<PAGE>
-----------------------------------------------------------
THE
TURKISH
INVESTMENT
FUND, INC.
-----------------------------------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 2000
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
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
Robin Conkey
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
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
--------------------------------------------------------------------------------
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, 2000, The Turkish Investment Fund, Inc. (the
"Fund") had a total return, based on net asset value per share, of 174.88%
compared to 147.35% 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 April 30, 2000, the
Fund's total return, based on net asset value per share, was 171.18% compared to
242.48% for the Index. On April 30, 2000, the closing price of the Fund's shares
on the New York Stock Exchange was $18 13/16, representing a 28% discount to the
Fund's net asset value per share.
The performance of the Fund was supported by good stock selection in the
consumer goods, multi-industry and basic materials sectors, as well as
overweights in the media and beverage sectors. Stocks that contributed
significantly to performance include Ege Biracilik, the largest brewery in
Turkey, Netas, a telecommunications equipment manufacturer, and conglomerates
Dogan Yayin Holdings and Dogan Holdings.
The dramatic rise in the Turkish stock market over the six month period ended
April 2000 comes on the back of optimism regarding the country's initiative to
tackle inflation and address its chronic fiscal problems. The structural
adjustment program the government agreed to with the IMF in December 1999 has
set clear targets for benchmarking progress, provided strong financial backing
and added credibility to the government's efforts. The steep drop in interest
rates (from 95% in August 1999 to 35% in January 2000) should make a significant
difference to the health of the budget, which records strong primary surpluses,
but allocates an enormous proportion of its resources to servicing debt.
The CPI numbers for the first few months of 2000 came in at the 68% to 70%
level, in line with the assumption that inflation would not drop prematurely as
a result of the program. The April release, however, encouraged markets,
recording a 61.5% increase year-on-year on the CPI. Subsequent months should
show further improvements, with June and July month-on-month figures expected to
be negative. For the year as a whole, we expect CPI inflation to end at about
35%, well shy of the 25% IMF target, but enough to satisfy current expectations.
Markets, nonetheless, are concerned that the slow decrease in inflation may lead
to overvaluation of the currency, which has been following the devaluation path
prescribed in advance for the entire year by the Central Bank, in an attempt to
control inflationary expectations. Interest rates have been mostly stable for
the first five months of 2000 at around 35%, reflecting market optimism about
the prospects for the program.
Growth in the economy should see a marked improvement in 2000, when we expect a
5% expansion in GDP, kick-started by the lower interest rate environment and
rising consumer expenditure. The trade deficit has broadened so far this year,
as the currency has strengthened in real terms against both the euro and the
dollar. Export growth has failed to materialize thus far, and will be a critical
element in assessing the health of the current account going forward.
Presidential elections, the final round of which took place on May 16,
proclaimed Sezer, the favored candidate, as the winner. His presidency is likely
to emphasize human rights and enhance Turkey's relationship with the European
Union.
On the privatization front, the government received a windfall of US$2.5 billion
(US$2.0 billion above expectations) for one of the cellular licenses offered as
well as completed the sale of parts of its stakes in Petrol Ofisi and Tupras,
two companies operating in the domestic oil industry. With these sales
completed, privatization proceeds have reached 66% of their target for 2000,
comfortably ahead of budget. Other large sales should follow later on this year,
including Turk Telecom and Turkish Airlines. The fiscal numbers should improve
slightly this year, falling to about a 10% deficit from 12% in 1999. 2001
should, however, show a much steeper fall to about a 5% deficit, as the benign
effect of lower interest rates on the government's debt burden becomes apparent.
The market will be monitoring progress on the reform front over the coming
months, specifically the issue of agricultural subsidies, where some work has
been done, but the more difficult measures are yet to come. Government should
also make some headway in banking reform, and we expect the deposit insurance
scheme to be revised. Over the long-term, it is the reforms in agriculture,
social security and banking that attack the heart of the fiscal problem and will
determine whether the program is ultimately successful.
