<PAGE>
THE THAI FUND, INC.
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DIRECTORS AND OFFICERS
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS Snoh Unakul
Michael F. Klein DIRECTOR
PRESIDENT AND DIRECTOR James W. Grisham
Peter J. Chase VICE PRESIDENT
DIRECTOR Harold J. Schaaff, Jr.
John W. Croghan VICE PRESIDENT
DIRECTOR Joseph P. Stadler
David B. Gill VICE PRESIDENT
DIRECTOR Valerie Y. Lewis
Graham E. Jones SECRETARY
DIRECTOR Joanna M. Haigney
Sukri Kaocharern TREASURER
DIRECTOR Belinda A. Brady
John A. Levin ASSISTANT TREASURER
DIRECTOR
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U.S. INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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THAI INVESTMENT ADVISER
The Mutual Fund Public Company Limited
30th-32nd Floor, Lake Rajada Building
193-195 Ratchadaphisek Road
Khlong-Toey, Bangkok 10110 Thailand
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ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIANS
The Thai Farmers Bank Public Company Limited
1 Soi Thai Farmers
Ratburana Road, Ratburana
Bangkok, Thailand
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(617) 575-3120
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LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
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For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
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THE
THAI FUND,
INC.
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THIRD QUARTER REPORT
SEPTEMBER 30, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- ----------
For the nine months ended September 30, 1997, The Thai Fund, Inc. (the "Fund")
had a total return, based on net asset value per share, of -49.47% compared to
- -53.56% for the U.S. dollar adjusted Securities Exchange of Thailand Index (the
"Index"). For the one year ended September 30, 1997, the Fund had a total
return, based on net asset value per share, of -63.31% compared to -65.18% for
the Index. For the period from the Fund's commencement of operations on February
16, 1988 through September 30, 1997, the Fund's total return, based on net asset
value per share, was 50.17% compared to 13.55% for the Index. On September 30,
1997, the closing price of the Fund's shares on the New York Stock Exchange was
$11 1/8 , representing a 42.7% premium to the Fund s net asset value per share.
Although the Thai market rallied in baht terms, as a result of the baht
devaluation, in U.S. terms the Thai market fell 25.7% during the third quarter.
The currency crisis in the Asian regional markets affected worldwide sentiment
towards Thailand. Despite higher domestic interest rates, the Thai baht
continued to fall. The devaluation of the Thai baht is likely to result in
further deterioration of corporate earnings due to high levels of U.S.
dollar-denominated debt. The devaluation of the Thai baht, however, is an
important government policy change that may eventually lead to economic and
market recovery. In the meantime, the Thai economy and stock market still face a
number of problems, such as high interest rates, an anticipated recession in
1998, credit contraction, high levels of bad debts and falling corporate
earnings.
As expected, the export sectors, such as the electronics, telecommunications and
energy sectors, have outperformed the benchmark since the devaluation in July.
The investment theme in the third quarter was to find survivors in a tight
liquidity environment. Companies earning U.S. dollar revenues have been
aggressively sought after by investors in the market. At the time of this
writing, the valuations of such companies and other export-related companies are
at a premium to the market. The current investment outflow from the
finance sector into U.S. dollar-based companies will likely continue in the
near term. Further, it is anticipated that the consumer goods, entertainment,
retail and telecommunications industries will flourish as they did after the
1984 baht devaluation.
In an effort to revive the Thai economy and promote confidence in the market,
the Thai government during the third quarter accepted a $17.1 billion loan from
the International Monetary Fund. In accepting the loan, the Thai government
agreed to an IMF-mandated austerity program, that established a number of
fiscal-related targets for Thailand, such as retaining international reserves of
at least $24.5 billion in 1997 and $24.8 billion in 1998, reducing the current
account deficit from 8.0% in 1996 to 3.9% and 1.7% in 1997 and 1998,
respectively, expanding the economic growth rate by 0.6% in 1997 and 1.0% in
1998 and capping the inflation rate at 12.0% in 1997 and 5.8% in 1998.
