<PAGE>
THE THAI FUND, INC.
- ---------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS Snoh Unakul
Warren J. Olsen DIRECTOR
PRESIDENT AND DIRECTOR James W. Grisham
Michael F. Klein 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
</TABLE>
- ---------------------------------------------
U.S. INVESTMENT ADVISER
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
- ----------------------------------------------------------------
THAI INVESTMENT ADVISER
The Mutual Fund Public Company Limited
30th-32nd Floor, Lake Rajada Building
193-195 Ratchadaphisek Road
Khlong-Toey, Bangkok 10110 Thailand
- ----------------------------------------------------------------
ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
- ----------------------------------------------------------------
CUSTODIANS
The Thai Farmers Bank Public Company Limited
1 Soi Thai Farmers
Ratburana Road, Ratburana
Bangkok, Thailand
The Chase Manhattan Bank
770 Broadway
New York, New York 10003
- ----------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(617) 575-3120
- ----------------------------------------------------------------
LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
- ----------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- ----------------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726.
----------------------------------------------------------------
THE
THAI FUND,
INC.
----------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------
For the six months ended June 30, 1997, The Thai Fund, Inc. (the "Fund") had a
total return, based on net asset value per share, of -31.51% compared to -34.14%
for the U.S. dollar adjusted Securities Exchange of Thailand Index (the
"Index"). For the one year ended June 30, 1997, the Fund had a total return,
based on net asset value per share, of -56.07% compared with -56.56% for the
Index. For the period from the Fund's commencement of operations on February 16,
1988 through June 30, 1997, the Fund's total return, based on net asset value
per share, was 103.54% compared to 61.02% for the Index. On June 30, 1997, the
closing price of the Fund's shares on the New York Stock Exchange was $15 3/8,
representing a 43.6% premium to the net asset value per share.
The Thai market fell sharply in the first half of the year as the economy, which
began to slow down last year, gathered downward momentum towards the middle of
the year. The official forecast for 1997 GDP growth was cut from 7.1% to 5.9% as
corporate bankruptcies and defaults by major companies on their debt instruments
sparked fears about a financial crisis.
Speculative attacks on the Thai baht resulted in capital controls being imposed
on offshore lending of the currency, which, in turn, had the unintended effect
of cutting off foreign credit to domestic companies, creating a liquidity
crisis. Interbank rates soared from 10% in May to 22% in June. Adding to the
litany of bad news, the much discussed merger between Finance One, the largest
finance company in Thailand, and Thai Danu Bank did not materialize. As the
amount of non-performing loans at banks rose, causing confidence in the banking
system to reach new lows, the Bank of Thailand stepped in and ordered 16 finance
companies to cease operations.
With the Thai baht coming under continued pressure, the Bank of Thailand
announced on July 2, 1997 that the Thai baht would be a "managed float" under a
new currency regime. The Thai market initially surged strongly in response to
the news as foreign investors piled into the market, bidding up stocks of blue
chip companies. After a week of euphoric rise, the markets began trending
sideways and the market gains in local currency terms were fully offset by
depreciation of the baht against the dollar.
At this writing, there is increasing likelihood that the Thai government will
opt for help from the International Monetary Fund (IMF). Unfortunately, just as
the baht float proved not to be a panacea, neither is the IMF program without
pain. It calls for fairly drastic measures such as letting bankrupt finance
companies shut down and keeping interest rates high. While IMF's presence will
lend confidence to investors, the weak currency and unstable economy will most
probably sideline investors. The market is expected to trade within narrow
ranges until a clearer picture emerges.
Sincerely,
[SIGNATURE]
Michael F. Klein
PRESIDENT AND DIRECTOR
[SIGNATURE]
Ean Wah Chin
SENIOR PORTFOLIO MANAGER
[SIGNATURE]
Richard Toh
PORTFOLIO MANAGER
July 1997
2
<PAGE>
The Thai Fund, Inc.
