<PAGE>
THE THAI FUND, INC.
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs William G. Morton, Jr.
CHAIRMAN OF THE BOARD DIRECTOR
OF DIRECTORS
Michael F. Klein Snoh Unakul
PRESIDENT AND DIRECTOR DIRECTOR
Peter J. Chase Stefanie V. Chang
DIRECTOR VICE PRESIDENT
John W. Croghan Harold J. Schaaff, Jr.
DIRECTOR VICE PRESIDENT
David B. Gill Joseph P. Stadler
DIRECTOR VICE PRESIDENT
Graham E. Jones Valerie Y. Lewis
DIRECTOR SECRETARY
Sukri Kaocharern Joanna M. Haigney
DIRECTOR TREASURER
John A. Levin Belinda A. Brady
DIRECTOR ASSISTANT TREASURER
- --------------------------------------------------------------------------------
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
3 Chase MetroTech Center
Brooklyn, New York 11245
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(800) 730-6001
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1997
MORGAN STANLEY ASSET MANAGEMENT INC.
INVESTMENT ADVISER
<PAGE>
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
For the year ended December 31, 1997, The Thai Fund, Inc. (the "Fund") had a
total return, based on net asset value per share, of -75.17%, compared to
- -75.54% for the U.S. dollar adjusted Securities Exchange of Thailand Index (the
"Index"). For the period since the Fund's commencement of operations on
February 16, 1988 through December 31, 1997, the Fund's total return, based on
net asset value per share, was -26.22% compared to -40.18% for the Index. On
December 31, 1997, the closing price of the Fund's shares on the New York Stock
Exchange was $5.25, representing a 37.8% premium to the Fund's net asset value
per share of $3.81.
Against the backdrop of a sluggish economy, speculative attacks on the Thai baht
by foreign investors and an increase in non-performing loans at finance
companies and banks, the Thai market fell sharply in the first half of the year
and continued its downward spiral throughout the second half. The dramatic
slowdown in export growth throughout the first half of the year coupled with the
poor asset quality of numerous financial institutions led Moody's to downgrade
the long-term debt and deposits of several Thai banks in May. Moody's also
downgraded the Thai sovereign debt from Baa3 to Baa1, or junk status, in
December. As confidence in the banking system reached new lows, the Bank of
Thailand ordered 58 finance companies to temporarily suspend their operation and
submit rehabilitation plans. In an effort to revitalize the economy and promote
confidence in the market, the government decided to seek financial assistance
from the IMF at the end of July. As part of the key requirements of the IMF
bailout package, 56 of the 58 suspended finance companies were ordered to close.
As a result of the resignation of Dr. Amnuay, the Finance Minister, at the end
of June, many foreign investors began speculative attacks against the Thai baht
which resulted in capital controls being imposed on offshore lending of the
currency. On July 2, 1997, the Bank of Thailand announced unexpectedly a
change in the currency exchange system from a fixed exchange rate to a floating
system, which resulted in a 13.5% fall to Baht28.1/US$1 in one day. Over the
year, the Baht fell 87% against the US dollar and closed the year at Baht
48/US$1.
Monthly economic indicators released by the Bank of Thailand confirms that the
economic slowdown intensified in the fourth quarter of 1997. The external trade
statistics showed that the Thai trade balance had recovered in October, but it
was due to the significant decline in imports. The rapidly weakening import
bill, together with the modest growth in exports, should turn in an overall
current account surplus in 1998. Meanwhile, the overall balance of payments
recorded a deficit in November 1997 and private capital inflows may not be as
robust as earlier estimated. Consumer price data for the fourth quarter
revealed that inflation had edged higher on the back of non-food prices. The
data reinforces the belief that the baht devaluation has failed to improve the
country's export competitiveness
While the broad picture reflects a contracting economy that will correct the
current account deficit and provide relief to the balance of payments situation,
the risks continue to lie in how the government will tackle the near term
economic challenges. These include rescheduling of short-term external debt,
containing inflationary pressures from rising import prices, avoiding a
liquidity squeeze, recapitalizing the financial system and stimulating exports
which are faced with sluggish economic growth in their export markets. It is
important to note that the new government is committed to economic reform. The
promulgation of a bankruptcy law that will greatly affect the banking sector is
expected in February 1998. Recapitalizing the banking industry successfully is
vital for recovery of the stock market and the economy going forward.
