<PAGE>
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THE
TURKISH
INVESTMENT
FUND, INC.
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FIRST QUARTER REPORT
JANUARY 31, 2000
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
THE TURKISH INVESTMENT FUND, INC.
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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
TREASURER
Robin Conkey
Assistant Treasurer
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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
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ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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SHAREHOLDER SERVICING AGENT
Investors Bank and Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
(800) 342-8756
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LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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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 three months ended January 31, 2000, The Turkish Investment Fund, Inc.
(the "Fund") had a total return, based on net asset value per share, of 140.10%
compared to 121.96% for the U.S. dollar adjusted Morgan Stanley Capital
International (MSCI) Turkey Index (the "Index"). For the period from the Fund's
commencement of operations on December 5, 1989 through January 31, 2000, the
Fund's total return, based on net asset value per share, was 136.62% compared to
207.32% for the Index. On January 31, 2000, the closing price of the Fund's
shares on the New York Stock Exchange was $18 1/ 2, representing an 18.9%
discount to the Fund's net asset value per share.
The Fund's strong performance for the three months ended January 31, 2000 was
driven by good stock selection and overweight positions in the beverage, media,
multi-industry and telecommunications sectors. Notable contributors to
performance included Ege Biracilik, the largest brewery in Turkey, Netas, a
producer of telecommunications equipment, and conglomerates Dogan Yayin Holdings
and Dogan Holdings. These companies are well positioned to benefit from lower
interest rates and consumer recovery in Turkey. The Turkish government
recognizes the importance of proceeding with anticipated privatization plans,
and we believe Netas will be a natural beneficiary of the expected auction of
two cellular licenses in 2000, as it will be bidding in the tender process for
the roll out of the networks for the cellular companies.
After years of high inflation, large budget deficits and macroeconomic
instability, Turkey began the year 2000 by launching a landmark structural
adjustment program that revolves around a $4 billion IMF stand-by agreement. The
key goal of the adjustment program, which was formally approved by the IMF in
December 1999, is to reduce inflation and reverse the country's recurrent fiscal
imbalances. To be successful, the government must make tough fiscal adjustments,
continue its program of structural reform, and implement a new exchange rate
regime. Since taking office last year, Turkey's government has demonstrated
unprecedented commitment to the successful implementation of structural
adjustment, despite adverse shocks such as the massive earthquake that struck
the country in August. Through a Parliamentary majority, the ruling three party
coalition has passed critical reform bills, such as social security and
international arbitration, and is now turning to the implementation of the
dis-inflation program. Moreover, the European Union (EU) formally offered
candidacy to Turkey for membership in the EU during the Helsinki summit in
December of last year. Closer ties with Western Europe will likely provide a
long-term anchor for political and economic developments, improve the business
environment and lead to higher foreign direct investment. A combination of faith
in the ability of the current government to implement the IMF stabilization
program, leading to permanently lower interest rates, coupled with significantly
improved international relations, led to a continuation of the re-rating of the
market. For the 12 months ended January 2000, the Turkish market, as measured by
the Index, rallied over 280%.
The key driver of the market's phenomenal performance has been the sharp fall in
nominal interest rates. Rates have declined from around 95% in August 1999 to
35% in the January 19, 2000 14-month government bond auction. Initially, the
fall in interest rates came in the relatively long end of Turkish government
paper, but following the announcement of the Turkish Central Bank's plan to
adopt a new currency regime in the new year, short term rates also fell. During
the end of 1999, the Central Bank devalued the currency by around 5% a month.
Starting in January, the Central Bank is allowing the currency to devalue by
only 2.1% each month in the first quarter, 1.7% per month in the second quarter,
1.1% per month in the third quarter and 0.7% per month in the fourth quarter.
Thus, unlike in the past when the rate of devaluation mirrored inflation, the
new exchange rate will be known well ahead of time. The slower devaluation rate
will lead to lower imported inflation, allowing the government to set an
aggressive year-end 2000 inflation target of 25% for CPI, which would be the
best performance in many years.
After four quarters of negative real GDP growth, the Turkish economy started to
recover during the end of 1999. The devastating August earthquake caused some
disruptions and a short-lived contraction in demand, but economic activity is
rebounding sharply. Industrial capacity utilization rates rose to 76% in
December 1999, up from 71% the month before. GDP will contract by around 4% for
all of 1999, and should rebound to a 5% growth level during 2000. Going forward,
stronger growth should be driven by a combination of sharply lower interest
rates and a pick up in export growth. Lower interest rates should trigger a boom
in private consumption as investors switch out of fixed income instruments and
consumer credit becomes available. While trade with countries in the former
Soviet Union continues to be sluggish, an upturn in demand from the EU and
improving global economic growth is bolstering Turkey's export performance.