2
<PAGE>
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 six months ended April
30, 2000, the Fund repurchased 68,800 shares of its Common Stock at an average
price per share of $18.25 and an average discount of 26.13% 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/ Harold J. Schaaff
Harold J. Schaaff, Jr.*
PRESIDENT AND DIRECTOR
June 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. FOREIGN INVESTING INVOLVES CERTAIN
RISKS, INCLUDING CURRENCY FLUCTUATIONS AND CONTROLS, RESTRICTIONS ON FOREIGN
INVESTMENTS, LESS GOVERNMENTAL SUPERVISION AND REGULATION, LESS LIQUIDITY AND
THE POTENTIAL FOR MARKET VOLATILITY.
--------------------------------------------------------------------------------
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.
* HAROLD J. SCHAAFF, JR. WAS ELECTED PRESIDENT AND DIRECTOR OF THE FUND ON MARCH
20, 2000. MR. SCHAAFF JOINED MORGAN STANLEY DEAN WITTER IN 1989 AND IS A
MANAGING DIRECTOR OF MORGAN STANLEY & CO. INCORPORATED AND MORGAN STANLEY DEAN
WITTER INVESTMENT MANAGEMENT INC. HE FORMERLY SERVED AS GENERAL COUNSEL AND
SECRETARY OF MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
3
<PAGE>
The Turkish Investment Fund, Inc.
Investment Summary as of April 30, 2000 (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> <C>
FISCAL YEAR TO DATE 130.11% -- 174.88% -- 147.35 % --
ONE YEAR 147.08 147.08% 190.76 190.76% 138.86 138.86%
FIVE YEAR 188.59 23.61 351.90 35.21 218.32 26.06
TEN YEAR 89.00 6.57 117.81 8.10 112.95 7.85
SINCE INCEPTION* 95.24 6.64 171.18 10.06 242.48 12.57
</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 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 $26.13
Market Value Per Share ...... $ 9.38 $7.00 $6.00 $10.38 $6.88 $5.88 $5.38 $7.63 $4.31 $8.19 $18.81
Premium/(Discount) .......... -26.6% 35.7% 27.9% 10.3% 40.7% -0.8% -3.5% -12.7% -12.8% -14.0% -28.0%
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% 174.88%
Index Total Return (3) ...... 93.17% -64.65% -21.03% 156.26% -45.26% 26.48% -4.24% 87.70% -50.28% 78.92% 147.35%
</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.
Investment Summary as of April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[PIE CHART]
<TABLE>
<S> <C>
Equity Securities (98.7%)
Short-Term Investment (1.3%)
</TABLE>
--------------------------------------------------------------------------------
INDUSTRIES
[PIE CHART]
<TABLE>
<S> <C>
Automobiles (7.1%)
Banks (22.7%)
Beverages (9.6%)
Communications Equipment (9.6%)
Diversified Financials (8.2%)
Food & Drug Retailing (3.2%)
Household Durables (16.4%)
Insurance (3.1%)
Media (6.1%)
Metals & Mining (3.3%)
Other (10.7%)
</TABLE>
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Yapi Ve Kredi Bankasi 15.0%
2. Vestel Elektronik Sanayi Ve Ticaret AS 8.8
3. Arcelik AS 7.6
4. Netas Northern Electric
Telekomunikasyon AS 7.5
5. Turkiye Garanti Bankasi 7.2
6. Dogan Yayin Holding AS 5.8
7. Dogan Sirketler Grubu Holding AS 4.4
8. Ford Otomotiv Sanayi AS 4.0
9. Guney Biracilik Ve Malt Sanayii 3.6
10. Ege Biracilik Ve Malt Sanayii 3.3
----
67.2%
----
----
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
--------
STATEMENT OF NET ASSETS (UNAUDITED)
--------
APRIL 30, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (000)
-------------------------------------------------------------------------------
<S> <C> <C>
TURKISH COMMON STOCKS (98.9%)
(Unless otherwise noted)
-------------------------------------------------------------------------------
AUTO COMPONENTS (0.9%)
Brisa Bridgestone Sabanci
Lastik San. Ve Tic AS 21,373,000 U.S.$ 1,573
---------------
-------------------------------------------------------------------------------
AUTOMOBILES (7.1%)
(a)Ford Otomotiv Sanayi AS 102,812,000 6,726
(a)Tofas Turk Otomobil Fabrikasi AS 171,500,000 3,155
(a)Yazicilar AS 23,110,000 2,230
---------------
12,111
---------------
-------------------------------------------------------------------------------
BANKS (22.7%)