Investment Summary as of June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
----------------------------------------------------------------------------
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 -6.11% -- -31.51% -- -34.14% --
ONE YEAR -34.25 -34.25% -56.07 -56.07% -56.56 -56.56%
FIVE YEAR 46.26+ 7.90+ 0.61+ 0.12+ -28.05 -6.37
SINCE INCEPTION* 192.32+ 12.24+ 103.54+ 7.88+ 61.02 5.21
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
TOTAL RETURN
1988* 1989 1990 1991 1992 1993 1994 1995 1996
<S> <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
Market Value Per Share $11.75 $32.25 $16.00 $16.25 $18.75 $36.88 $22.38 $22.38 $16.38
Premium/(Discount) 14.7% 70.8% 22.3% 5.5% -9.4% -6.4% -20.9% -10.1% 4.8%
Income Dividends $0.29 $0.36 $0.21 $0.21 - $0.36 $0.35 $0.11 $0.32
Capital Gains Distributions - $2.09 $1.68 $0.47 - $0.51 $4.62 $3.38 $0.08
Fund Total Return (2) -5.60% 109.87% -20.44% 23.08% 34.26% 98.89% -10.43%+ -0.05% -35.93%
Index Total Return (3) 3.90% 120.97% -28.60% 15.80% 24.71% 88.40% -17.76% -6.11% -36.25%
<CAPTION>
YEARS ENDED DECEMBER 31: SIX MONTHS
TOTAL RETURN ENDED
JUNE 30, 1997
<S> <C>
Net Asset Value Per Share $10.71
Market Value Per Share $15.38
Premium/(Discount) 43.6%
Income Dividends -
Capital Gains Distributions -
Fund Total Return (2) -31.51%
Index Total Return (3) -34.14%
</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 June 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Equity Securities 95.3%
Short-Term Investments 4.7%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Appliances & Household Durables 5.3%
Automobiles 5.8%
Banking 28.2%
Beverages & Tobacco 10.1%
Broadcasting & Publishing 8.3%
Building Materials & Components 5.1%
Chemicals 4.3%
Financial Services 4.2%
Insurance 3.7%
Telecommunications 9.5%
Other 15.5%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
1. Bangkok Bank Co., Ltd. 12.8%
2. The Serm Suk Co., Ltd. 10.1
3. Thai Farmers Bank Co., Ltd. 8.5
4. Siam Commercial Bank Co.,
Ltd. 6.1
5. BEC World Co., Ltd. 6.1
<CAPTION>
PERCENT OF
NET ASSETS
----
<C> <S> <C>
6. Advanced Information Services
Co., Ltd. 4.7%
7. National Petrochemical Co.,
Ltd. 4.3
8. Thai Rung Union Car Co., Ltd. 4.3
9. Onpa International Co., Ltd. 3.6
10. Thai Investment & Securities
Co., Ltd. 3.0
----
63.5%
----
----
</TABLE>
*Excludes short-term investments.
4
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
JUNE 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
THAI INVESTMENT PLAN (102.5%)
- --------------------------------------------------
- ----------
THAI COMMON STOCKS (98.5%)
(Unless otherwise noted)
- -----------------------------------------------------------------
- -------------
APPLIANCES & HOUSEHOLD DURABLES (5.3%)
Onpa International Co., Ltd. 2,047,400 U.S.$ 5,058
Singer Thailand Co., Ltd. 165,800 640
(c)Thai Glass Industries Co., Ltd.
(Foreign) 229,800 603
Thai Glass Industries Co., Ltd. 423,200 1,111
--------------
7,412
--------------
AUTOMOBILES (5.8%)
Swedish Motor Co., Ltd. 1,371,100 635
Thai Rung Union Car Co., Ltd. 1,660,000 5,991
Thai Stanley Electric Co., Ltd. 730,000 1,522
--------------
8,148
--------------
BANKING (28.2%)
Bangkok Bank Co., Ltd. 3,600,000 17,927
Industrial Finance Corp. of Thailand 950,000 1,073
Siam Commercial Bank Co., Ltd. 2,300,000 8,612
Thai Farmers Bank Co., Ltd. 3,900,000 11,969
--------------
39,581
--------------
BEVERAGES & TOBACCO (10.1%)
The Serm Suk Co., Ltd. 1,149,800 14,203
--------------
BROADCASTING & PUBLISHING (8.3%)
BEC World Co., Ltd. 914,000 7,833
(c)BEC World Co., Ltd. (Foreign) 86,000 737
Media of Medias Co., Ltd. 500,000 1,158
Matichon Co., Ltd. 13,100 24
(c)Nation Multimedia Group Co., Ltd.
