UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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Investment Company Act file number |
811-05921 | |||||||
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The Turkish Investment Fund Inc. | ||||||||
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(Exact name of registrant as specified in charter) | ||||||||
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522 Fifth Avenue, New York, New York |
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10036 | ||||||
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(Address of principal executive offices) |
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(Zip code) | ||||||
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Arthur Lev | ||||||||
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(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: |
212-296-6990 |
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Date of fiscal year end: |
October 31, 2011 |
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Date of reporting period: |
October 31, 2011 |
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Item 1 - Report to Shareholders
The Turkish Investment Fund, Inc.
Directors
Michael E. Nugent
Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
W. Allen Reed
Fergus Reid
Stefanie V. Chang Yu
Vice President
Francis J. Smith
Treasurer and Principal Financial Officer
Mary Ann Picciotto
Chief Compliance Officer
Mary E. Mullin
Secretary
Officers
Michael E. Nugent
Chairman of the Board and Director
Arthur Lev
President and Principal Executive Officer
Investment Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Custodian
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
Stockholder Servicing Agent
Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
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 toll free 1 (800) 231-2608 or visit our website at www.morganstanley.com/im. All investments involve risks, including the possible loss of principal.
© 2011 Morgan Stanley
MSIFTKFANN
IU11-02601P-Y10/11
INVESTMENT MANAGEMENT
The Turkish Investment Fund, Inc. (TKF)
Morgan Stanley
Investment Management Inc.
Investment Adviser
Annual
Report
October 31, 2011
The Turkish Investment Fund, Inc.
Overview
Letter to Stockholders (unaudited)
Performance
For the year ended October 31, 2011, The Turkish Investment Fund, Inc. (the "Fund") had total returns of -27.25%, based on net asset value, and -29.94% based on market value per share (including reinvestment of distributions), compared to its benchmark, the U.S. dollar adjusted Morgan Stanley Capital International (MSCI) Turkey Index (the "Index"), which returned -34.73%. On October 31, 2011, the closing price of the Fund's shares on the New York Stock Exchange was $12.80, representing an 11.4% discount to the Fund's net asset value per share. Past performance is no guarantee of future results.
Factors Affecting Performance
• For the 12-month period ending October 31, 2011, the Turkish market returned -34.73% (in U.S. dollar terms) as measured by the Index, underperforming the MSCI Emerging Markets Index, which returned -7.72% for the same period.
• While Turkey was the best-performing country within the Europe, Middle East and Africa (EMEA) region for the previous one-year period (the period ending October 31, 2010), the Turkish market experienced a sharp correction in 2011, falling to become the worst-performing market in the global emerging markets universe as of October 31, 2011.
• The market's weak performance was the result of an overheated market and rising inflation due to a weaker currency pass through, higher taxes and high commodity prices.
• Relative to the Index, stock selection and sector allocation both contributed positively to the Fund's performance.
• Performance was driven by our continued belief in the growing Turkish consumer market, with the Fund's overweight to consumer staples being the largest contributor to performance relative to the Index. An overweight to consumer discretionary was also a contributor during the period.
• The Fund's stock selection within the materials sector was the largest detractor relative to the Index. An off-benchmark position in the utilities sector also was a detractor from relative performance.
Management Strategies
• We continue to believe Turkey is likely to benefit from higher growth and improving consumption patterns. However, with commodity prices continuing to fuel inflation, we have responded with some tactical defensive positioning. Overall, we have a medium- to long-term positive view toward Turkey but are more cautious in the short term.
• The central bank has warned several times that inflation will hit double digits for a short period, but the market remains nervous that the central bank will be forced to tighten more aggressively than expected. The market, which is heavily exposed to financials, will likely struggle to perform until the inflation scare passes.
2
The Turkish Investment Fund, Inc.
Overview
Letter to Stockholders (unaudited) (cont'd)
• The domestic economy remains strong with consensus gross domestic product (GDP) forecasts at 5.9% for 2011 and 3.7% for 2012, driven by historically low interest rates and pent-up demand. The market remains focused on developments in monetary policy as the central bank is seeking to curb inflation and address the growing current account deficit with unorthodox measures such as sharply raising reserve requirements and cutting short-term interest rates.
• While we are cautious about the short-term headwinds for Turkey given its fast-paced credit environment and rising inflationary pressures, we do see positive catalysts for the medium term, such as a possible rating upgrade and/or a potential decline in the price of oil, which we believe could be beneficial for the market.
Sincerely,
Arthur Lev
President and Principal Executive Officer November 2011
3
The Turkish Investment Fund, Inc.
October 31, 2011
Investment Advisory Agreement Approval (unaudited)
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser (as defined herein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund's Adviser under the administration agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Adviser's expense. (The advisory and administration agreements together are referred to as the "Management Agreement.") The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper, Inc. ("Lipper").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as determined by Lipper, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance as of December 31, 2010, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board also noted that the Fund's performance outperformed its benchmark for the one- and three-year periods but underperformed its benchmark for the five-year period. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as determined by Lipper. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee and total expense ratio were lower than its peer group average. After discussion, the Board concluded that: (i) the Fund's performance was acceptable; and (ii) the management fee and total expense ratio were competitive with its peer group average.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the
4
The Turkish Investment Fund, Inc.
October 31, 2011
Investment Advisory Agreement Approval (unaudited) (cont'd)
management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board considered that, with respect to closed-end funds, the assets are not likely to grow with new sales or grow significantly as a result of capital appreciation. The Board concluded that economies of scale for the Fund were not a factor that needed to be considered at the present time.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other benefits to the Adviser and its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, "float" benefits derived from handling of checks for purchases and sales, research received by the Adviser generated from commission dollars spent on funds' portfolio trading and fees for distribution and/or shareholder servicing. The Board reviewed with the Adviser each of these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
5
The Turkish Investment Fund, Inc.
October 31, 2011
Investment Advisory Agreement Approval (unaudited) (cont'd)
General Conclusion
After considering and weighing all of the above factors, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single factor referenced above. The Board considered these factors over the course of numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors differently in reaching their individual decisions to approve the Management Agreement.
6
The Turkish Investment Fund, Inc.