(a)Turk Ekonomi Bankasi AS 54,500 667
(a)Turkiye Garanti Bankasi 729,500,000 12,289
Yapi Ve Kredi Bankasi 800,363,656 25,525
---------------
38,481
---------------
-------------------------------------------------------------------------------
BEVERAGES (9.6%)
Ege Biracilik Ve Malt Sanayii 63,082,000 5,674
(a)Erciyas Biracilik Ve Malt 59,478,668 4,426
Guney Biracilik Ve Malt Sanayii 111,586,500 6,114
---------------
16,214
---------------
-------------------------------------------------------------------------------
BUILDING PRODUCTS (1.4%)
Trakya Cam Sanayii AS 147,914,122 2,395
---------------
-------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (9.6%)
Alcatel Teletas Telekomunikasyon
Endustri ve Ticaret AS 11,930,000 3,561
Netas Northern Electric
Telekomunikasyon AS 75,568,000 12,730
---------------
16,291
---------------
-------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (2.6%)
Adana Cimento 62,113,200 2,159
Akcansa Cimento AS 41,055,000 906
Goltas Goller Bolgesi Cimento
Sanayi ve Ticaret AS 55,600,000 1,387
---------------
4,452
---------------
-------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS (8.2%)
(a)Alarko Holding AS 46,135,000 3,131
Dogan Sirketler Grubu Holding AS 240,632,800 7,478
(a)Ihlas Holding AS 27,000,000 2,031
(a)Yapi Kredi Koray Gayrimenkul
Yatirim Ortakligi AS 109,900,000 1,204
---------------
13,844
---------------
-------------------------------------------------------------------------------
ELECTRIC UTILITIES (0.3%)
(a)Cukurova Elektrik AS 546,000 554
---------------
-------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (1.1%)
Sarkuysan Elektrolitik Bakir
Sanayi ve Ticaret AS 50,100,000 1,946
---------------
-------------------------------------------------------------------------------
FOOD & DRUG RETAILING (3.2%)
Migros Turk TAS 7,892,000 5,356
---------------
-------------------------------------------------------------------------------
GAS UTILITIES (2.3%)
Aygaz AS 34,197,000 3,915
---------------
-------------------------------------------------------------------------------
HOTELS RESTAURANTS & LEISURE (0.9%)
Usas Ucak Servisi AS 623,000 1,600
---------------
-------------------------------------------------------------------------------
HOUSEHOLD DURABLES (16.4%)
Arcelik AS 150,909,800 12,834
(a)Vestel Elektronik Sanayi Ve
Ticaret AS 39,703,000 14,935
---------------
27,769
---------------
-------------------------------------------------------------------------------
INSURANCE (3.1%)
Aksigorta AS 199,014,000 5,289
---------------
-------------------------------------------------------------------------------
MEDIA (6.1%)
(a)Dogan Yayin Holding AS 406,250,000 9,800
(a)Sabah Yayincilik AS 63,600,000 572
---------------
10,372
---------------
-------------------------------------------------------------------------------
METALS & MINING (3.3%)
(a)Eregli Demir Ve Celik
Fabrikalari TAS 101,348,000 5,553
---------------
-------------------------------------------------------------------------------
MULTILINE RETAIL (0.1%)
(a)Carsi Buyuk Magazacilik AS 3,757,000 197
---------------
-------------------------------------------------------------------------------
TOTAL TURKISH COMMON STOCKS
(Cost U.S.$109,428) 167,912
---------------
-------------------------------------------------------------------------------
<CAPTION>
NO.OF
RIGHTS
<S> <C> <C>
-------------------------------------------------------------------------------
RIGHTS (0.2%)
-------------------------------------------------------------------------------
MULTILINE RETAIL (0.2%)
(a)Carsi Buyuk Magazacilik AS,
expiring 5/12/00
(Cost U.S.$--@) 3,757,000 381
---------------
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.3%)
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.3%)
Chase Securities, Inc., 5.55%
dated 4/28/00, due
5/1/00, to be repurchased
at U.S. $2,177,
collateralized by
U.S.$2,260 Federal Home
Loan Mortgage Corp.