(Foreign) 824,900 1,751
Post Publishing Co. Ltd. 141,275 142
--------------
11,645
--------------
BUILDING MATERIALS & COMPONENTS (5.1%)
American Standard Sanitaryware
Thailand Co., Ltd. 75,150 383
Siam Cement Co., Ltd. 264,000 3,934
Siam City Cement Co., Ltd. 620,000 2,513
Tipco Asphalt Co., Ltd. 72,800 379
--------------
7,209
--------------
CHEMICALS (4.3%)
National Petrochemical Co., Ltd. 5,904,900 6,041
--------------
ELECTRICAL & ELECTRONICS (2.6%)
Shinawatra Computer Co., Ltd. (Local) 520,700 3,598
--------------
ENERGY EQUIPMENT & SERVICES (0.5%)
Thai Storage Battery Co., Ltd. 691,700 694
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
SHARES (000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
ENERGY SOURCES (0.5%)
Lanna Lignite Co. Ltd. 100,000 U.S.$ 707
(a)Saha-Union Co., Ltd. (Rights) 161,133 62
--------------
769
--------------
FINANCIAL SERVICES (4.2%)
Phatra Leasing Co., Ltd. 440,000 110
Phatra Thanakit Co., Ltd. 1,500,000 1,534
Thai Investment & Securities Co., Ltd. 2,042,900 4,180
--------------
5,824
--------------
FOOD & HOUSEHOLD PRODUCTS (0.3%)
Big C Supercenter Co., Ltd. 1,250,000 396
--------------
INSURANCE (3.7%)
Bangkok Insurance Co., Ltd. 261,800 3,376
Dhipaya Insurance Co., Ltd. 1,013,700 1,663
(c)Dhipaya Insurance Co., Ltd.
(Foreign) 49,000 80
--------------
5,119
--------------
LEISURE & TOURISM (0.1%)
(a)Thai Wah Resort Development Co.,
Ltd. 171,900 100
--------------
MACHINERY & ENGINEERING (0.4%)
(a)Sino Thai Engineering &
Construction Co., Ltd. 195,800 544
--------------
MERCHANDISING (0.0%)
Robinson Department Store Co., Ltd. 152,300 56
(c)Robinson Department Store Co., Ltd.
(Foreign) 24,000 8
--------------
64
--------------
MISCELLANEOUS MATERIALS & COMMODITIES (2.6%)
Charoen Pokphand Feedmill Co., Ltd. 1,848,800 3,640
--------------
REAL ESTATE (2.0%)
Central Pattana Co., Ltd. 24,100 33
Land & House Co., Ltd. 1,431,200 2,238
Quality House Co., Ltd. 1,683,400 572
--------------
2,843
--------------
RECREATION, OTHER CONSUMER GOODS (1.2%)
CVD Entertainment Co., Ltd. 997,000 1,693
--------------
TELECOMMUNICATIONS (9.5%)
Advanced Information Services Co.,
Ltd. 634,000 5,713
Advanced Information Services Co.,
Ltd. (Foreign) 115,000 821
(a)TelecomAsia Co., Ltd. 3,000,000 3,619
United Communication Industry Co.,
Ltd. 772,000 3,189
--------------
13,342
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------
- ------------
<S> <C> <C>
TEXTILES & APPAREL (1.7%)
Saha-Union Co., Ltd. 1,933,600 U.S.$ 1,213
(a,c)Thai Rung Textile Co., Ltd. 3,832 0
Thai Wacoal Co., Ltd. 347,013 1,205
--------------
2,418
--------------
UTILITIES (2.1%)
(a,b)Eastern Water Resources
Development Co., Ltd. 2,500,000 2,895
--------------
- -----------------------------------------------------------------
- -------------
TOTAL THAI COMMON STOCKS
(Cost U.S. $167,766) 138,178
--------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
FACE
AMOUNT
(000)
<S> <C> <C>
- -----------------------------------------------------------------
- -------------
FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (4.0%)
(Interest Bearing Demand Account)
Thai Baht
(Cost U.S. $5,701) THB 145,788 5,628
--------------
- -----------------------------------------------------------------
- -------------
TOTAL THAI INVESTMENT PLAN
(Cost U.S. $173,467) 143,806
--------------
- -----------------------------------------------------------------
- -------------
REPURCHASE AGREEMENT (0.8%)
Chase Securities., Inc. 5.70%, dated
6/30/97, due 7/1/97, to be
repurchased at U.S. $1,147
collateralized by United States
Treasury Bonds, 5.625%, due 2/15/06,
valued at U.S. $1,173 (Cost U.S.