October 31, 2011
Portfolio of Investments
| Shares |
Value (000) |
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| COMMON STOCKS (96.7%) | |||||||||||
| Automobiles (1.8%) | |||||||||||
| Tofas Turk Otomobil Fabrikasi AS | 509,263 | $ | 1,962 | ||||||||
| Beverages (19.7%) | |||||||||||
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Anadolu Efes Biracilik Ve Malt Sanayii AS |
896,539 | 10,873 | |||||||||
| Coca-Cola Icecek AS | 770,295 | 10,437 | |||||||||
| 21,310 | |||||||||||
| Commercial Banks (31.4%) | |||||||||||
| Turkiye Garanti Bankasi AS | 4,708,075 | 16,532 | |||||||||
| Turkiye Halk Bankasi AS | 670,499 | 4,109 | |||||||||
| Turkiye Sinai Kalkinma Bankasi AS | 1,299,740 | 1,455 | |||||||||
| Turkiye Vakiflar Bankasi Tao, Class D | 3,015,070 | 5,123 | |||||||||
| Yapi ve Kredi Bankasi AS (a) | 3,623,464 | 6,768 | |||||||||
| 33,987 | |||||||||||
| Construction Materials (8.9%) | |||||||||||
| Adana Cimento Sanayii TAS A Shares | 1,026,700 | 2,328 | |||||||||
| Akcansa Cimento AS | 1,379,559 | 5,227 | |||||||||
| Mardin Cimento Sanayii ve Ticaret AS | 265,501 | 944 | |||||||||
| Unye Cimento Sanayii ve Ticaret AS | 477,921 | 1,130 | |||||||||
| 9,629 | |||||||||||
| Containers & Packaging (1.7%) | |||||||||||
| Kartonsan Karton Sanayi ve Ticaret AS | 16,760 | 1,854 | |||||||||
| Diversified Financial Services (3.3%) | |||||||||||
| Haci Omer Sabanci Holding AS | 1,057,570 | 3,606 | |||||||||
| Diversified Telecommunication Services (9.0%) | |||||||||||
| Turk Telekomunikasyon AS | 2,292,918 | 9,695 | |||||||||
| Food Products (0.2%) | |||||||||||
| Pinar SUT Mamulleri Sanayii AS | 19,744 | 171 | |||||||||
| Hotels, Restaurants & Leisure (2.5%) | |||||||||||
| DO & Co. Restaurants & Catering AG | 68,569 | 2,724 | |||||||||
| Household Durables (2.9%) | |||||||||||
| Turkiye Sise ve Cam Fabrikalari AS | 1,669,016 | 3,193 | |||||||||
| Insurance (1.9%) | |||||||||||
| Anadolu Hayat Emeklilik AS | 1,189,187 | 2,035 | |||||||||
| Oil, Gas & Consumable Fuels (9.0%) | |||||||||||
| Tupras Turkiye Petrol Rafinerileri AS | 434,279 | 9,773 | |||||||||
| Transportation Infrastructure (0.2%) | |||||||||||
| TAV Havalimanlari Holding AS (a) | 40,000 | 193 | |||||||||
| Shares |
Value (000) |
||||||||||
| Wireless Telecommunication Services (4.2%) | |||||||||||
| Turkcell Iletisim Hizmetleri AS (a) | 883,871 | $ | 4,357 | ||||||||
| Turkcell Iletisim Hizmetleri AS ADR (a) | 17,000 | 210 | |||||||||
| 4,567 | |||||||||||
| TOTAL COMMON STOCKS (Cost $87,477) | 104,699 | ||||||||||
| SHORT-TERM INVESTMENT (3.4%) | |||||||||||
| Investment Company (3.4%) | |||||||||||
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Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (See Note F) (Cost $3,743) |
3,742,909 | 3,743 | |||||||||
| TOTAL INVESTMENTS (100.1%) (Cost $91,220) (b) | 108,442 | ||||||||||
| LIABILITIES IN EXCESS OF OTHER ASSETS (-0.1%) | (161 | ) | |||||||||
| NET ASSETS (100.0%) | $ | 108,281 | |||||||||
(a) Non-income producing security.
(b) The approximate market value and percentage of net assets, $104,489,000 and 96.5%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to the Financial Statements.
ADR American Depositary Receipt.
Portfolio Composition
| Classification |
Percentage of Total Investments |
||||||
| Commercial Banks | 31.3 | % | |||||
| Other* | 22.2 | ||||||
| Beverages | 19.7 | ||||||
| Oil, Gas & Consumable Fuels | 9.0 | ||||||
| Diversified Telecommunication Services | 8.9 | ||||||
| Construction Materials | 8.9 | ||||||
| Total Investments | 100.0 | % | |||||
* Industries representing less than 5% of total investments.
The accompanying notes are an integral part of the financial statements.
7
The Turkish Investment Fund, Inc.
October 31, 2011
Portfolio of Investments (cont'd)
Fair Value Measurement Information:
The following is a summary of the inputs used to value the Fund's net assets as of October 31, 2011. (See Note A-3 to the financial statements for further information regarding fair value measurement.)
| Investment Type |
Level 1 Unadjusted quoted prices (000) |
Level 2 Other significant observable inputs (000) |
Level 3 Significant unobservable inputs (000) |
Total (000) |
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| Assets: | |||||||||||||||||||
| Common Stocks | |||||||||||||||||||
| Automobiles | $ | — | $ | 1,962 | $ | — | $ | 1,962 | |||||||||||
| Beverages | — | 21,310 | — | 21,310 | |||||||||||||||
| Commercial Banks | — | 33,987 | — | 33,987 | |||||||||||||||
| Construction Materials | — | 9,629 | — | 9,629 | |||||||||||||||
|
Containers & Packaging |
— | 1,854 | — | 1,854 | |||||||||||||||
|
Diversified Financial Services |
— | 3,606 | — | 3,606 | |||||||||||||||
|
Diversified Telecommunication Services |
— | 9,695 | — | 9,695 | |||||||||||||||
| Food Products | — | 171 | — | 171 | |||||||||||||||
|
Hotels, Restaurants & Leisure |
— | 2,724 | — | 2,724 | |||||||||||||||
| Household Durables | — | 3,193 | — | 3,193 | |||||||||||||||
| Insurance | — | 2,035 | — | 2,035 | |||||||||||||||
|
Oil, Gas & Consumable Fuels |
— | 9,773 | — | 9,773 | |||||||||||||||
|
Transportation Infrastructure |
— | 193 | — | 193 | |||||||||||||||
|
Wireless Telecommunication Services |
210 | 4,357 | — | 4,567 | |||||||||||||||
|
Total Common Stocks |
210 | 104,489 | — | 104,699 | |||||||||||||||
|
Short-Term Investment — |
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| Investment Company | 3,743 | — | — | 3,743 | |||||||||||||||
| Total Assets | $ | 3,953 | $ | 104,489 | $ | — | $ | 108,442 | |||||||||||
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of October 31, 2011, securities with a total value of approximately $96,250,000 transferred from Level 1 to Level 2. At October 31, 2011, the fair market value of certain securities were adjusted due to developments which occurred between the time of the close of the foreign markets on which they trade and the close of business on the NYSE which resulted in their Level 2 classification.
The accompanying notes are an integral part of the financial statements.
8
The Turkish Investment Fund, Inc.
October 31, 2011
Financial Statements
| Statement of Assets and Liabilities |
October 31, 2011 (000) |
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| Assets: | |||||||
| Investments in Securities of Unaffiliated Issuers, at Value (Cost $87,477) | $ | 104,699 | |||||
| Investment in Security of Affiliated Issuer, at Value (Cost $3,743) | 3,743 | ||||||
| Total Investments in Securities, at Value (Cost $91,220) | 108,442 | ||||||
| Foreign Currency, at Value (Cost $134) | 133 | ||||||
| Tax Reclaim Receivable | 3 | ||||||
| Receivable from Affiliate | — | @ | |||||
| Other Assets | 2 | ||||||
| Total Assets | 108,580 | ||||||
| Liabilities: | |||||||
| Payable for Investments Purchased | 140 | ||||||
| Payable for Investment Advisory Fees | 76 | ||||||
| Payable for Professional Fees | 40 | ||||||
| Payable for Custodian Fees | 24 | ||||||
| Payable for Administration Fees | 4 | ||||||
| Payable for Directors' Fees and Expenses | 2 | ||||||
| Payable for Stockholder Servicing Agent Fees | 1 | ||||||
| Other Liabilities | 12 | ||||||
| Total Liabilities | 299 | ||||||
| Net Assets | |||||||
| Applicable to 7,492,118 Issued and Outstanding $0.01 Par Value Shares (30,000,000 Shares Authorized) | $ | 108,281 | |||||
| Net Asset Value Per Share | $ | 14.45 | |||||
| Net Assets Consist of: | |||||||
| Common Stock | $ | 75 | |||||
| Paid-in-Capital | 92,934 | ||||||
| Undistributed Net Investment Income | 2,277 | ||||||
| Accumulated Net Realized Loss | (4,226 | ) | |||||
| Unrealized Appreciation (Depreciation) on: | |||||||
| Investments | 17,222 | ||||||
| Foreign Currency Translations | (1 | ) | |||||
| Net Assets | $ | 108,281 | |||||
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
9
The Turkish Investment Fund, Inc.
