platform as it would be
impossible to form a stable government without them. Although uncertainty
remains, the MHP has presented a manifesto that is clearly consistent with the
other potential coalition partners and it appears that a DSP-ANAP- MHP coalition
may be formed. Most importantly, from a market point of view, it appears that
DSP and ANAP would win the most important economic posts in such a coalition.
Although this government is one of many since the foundation of the Turkish
Republic, a broad consensus appears to be forming that Turkey must continue on
the reform path. After a brief-lived sell-off immediately following the
elections, the market remained stable from April to the end of May.
In the aftermath of the elections and the formation of a new government,
investor attention will likely be dominated by relations between Turkey and the
IMF and whether an agreement involving financial assistance can be signed. An
IMF loan would allow the government to reduce the average cost of funding
government debt as the money could be used to pay down domestic debt. In
addition, with the IMF's stamp of approval, it will improve Turkey's ability to
access international capital markets and obtain additional financing from the
World Bank. Thus far, Turkey has stated its willingness to commit to the
structural reforms necessary to strike a new agreement, but there will be
strings attached to a deal. The IMF will require the fulfillment of prior
actions, which must be taken before the final approval of the program. These
actions are likely to include: the passage of the banking law, tightening of
fiscal policy and possibly first steps toward large-scale privatizations.
Turkey has been in a Staff Monitored Program (SMP) with the IMF since mid-1998
and has successfully passed the quarterly tests.
Over the past few months, the Turkish economy has slowed sharply. Industrial
production, which peaked toward the end of 1997 at 20% year-on-year growth
rates, was negative during the first few months of 1999.
2
<PAGE>
Capacity utilization continued to decline, falling from 74.4% at 1998 year-end
to a low of 72% in February, before recovering to 75.7% in March. During the
first quarter of 1999 Turkey experienced negative growth and the first half of
1999 will be flat at best. For the year as a whole, growth may be around 2%
which, by historical standards, is very low. Not surprisingly, corporate
earnings thus far this year have been poor. Fiscal policy remains relatively
conservative. There has been some deterioration in the primary surplus, but it
is due more to recession-induced decline in revenue than intensified
pre-election spending.
During 1998 and the beginning of 1999, Turkey's inflation rate fell steadily
helped by declining oil prices, a restrictive monetary policy and the
contraction in domestic demand. In March, inflation as measured by wholesale
price inflation (WPI) fell to a low of 48.2% year-on-year. But by April, the
reversal in oil prices worldwide and increases in private manufacturing sector
prices signaled the end of the year-long inflation fall as WPI rose to 50%. A
gradual pick up in inflation during the second quarter is likely, due to
increasing commodity prices (especially oil prices), the need to raise public
sector prices, and a likely recovery in private sector consumer demand.
The one benefit resulting from Turkey's weak economy is an improvement in the
country's balance of payments situation. There has been no pressure on the
trade deficit, current account or Central Bank foreign exchange reserves. The
improved trade situation is being driven by a sharp fall in imports due to weak
domestic demand. During the first two months of the year, the trade deficit
reached about $1 billion - less than half of last year's level.
Turkey has faced a turbulent last 12 months, including domestic political
turmoil and foreign shocks, such as the Russian ruble devaluation. Although
some have described the country's financial situation as 'fragile', Turkey
has proven to be remarkably resilient. Despite factors such as the shock of
the Russian crisis, the Brazilian devaluation and generally inhospitable
international capital markets, Turkey has managed to successfully refinance
all of its debt obligations and keep its currency regime intact. Turkey must
now continue with the successful reform process that was prematurely aborted
last year.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
May 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, CAN NOW BE ACCESSED AT
www.msdw.com/institutional/investmentmanagement.
3
<PAGE>
The Turkish Investment Fund, Inc.