$1,147) U.S.$ 1,147 1,147
--------------
- -----------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (103.3%)
(Cost U.S. $174,614) 144,953
--------------
- -----------------------------------------------------------------
- -------------
OTHER ASSETS (0.1%)
Dividends Receivable 56
Interest Receivable 4
Other Assets 36 96
--------------- --------------
- -----------------------------------------------------------------
- -------------
LIABILITIES (-3.4%)
Payable for:
Thai Taxes (2,735)
Investments Purchased (1,734)
U.S. Investment Advisory Fees (90)
Shareholder Reporting Expenses (59)
Thai Investment Advisory Fees (52)
Professional Fees (37)
Directors' Fees and Expenses (37)
Custodian Fees (26)
Administrative Fees (15)
Other Liabilities (1) (4,786)
--------------- --------------
- -----------------------------------------------------------------
- -------------
<CAPTION>
VALUE
(000)
<S> <C> <C>
- ---------------------------------------------------------
- ------------
NET ASSETS (100%)
Applicable to 13,101,845 issued and outstanding
U.S.$0.01 par value shares (30,000,000 shares
authorized) U.S.$ 140,263
--------------
--------------
- -----------------------------------------------------------------
- -------------
NET ASSET VALUE PER SHARE U.S.$ 10.71
--------------
--------------
- -----------------------------------------------------------------
- -------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- -----------------------------------------------------------------
Common Stock U.S.$ 131
Capital Surplus 189,640
Accumulated Net Investment Loss (3,063)
Accumulated Net Realized Loss (16,786)
Unrealized Depreciation on Investments and Foreign
Currency Translations (29,659)
- -----------------------------------------------------------------
- -------------
TOTAL NET ASSETS U.S.$ 140,263
--------------
--------------
- -----------------------------------------------------------------
- -------------
</TABLE>
(a) Non-income producing.
(b) Security is valued at cost -- see note A-1 to financial statements.
(c) Security valued at fair value -- see note A-1 to financial statements.
June 30, 1997 exchange rate -- Thai Baht (THB) 25.905 = U.S. $1.00
NOTE: Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging markets, and foreign ownership
limitations may also be imposed by the charters of individual companies in
emerging markets. As a result, an additional class of shares designated as
"foreign" may be created and offered for investment. The "local" and
"foreign" shares' market values may vary.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends............................................................................... U.S.$ 4,836
Interest................................................................................ 247
- ---------------------------------------------------------------------------------------------------------------
Total Income.......................................................................... 5,083
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
U.S. Investment Advisory Fees........................................................... 588
Thai Investment Advisory Fees........................................................... 188
Administrative Fees..................................................................... 97
Custodian Fees.......................................................................... 96
Shareholder Reporting Expenses.......................................................... 81
Professional Fees....................................................................... 36
Directors' Fees and Expenses............................................................ 20
Transfer Agent Fees..................................................................... 13
Other Expenses.......................................................................... 20
- ---------------------------------------------------------------------------------------------------------------
Total Expenses........................................................................ 1,139
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income Before Thai Tax................................................... 3,944
Less: Thai Tax on Investment Income..................................................... (360)
- ---------------------------------------------------------------------------------------------------------------
Net Investment Income............................................................. 3,584
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold (Net of Thai tax of U.S. $2,034 on net realized gains)....... (18,600)
Foreign Currency Transactions........................................................... 292
- ---------------------------------------------------------------------------------------------------------------
Net Realized Loss................................................................. (18,308)