October 31, 2011
Financial Statements (cont'd)
| Statement of Operations |
Year Ended October 31, 2011 (000) |
||||||
| Investment Income: | |||||||
| Dividends from Securities of Unaffiliated Issuers (Net of $617 of Foreign Taxes Withheld) | $ | 3,584 | |||||
| Dividends from Security of Affiliated Issuer | 8 | ||||||
| Total Investment Income | 3,592 | ||||||
| Expenses: | |||||||
| Investment Advisory Fees (Note B) | 1,007 | ||||||
| Custodian Fees (Note D) | 136 | ||||||
| Administration Fees (Note C) | 103 | ||||||
| Professional Fees | 84 | ||||||
| Stockholder Reporting Expenses | 22 | ||||||
| Stockholder Servicing Agent Fees | 5 | ||||||
| Directors' Fees and Expenses | 4 | ||||||
| Other Expenses | 43 | ||||||
| Total Expenses | 1,404 | ||||||
| Waiver of Administration Fees (Note C) | (48 | ) | |||||
| Rebate from Morgan Stanley Affiliate (Note F) | (8 | ) | |||||
| Net Expenses | 1,348 | ||||||
| Net Investment Income | 2,244 | ||||||
| Realized Gain: | |||||||
| Investments Sold | 7,719 | ||||||
| Foreign Currency Transactions | 29 | ||||||
| Net Realized Gain | 7,748 | ||||||
| Change in Unrealized Appreciation (Depreciation): | |||||||
| Investments | (50,757 | ) | |||||
| Foreign Currency Translations | (2 | ) | |||||
| Net Change in Unrealized Appreciation (Depreciation) | (50,759 | ) | |||||
| Net Realized Gain (Loss) and Change in Unrealized Appreciation (Depreciation) | (43,011 | ) | |||||
| Net Decrease in Net Assets Resulting from Operations | $ | (40,767 | ) | ||||
The accompanying notes are an integral part of the financial statements.
10
The Turkish Investment Fund, Inc.
October 31, 2011
Financial Statements (cont'd)
| Statements of Changes in Net Assets |
Year Ended October 31, 2011 (000) |
Year Ended October 31, 2010 (000) |
|||||||||
| Increase (Decrease) in Net Assets: | |||||||||||
| Operations: | |||||||||||
| Net Investment Income | $ | 2,244 | $ | 1,526 | |||||||
| Net Realized Gain | 7,748 | 11,639 | |||||||||
| Net Change in Unrealized Appreciation (Depreciation) | (50,759 | ) | 40,625 | ||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | (40,767 | ) | 53,790 | ||||||||
| Distributions from and/or in Excess of: | |||||||||||
| Net Investment Income | (1,480 | ) | (995 | ) | |||||||
| Total Distributions | (1,480 | ) | (995 | ) | |||||||
| Total Increase (Decrease) | (42,247 | ) | 52,795 | ||||||||
| Net Assets: | |||||||||||
| Beginning of Period | 150,528 | 97,733 | |||||||||
| End of Period (Including Undistributed Net Investment Income of $2,277 and $1,484) | $ | 108,281 | $ | 150,528 | |||||||
The accompanying notes are an integral part of the financial statements.
11
The Turkish Investment Fund, Inc.
October 31, 2011
Financial Highlights
Selected Per Share Data and Ratios
| Year Ended October 31, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||||||
| Net Asset Value, Beginning of Period | $ | 20.09 | $ | 13.04 | $ | 7.43 | $ | 24.01 | $ | 18.86 | |||||||||||||
| Net Investment Income† | 0.30 | 0.20 | 0.13 | 0.13 | 0.12 | ||||||||||||||||||
| Net Realized and Unrealized Gain (Loss) on Investments | (5.74 | ) | 6.98 | 5.48 | (13.77 | ) | 9.30 | ||||||||||||||||
| Total from Investment Operations | (5.44 | ) | 7.18 | 5.61 | (13.64 | ) | 9.42 | ||||||||||||||||
| Distributions from and/or in excess of: | |||||||||||||||||||||||
| Net Investment Income | (0.20 | ) | (0.13 | ) | — | (0.31 | ) | (0.23 | ) | ||||||||||||||
| Net Realized Gain | — | — | — | (2.63 | ) | (4.04 | ) | ||||||||||||||||
| Total Distributions | (0.20 | ) | (0.13 | ) | — | (2.94 | ) | (4.27 | ) | ||||||||||||||
|
Dilutive Effect of Shares Issued through Rights Offering and Offering Costs |
— | — | — | — | (0.00 | )‡ | |||||||||||||||||
| Anti-Dilutive Effect of Share Repurchase Program | — | — | 0.00 | ‡ | 0.00 | ‡ | — | ||||||||||||||||
| Net Asset Value, End of Period | $ | 14.45 | $ | 20.09 | $ | 13.04 | $ | 7.43 | $ | 24.01 | |||||||||||||
| Per Share Market Value, End of Period | $ | 12.80 | $ | 18.48 | $ | 12.00 | $ | 6.20 | $ | 21.11 | |||||||||||||
| TOTAL INVESTMENT RETURN: | |||||||||||||||||||||||
| Market Value | (29.94 | )% | 55.46 | % | 93.55 | % | (66.09 | )% | 51.24 | % | |||||||||||||
| Net Asset Value(1) | (27.25 | )% | 55.52 | % | 75.98 | % | (64.37 | )% | 63.80 | % | |||||||||||||
| RATIOS, SUPPLEMENTAL DATA: | |||||||||||||||||||||||
| Net Assets, End of Period (Thousands) | $ | 108,281 | $ | 150,528 | $ | 97,733 | $ | 55,719 | $ | 180,039 | |||||||||||||
| Ratio of Expenses to Average Net Assets(2) | 1.05 | %+ | 1.09 | %+ | 1.38 | %+ | 1.12 | %+ | 1.08 | %+ | |||||||||||||
| Ratio of Net Investment Income to Average Net Assets(2) | 1.74 | %+ | 1.31 | %+ | 1.49 | %+ | 0.85 | %+ | 0.67 | %+ | |||||||||||||
| Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets | 0.01 | % | 0.01 | % | 0.00 | %§ | 0.00 | %§ | 0.00 | %§ | |||||||||||||
| Portfolio Turnover Rate | 29 | % | 28 | % | 56 | % | 38 | % | 65 | % | |||||||||||||
| (2) Supplemental Information on the Ratios to Average Net Assets: | |||||||||||||||||||||||
| Ratios Before Expenses Waived by Administrator: | |||||||||||||||||||||||
| Ratio of Expenses to Average Net Assets | 1.09 | % | 1.12 | %+ | 1.40 | %+ | 1.16 | %+ | 1.12 | %+ | |||||||||||||
| Ratio of Net Investment Income to Average Net Assets | 1.70 | % | 1.28 | %+ | 1.47 | %+ | 0.81 | %+ | 0.63 | %+ | |||||||||||||
(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. This percentage is not an indication of the performance of a stockholder'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.
† Per share amount is based on average shares outstanding.
‡ Amount is less than $0.005 per share.
+ The Ratios of Expenses and Net Investment Income reflect the rebate of certain Fund expenses in connection with the investments in Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as "Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets."
§ Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
12
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements
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 (the "Act"), as amended. The Fund's investment objective is long-term capital appreciation through investments primarily in equity securities of Turkish corporations. To the extent that the Fund invests in derivative instruments that the Adviser believes have economic characteristics similar to equity securities of Turkish corporations, such investments will be counted for purposes of the Fund's policy in the previous sentence. To the extent the Fund makes such investments, the Fund will be subject to the risks of such derivative instruments as described herein.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Fund in the preparation of its financial statements. U.S. GAAP 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: Securities listed on a foreign exchange are valued at their closing price except as noted below. Unlisted securities and listed securities not traded on the valuation date for which market quotations are readily available are valued at the mean between the current bid and ask prices. Equity securities listed on a U.S. exchange are valued at the latest quoted sales price on the valuation date. Equity securities listed or traded on NASDAQ, for which market quotations are available, are valued at the NASDAQ Official Closing Price. Short-term debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, unless the Board of Directors (the "Directors") determines such valuation does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined in good faith under procedures adopted by the Directors.
All other securities and investments for which market values are not readily available, including restricted securities, and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Directors, although the actual calculations may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange ("NYSE"). Occasionally, developments that could affect the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If these developments are expected to materially affect the value of the securities, the valuations may be adjusted to reflect the estimated fair value as of the close of the NYSE, as determined in good faith under procedures established by the Directors.
2. 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 ask prices of such currencies against U.S. dollars last quoted by a major bank as follows:
—investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
13
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements (cont'd)
—investment transactions and investment income at the prevailing rates 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) on investments in securities 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 (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 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) on investments and foreign currency translations in the Statement of Assets and Liabilities. The change in unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations.
A significant portion of the Fund's net assets consist of equity securities denominated in Turkish Lira. Changes in currency exchange rates will affect the value of and investment income from such securities. Turkish securities are often subject to greater price volatility, limited capitalization and liquidity, and higher rates of inflation than securities of companies based in the United States. In addition, Turkish securities may be subject to substantial governmental involvement in the economy and greater social, economic and political uncertainty.
3. Fair Value Measurement: Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosure" ("ASC 820"), defines fair value as the value that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below.
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
14
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements (cont'd)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
In May 2011, FASB issued Accounting Standards Update ("ASU") 2011-04. The amendments in this update are the results of the work of FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements, which are effective during interim and annual periods beginning after December 15, 2011. Consequently, these amendments improve the comparability of fair value measurements presented and disclosed in the financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards. At this time, the Fund's management is evaluating the implications of ASU 2011-04.
4. Indemnifications: The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
5. Other: Security transactions are accounted for on the date the securities are purchased or sold. Realized gains (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 are recorded on the ex-dividend date (except certain dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes.
B. Investment Advisory Fees: Morgan Stanley Investment Management Inc. (the "Adviser" or "MS Investment Management") provides investment advisory services to the Fund under the terms of an Investment Advisory Agreement (the "Agreement"). Under the Agreement, the 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 Fund's next $50 million of average weekly net assets and 0.55% of the Fund's average weekly net assets in excess of $100 million.
C. Administration Fees: MS Investment Management also serves as Administrator to the Fund pursuant to an Administration Agreement. Under the Administration Agreement, the administration fee is 0.08% of the Fund's average weekly net assets. MS Investment Management has agreed to limit the administration fee through a waiver so that it will be no greater than the previous administration fee of 0.02435% of the Fund's average weekly net assets plus $24,000 per annum. This waiver is voluntary and may be terminated at any time. For the year ended October 31, 2011, approximately $48,000 of administration fees were waived pursuant to this arrangement. Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
15
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements (cont'd)
D. Custodian Fees: State Street (the "Custodian") and its affiliates serve as Custodian for the Fund. The Custodian holds cash, securities, and other assets of the Fund as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
The Fund has entered into an arrangement with its Custodian whereby credits realized on uninvested cash balances were used to offset a portion of the Fund's expenses. If applicable, these custodian credits are shown as "Expense Offset" in the Statement of Operations.
E. Federal Income 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 Federal income taxes is required in the financial statements. Dividend income and distributions to stockholders are recorded on the ex-dividend date.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10 "Income Taxes — Overall" sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in ''Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended October 31, 2011, remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown in the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes.
The tax character of distributions paid during fiscal 2011 and 2010 was as follows:
|
2011 Distributiions Paid From: |
2010 Distributiions Paid From: |
||||||||||||||
|
Ordinary Income (000) |
Long-Term Capital Gain (000) |
Ordinary Income (000) |
Long-Term Capital Gain (000) |
||||||||||||
| $ | 1,480 | $ | — | $ | 995 | $ | — | ||||||||
The amount and character of income and capital gain distributions to be paid by the Fund are determined in accordance with Federal income tax regulations, which may differ from U.S. GAAP. These book/tax differences are considered either temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
Permanent differences, primarily due to differing treatments of gains (losses) related to foreign currency transactions, resulted in the following reclassifications among the components of net assets at October 31, 2011:
|
Undistributed (Distributions in Excess of) Net Investment Income (Loss) (000) |
Accumulated Net Realized Gain (Loss) (000) |
Paid-in Capital (000) |
|||||||||
| $ | 29 | $ | (29 | ) | $ | — | |||||
16
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements (cont'd)
At October 31, 2011, the components of distributable earnings for the Fund on a tax basis were as follows:
|
Undistributed Ordinary Income (000) |
Undistributed Long-Term Capital Gain (000) |
||||||
| $ | 2,278 | $ | — | ||||
At October 31, 2011, the U.S. Federal income tax cost basis of investments was approximately $92,098,000 and, accordingly, net unrealized appreciation for U.S. Federal income tax purposes was $16,344,000 of which $21,734,000 related to appreciated securities and $5,390,000 related to depreciated securities.
At October 31, 2011, the Fund had a capital loss carryforward for U.S. Federal income tax purposes of approximately $3,348,000 to offset against future capital gains which will expire on October 31, 2017.
During the year ended October 31, 2011, the Fund had utilized capital loss carryforward for U.S. Federal income tax purposes of approximately $7,672,000. The Turkish Ministry of Finance issued new tax legislation effective January 1, 2006, impacting the taxation of income and capital gains derived by foreign investors from securities trading in the Turkish market. Through the approval of this amendment, investors with non-resident investment fund (NRIF) status as of December 31, 2005 will have the ability to continue utilizing their NRIF status after January 1, 2006, for their equity positions purchased and fixed income securities issued prior to January 1, 2006. Thus, the tax rates associated with NRIF status would continue to apply on these holdings after January 1, 2006 even after the new tax law goes into effect. Dividend income from equity securities purchased and interest income from fixed income securities issued after December 31, 2005, will be subject to the new tax law which imposes a withholding tax of 15% and up to 15% respectively. The Fund currently is not subject to capital gains tax derived from securities trading in Turkish market.
F. Security Transactions and Transactions with Affiliates: During the year ended October 31, 2011, the Fund made purchases and sales totaling approximately $38,248,000 and $35,648,000, respectively, of investment securities other than long-term U.S. Government securities and short-term investments. There were no purchases and sales of long-term U.S. Government securities for the year ended October 31, 2011.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser. Investment Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the year ended October 31, 2011, advisory fees paid were reduced by approximately $8,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of the Liquidity Funds during the year ended October 31, 2011 is as follows:
|
Value October 31, 2010 (000) |
Purchases at Cost (000) |
Sales (000) |
Dividend Income (000) |
Value October 31, 2011 (000) |
|||||||||||||||
| $ | 5,509 | $ | 24,210 | $ | 25,976 | $ | 8 | $ | 3,743 | ||||||||||
During the year ended October 31, 2011, the Fund incurred approximately $11,000 in brokerage commissions with Morgan Stanley & Co., LLC, an affiliate of the Adviser and Administrator, for portfolio transactions executed on behalf of the Portfolio.
G. Other: On September 15, 1998, the Fund commenced a share repurchase program for purposes of enhancing stockholder value and reducing the discount at which the Fund's shares trade from their net asset value. During the year ended October 31, 2011, the Fund did not repurchase any of its shares. Since the inception of the program, the Fund has repurchased 1,448,177
17
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements (cont'd)
of its shares at an average discount of 17.13% 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 Directors.