On the political front, Prime Minister General Chavalit Yongchaiyudh and his
administration stepped down in November. The Democratic Party, led by Mr. Chuan
Leepai, then gained majority support to set up a new coalition government. The
new government moved quickly in implementing policies to achieve the targets
committed to the IMF that included the improvement of the current account
deficit to 3.9% and 1.7% of GDP in 1997 and 1998, respectively.
In terms of sector strategy, the Fund did not perform well, relative to the
Index, having an overweight position in the banking sector which underperformed
the Index and an underweight position in the energy sector which outperformed
the benchmark.
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 of providing investors with exposure to a diversified
portfolio of Thai equity securities, to remain invested in equity securities,
even during market volatility and market downturns.
Given the bleak outlook on the economy, the stock market is unlikely to improve
in the near term. Until
2
<PAGE>
the economy demonstrates a sustainable improvement in the balance of payment
account, both the stock market and the Thai baht are expected to trade lower in
the first half of 1998.
Finally, this is to inform you that effective January 1, 1998, Joseph Tern, a
Principal of Morgan Stanley Asset Management Inc. ("MSAM"), will assume primary
responsibility for the day-to-day management of the Fund' assets. Mr. Tern
joined MSAM's Singapore office in 1992 as a portfolio manager specializing in
the Singapore, Malaysia and Indonesia stock markets. Prior to joining MSAM, Mr.
Tern spent over four years at UOB Asset Management where he managed unit trusts
and institutional accounts. Mr. Tern is a Chartered Financial Analyst and holds
an Bachelor's degree in Accountancy (honors) from the National University of
Singapore.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
/s/ Ean Wah Chin
Ean Wah Chin
PORTFOLIO MANAGER
/s/ Joseph Tern
Joseph Tern
PORTFOLIO MANAGER
January 1998
3
<PAGE>
THE THAI FUND, INC.
INVESTMENT SUMMARY AS OF DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
HISTORICAL TOTAL RETURN (%)
INFORMATION ------------------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
------------------------ ------------------------ ------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
ONE YEAR -67.35% -67.35% -75.17% -75.17% -75.54% -75.54%
FIVE YEAR -56.93+ -15.51+ -71.68+ -22.30+ -77.32 -25.68
SINCE INCEPTION* 1.66+ 0.17+ -26.22+ -3.03+ -40.18 -5.01
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
RETURNS AND PER SHARE INFORMATION
[CHART]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
1988* 1989 1990 1991 1992 1993 1994 1995 1996 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 $ 3.81
Market Value Per Share . . . . $11.75 $32.25 $16.00 $16.25 $18.75 $36.88 $22.38 $22.38 $16.38 $ 5.25
Premium/(Discount) . . . . . . 14.7% 70.8% 22.3% 5.5% -9.4% -6.4% -20.9% -10.1% 4.8% 37.8%
Income Dividends . . . . . . . $ 0.29 $ 0.36 $ 0.21 $ 0.21 -- $ 0.36 $ 0.35 $ 0.11 $ 0.32 $ 0.11
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% 98.90% -10.40%* -0.10% -35.93% -75.17%
Index Total Return (3) . . . . 3.90% 120.97% -28.60% 15.80% 24.71% 88.40% -17.76% -6.11% -36.25% -75.54%
</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.
4
<PAGE>
THE THAI FUND, INC.
PORTFOLIO SUMMARY AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
PORTFOLIO INVESTMENTS DIVERSIFICATION
[CHART]
<TABLE>
<S> <C>
Equity Securities 91.7%
Short-Term Investments 8.3%
</TABLE>
- --------------------------------------------------------------------------------
SECTORS (UNAUDITED)
[CHART]
<TABLE>
<S> <C>
Automobiles 4.8%
Banking 21.9%
Beverages & Tobacco 14.1%
Broadcasting & Publishing 9.0%
Building Materials & Components 5.2%
Chemicals 6.2%
Insurance 4.5%
Miscellaneous Materials & Commodities 4.4%
Telecommunications 5.8%
Utilities -- Electrical & Gas 4.5%
Other 19.6%
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
PERCENT OF
NET ASSETS
----------
<C> <S> <C>
1. The Serm Suk Co., Ltd. 14.1%
2. Bangkok Bank Co., Ltd. 9.3
3. Thai Farmers Bank Co., Ltd. 8.1
4. BEC World Co., Ltd. 8.0
5. National Petrochemical Co., Ltd. 6.2
6. Advanced Information Services Co., Ltd. 4.8
7. Siam Commercial Bank Co., Ltd. 4.6
8. Eastern Water Resources Development Co. Ltd. 4.5
9. Charoen Pokphand Feedmill Co., Ltd. 4.4
10. Bangkok Insurance Co., Ltd. 2.9
----
66.9%
----
----
</TABLE>
* Excludes short-term investments.