Investment Summary as of April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL TOTAL RETURN (%)
INFORMATION ------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
---------------------- ---------------------- ----------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE 80.99% -- 86.49% -- 85.28% --
ONE YEAR -2.43 -2.43% -6.56 -6.56% -18.44 -18.44%
FIVE YEAR 7.38 1.43 153.82 20.48 211.58 25.52
SINCE INCEPTION* -20.98 -2.47 -6.73 -0.74 43.38 3.91
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31: SIX MONTHS
ENDED
APRIL 30,
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 $9.00
Market Value Per Share . . . . $9.38 $7.00 $6.00 $10.38 $6.88 $5.88 $5.38 $7.63 $4.31 $7.63
Premium/(Discount) . . . . . . -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% -3.5% -12.7% -12.8% -15.2%
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% 86.49%
Index Total Return (3) . . . . 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -4.24% 87.70% -50.28% 85.28%
</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 April 30, 1999, the Index was 56%
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 April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[PIE CHART]
<TABLE>
<S> <C>
Equity Securities (99.1%)
Short-Term Investments (0.9%)
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
[PIE CHART]
<TABLE>
<S> <C>
Appliances & Household Durables (6.0%)
Banking (25.3%)
Beverages & Tobacco (12.6%)
Building Materials & Components (6.4%)
Diversified Operations (4.0%)
Electrical & Electronics (7.3%)
Energy Sources (4.1%)
Insurance (10.9%)
Merchandising (12.3%)
Utilities -- Electrical & Gas (4.3%)
Other (6.8%)
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Migros Turk TAS 12.3%
2. Yapi Ve Kredi Bankasi 12.0
3. Aksigorta AS 10.9
4. Vestel Elektronik Sanayi Ve Ticaret AS 7.3
5. Akbank TAS 6.6
6. Arcelik 6.0
7. Ege Biracilik Ve Malt Sanayii 5.8
8. Akcansa Cimento AS 5.6
9. Erciyas Biracilik Ve Malt 4.4
10. Turcas Petroculuk AS 4.3
----
75.2%
----
----
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
- --------
STATEMENT OF NET ASSETS (UNAUDITED)
- --------
APRIL 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------------
<S> <C> <C>
TURKISH COMMON STOCKS (100.1%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES (6.0%)
Arcelik AS 89,907,000 U.S.$ 3,556
---------------
- --------------------------------------------------------------------------------
BANKING (25.3%)
Akbank TAS 123,500,000 3,940
(a)Turkiye Garanti Bankasi 41,200,000 1,866
(a)Turkiye Garanti Bankasi GDS 17,946 82
Turkiye Is Bankasi 41,505,000 2,039
Yapi Ve Kredi Bankasi 298,202,813 7,153
---------------
15,080
---------------
- --------------------------------------------------------------------------------
BEVERAGES & TOBACCO (12.6%)
Ege Biracilik Ve Malt Sanayii 33,920,322 3,462
Erciyas Biracilik Ve Malt 94,732,668 2,599
Guney Biracilik Ve Malt Sanayii 36,293,250 1,482
---------------
7,543
---------------
- --------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS (6.4%)
Adana Cimento 16,044,000 522
Akcansa Cimento AS 130,138,571 3,321
---------------
3,843
---------------
- --------------------------------------------------------------------------------
DIVERSIFIED OPERATIONS (4.0%)
Dogan Yayin Holding 191,470,500 2,394
---------------
- --------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS (7.3%)
(a)Vestel Elektronik Sanayi Ve Ticaret AS 40,730,032 4,365
---------------
- --------------------------------------------------------------------------------
ENERGY SOURCES (4.1%)
Cukurova Elektrik AS 1,960,000 2,426
---------------
- --------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS (1.6%)
Tat Konserve Sanayii AS 23,107,000 929
---------------
- --------------------------------------------------------------------------------
INSURANCE (10.9%)
Aksigorta AS 100,122,000 6,515
---------------
- --------------------------------------------------------------------------------
MERCHANDISING (12.3%)
Migros Turk TAS 5,316,000 7,326
---------------
- --------------------------------------------------------------------------------
MULTI-INDUSTRY (2.1%)
Alarko Holding AS 64,000,000 1,258
---------------
- --------------------------------------------------------------------------------
OIL & GAS (1.9%)
Aygaz AS 13,306,000 1,155
---------------
- --------------------------------------------------------------------------------
TRANSPORTATION -- AIRLINES (1.3%)
Usas Ucak Servisi AS 493,000 805
---------------
- --------------------------------------------------------------------------------
UTILITIES -- ELECTRICAL & GAS (4.3%)
Turcas Petroculuk AS 109,601,000 U.S.$ 2,573
---------------
- --------------------------------------------------------------------------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S.$47,576) 59,768
---------------
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.9%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.9%)
Chase Securities, Inc., 4.68%,
dated 4/30/99, due 5/3/99,
to be repurchased at
U.S.$519, collateralized by
U.S.$415 U.S. Treasury Bond
8.125%, due 8/15/19, valued
at U.S.$529 (Cost U.S.$519) U.S.$ 519 519
---------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.0%)
(Cost U.S.$48,095) 60,287
---------------
- --------------------------------------------------------------------------------
<CAPTION>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS (0.9%)
Cash 46
Receivable for Investments Sold 448
Net Unrealized Appreciation on
Open Forward Foreign Currency
Contracts 5
Other Assets 19 518