Pursuant to the Fund's investment restriction regarding concentration of investments in any one industry, the Fund will be required to invest between 25 percent and 35 percent of its total assets in the securities of issuers in one or more industries if, at the time of investment, each such industry represents 25 percent or more of the Fund's benchmark Index. During the period, Commercial Banks represented over 25 percent of the Index and the Fund increased its investment in Commercial Banks to over 25 percent, which subsequently increased due to market appreciation. The commercial banking business can be affected by general business, economic and market conditions, including, but not limited, to short-term and long-term interest rates, inflation, deflation, money supply, fluctuations in both debt and equity capital markets and the strength of the U.S. and foreign economies. Commercial banks may be subject to extensive government regulation which can limit both the amounts and types of loans and other financial commitments they can make, the interest rates and fees they can charge and the amount of capital that they must maintain. Changes to regulations, including changes in interpretation or implementation of statutes, regulations or policies can have a substantial and unpredictable effect on commercial banks. Profitability can be largely dependent on the availability and cost of capital funds and the rate of corporate and consumer debt defaults, and can fluctuate significantly when interest rates change. Credit losses resulting from financial difficulties of borrowers can negatively affect the commercial banking industry. For example, an economic downturn that suddenly decreased property values, caused an increase in unemployment, or other events that negatively impact household and/or corporate customers could decrease ability to pay interest or principal on loans or cause a decrease in the demand for commercial banking products and services. Commercial banks also have been and may in the future be affected by increased competition, which could adversely affect the asset growth, profitability and/or viability of commercial banks.
18
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements (cont'd)
Results of Annual Meeting of Stockholders (unaudited): On June 30, 2011, an annual meeting of the Fund's stockholders was held for the purpose of voting on the following matter, the results of which were as follows:
Election of Directors by all stockholders:
| Director | For | Withheld | |||||||||
| Kathleen A. Dennis | 4,016,294 | 183,203 | |||||||||
| Joseph J. Kearns | 4,007,105 | 192,392 | |||||||||
| Michael E. Nugent | 3,998,250 | 201,247 | |||||||||
| Fergus Reid | 3,988,840 | 210,657 | |||||||||
Federal Income Tax Information (unaudited)
For Federal income tax purposes, the following information is furnished with respect to the Fund's earnings for its taxable year ended October 31, 2011. When distributed, certain earnings may be subject to a maximum tax rate of 15% as provided for the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designated up to a maximum of $4,200,802 as taxable at this lower rate.
During the taxable year ended October 31, 2011, the Fund intends to pass through foreign tax credits of $617,250 and has derived $4,200,802 of net income from sources within foreign countries.
In January, the Fund provides tax information to stockholders for the preceding calendar year.
For More Information About Portfolio Holdings (unaudited)
The Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports within 60 days of the end of the Fund's second and fourth fiscal quarters. The semi-annual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semi-annual and annual reports to Fund stockholders and makes these reports available on its public website, www.morganstanley.com/im. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the Fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to stockholders, nor are the reports posted to the Morgan Stanley public website. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC toll free at 1(800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.
In addition to filing a complete schedule of portfolio holdings with the SEC each fiscal quarter, the Fund makes portfolio holdings information available by periodically providing the information on its public website, www.morganstanley.com/im.
The Fund provides a complete schedule of portfolio holdings on the public website on a calendar-quarter basis approximately 31 calendar days after the close of the calendar quarter. The Fund also provides Top 10 holdings information on the public website approximately 15 business days following the end of each month. You may obtain copies of the Fund's monthly or calendar-quarter website postings, by calling toll free 1(800) 231-2608.
19
The Turkish Investment Fund, Inc.
October 31, 2011
Notes to Financial Statements (cont'd)
Proxy Voting Policy and Procedures and Proxy Voting Record (unaudited)
A copy of (1) the Fund's policies and procedures with respect to the voting of proxies relating to the Fund's portfolio securities; and (2) how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, is available without charge, upon request, by calling toll free 1(800) 548-7786 or by visiting our website at www.morganstanley.com/im. This information is also available on the SEC's web site at www.sec.gov.
20
The Turkish Investment Fund, Inc.
October 31, 2011
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
The Turkish Investment Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The Turkish Investment Fund, Inc., (the "Fund"), including the portfolio of investments, as of October 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2011 by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Turkish Investment Fund, Inc. at October 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
December 22, 2011
21
The Turkish Investment Fund, Inc.
October 31, 2011
Portfolio Management (unaudited)
The Fund is managed by members of the Emerging Markets Equity team. The team consists of portfolio managers and analysts. Current members of the team jointly and primarily responsible for the day-to-day management of the Fund's portfolio are Eric Carlson and Paul C. Psaila, each a Managing Director of the Adviser.
Mr. Carlson has been associated with the Adviser in an investment management capacity since 1997 and began managing the Fund in January 2006. Mr. Psaila has been associated with the Adviser in an investment management capacity since 1994 and began managing the Fund in September 1997.
22
The Turkish Investment Fund, Inc.
October 31, 2011
Investment Policy (unaudited)
The Fund may use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based on the value of another underlying asset, interest rate, index or financial instrument. A derivative instrument often has risks similar to its underlying instrument and may have additional risks, including imperfect correlation between the value of the derivative and the underlying instrument, risks of default by the other party to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which they relate, and risks that the transactions may not be liquid. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated with other portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. Certain derivative transactions may give rise to a form of leverage. Leverage associated with derivative transactions may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet earmarking or segregation requirements, pursuant to applicable SEC rules and regulations, or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Investment Adviser seeks to use derivatives to further the Fund's investment objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund may use and their associated risks:
Foreign Currency Forward Contracts. In connection with its investments in foreign securities, the Fund also may enter into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date ("forward contracts"). A foreign currency forward contract is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Forward foreign currency exchange contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. Hedging the Fund's currency risks involves the risk of mismatching the Fund's objectives under a forward or futures contract with the value of securities denominated in a particular currency. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts.
23
The Turkish Investment Fund, Inc.
October 31, 2011
Dividend Reinvestment and Cash Purchase Plan (unaudited)
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the Plan), each stockholder will be deemed to have elected, unless Computershare Trust Company, N.A. (the Plan Agent) is otherwise instructed by the stockholder 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 (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 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 a Distribution 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 stockholders 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 stockholders, 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 stockholder as representing the total amount registered in the stockholder's name and held for the account of beneficial owners who are participating in the Plan.
Stockholders 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 stockholders 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.
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940-3078
1 (800) 231-2608
24
The Turkish Investment Fund, Inc.
October 31, 2011
U.S. Privacy Policy (unaudited)
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our privacy policy ("Policy") annually.
This Policy applies to current and former individual clients of certain Morgan Stanley closed-end funds and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. We may amend this Policy at any time, and will inform you of any changes to this Policy as required by law.
We Respect Your Privacy
We appreciate that you have provided us with your personal financial information and understand your concerns about safeguarding such information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what nonpublic personal information we collect about you, how we collect it, when we may share it with others, and how others may use it. It discusses the steps you may take to limit our sharing of information about you with affiliated Morgan Stanley companies ("affiliated companies"). It also discloses how you may limit our affiliates' use of shared information for marketing purposes. Throughout this Policy, we refer to the nonpublic information that personally identifies you or your accounts as "personal information."
1. What Personal Information Do We Collect About You?
To better serve you and manage our business, it is important that we collect and maintain accurate information about you. We obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our websites and from third parties and other sources.
For example:
• We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through application forms you submit to us.
• We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.