5
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------
<S> <C> <C>
THAI INVESTMENT PLAN (99.6%)
- ---------------------------------------------------------------------------
THAI COMMON STOCKS (93.5%)
(Unless otherwise noted)
- ---------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES (2.2%)
Onpa International Co., Ltd. 2,047,400 U.S.$ 489
Singer Thailand Public Co. Ltd. 165,800 96
Thai Glass Industries Co., Ltd. 423,200 325
(b) Thai Glass Industries Co., Ltd. (Foreign) 229,800 177
-------------
1,087
-------------
- ---------------------------------------------------------------------------
AUTOMOBILES (4.8%)
Swedish Motor Co., Ltd. 1,371,100 385
Thai Engine Manufacturing Public Co. Ltd. 679,000 1,128
Thai Rung Union Car Co., Ltd. 1,727,300 475
Thai Stanley Electric Co., Ltd. 730,000 409
-------------
2,397
-------------
- ---------------------------------------------------------------------------
BANKING (21.9%)
Bangkok Bank Co., Ltd. 2,602,000 4,647
Siam Commercial Bank Co., Ltd. 2,300,000 2,293
(a) Siam Commercial Bank Co., Ltd. (Rights) 766,667 16
Thai Farmers Bank Co., Ltd. 3,240,000 4,037
-------------
10,993
-------------
- ---------------------------------------------------------------------------
BEVERAGES & TOBACCO (14.1%)
The Serm Suk Co., Ltd. 1,309,000 7,068
-------------
- ---------------------------------------------------------------------------
BROADCASTING & PUBLISHING (9.0%)
BEC World Co., Ltd. 1,000,000 3,988
Nation Multimedia Group Co., Ltd. 1,175,100 311
(b) Nation Multimedia Group Co., Ltd.
(Foreign) 824,900 214
-------------
4,513
-------------
- ---------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS (5.2%)
American Standard Sanitaryware
Thailand Co., Ltd. 75,150 359
Siam Cement Co., Ltd. 264,000 1,316
Siam City Cement Co., Ltd. 794,647 858
Tipco Asphalt Co. Ltd. 72,800 56
-------------
2,589
-------------
- ---------------------------------------------------------------------------
CHEMICALS (6.2%)
National Petrochemical Co., Ltd. 5,904,900 3,127
-------------
- ---------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS (1.6%)
Shinawatra Computer Co., Ltd. 300,000 785
-------------
- ---------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (0.6%)
Thai Storage Battery Co., Ltd. 1,008,700 U.S.$ 309
-------------
- ---------------------------------------------------------------------------
ENERGY SOURCES (0.4%)
Lanna Lignite Co. Ltd. 100,000 204
-------------
- ---------------------------------------------------------------------------
FINANCIAL SERVICES (2.2%)
(a) Phatra Leasing Co., Ltd. 96,500 9
Phatra Thanakit Co., Ltd. 1,000,000 467
Thai Investment & Securities Co., Ltd. 1,964,900 612
-------------
1,088
-------------
- ---------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS (0.4%)
Big C Supercenter Co., Ltd. 1,250,000 200
-------------
- ---------------------------------------------------------------------------
INSURANCE (4.5%)
Bangkok Insurance Co., Ltd. 258,800 1,451
Dhipaya Insurance Co., Ltd. 1,016,600 808
-------------
2,259
-------------
- ---------------------------------------------------------------------------
MACHINERY & ENGINEERING (0.0%)
(a) Sino Thai Engineering & Construction
Co., Ltd. 195,800 24
-------------
- ---------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES (4.4%)
Charoen Pokphand Feedmill Co., Ltd. 1,848,800 2,189
-------------
- ---------------------------------------------------------------------------
REAL ESTATE (0.7%)
Central Pattana Co., Ltd. 24,100 12
Land & House Co., Ltd. 1,378,278 258
Quality House Co., Ltd. 1,683,400 80
-------------
350
-------------
- ---------------------------------------------------------------------------