The Fund's underperformance of the Index for the third quarter was primarily due
to stock selection as certain stocks in our portfolio underperformed the broader
market. In terms of sector strategy, the Fund did not perform well, having an
overweight position in the banking sector which underperformed the Index and an
underweight position in the energy sector which outperformed the benchmark. The
Fund owned securities of four banks which accounted for 30.5% of the Fund's net
assets, compared to the benchmark weighting of 26.2%.
Headed into the fourth quarter, the market is expected to enter a narrow trading
range in which we believe, it will remain until interest rates start to decline
and it is clear that the economy is past the worst. These events, however, are
not likely to materialize until at least 1998.
Although the Fund is permitted to temporarily increase its cash position during
periods of market volatility, we intend, consistent with the Fund s long-term
investment objective to remain invested in equity securities, even during market
downturns.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
/s/ Ean Wah Chin
Ean Wah Chin
Senior Portfolio Manager
October 1997
2
<PAGE>
THE THAI FUND, INC.
INVESTMENT SUMMARY AS OF SEPTEMBER 30, 1997 (UNAUDITED)
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<TABLE>
<CAPTION>
HISTORICAL TOTAL RETURN (%)
INFORMATION ----------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
--------------------- -------------------- -------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE -31.21% -- -49.47% -- -53.56% --
ONE YEAR -48.27 -48.27% -63.31 -63.31% -65.18 -65.18%
FIVE YEAR 2.33+ 0.46+ -36.45+ -8.67+ -55.30 -14.88
SINCE INCEPTION* 114.18+ 8.23+ 50.17+ 4.31+ 13.55 1.33
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[BARCHART]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31: NINE MONTHS
ENDED
1988* 1989 1990 1991 1992 1993 1994 1995 1996 SEPTEMBER 30, 1997
----- ---- ---- ---- ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value
Per Share . . . . $ 10.24 $ 18.88 $ 13.08 $ 15.41 $ 20.69 $ 39.42 $ 28.30 $ 24.89 $15.63 $ 7.80
Market Value
Per Share . . . $ 11.75 $ 32.25 $ 16.00 $ 16.25 $ 18.75 $ 36.88 $ 22.38 $ 22.38 $16.38 $11.13
Premium/(Discount) . 14.7% 70.8% 22.3% 5.5% -9.4% -6.4% -20.9% -10.1% 4.8% 42.7%
Income Dividends . $ 0.29 $ 0.36 $ 0.21 $ 0.21 -- $ 0.36 $ 0.35 $ 0.11 $ 0.32 $ 0.06
Capital Gains
Distributions -- $ 2.09 $ 1.68 $ 0.47 -- $ 0.51 $ 4.62 $ 3.38 $ 0.08 $ 0.12
Fund Total Return (2) -5.60% 109.87% -20.44% 23.08% 34.26% 98.89% -10.43%+ -0.05% -35.93% -49.47%
Index Total Return (3) 3.90% 120.97% -28.60% 15.80% 24.71% 88.40% -17.76% -6.11% -36.25% -53.56%
</TABLE>
(1) Assumes dividends and distributions, if any, were reinvested.
(2) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
per share of the Fund.
(3) The U.S. dollar adjusted Securities Exchange of Thailand (SET) Index is a
capitalization weighted index of all stocks traded on the Stock Exchange of
Thailand, including dividends.
* The Fund commenced operations on February 16, 1988.
+ This return does not include the effect of the rights issued in connection
with the Rights Offering.
3
<PAGE>
THE THAI FUND, INC.