• We may obtain information about your creditworthiness and credit history from consumer reporting agencies.
• We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.
25
The Turkish Investment Fund, Inc.
October 31, 2011
U.S. Privacy Policy (unaudited) (cont'd)
• If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of ''cookies.'' ''Cookies'' recognize your computer each time you return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies.
2. When Do We Disclose Personal Information We Collect About You?
To provide you with the products and services you request, to better serve you, to manage our business and as otherwise required or permitted by law, we may disclose personal information we collect about you to other affiliated companies and to nonaffiliated third parties.
a. Information We Disclose to Our Affiliated Companies. In order to manage your account(s) effectively, including servicing and processing your transactions, to let you know about products and services offered by us and affiliated companies, to manage our business, and as otherwise required or permitted by law, we may disclose personal information about you to other affiliated companies. Offers for products and services from affiliated companies are developed under conditions designed to safeguard your personal information.
b. Information We Disclose to Third Parties. We do not disclose personal information that we collect about you to nonaffiliated third parties except to enable them to provide marketing services on our behalf, to perform joint marketing agreements with other financial institutions, and as otherwise required or permitted by law. For example, some instances where we may disclose information about you to third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with a nonaffiliated third party, they are required to limit their use of personal information about you to the particular purpose for which it was shared and they are not allowed to share personal information about you with others except to fulfill that limited purpose or as may be required by law.
3. How Do We Protect the Security and Confidentiality of Personal Information We Collect About You?
We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information about you, and we require them to adhere to confidentiality standards with respect to such information.
4. How Can You Limit Our Sharing of Certain Personal Information About You With Our Affiliated Companies for Eligibility Determination?
We respect your privacy and offer you choices as to whether we share with our affiliated companies personal information that was collected to determine your eligibility for products and services such as credit reports and other information that you have provided to
26
The Turkish Investment Fund, Inc.
October 31, 2011
U.S. Privacy Policy (unaudited) (cont'd)
us or that we may obtain from third parties ("eligibility information"). Please note that, even if you direct us not to share certain eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with those companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account. We may also share certain other types of personal information with affiliated companies-such as your name, address, telephone number, e-mail address and account number(s), and information about your transactions and experiences with us.
5. How Can You Limit the Use of Certain Personal Information About You by Our Affiliated Companies for Marketing?
You may limit our affiliated companies from using certain personal information about you that we may share with them for marketing their products or services to you. This information includes our transactions and other experiences with you such as your assets and account history. Please note that, even if you choose to limit our affiliated companies from using certain personal information about you that we may share with them for marketing their products and services to you, we may still share such personal information about you with them, including our transactions and experiences with you, for other purposes as permitted under applicable law.
6. How Can You Send Us an Opt-Out Instruction?
If you wish to limit our sharing of certain personal information about you with our affiliated companies for "eligibility purposes" and for our affiliated companies' use in marketing products and services to you as described in this notice, you may do so by:
• Calling us at (800) 231-2608
Monday–Friday between 9a.m. and 6p.m. (EST)
• Writing to us at the following address:
Morgan Stanley Closed-End Privacy Department
Harborside Financial Center
201 Plaza Two, 3rd Floor
Jersey City, NJ 07311
If you choose to write to us, your written request should include: your name, address, telephone number and account number(s) to which the opt-out applies and should not be sent with any other correspondence. In order to process your request, we require that the request be provided by you directly and not through a third party. Once you have informed us about your privacy preferences, your opt-out preference will remain in effect with respect to this Policy (as it may be amended) until you notify us otherwise. If you are a joint account owner, we will accept instructions from any one of you and apply those instructions to the entire account. Please allow approximately 30 days from our receipt of your opt-out for your instructions to become effective.
Please understand that if you opt-out, you and any joint account holders may not receive certain Morgan Stanley or our affiliated companies' products and services that could help you manage your financial resources and achieve your investment objectives.
27
The Turkish Investment Fund, Inc.
October 31, 2011
U.S. Privacy Policy (unaudited) (cont'd)
If you have more than one account with us or our affiliates, you may receive multiple privacy policies from us, and would need to follow the directions stated in each particular policy for each account you have with us.
7. What if an affiliated company becomes a nonaffiliated third party?
If, at any time in the future, an affiliated company becomes a nonaffiliated third party, further disclosures of personal information made to the former affiliated company will be limited to those described in Section 2(b) above relating to nonaffiliated third parties. If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliated companies, your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a nonaffiliated third party.
SPECIAL NOTICE TO RESIDENTS OF VERMONT
This section supplements our Policy with respect to our individual clients who have a Vermont address and supersedes anything to the contrary in the above Policy with respect to those clients only.
The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information ("opt-in").
If you wish to receive offers for investment products and services offered by or through other affiliated companies, please notify us in writing at the following address:
Morgan Stanley Closed-End Privacy Department
Harborside Financial Center
201 Plaza Two, 3rd Floor
Jersey City, NJ 07311
Your authorization should include: your name, address, telephone number and account number(s) to which the opt-in applies and should not be sent with any other correspondence. In order to process your authorization, we require that the authorization be provided by you directly and not through a third-party.
28
The Turkish Investment Fund, Inc.
October 31, 2011
U.S. Privacy Policy (unaudited) (cont'd)
SPECIAL NOTICE TO RESIDENTS OF CALIFORNIA
The following section supplements our Policy with respect to our individual clients who have a California address and supersedes anything to the contrary in the above Policy with respect to those clients only.