RECREATION, OTHER CONSUMER GOODS (1.5%)
CVD Entertainment Co., Ltd. 1,467,500 770
-------------
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS (5.8%)
Advanced Information Services Co., Ltd. 500,000 2,409
(a) TelecomAsia Co., Ltd. 1,000,000 183
United Communication Industry Co., Ltd. 772,000 305
-------------
2,897
-------------
- ---------------------------------------------------------------------------
TEXTILES & APPAREL (3.5%)
Saha-Union Co., Ltd. 1,933,600 1,114
(a,b) Thai Rung Textile Co., Ltd. 3,832 --
Thai Wacoal Co., Ltd. 347,013 649
-------------
1,763
-------------
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ---------------------------------------------------------------------------
<S> <C> <C>
UTILITIES -- ELECTRICAL & GAS (4.5%)
Eastern Water Resources Development
Co., Ltd. 2,473,000 U.S.$ 2,260
-------------
- ---------------------------------------------------------------------------
TOTAL THAI COMMON STOCKS
(Cost U.S.$156,114) 46,872
-------------
- ---------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- ---------------------------------------------------------------------------
<S> <C> <C>
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (6.1%)
(Interest Bearing Demand Account)
Thai Baht
(Cost U.S.$3,294) THB 148,520 3,084
-------------
- ---------------------------------------------------------------------------
TOTAL THAI investment plan
(Cost U.S.$159,408) 49,956
-------------
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (2.4%)
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.4%)
Chase Securities, Inc., 5.95%,
dated 12/31/97, due 1/2/98,
to be repurchased at
U.S.$1,180, collateralized by
U.S.$1,195, United States
Treasury Notes, 5.625%, due
2/15/06, valued at U.S.$1,207
(Cost U.S.$1,180) U.S.$ 1,180 1,180
-------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS (102.0%)
(Cost U.S.$160,588) 51,136
-------------
- ---------------------------------------------------------------------------
OTHER ASSETS (0.7%)
Receivable for Investments Sold 299
Interest Receivable 15
Other Assets 20 334
------------- -------------
- ---------------------------------------------------------------------------
LIABILITIES (-2.7%)
Payable For:
Dividends Declared (703)
Thai Taxes (422)
Professional Fees (53)
U.S. Investment Advisory Fees (50)
Shareholder Reporting Expenses (47)
Thai Investment Advisory Fees (30)
Director's Fees and Expenses (25)
Custodian Fees (14)
Administrative Fees (12)
Other Liabilities (2) (1,358)
------------- -------------
- ---------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 13,138,238, issued and
outstanding U.S.$0.01 par value shares
(30,000,000 shares authorized) U.S.$ 50,112
-------------
-------------
- ---------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 3.81
-------------
-------------
- ---------------------------------------------------------------------------
<CAPTION>
AMOUNT
(000)
- ---------------------------------------------------------------------------
<S> <C>
AT DECEMBER 31, 1997, NET ASSETS CONSISTED OF:
- ---------------------------------------------------------------------------
Common Stock U.S.$ 131
Capital Surplus 190,107
Undistributed Net Investment Income 1,295
Accumulated Net Realized Loss (32,032)
Unrealized Depreciation on Investments
and Foreign Currency Translations (109,389)
- ---------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 50,112
-------------
-------------
- ---------------------------------------------------------------------------
</TABLE>
(a) - Non-income producing
(b) - Security valued at fair value - see note A-1 to financial statements.