2
<PAGE>
In the near-term, the market will closely scrutinize the performance of
inflation. The benefits of the government's dis-inflation program will take a
few months to noticeably impact inflation and there is a risk that market
participants may become impatient. January's inflation figures came in higher
than most expectations, but it was driven in part by several one-time factors.
The new currency devaluation rate should strongly impact inflation, but with a
lag. Turkey's government remains committed to year-end inflation targets of 20%
and 25% for WPI and CPI, respectively. Meanwhile, Turkey has renewed its
privatization process and several large scale privatizations are scheduled for
early 2000, such as the sale of two GSM (cellular) licenses and a majority stake
in Petrol Ofisi, the petroleum distribution company. Not only is privatization
an important source of revenue for government coffers, but it also improves
sentiment.
Turkey's coalition government has evidenced a strong commitment to structural
reforms, with the hope of reducing inflation and interest rates. Although there
could be delays in implementing planned privatizations, we believe the
government will continue to take the requisite steps according to its program
with the IMF. We expect the second tranche of the IMF loan to be disbursed in
March. We will continue to focus on those companies which are attractively
valued and possess good earnings visibility, and which stand to benefit from a
declining inflation and interest rate environment.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
February 2000
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.
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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 January 31, 2000 (Unaudited)
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<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> <C>
FISCAL YEAR TO DATE 126.28% -- 140.10% -- 121.96% --
ONE YEAR 306.07 306.07% 320.50 320.50% 283.40 283.40%
FIVE YEAR 285.15 30.96 500.49 43.12 400.00 37.97
SINCE INCEPTION* 91.99 6.63 136.62 8.85 207.32 11.69
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
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RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31: THREE MONTHS
ENDED
JANUARY 31,
1990* 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <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 $ 9.52 $22.80
Market Value Per Share $ 9.38 $ 7.00 $ 6.00 $10.38 $ 6.88 $ 5.88 $ 5.38 $ 7.63 $ 4.31 $ 8.19 $18.50
Premium/(Discount) ...... -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% -3.5% -12.7% -12.8% -14.0% -18.9%
Income Dividends ........$ 0.03 -- $ 0.07 $ 0.04 $0.12 -- $ 0.12 $ 0.14 $ 0.14 $ 0.12 $ 0.03
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% 97.06% 140.10%
Index Total Return (3) .. 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -4.24% 87.70% -50.28% 78.92% 121.96%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The Morgan Stanley Capital International (MSCI) Turkey Index is an unmanaged
index of common stocks.
* The Fund commenced operations on December 5, 1989.
4
<PAGE>
The Turkish Investment Fund, Inc.
Portfolio Summary as of January 31, 2000 (Unaudited)
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DIVERSIFICATION OF TOTAL INVESTMENTS
[PIE CHART]
<TABLE>
<S> <C>
Short-Term Investment (1.1%)
Equity Securities (98.9%)
</TABLE>
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SECTORS
[PIE CHART]
<TABLE>
<S> <C>
Appliances & Household Durables (9.8%)
Automobiles (4.2%)
Banking (23.3%)
Beverages & Tobacco (8.9%)
Broadcasting & Publishing (6.8%)
Building Materials & Components (5.6%)
Business & Public Services (4.9%)
Insurance (6.7%)
Merchandising (5.8%)
Utilities -- Electrical & Gas (4.7%)
Other (19.3%)
</TABLE>
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TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Yapi Ve Kredi Bankasi 14.8%
2. Vestel Elektronik Sanayi Ve Ticaret AS 7.3
3. Aksigorta AS 6.7
4. Dogan Sirketler Grubu Holding AS 4.9
5. Turkiye Is Bankasi 4.9
6. Dogan Yayin Holding AS 4.8
7. Migros Turk TAS 4.1
8. Ege Biracilik Ve Malt Sanayii 3.7
9. Turkiye Garanti Bankasi 3.7
10. Netas Northern Electric
Telekomunikasyon AS 3.6
----
58.5%
----
----
</TABLE>
5
<PAGE>
INVESTMENTS (UNAUDITED)
- ----------
JANUARY 31, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (000)
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<S> <C> <C>
TURKISH COMMON STOCKS (98.2%)
(Unless otherwise noted)
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APPLIANCES & HOUSEHOLD DURABLES (9.8%)
Arcelik AS 56,957,800 U.S.$ 3,715
Vestel Elektronik Sanayi Ve
Ticaret AS 36,360,000 10,882
--------------------
14,597
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AUTOMOBILES (4.2%)
Ford Otomotiv Sanayi AS 103,612,000 5,184