In response to a California law, if your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
29
2011 Annual Report
October 31, 2011
Director and Officer Information (unaudited)
Independent Directors:
|
Name, Age and Address of Independent Director |
Position(s) Held with Registrant |
Length of Time Served* |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Independent Director** |
Other Directorships Held by Independent Director*** |
||||||||||||||||||
|
Frank L. Bowman (67) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036 |
Director |
Since August 2006 |
President, Strategic Decisions, LLC (consulting) (since February 2009); Director or Trustee of various Morgan Stanley Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee (since February 2007); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (February 2005 through November 2008); retired as Admiral, U.S. Navy after serving over 38 years on active duty including 8 years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004); served as Chief of Naval Personnel (July 1994-September 1996) and on the joint staff as Director of Political — Military Affairs (June 1992 to July 1994); Knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; Awarded the Officer de l'Orde National du Mérite by the French Government; elected to the National Academy of Engineering (2009). | 102 | Director of BP p.l.c.; Director of Naval and Nuclear Technologies LLP; Director of the Armed Services YMCA of the USA and the Naval Submarine League; Director of the American Shipbuilding Suppliers Association; Member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA military Advisory Board. | ||||||||||||||||||
|
Michael Bozic (70) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036 |
Director |
Since April 1994 |
Private investor; Chairperson of the Compliance and Insurance Committee (since October 2006); Director or Trustee of various Morgan Stanley Funds (since April 1994); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. | 104 | Director of various business organizations. | ||||||||||||||||||
30
2011 Annual Report
October 31, 2011
Director and Officer Information (unaudited) (cont'd)
Independent Directors: (cont'd)
|
Name, Age and Address of Independent Director |
Position(s) Held with Registrant |
Length of Time Served* |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Independent Director** |
Other Directorships Held by Independent Director |
||||||||||||||||||
|
Kathleen A. Dennis (58) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036 |
Director |
Since August 2006 |
President, Cedarwood Associates (mutual fund and investment management consulting) (since July 2006); Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006). | 102 | Director of various non-profit organizations. | ||||||||||||||||||
|
Dr. Manuel H. Johnson (62) c/o Johnson Smick Group, Inc. 888 16th Street, N.W. Suite 740 Washington, D.C. 20006 |
Director |
Since July 1991 |
Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since July 1991); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006), Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. | 104 | Director of NVR, Inc. (home construction); Director of Evergreen Energy; Director of Greenwich Capital Holdings. | ||||||||||||||||||
|
Joseph J. Kearns (69) c/o Kearns & Associates LLC PMB754 22631 Pacific Coast Highway Malibu, CA 90265 |
Director |
Since August 1994 |
President, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of various Morgan Stanley Funds (since August 1994); CFO of the J. Paul Getty Trust. | 105 | Director of Electro Rent Corporation (equipment leasing) and The Ford Family Foundation. | ||||||||||||||||||
31
2011 Annual Report
October 31, 2011
Director and Officer Information (unaudited) (cont'd)
Independent Directors: (cont'd)
|
Name, Age and Address of Independent Director |
Position(s) Held with Registrant |
Length of Time Served* |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Independent Director** |
Other Directorships Held by Independent Director*** |
||||||||||||||||||
|
Michael F. Klein (53) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036 |
Director |
Since August 2006 |
Managing Director, Aetos Capital, LLC (since March 2000) and Co-President, Aetos Alternatives Management, LLC (since January 2004); Chairperson of the Fixed Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, Morgan Stanley Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. LLC and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999). | 102 | Director of certain investment funds managed or sponsored by Aetos Capital, LLC. Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals). | ||||||||||||||||||
|
Michael E. Nugent (75) c/o Triumph Capital, L.P. 445 Park Avenue New York, NY 10022 |
Chairperson of the Board and Director |
Chairperson of the Boards since July 2006 and Director since July 1991 | General Partner, Triumph Capital, L.P. (private investment partnership); Chairperson of various Morgan Stanley Funds (since July 2006); Director or Trustee of the Funds (since July 1991); formerly, Chairperson of the Insurance Committee (until July 2006). | 104 | None. | ||||||||||||||||||
|
W. Allen Reed (64) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors 1177 Avenue of the Americas New York, NY 10036 |
Director |
Since August 2006 |
Chairperson of the Equity Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, President and CEO of General Motors Asset Management; Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005). | 102 | Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation; formerly, Director of iShares, Inc. (2001-2006). | ||||||||||||||||||
32
2011 Annual Report
October 31, 2011
Director and Officer Information (unaudited) (cont'd)
Independent Directors: (cont'd)
|
Name, Age and Address of Independent Director |
Position(s) Held with Registrant |
Length of Time Served* |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Interested Director** |
Other Directorships Held by Interested Director*** |
||||||||||||||||||
|
Fergus Reid (79) c/o Joe Pietryka, Inc. 85 Charles Colman Blvd. Pawling, NY 12564 |
Director |
Since June 1992 |
Chairman, Joe Pietryka, Inc.; Chairperson of the Governance Committee and Director or Trustee of various Morgan Stanley Funds (since June 1992). | 105 | Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by JP Morgan Investment Management Inc. | ||||||||||||||||||
Interested Director:
|
Name, Age and Address of Interested Director |
Position(s) Held with Registrant |
Length of Time Served* |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Interested Director** |
Other Directorships Held by Interested Director*** |
||||||||||||||||||
|
James F. Higgins (63) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311 |
Director |
Since June 2000 |
Director or Trustee of various Morgan Stanley Funds (since June 2000); Senior Advisor of Morgan Stanley (since August 2000). | 103 | Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services). | ||||||||||||||||||
* Each Director serves an indefinite term, until his or her successor is elected.
** The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by Morgan Stanley Investment Management Inc. (the "Adviser") (as of December 31, 2010) and any funds that have an adviser that is an affiliated person of the Adviser (including, but not limited to, Morgan Stanley AIP GP LP).
*** This includes any directorships at public companies and registered investment companies held by the Director at any time during the past five years.
33
2011 Annual Report
October 31, 2011
Director and Officer Information (unaudited) (cont'd)
Executive Officers:
| Name, Age and Address of Executive Officer |
Position(s) Held with Registrant |
Length of Time Served* |
Principal Occupation(s) During Past 5 Years | ||||||||||||
|
Arthur Lev (50) 522 Fifth Avenue New York, NY 10036 |
President and Principal Executive Officer — Equity and Fixed Income Funds |
Since June 2011 |
President and Principal Executive Officer (since June 2011) of the Equity and Fixed Income Funds in the Fund Complex; Head of the Long Only Business of Morgan Stanley Investment Management (since February 2011); Managing Director of the Adviser and various entities affiliated with the Adviser (since December 2006). Formerly, Chief Strategy Officer of Morgan Stanley Investment Management's Traditional Asset Management business (November 2010-February 2011); General Counsel of Morgan Stanley Investment Management (December 2006-October 2010); Partner and General Counsel of FrontPoint Partners LLC (July 2002 to December 2006); Managing Director and General Counsel of Morgan Stanley Investment Management (May 2000 to June 2002). | ||||||||||||
|
Mary Ann Picciotto (38) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311 |
Chief Compliance Officer |
Since May 2010 |
Executive Director of the Adviser and various entities affiliated with the Adviser; Chief Compliance Officer of various Morgan Stanley Funds (since May 2010); Chief Compliance Officer of the Adviser (since April 2007). | ||||||||||||
|
Stefanie V. Chang Yu (45) 522 Fifth Avenue New York, NY 10036 |
Vice President |
Since December 1997 |
Managing Director of the Adviser and various entities affiliated with the Adviser; Vice President of various Morgan Stanley Funds (since December 1997), Formerly, Secretary of the Adviser and various entities affiliated with the Adviser. | ||||||||||||
|
Francis J. Smith (46) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311 |
Treasurer and Principal Financial Officer | Treasurer since July 2003 and Principal Financial Officer since September 2002 | Executive Director of the Adviser and various entities affiliated with the Adviser; Treasurer and Principal Financial Officer of various Morgan Stanley Funds (since July 2003). | ||||||||||||
|
Mary E. Mullin (44) 522 Fifth Avenue New York, NY 10036 |
Secretary |
Since June 1999 |
Executive Director of the Adviser and various entities affiliated with the Adviser; Secretary of various Morgan Stanley Funds (since June 1999). | ||||||||||||
* Each Officer serves an indefinite term, until his or her successor is elected.
34
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Item 2. Code of Ethics.
(a) The Trust/Fund has adopted a code of ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Trust/Fund or a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Trust/Fund’s Code of Ethics is attached hereto as Exhibit 12 A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund’s Board of Trustees has determined that Joseph J. Kearns, an “independent” Trustee, is an “audit committee financial expert” serving on its audit committee. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2011
|
|
|
Registrant |
|
Covered Entities(1) |
| ||
|
Audit Fees |
|
$ |
50,700 |
|
N/A |
| |
|
|
|
|
|
|
| ||
|
Non-Audit Fees |
|
|
|
|
| ||
|
Audit-Related Fees |
|
$ |
— |
(2) |
$ |
— |
(2) |
|
Tax Fees |
|
$ |
3,380 |
(3) |
$ |
89,626 |
(4) |
|
All Other Fees |
|
$ |
|
|
$ |
390,354 |
|
|
Total Non-Audit Fees |
|
$ |
3,380 |
|
$ |
479,980 |
|
|
|
|
|
|
|
| ||
|
Total |
|
$ |
54,080 |
|
$ |
479,980 |
|
2010
|
|
|
Registrant |
|
Covered Entities(1) |
| ||
|
Audit Fees |
|
$ |
50,700 |
|
N/A |
| |
|
|
|
|
|
|
| ||
|
Non-Audit Fees |
|
|
|
|
| ||
|
Audit-Related Fees |
|
$ |
— |
(2) |
$ |
— |
(2) |
|
Tax Fees |
|
$ |
3,380 |
(3) |
$ |
199,783 |
(4) |
|
All Other Fees |
|
$ |
|
|
$ |
154,883 |
(5) |
|
Total Non-Audit Fees |
|
$ |
3,380 |
|
$ |
354,666 |
|
|
|
|
|
|
|
| ||
|
Total |
|
$ |
54,080 |
|
$ |
354,666, |
|
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.