- ---------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments............................................................. (49,519)
Appreciation on Foreign Currency Translations........................................... (299)
- ---------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation.................................... (49,818)
- ---------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation.................. (68,126)
- ---------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$(64,542)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income............................................... U.S.$ 3,584 U.S.$ 4,263
Net Realized Gain (Loss)............................................ (18,308) 1,726
Change in Unrealized Appreciation/Depreciation...................... (49,818) (122,483)
- ---------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations................ (64,542) (116,494)
- ---------------------------------------------------------------------------------------------------------------
Distributions:
In Excess of Net Investment Income.................................. -- (4,207)
Net Realized Gain................................................... -- (1,001)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions................................................. -- (5,208)
- ---------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (36,656 and 492,835 shares,
respectively)...................................................... 596 12,946
- ---------------------------------------------------------------------------------------------------------------
Total Decrease...................................................... (63,946) (108,756)
Net Assets:
Beginning of Period................................................. 204,209 312,965
- ---------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of
U.S.$3,063 and distributions in excess of net investment income of
U.S.$6,647, respectively........................................... U.S.$140,263 U.S.$204,209
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
SELECTED PER SHARE DATA JUNE 30, 1997 ----------------------------------------------------------------------------------
AND RATIOS: (UNAUDITED) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF PERIOD.... U.S.$ 15.63 U.S.$ 24.89 U.S.$ 28.30 U.S.$ 39.42 U.S.$ 20.69 U.S.$ 15.41
- -------------------------------------------------------------------------------------------------------------------------------
Offering Costs........... -- -- -- (0.05) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net Investment Income.... 0.27 0.31 0.38 0.32 0.35 0.31
Net Realized and
Unrealized Gain (Loss)
on Investments......... (5.19) (9.15) (0.19) (5.08) 19.27 4.96
- -------------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations......... (4.92) (8.84) 0.19 (4.76) 19.62 5.27
- -------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment
Income............. -- -- (0.06) (0.35) (0.31) --
In Excess of Net
Investment Income.. -- (0.32) (0.05) -- (0.05) --
Net Realized Gain.... -- (0.08) (3.23) (4.62) (0.45) --
In Excess of Net
Realized Gain...... -- -- (0.15) -- (0.06) --
- -------------------------------------------------------------------------------------------------------------------------------
Total
Distributions...... -- (0.40) (3.49) (4.97) (0.87) --
- -------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in
Net Asset Value due to
Capital Share
Transactions........... -- (0.02)+ (0.11)+ (1.34)++ (0.02)+ 0.01+
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. U.S.$ 10.71 U.S.$ 15.63 U.S.$ 24.89 U.S.$ 28.30 U.S.$ 39.42 U.S.$ 20.69
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE,
END OF PERIOD.......... U.S.$ 15.38 U.S.$ 16.38 U.S.$ 22.38 U.S.$ 22.38 U.S.$ 36.88 U.S.$ 18.75
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value........... (6.11)% (25.33)% 13.7% (24.3)%+++ 104.9% 15.4%
Net Asset Value (1).... (31.51)% (35.93)% (0.1)% (10.4)%+++ 98.9% 34.3%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(THOUSANDS)............ U.S.$140,263 U.S.$204,209 U.S.$312,965 U.S.$343,840 U.S.$400,967 U.S.$209,061
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses Before
Thai Tax to Average Net
Assets................. 1.30%** 1.19% 1.17% 1.13% 1.22% 1.37%
Ratio of Expenses After
Thai Tax to Average Net
Assets................. 1.71%** 1.43% 1.30% 1.22% 1.38% 1.70%
Ratio of Net Investment
Income to Average Net
Assets................. 4.09%** 1.42% 1.35% 1.01% 1.42% 1.83%
Portfolio Turnover
Rate................... 12% 24% 26% 22% 22% 24%
Average Commission Rate
(2):
Per Share............ U.S.$0.0071 U.S.$0.0135 N/A N/A N/A N/A
As a Percentage of
Trade Amount....... 0.34% 0.30% N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
** Annualized
+Increase (Decrease) due to shares issued on reinvestment of distributions.