December 31, 1997 exchange rate - Thai Baht (THB) 48.150 = U.S. $1.00
NOTE: Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging markets, and foreign ownership
limitations may also be imposed by the charters of individual companies in
emerging markets. As a result, an additional class of shares designated
as "foreign" may be created and offered for investment. The "local" and
"foreign" shares' market values may vary.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
STATEMENT OF OPERATIONS (000)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ 5,980
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
- -----------------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,315
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES
U.S. Investment Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 978
Thai Investment Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348
Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Shareholder Reporting Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Custodian Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Professional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Directors' Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Transfer Agent Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Other Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
- -----------------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,981
- -----------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Net of writeback of Thai tax - $391.). . . . . . . . . . . . . . . . . . 4,334
- -----------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold (Net of writeback of Thai tax - $1,595.) . . . . . . . . . . . . . . . . . (28,331)
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (653)
- -----------------------------------------------------------------------------------------------------------------------------
Net Realized Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,984)
- -----------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Depreciation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (129,173)
Depreciation on Foreign Currency Translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,667
- -----------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . (127,506)
- -----------------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation . . . . . . . . . . . . . . . (156,490)
- -----------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ (152,156)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 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.$ 4,334 U.S.$ 4,263
Net Realized Gain (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,984) 1,726
Change in Unrealized Appreciation/Depreciation. . . . . . . . . . . . . . . . . . (127,506) (122,483)
- -----------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations. . . . . . . . . . . . . . . (152,156) (116,494)
- -----------------------------------------------------------------------------------------------------------------------------
Distributions:
In Excess of Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . (1,482) (4,207)
Net Realized Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,001)
In Excess of Net Realized Gain. . . . . . . . . . . . . . . . . . . . . . . . . . (1,522) --
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,004) (5,208)
- -----------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (73,049 and 492,835 shares, respectively) . . . . . 1,063 12,946
- -----------------------------------------------------------------------------------------------------------------------------
Total Decrease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154,097) (108,756)
Net Assets:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,209 312,965
- -----------------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment income of U.S.$1,295 and
distributions in excess of net investment income of U.S.$6,647, respectively.) . U.S.$ 50,112 U.S.$ 204,209
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
SELECTED PER SHARE -------------------------------------------------------------------------------------------
DATA AND RATIOS: 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <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
- -----------------------------------------------------------------------------------------------------------------------------
Offering Costs . . . . . . . . -- -- -- (0.05) --
- -----------------------------------------------------------------------------------------------------------------------------
Net Investment Income. . . . . 0.33 0.31 0.38 0.32 0.35
Net Realized and Unrealized
Gain (Loss) on Investments. . (11.92) (9.15) (0.19) (5.08) 19.27
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations. . . . . . . (11.59) (8.84) 0.19 (4.76) 19.62
- -----------------------------------------------------------------------------------------------------------------------------
Distributions: . . . . . . . .
Net Investment Income . . . -- -- (0.06) (0.35) (0.31)
In Excess of Net Investment
Income . . . . . . . . . . (0.11) (0.32) (0.05) -- (0.05)
Net Realized Gain . . . . . -- (0.08) (3.23) (4.62) (0.45)
In Excess of Net Realized
Gain . . . . . . . . . . . (0.12) -- (0.15) -- (0.06)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions. . . (0.23) (0.40) (3.49) (4.97) (0.87)
- -----------------------------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value
due to Capital Share
Transactions . . . . . . . . -- (0.02)+ (0.11)+ (1.34)++ (0.02)+
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD . . . . . . . . U.S.$ 3.81 U.S.$ 15.63 U.S.$ 24.89 U.S.$ 28.30 U.S.$ 39.42
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE,
END OF PERIOD . . . . . . . . U.S.$ 5.25 U.S.$ 16.38 U.S.$ 22.38 U.S.$ 22.38 U.S.$ 36.88
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value. . . . . . . . (67.35)% (25.33)% 13.70% (24.30)%+++ 104.90%
Net Asset Value (1) . . . . (75.17)% (35.93)% (0.10)% (10.40)%+++ 98.90%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period
(Thousands) . . . . . . . . . U.S.$50,112 U.S.$204,209 U.S.$312,965 U.S.$343,840 U.S.$400,967
- -----------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses Before Thai
Tax to Average Net Assets . . 1.44% 1.19% 1.17% 1.13% 1.22%
Ratio of Expenses After Thai
Tax to Average Net Assets . . 1.44% 1.43% 1.30% 1.22% 1.38%
Ratio of Net Investment Income
to Average Net Assets . . . . 3.14% 1.42% 1.35% 1.01% 1.42%
Portfolio Turnover Rate. . . . 22% 24% 26% 22% 22%
Average Commission Rate (2): .
Per Share. . . . . . . . . . U.S.$0.0064 U.S.$ 0.0135 N/A N/A N/A
As a Percentage of Trade
Amount. . . . . . . . . . . 0.33% 0.30% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ 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 distributions, if any, were
reinvested. This percentage is 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, a fund is
required to disclose the average commission rate per share it paid for
portfolio trades on which commissions were charged.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
NOTES TO FINANICAL STATEMENTS
DECEMBER 31, 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 unit holder 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 of income 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 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
10
<PAGE>
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.
The Fund intends to use derivatives more actively than it has in the past. The
Fund intends to engage in transactions in futures contracts on foreign
currencies, stock indices, as well as in options, swaps and structured notes.
Consistent with the Fund's investment objectives and policies, the Fund intends
to use derivatives for non-hedging as well as hedging purposes.