7.00%, due 3/15/10,
valued at U.S.$2,227
(Cost U.S.$2,176) U.S.$ 2,176 U.S.$ 2,176
---------------
-------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost U.S.$111,604) 170,469
---------------
-------------------------------------------------------------------------------
OTHER ASSETS (0.9%)
Receivable for Investments Sold 1,503
Other Assets 13 1,516
--------------- ---------------
-------------------------------------------------------------------------------
LIABILITIES (-1.3%)
Payable For:
Bank Overdraft (1,502)
Fund Shares Repurchased (338)
Directors' Fees and Expenses (109)
Investment Advisory Fees (106)
Custodian Fees (50)
Shareholder Reporting Expenses (39)
Professional Fees (29)
Administrative Fees (17)
Other Liabilities (29) (2,219)
--------------- ---------------
-------------------------------------------------------------------------------
<CAPTION>
VALUE
(000)
-------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 6,495,880 issued and
outstanding U.S.$0.01 par value shares
(30,000,000 shares authorized) U.S.$ 169,766
===============
-------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 26.13
===============
-------------------------------------------------------------------------------
AT APRIL 30, 2000, NET ASSETS CONSISTED OF:
-------------------------------------------------------------------------------
Common Stock U.S.$ 65
Capital Surplus 74,723
Accumulated Net Investment Loss (652)
Accumulated Net Realized Gain 36,767
Unrealized Appreciation on Investments and
Foreign Currency Translations 58,863
-------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 169,766
===============
-------------------------------------------------------------------------------
</TABLE>
(a) -- Non-income producing.
@ -- Value is less than U.S.$500.
April 30, 2000 exchange rate -- Turkish Lira (TRL) 611,440 = U.S.$1.00.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 2000
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
---------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends ........................................................................ U.S.$ 134
Interest ......................................................................... 49
---------------------------------------------------------------------------------------------------------
Total Income .................................................................. 183
---------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees ......................................................... 525
Administrative Fees .............................................................. 91
Directors' Fees and Expenses ..................................................... 66
Custodian Fees ................................................................... 34
Professional Fees ................................................................ 31
Shareholder Reporting Expenses ................................................... 21
Annual Meeting and Proxy Expenses ................................................ 15
Transfer Agent Fees .............................................................. 10
Other Expenses ................................................................... 11
---------------------------------------------------------------------------------------------------------
Total Expenses ................................................................ 804
---------------------------------------------------------------------------------------------------------
Net Investment Loss ........................................................ (621)
---------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold ....................................................... 58,554
Foreign Currency Transactions .................................................... (42)
---------------------------------------------------------------------------------------------------------
Net Realized Gain ............................................................. 58,512
---------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments ...................................................... 50,889
Depreciation on Foreign Currency Translations .................................... (31)
---------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ................................ 50,858
---------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation .......... 109,370
---------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. U.S.$ 108,749
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) .......................................... U.S.$ (621) U.S.$ 337
Net Realized Gain ..................................................... 58,512 7,658
Change in Unrealized Appreciation/Depreciation ........................ 50,858 23,291
----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations .................. 108,749 31,286