PORTFOLIO SUMMARY AS OF SEPTEMBER 30, 1997 (UNAUDITED)
- -------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
[CHART] Equity Securities (97.2%)
Short-Term Investments (2.8%)
- --------------------------------------------------------------------------------
SECTORS
[CHART] Appliances & Household Durables (4.4%)
Automobiles (5.0%)
Banking (30.5%)
Beverages & Tobacco (11.6%)
Broadcasting & Publishing (8.4%)
Building Materials & Components (5.8%)
Financial Services (5.8%)
Insurance (3.8%)
Miscellaneous Materials & Commodities (3.8%)
Telecommunications (6.3%)
Other (14.6%)
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
PERCENT OF
NET ASSETS
----------
1. Bangkok Bank Co., Ltd. 12.1%
2. The Serm Suk Co., Ltd. 11.6
3. Thai Farmers Bank Co., Ltd 10.0
4. Siam Commercial Bank Co., Ltd. 7.3
5. BEC World Co., Ltd. 6.4
6. Thai Investment & Securities Co., Ltd. 4.2%
7. Thai Rung Union Car Co., Ltd. 3.9
8. Charoen Pokphand Feedmill Co., Ltd. 3.8
9. National Petrochemical Co., Ltd. 3.7
10. Advanced Information Services Co., Ltd. 3.2
-----
66.2%
-----
-----
* Excludes short-term investments.
4
<PAGE>
INVESTMENTS (UNAUDITED)
- -----------
SEPTEMBER 30, 1997
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
THAI INVESTMENT PLAN (103.3%)
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THAI COMMON STOCKS (101.8%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES (4.4%)
Onpa International Co., Ltd. 2,047,400 U.S.$ 2,989
Singer Thailand Co., Ltd. 165,800 277
Thai Glass Industries Co., Ltd. 423,200 816
Thai Glass Industries Co., Ltd. (Foreign) 229,800 443
---------
4,525
---------
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AUTOMOBILES (5.0%)
Swedish Motor Co., Ltd. 1,371,100 520
Thai Rung Union Car Co., Ltd. 1,927,300 4,035
Thai Stanley Electric Co., Ltd. 730,000 583
---------
5,138
---------
- --------------------------------------------------------------------------------
BANKING (30.5%)
Bangkok Bank Co., Ltd. 3,600,000 12,397
Industrial Finance Corp. of Thailand 950,000 1,073
Siam Commercial Bank Co., Ltd. 2,300,000 7,477
Thai Farmers Bank Co., Ltd. 3,900,000 10,260
---------
31,207
---------
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BEVERAGES & TOBACCO (11.6%)
The Serm Suk Co., Ltd. 1,309,000 11,828
---------
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BROADCASTING & PUBLISHING (8.4%)
BEC World Co., Ltd. 1,000,000 6,501
Matichon Co., Ltd. 13,100 16
Media of Medias Co., Ltd. 500,000 214
Nation Multimedia Group Co., Ltd. (Foreign) 824,900 716
Nation Multimedia Group Co., Ltd. 1,175,100 1,028
Post Publishing Co., Ltd. 141,275 97
---------
8,572
---------
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BUILDING MATERIALS & COMPONENTS (5.8%)
American Standard Sanitaryware Thailand
Co., Ltd. 75,150 455
Siam Cement Co., Ltd. 264,000 3,055
Siam City Cement Co., Ltd. 620,000 2,203
Tipco Asphalt Co. Ltd. 72,800 223
---------
5,936
---------
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CHEMICALS (3.7%)
National Petrochemical Co., Ltd. 5,904,900 3,741
---------
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ELECTRICAL & ELECTRONICS (1.6%)
Shinawatra Computer Co., Ltd. 300,000 1,628
---------
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ENERGY EQUIPMENT & SERVICES (0.9%)
Thai Storage Battery Co., Ltd. 1,008,700 U.S.$ 875
-----------
- --------------------------------------------------------------------------------
ENERGY SOURCES (0.6%)
Lanna Lignite Co. Ltd. 100,000 543
Saha-Union Co., Ltd. (Rights) 161,133 44
-----------
587
-----------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (5.8%)
Phatra Leasing Co., Ltd. 440,000 78
Phatra Thanakit Co., Ltd. 1,500,000 1,508
Thai Investment & Securities Co., Ltd. 2,042,900 4,333
-----------
5,919
-----------
- --------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS (0.3%)
Big C Supercenter Co., Ltd. 1,250,000 331
-----------
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INSURANCE (3.8%)