--------------- ---------------
- --------------------------------------------------------------------------------
LIABILITIES (-1.9%)
Payable For:
Investments Purchased (752)
Fund Shares Redeemed (113)
Shareholder Reporting Expenses (60)
Investment Advisory Fees (42)
Professional Fees (42)
Custodian Fees (42)
Directors' Fees and Expenses (28)
Administrative Fees (11)
Other Liabilities (23) (1,113)
--------------- ---------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 6,633,780 issued and
outstanding U.S.$ 0.01 par value shares
(30,000,000 shares authorized) U.S.$ 59,692
---------------
---------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 9.00
---------------
---------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C>
AT APRIL 30, 1999, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
Common Stock U.S.$ 66
Capital Surplus 76,516
Accumulated Net Investment Loss (453)
Accumulated Net Realized Loss (28,636)
Unrealized Appreciation on Investments and
Foreign Currency Translations 12,199
- --------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 59,692
---------------
---------------
- --------------------------------------------------------------------------------
</TABLE>
(a) -- Non-income producing.
GDS -- Global Depositary Shares.
April 30, 1999 exchange rate -- Turkish Lira (TRL) 391,860 = U.S.$1.00.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1999
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
- -----------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ 15
- -----------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
- -----------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Custodian Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Shareholder Reporting Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Professional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Directors' Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Annual Meeting and Proxy Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Transfer Agent Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
- -----------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515
- -----------------------------------------------------------------------------------------------------------
Net Investment Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (500)
- -----------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,149
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165)
- -----------------------------------------------------------------------------------------------------------
Net Realized Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 984
- -----------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,446
Appreciation on Foreign Currency Translations . . . . . . . . . . . . . . . . . . . . 39
- -----------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation . . . . . . . . . . . . . . . . . . 27,485
- -----------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation . . . . . . . 28,469
- -----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . U.S.$ 27,969
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss). . . . . . . . . . . . . . . . . . . . U.S.$ (500) U.S.$ 997
Net Realized Gain . . . . . . . . . . . . . . . . . . . . . . . . . 984 5,541
Change in Unrealized Appreciation/Depreciation. . . . . . . . . . . 27,485 (32,369)
- -----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations . . 27,969 (25,831)
- -----------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . (821) (972)
- -----------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Repurchase of Shares (355,350 and 57,300 shares, respectively). . . (2,007) (262)
- -----------------------------------------------------------------------------------------------------------
Total Increase (Decrease) . . . . . . . . . . . . . . . . . . . . . 25,141 (27,065)
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . 34,551 61,616
- -----------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of
U.S.$453 and undistributed net investment income of U.S.$868,
respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ 59,692 U.S.$ 34,551
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED OCTOBER 31,
SELECTED PER SHARE DATA 1999 ---------------------------------------------
AND RATIOS: (UNAUDITED) 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . U.S.$ 4.94 U.S.$ 8.74 U.S.$ 5.57
- ---------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) . . . . . . . . . (0.07) 0.14 0.18
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . 4.20 (3.80) 3.13
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations . . . . . 4.13 (3.66) 3.31
- ---------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income . . . . . . . . . . . (0.12) (0.14) (0.14)
- ---------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Shares Repurchased . . 0.05 -- --
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . U.S.$ 9.00 U.S.$ 4.94 U.S.$ 8.74
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD . . . . U.S.$ 7.63 U.S.$ 4.31 U.S.$ 7.63
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value . . . . . . . . . . . . . . . . 80.99% (42.36)% 45.34%
Net Asset Value (1) . . . . . . . . . . . . 86.49% (42.39)% 60.76%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) . . . . U.S.$59,692 U.S.$ 34,551 U.S.$ 61,616
- ---------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets . . . 2.32%* 1.71% 1.91%
Ratio of Net Investment Income (Loss)
to Average Net Assets . . . . . . . . . . . . (2.25)%* 1.76% 2.57%