++Consists of U.S.$0.09 per share decrease from reinvestment of distributions and U.S.$1.25 per share decrease due to common
stock issued through Rights Offering during the year.
+++This return does not include the effect of the rights issued in connection with the Rights Offering.
(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 capital gains 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.
(2)For fiscal years beginning on or after September 1, 1995, the fund is required to disclose the average commission rate per
share it paid for portfolio trades on which commissions were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
- ----------
The Thai Fund, Inc. (the "Fund") was incorporated on June 10, 1987 and is
registered as a non-diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended. The Fund's investment objective
is long-term capital appreciation through investments primarily in equity
securities. The Fund makes its investments in Thailand through the Thai
Investment Plan (the "Plan") established in conformity with Thai law. The Fund
is the sole unitholder of the Plan. The accompanying financial statements are
prepared on a consolidated basis and present the financial position and results
of operations of the Plan and the Fund.
A. The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for
which market quotations are readily available are valued at the last sales
price on the valuation date, or if there was no sale on such date, at the
mean between the current bid and asked prices. Securities which are traded
over-the-counter are valued at the average of the mean of current bid and
asked prices obtained from reputable brokers. Short-term securities which
mature in 60 days or less are valued at amortized cost. All other securities
and assets for which market values are not readily available (including
investments which are subject to limitations as to their sale) are valued at
fair value as determined in good faith by the Board of Directors (the
"Board"), although the actual calculations may be done by others.
2. TAXES: It is the Fund's intention to continue to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for U.S. Federal income taxes is required in the financial
statements.
Distributions from the Plan to the Fund are subject to Thai income tax which
is withheld at a rate of 10% of the local currency gross distribution
amount. All distributions from the Plan to the Fund must be approved by The
Bank of Thailand ("BOT") pursuant to the laws of The Kingdom of Thailand.
For financial statement purposes, the Fund allocates the Thai income tax to
net investment income, net realized gains and net unrealized appreciation on
the basis of their relative amounts. For U.S. Federal income tax purposes,
the Thai income tax is deducted, when paid, from net investment income.
3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase
agreements, a bank as custodian for the Fund takes possession of the
underlying securities, with a market value at least equal to the amount of
the repurchase transaction, including principal and accrued interest. To the
extent that any repurchase transaction exceeds one business day, the value
of the collateral is marked-to-market on a daily basis to determine the
adequacy of the collateral. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the counterparty to the agreement, realization and/or
retention of the collateral or proceeds may be subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Amounts denominated in Thai baht are translated
into U.S. dollars at the mean of the bid and asked prices of such currency
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;
- investment transactions and investment income at the prevailing rate of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rate and market values at the close of the period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rate from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund does
not isolate the effect of changes in the foreign exchange rate from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) are included in the reported net realized and unrealized
gains (losses) on investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, dispositions of foreign currency, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and
9
<PAGE>
the difference between the amount of investment income 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 Net
Assets. The change in net unrealized currency gains (losses) for the period
is reflected in the Statement of Operations.
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts to attempt to protect securities and related
receivables and payables against changes in future foreign exchange rates. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Interest
income is recognized on the accrual basis. Dividend income is recorded on
the ex-dividend date (except certain dividends which may be recorded as soon
as the Fund is informed of such dividend) net of applicable withholding
taxes where recovery of such taxes is not reasonably assured. Distributions
to shareholders are recorded on the ex-date.
The amount and character of income and capital gain distributions to be paid
are determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing book and tax treatments for foreign currency
transactions, foreign taxes on net realized gains and gains on certain
securities of corporations designated as "passive foreign investment
companies". These differences are also primarily due to differing book and
tax treatments of the timing of the recognition of losses on securities and
the timing of the deductibility of certain foreign taxes.
Permanent book and tax basis differences relating to shareholder
distributions may result in reclassifications to undistributed net
investment income (loss), accumulated net realized gain (loss) and capital
surplus.
Adjustments for permanent book-tax differences, if any, are not reflected in
ending undistributed net investment income (loss) for the purpose of
calculating net investment income (loss) per share in the financial
highlights.