----------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ................................................. (200) (821)
----------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Repurchase of Shares (68,800 and 424,450 shares, respectively) ........ (1,259) (2,540)
----------------------------------------------------------------------------------------------------------
Total Increase (Decrease) ............................................. 107,290 27,925
NET ASSETS:
Beginning of Period ................................................... 62,476 34,551
----------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of U.S.$652
and undistributed net investment income of U.S.$169, respectively) . U.S.$ 169,766 U.S.$ 62,476
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</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 2000 ----------------------------------------------------------------------
AND RATIOS: (UNAUDITED) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....... U.S.$ 9.52 U.S.$ 4.94 U.S.$ 8.74 U.S.$ 5.57 U.S.$ 5.93 U.S.$ 4.89
-----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ............... (0.10) 0.05 0.14 0.18 0.17 0.13
Net Realized and Unrealized Gain
(Loss) on Investments ................... 16.67 4.58 (3.80) 3.13 (0.41) 0.91
-----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations ..... 16.57 4.63 (3.66) 3.31 (0.24) 1.04
-----------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ................... (0.03) (0.12) (0.14) (0.14) (0.12) --
-----------------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Shares
Repurchased ............................. 0.07 0.07 -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ............. U.S.$ 26.13 U.S.$ 9.52 U.S.$ 4.94 U.S.$ 8.74 U.S.$ 5.57 U.S.$ 5.93
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD ...... U.S.$ 18.81 U.S.$ 8.19 U.S.$ 4.31 U.S.$ 7.63 U.S.$ 5.38 U.S.$ 5.88
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ............................ 130.11% 94.34% (42.36)% 45.34% (6.58)% (14.55)%
Net Asset Value (1) ..................... 174.88% 97.06% (42.39)% 60.76% (4.09)% 21.27%
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) ...... U.S.$169,766 U.S.$62,476 U.S.$34,551 U.S.$61,616 U.S.$39,254 U.S.$41,757
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets .... 1.19%* 1.96% 1.71% 1.91% 2.07% 1.91%
Ratio of Net Investment Income (Loss) to
Average Net Assets ....................... (0.92)%* 0.66% 1.76% 2.57% 3.23% 2.18%
Portfolio Turnover Rate .................... 84% 175% 68% 51% 60% 48%
-----------------------------------------------------------------------------------------------------------------------------------
</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, 2000 (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
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with changes in currency exchange rates. The contract 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. Investment income 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 for certain
out-of-pocket expenses incurred by the Administrator on its behalf.
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, 2000, the Fund made purchases and
sales totaling $105,325,125 and $108,130,746, 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, 2000, the U.S. Federal income tax cost basis of
securities was approximately $111,604,000 and accordingly, net unrealized
appreciation for U.S. Federal income tax purposes was $58,865,000, of which
$61,407,000 related to appreciated securities and $2,542,000 related to
depreciated securities. At October 31, 1999, the Fund had capital loss
carryforwards totaling approximately $20,925,000 available to offset future
capital gains of which $17,735,000, $2,484,000 and $706,000 will expire on
October 31, 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.
Additionally, at April 30, 2000, approximately 23% of the Fund's net assets are
invested in the banking industry. This concentration subjects the Fund to market
and credit risks within the industry.
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, 2000 totaled $104,000 and are included in Payable for
Directors' Fees and Expenses on the Statement of Net Assets.
H. During the six months ended April 30, 2000, the Fund incurred $89,874 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 trade from their net asset value. For the six months ended
April 30, 2000, the Fund repurchased 68,800 shares of its Common Stock at an
average price per
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share of $18.25 and an average discount of 26.13% 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.
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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, that 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
1-800-342-8756
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