Portfolio Turnover Rate . . . . . . . . . . . 108% 68% 51%
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
SELECTED PER SHARE DATA -----------------------------------------------------
AND RATIOS: 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . U.S.$ 5.93 U.S.$ 4.89 U.S.$ 9.41
- -------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) . . . . . . . . . 0.17 0.13 0.07
Net Realized and Unrealized Gain (Loss)
on Investments . . . . . . . . . . . . . . . (0.41) 0.91 (4.47)
- -------------------------------------------------------------------------------------------------------------
Total from Investment Operations . . . . . (0.24) 1.04 (4.40)
- -------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income . . . . . . . . . . . (0.12) -- (0.12)
- -------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Shares Repurchased . . -- -- --
- -------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . . U.S.$ 5.57 U.S.$ 5.93 U.S.$ 4.89
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD . . . . U.S.$ 5.38 U.S.$ 5.88 U.S.$ 6.88
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value . . . . . . . . . . . . . . . . (6.58)% (14.55)% (33.19)
Net Asset Value (1) . . . . . . . . . . . . (4.09)% 21.27% (47.61)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) . . . . U.S.$ 39,254 U.S.$41,757 U.S.$ 34,447
- -------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets . . . 2.07% 1.91% 2.16%
Ratio of Net Investment Income (Loss)
to Average Net Assets . . . . . . . . . . . . 3.23% 2.18% 1.03%
Portfolio Turnover Rate . . . . . . . . . . . 60% 48% 68%
- -------------------------------------------------------------------------------------------------------------
</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.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (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, plus 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
10
<PAGE>
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 reclassifications among undistributed net
investment income (loss), accumulated net realized gain (loss) and paid in
capital.
B. Morgan Stanley Dean Witter Investment Management Inc. and Morgan Stanley
Dean Witter Investment Management Limited provide investment advisory services
to the Fund under the terms of an Investment Advisory Agreement (the
"Agreement"). Under the Agreement, advisory fees are computed weekly and payable
monthly at an annual rate of 0.95% of the Fund's first $50 million of average
weekly net assets, 0.75% of the next $50 million of average weekly net assets
and 0.55% 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 0.08% 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. The Chase Manhattan Bank and its affiliates serve as custodian for the
Fund. Custody fees are payable monthly based on assets held in custody,
investment purchase and sales activity, an account maintenance fee, plus
reimbursement for certain out-of-pocket expenses.
E. During the six months ended April 30, 1999, the Fund made purchases and
sales totaling $47,443,670 and $48,244,917, 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, 1999, the U.S. Federal income tax cost basis of
securities was approximately $48,095,000 and accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $12,192,000, of which
$17,683,000 related to appreciated securities and $5,491,000 related to
depreciated securities. At October 31, 1998, the Fund had capital loss
carryforwards totaling approximately $29,321,000 available to offset future
capital gains of which $8,367,000, $17,764,000, $2,484,000 and $706,000 will
expire on October 31, 2000, 2001, 2002, and 2004, respectively. To the extent
that future capital gains are offset by these loss carryforwards, 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 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,
1999 totaled $25,500 and are included in Payable for Directors' Fees and
Expenses on the Statement of Net Assets.
H. During the six months ended April 30, 1999, the Fund incurred $118,943 of
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliated
broker/dealer.
I. 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 traded from their net asset value. From that date through April
30, 1999, the Fund repurchased 412,650 shares or 5.86% of its Common Stock at an
average price per share of $5.45 and an average discount of 14.95% 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.
11
<PAGE>
YEAR 2000 DISCLOSURE:
The investment advisory services provided to the Fund by the Advisers depend on
the smooth operation of their computer systems. Many computer and software
systems in use today cannot recognize the year 2000, but revert to 1900 or some
other date, due to the manner in which dates were encoded and calculated. That
failure could have a negative impact on the handling of securities trades,
pricing and account services. The Advisers have been actively working on
necessary changes to their own computer systems to deal with the year 2000
problem and expect that their systems will be adapted before that date. There
can be no assurance, however, that they will be successful. In addition, other
unaffiliated service providers may be faced with similar problems. The Advisers
are monitoring their remedial efforts, but, there can be no assurance that they
and the services they provide will not be adversely affected.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
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 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
13