Tofas Turk Otomobil 84,500,000 1,177
Fabrikasi AS --------------------
6,361
--------------------
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BANKING (23.3%)
Turkiye Garanti Bankasi 322,948,000 5,482
Turkiye Is Bankasi 157,682,000 7,325
Yapi Ve Kredi Bankasi 772,863,656 22,095
--------------------
34,902
--------------------
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BEVERAGES & TOBACCO (8.9%)
Ege Biracilik Ve Malt Sanayii 74,214,000 5,503
Erciyas Biracilik Ve Malt 70,778,668 3,604
Guney Biracilik Ve Malt Sanayii 111,586,500 4,237
--------------------
13,344
--------------------
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BROADCASTING & PUBLISHING (6.8%)
Dogan Yayin Holding AS 372,000,000 7,145
Hurriyet Gazetecilik Ve
Matbaacilik A.S. 103,350,000 2,447
Sabah Yayincilik AS 63,600,000 648
--------------------
10,240
--------------------
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BUILDING MATERIALS & COMPONENTS (5.6%)
Adana Cimento 62,113,200 2,719
Akcansa Cimento AS 138,317,000 3,398
Goltas Goller Bolgesi Cimento
Sanayi ve Ticaret AS 55,600,000 2,236
--------------------
8,353
--------------------
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BUSINESS & PUBLIC SERVICES (4.9%)
Dogan Sirketler Grubu
Holding AS 253,743,800 7,368
--------------------
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ELECTRICAL & ELECTRONICS (2.0%)
Alcatel Teletas Telekomunikasyon
Endustri ve Ticaret AS 12,708,000 3,065
--------------------
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ELECTRONIC COMPONENTS, INSTRUMENTS (1.4%)
Sarkuysan Elektrolitik Bakir
Sanayi ve Ticaret AS 50,100,000 2,104
--------------------
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FINANCIAL SERVICES (2.3%)
Alarko Holding 46,135,000 3,462
--------------------
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FOOD & HOUSEHOLD PRODUCTS (2.0%)
Usas Ucak Servisi AS 996,000 2,919
--------------------
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INDUSTRIAL COMPONENTS (0.9%)
Brisa Bridgestone Sabanci
Lastik San. Ve Tic AS 21,373,000 1,375
--------------------
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INSURANCE (6.7%)
Aksigorta AS 391,359,000 9,965
--------------------
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MERCHANDISING (5.8%)
Carsi Buyuk Magazacilik AS 21,382,000 2,560
Migros Turk TAS 7,892,000 6,134
--------------------
8,694
--------------------
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METALS -- NON FERROUS (0.8%)
Izmir Demir Celik Sanayi AS 136,760,000 1,148
--------------------
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METALS -- STEEL(2.0%)
Eregli Demir Ve Celik
Fabrikalari TAS 69,650,000 2,925
--------------------
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MISC. MATERIALS & COMMODITIES (1.6%)
Trakya Cam Sanayii AS 147,914,122 2,431
--------------------
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REAL ESTATE (0.9%)
Yapi Kredi Koray Gayrimenkul
Yatirim Ortakligi AS 109,900,000 1,296
--------------------
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TELECOMMUNICATIONS(3.6%)
Netas Northern Electric
Telekomunikasyon AS 46,907,000 5,364
--------------------
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UTILITIES ELECTRICAL & GAS(4.7%)
Aygaz AS
Cukurova Elektrik AS 37,397,000 4,878
1,799,000 2,154
--------------------
7,032
--------------------
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TOTAL TURKISH COMMON STOCKS
(Cost U.S.$77,797) 146,945
--------------------
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6
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT(1.1%)
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REPURCHASE AGREEMENT(1.1%)
Chase Securities, Inc.,
5.55%, dated 01/31/00,
due 02/01/00, to be
repurchased at
U.S.$1,676,
collateralized by
U.S.$1,385 U.S.Treasury
Bond 8.50%, due
02/15/20, valued at
U.S.$1,710 (Cost
U.S.$1,676) U.S. $ 1,676 U.S. $ 1,676
--------------------
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TOTAL INVESTMENTS(99.3%)
(Cost U.S.$79,473) 148,621
--------------------
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<CAPTION>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES (0.7%)
Other Assets U.S. $11,920
Liabilities (10,852) 1,068
------------ --------------------
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NET ASSETS (100%)
Applicable to 6,564,681 issued and outstanding
U.S. $0.01 par value shares (30,000,000 shares
authorized) U.S. $ 149,689
--------------------
--------------------
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NET ASSET VALUE PER SHARE U.S. $ 22.80
--------------------
--------------------
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January 31, 2000 exchange rate -- Turkish Lira (TRL)
559,660 = U.S.$1.00
</TABLE>
7