(2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities’ and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements.
(3) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant’s tax returns.
(4) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities’ tax returns.
(5) All other fees represent project management for future business applications and improving business and operational processes.
(e)(1) The audit committee’s pre-approval policies and procedures are as follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(1)
1. Statement of Principles
The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor’s independence from the Fund.
The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee’s administration of the engagement of the independent auditor. The SEC’s rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee (“general pre-approval”); or require the specific pre-approval of the Audit Committee or its delegate (“specific pre-approval”). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the “Policy”), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time.
The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee’s responsibilities to pre-approve services performed by the Independent Auditors to management.
The Fund’s Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors’ independence.
2. Delegation
As provided in the Act and the SEC’s rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
3. Audit Services
The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund’s financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
4. Audit-related Services
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters
not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
5. Tax Services
The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor’s independence, and the SEC has stated that the Independent Auditors may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
6. All Other Services
The Audit Committee believes, based on the SEC’s rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
7. Pre-Approval Fee Levels or Budgeted Amounts
Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services.
8. Procedures
All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund’s Chief Financial Officer and must include a detailed description of the services to be
rendered. The Fund’s Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund’s Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
The Audit Committee has designated the Fund’s Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund’s Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund’s Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund’s Chief Financial Officer or any member of management.
9. Additional Requirements
The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor’s independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence.
10. Covered Entities
Covered Entities include the Fund’s investment adviser(s) and any entity controlling, controlled by or under common control with the Fund’s investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund’s audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:
Morgan Stanley Retail Funds
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
Morgan Stanley Institutional Funds
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee’s pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors’ independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are:
Joseph Kearns, Michael Nugent and Allen Reed.
(b) Not applicable.
Item 6.
(a) See Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The Fund/Trust invests in exclusively non-voting securities and therefore this item is not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
The Turkish Investment Fund, Inc.
FUND MANAGEMENT
PORTFOLIO MANAGEMENT. As of the date of this report, the Fund is managed by members of the Emerging Markets Equity team. The team consists of portfolio managers and analysts. Current members of the team jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and the overall execution of the strategy of the Fund are Paul Psaila and Eric Carlson, each a Managing Director of the Adviser.
Mr. Psaila has been associated with the Adviser in an investment management capacity since February 1994 and began managing the Fund in September 1997. Mr. Carlson has been associated with the Adviser in an investment management capacity since September 1997 and began managing the Fund in January 2006.
The composition of the team may change from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGERS
As of October 31, 2011:
Mr. Psaila managed eight registered investment companies with a total of approximately $3.5 billion in assets; five pooled investment vehicles other than registered investment companies with a total of approximately $2.8 billion in assets; and 19 other accounts with a total of approximately $5.2 billion in assets. Of these other accounts, three accounts with a total of approximately $1.6 billion in assets, had performance-based fees.
Mr. Carlson managed seven registered investment companies with a total of approximately $3.2 billion in assets; five pooled investment vehicles other than registered investment companies with a total of approximately $2.8 billion in assets; and 19 other accounts with a total of approximately $5.2 billion in assets. Of these other accounts, three accounts with a total of approximately $1.6 billion in assets, had performance-based fees.
Because the portfolio managers manage assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals), there may be an incentive to favor one client over another resulting in conflicts of interest. For instance, the Adviser may receive fees from certain accounts that are higher than the fee it receives from the Fund, or it may receive a performance-based fee on certain accounts. In those instances, the portfolio manager may have an incentive to favor the higher and/or performance-based fee accounts over the Fund. In addition, a conflict of interest could exist to the extent the Adviser has proprietary investments in certain accounts, where portfolio managers have personal investments in certain accounts or when certain accounts are investment options in the Adviser’s employee benefits and/or deferred compensation plans. The portfolio managers may have an incentive to favor these accounts over others. If the Adviser manages accounts that
engage in short sales of securities of the type in which the Fund invests, the Adviser could be seen as harming the performance of the Fund for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall. The Adviser has adopted trade allocation and other policies and procedures that it believes are reasonably designed to address these and other conflicts of interest.
PORTFOLIO MANAGER COMPENSATION STRUCTURE
Portfolio managers receive a combination of base compensation and discretionary compensation, comprising a cash bonus and several deferred compensation programs described below. The methodology used to determine portfolio manager compensation is applied across all funds/accounts managed by the portfolio managers.
BASE SALARY COMPENSATION. Generally, portfolio managers receive base salary compensation based on the level of their position with the Adviser.
DISCRETIONARY COMPENSATION. In addition to base compensation, portfolio managers may receive discretionary compensation.
Discretionary compensation can include:
· Cash Bonus.
· Morgan Stanley’s Long Term Incentive Compensation awards - a mandatory program that defers a portion of discretionary year-end compensation into restricted stock units or other awards based on Morgan Stanley common stock or other plans that are subject to vesting and other conditions.
· Investment Management Alignment Plan (IMAP) awards - a mandatory program that defers a portion of discretionary year-end compensation and notionally invests it in designated funds advised by the Adviser or its affiliates. The award is subject to vesting and other conditions. Portfolio managers must notionally invest a minimum of 25% to a maximum of 100% of their IMAP deferral account into a combination of the designated funds they manage that are included in the IMAP fund menu, which may or may not include the Fund. IMAP awards contain a clawback provision that can be triggered if an individual engages in conduct detrimental to Morgan Stanley or one of its businesses — such as causing the need for a material restatement of results, a substantial loss on a holding or any loss on a holding if the employee operated outside of risk parameters, which such holding was a factor in determining compensation.
· Voluntary Deferred Compensation Plans - voluntary programs that permit certain employees to elect to defer a portion of their discretionary year-end compensation and notionally invest the deferred amount across a range of designated investment funds, which may include funds advised by the Adviser or its affiliates.
Several factors determine discretionary compensation, which can vary by portfolio management team and circumstances. These factors include:
· Revenues generated by the investment companies, pooled investment vehicles and other accounts managed by the portfolio manager.
· The investment objective of the funds/accounts managed by the portfolio manager.
· Contribution to the business objectives of the Adviser.
· The dollar amount of assets managed by the portfolio manager.
· Market compensation survey research by independent third parties.
· Other qualitative factors, such as contributions to client objectives.
· Performance of Morgan Stanley and Morgan Stanley Investment Management, and the overall performance of the investment team(s) of which the portfolio manager is a member.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of October 31, 2011, the portfolio managers did not own any shares of the Fund.
Applicable only to reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
REGISTRANT PURCHASE OF EQUITY SECURITIES
|
Period |
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(a) Total |
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(b) Average |
|
(c) Total |
|
(d) Maximum |
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mo-da-year — |
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|
|
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N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
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N/A |
|
N/A |
|
|
mo-da-year — |
|
|
|
|
|
N/A |
|
N/A |
|
|
Total |
|
|
|
|
|
N/A |
|
N/A |
|
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Trust’s/Fund’s principal executive officer and principal financial officer have concluded that the Trust’s/Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust/Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.
(b) There were no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto.
(b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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The Turkish Investment Fund |
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/s/ Arthur Lev |
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Arthur Lev |
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Principal Executive Officer |
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December 15, 2011 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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/s/ Arthur Lev |
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Arthur Lev |
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Principal Executive Officer |
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December 15, 2011 |
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/s/ Francis Smith |
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Francis Smith |
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Principal Financial Officer |
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December 15, 2011 |
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