B. Morgan Stanley Asset Management Inc. (the "U.S. Adviser") provides
investment advisory services to the Fund under the terms of an Investment
Advisory Agreement (the "Agreement"). Under the Agreement, the U.S. Adviser is
paid a fee computed weekly and payable monthly at an annual rate of .90% of the
Fund's first $50 million of average weekly net assets, .70% of the Fund's next
$50 million of average weekly net assets and .50% of the Fund's average weekly
net assets in excess of $100 million.
C. The Mutual Fund Public Company Limited (the "Thai Adviser") provides
investment advisory services to the Fund under the terms of a contract. Under
the contract, the Thai Adviser is paid a fee computed weekly and payable monthly
at an annual rate of .40% of the Fund's first $50 million of average weekly net
assets, .25% of the Fund's next $50 million of average weekly net assets and
.20% of the Fund's average weekly net assets in excess of $100 million.
D. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services
Company (the "Administrator"), provides administrative services to the Fund
under an Administration Agreement. Under the Administration Agreement, the
Administrator is paid a fee computed weekly and payable monthly at an annual
rate of .05% of the Fund's average weekly net assets, plus $100,000 per annum.
In addition, the Fund is charged certain out-of-pocket expenses by the
Administrator. The Chase Manhattan Bank, acts as custodian for the Fund's assets
held in the United States.
E. During the six months ended June 30, 1997, the Fund made purchases and sales
totaling $29,311,000 and $20,113,000, respectively, of investment securities
other than long-term U.S. Government securities and short-term investments.
There were no purchases or sales of
10
<PAGE>
long-term U.S. Government securities. At June 30, 1997, the U.S. Federal income
tax cost basis of securities was $168,913,000 and accordingly, net unrealized
depreciation for U.S. Federal income tax purposes was $29,588,000, of which
$23,460,000 related to appreciated securities and $53,048,000 related to
depreciated securities.
F. A significant portion of the Fund's net assets consist of investments in the
Thai Investment Plan, including Thai equity securities, which may be subject to
greater price volatility, lower liquidity and less diversity than equity
securities of companies based in the United States. In addition, Thai equity
securities may be subject to substantial governmental involvement in the economy
and greater social, economic and political uncertainty.
G. Each Director of the Fund who is not an officer of the Fund or an affiliated
person as defined under the Investment Company Act of 1940, as amended, may
elect to participate in the Directors' Deferred Compensation Plan (the "Plan").
Under the Plan, such Directors may elect to defer payment of a percentage of
their total fees earned as a Director of the Fund. These deferred portions are
treated, based on an election by the Director, as if they were either invested
in the Fund's shares or invested in U.S. Treasury Bills, as defined under the
Plan. The deferred fees payable, under the Plan, at June 30, 1997 totaled
$19,000 and are included in Payable for Directors' Fees and Expenses on the
Statement of Net Assets.
H. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Thai Fund, Inc. was held on April
30, 1997. The following is a summary of each proposal presented and the total
number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- ------------------------------------------------------------------------------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1. To elect the following Directors: John W. Croghan 6,706,101 -- 88,049 --
Graham E. Jones 6,706,272 -- 87,878 --
Snoh Unakul 6,697,825 -- 96,325 --
2. To ratify the selection of Price Waterhouse LLP as independent public
accountants of the Fund. 6,717,472 27,537 -- 49,141
3. To approve an Investment Advisory and Management Agreement between the Fund
and Morgan Stanley Asset Management Inc. 6,601,544 97,119 -- 95,487
4. To approve a Research Advisory Agreement among the fund, Morgan Stanley
Asset Management Inc. and Arab-Malaysia Consultant Sdn Bhd. 6,608,146 93,289 -- 92,715
</TABLE>
11
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless Boston Equiserve (the
"Plan Agent") is otherwise instructed by the shareholder in writing, to have all
distributions automatically reinvested in Fund shares. Participants in the Plan
have the option of making additional voluntary cash payments to the Plan Agent,
semi-annually, in any amount from $100 to $3,000, for investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
The Thai Fund, Inc.
Boston Equiserve
Dividend Reinvestment and Cash Purchase Plan
P.O. Box 1681
Boston, MA 02105-1681
1-800-442-2001
12