Bangkok Insurance Co., Ltd. 261,800 3,101
Dhipaya Insurance Co., Ltd. 1,062,700 805
-----------
3,906
-----------
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LEISURE & TOURISM (0.1%)
Thai Wah Resort Development Co., Ltd. 221,600 104
-----------
- --------------------------------------------------------------------------------
MACHINERY & ENGINEERING (0.3%)
Sino Thai Engineering & Construction Co., Ltd. 195,800 324
-----------
- --------------------------------------------------------------------------------
MERCHANDISING (0.0%)
Robinson Department Store Co., Ltd. 152,300 19
Robinson Department Store Co., Ltd. (Foreign) 24,000 3
-----------
22
-----------
- --------------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES (3.8%)
Charoen Pokphand Feedmill Co., Ltd. 1,848,800 3,871
-----------
- --------------------------------------------------------------------------------
REAL ESTATE (1.9%)
Central Pattana Co., Ltd. 24,100 39
Land & House Co., Ltd. 1,478,278 1,629
Quality House Co., Ltd. 1,683,400 324
Quality House Co., Ltd. (Rights) 673,360 --@
-----------
1,992
-----------
- --------------------------------------------------------------------------------
RECREATION, OTHER CONSUMER GOODS (1.8%)
CVD Entertainment Co., Ltd. 1,467,500 1,860
-----------
- --------------------------------------------------------------------------------
5
<PAGE>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (6.3%)
Advanced Information Services Co., Ltd. 500,000 U.S.$ 3,306
TelecomAsia Co., Ltd. 1,000,000 812
United Communication Industry Co., Ltd. 772,000 2,297
-----------
6,415
-----------
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (2.4%)
Saha-Union Co., Ltd. 1,933,600 1,572
Thai Rung Textile Co., Ltd. 3,832 --@
Thai Wacoal Co., Ltd. 347,013 860
-----------
2,432
-----------
- --------------------------------------------------------------------------------
UTILITIES - ELECTRICAL & GAS (2.8%)
Eastern Water Resources Development Co., Ltd. 2,500,000 2,858
-----------
- --------------------------------------------------------------------------------
TOTAL THAI COMMON STOCKS
(Cost U.S.$164,366) 104,071
-----------
- --------------------------------------------------------------------------------
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (1.5%)
(Interest Bearing Demand Account)
Thai Baht (Cost U.S.$1,740) THB 55,608 1,532
-----------
- --------------------------------------------------------------------------------
TOTAL THAI INVESTMENT PLAN
(Cost U.S.$166,106) 105,603
-----------
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (1.4%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.4%)
Chase Securities, Inc., 5.75%, dated 9/30/97,
due 10/1/97, to be repurchased at U.S.$1,473,
collateralized by United States Treasury Bonds
7.875%, due 2/15/21, valued at U.S.$1,505
(Cost U.S.$ 1,473) U.S.$ 1,473 1,473
-----------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (104.7%)
(Cost U.S.$167,579) 107,076
-----------
- --------------------------------------------------------------------------------
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-4.7%)
Other Assets U.S. $ 1,606
Liabilities (6,434) U.S. $(4,828)
--------------- -------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 13,101,845 issued and outstanding U.S.$0.01 par value shares
(30,000,000 shares authorized) U.S. $102,248
-------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S. $ 7.80
-----------
- --------------------------------------------------------------------------------
@ -- Value is less than U.S.$500.
NOTE: Prior government approval for foreign investments may be required
under certain circumstances in some emerging markets, and foreign
ownership limitations may also be imposed by the charters of
individual companies in emerging markets. As a result, an additional
class of shares designated as "foreign" may be created and offered for
investment. The "local" and "foreign" shares' market values may vary.
6