Following is a description of derivative instruments and their associated risks
that the Fund intends to utilize:
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into
foreign currency exchange contracts generally to attempt to protect
securities and related receivables and payables against changes in future
foreign exchange rates and, in certain situations, to gain exposure to a
foreign currency. 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. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The Fund
may make forward commitments to purchase or sell securities. Payment and
delivery for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not to exceed 120 days)
after the date of the transaction. Additionally, the Fund may purchase
securities on a when-issued or delayed delivery basis. Securities purchased
on a when-issued or delayed delivery basis are purchased for delivery
beyond the normal settlement date at a stated price and yield, and no
income accrues to the Fund on such securities prior to delivery. When the
Fund enters into a purchase transaction on a when-issued or delayed
delivery basis, it either establishes a segregated account in which it
maintains liquid assets in an amount at least equal in value to the Fund's
commitments to purchase such securities or denotes such securities on the
custody statement for tis regular custody account. Purchasing securities on
a forward commitment or when-issued or delayed-delivery basis may involve a
risk that the market price at the time of delivery may be lower than the
agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
7. SWAP AGREEMENTS: The Fund may enter into swap agreements to exchange the
return generated by one security, instrument or basket of instruments for
the return generated by another security, instrument or basket of
instruments. The following summarizes swaps which may be entered into by
the Fund:
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal
amount. Net periodic interest payments to be received or paid are accrued
daily and are recorded in the Statement of Operations as an adjustment to
interest income. Interest rate swaps are marked-to-market daily based upon
quotations from market makers and the change, if any, is recorded as
unrealized appreciation or depreciation in the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security, instrument or basket of
instruments underlying the transaction exceeds or falls short of the
offsetting interest obligation, the Fund will receive a payment from or
make a payment to the counterparty, respectively. Total return swaps are
marked-to-market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized gains or losses in the Statement
of Operations. Periodic payments received or made at the end of each
measurement period, but prior to termination, are recorded as realized
gains or losses in the Statement of Operations.
Realized gains or losses on maturity or termination of interest rate and
total return swaps are presented in the Statement of Operations. Because
there is no organized market for these swap agreements, the value reported
in the Statement of Net Assets may differ from that which would be realized
in the event the Fund terminated its position in the agreement. Risks may
arise upon entering into these agreements from the potential inability of
the counterparties to meet the terms of the agreements and are generally
limited to the amount of net interest payments to be received and/or
favorable movements in the value of the underlying security, instrument or
basket of instruments, if any, at the date of default.
11
<PAGE>
8. STRUCTURED SECURITIES: The Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with or purchase by an entity of
specified instruments and the issuance by that entity of one or more
classes of securities ("Structured Securities") backed by, or representing
interests in, the underlying instruments. Structured Securities, invested
in by the Fund, generally will have credit risk equivalent to that of the
underlying instruments. Structured Securities are typically sold in private
placement transactions with no active trading market. Investments in
structured securities may be more volatile than their underlying
instruments, however, any loss is limited to the amount of the original
investment.
9. OVER-THE-COUNTER TRADING: Derivative instruments that may be purchased or
sold by the Fund are expected to regularly consist of instruments not
traded on an exchange. The risk of nonperformance by the obligor on such an
instrument may be greater, and the ease with which the Fund can dispose of
or enter into closing transactions with respect to such an instrument may
be less, than in the case of an exchange-traded instrument. In addition,
significant disparities may exist between bid and asked prices for
derivative instruments that are not traded on an exchange. Derivative
instruments not traded on exchanges are also not subject to the same type
of government regulation as exchange traded instruments, and many of the
protections afforded to participants in a regulated environment may not be
available in connection with such transactions.
10. 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 year ended December 31, 1997, the Fund made purchases and sales
totaling $36,494,000 and $29,657,000, respectively, of investment securities
other than long-term U.S. Government securities and short-term investments.
There were no purchases or sales of long-term U.S. Government securities. At
December 31, 1997, the U.S. Federal income tax cost basis of securities was
$157,936,000 and, accordingly, net unrealized depreciation for U.S. Federal
income tax purposes was $109,884,000, of which $249,000 related to appreciated
securities and $110,133,000 related to depreciated securities. At December 31,
1997, the Fund had a capital loss carryforward for U.S. Federal income tax
purposes of approxi-
12
<PAGE>
mately $23,692,000 which will expire on December 31, 2005. To the extent that
capital gains are offset, such gains will not be distributed to the
shareholders. For the year ended December 31, 1997, the Fund intends to elect to
defer to January 1, 1998 for U.S. Federal income tax purposes, post-October
currency losses of $171,000 and post-October capital losses of $8,277,000.
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 December
31, 1997 totaled $10,000 and are included in Payable for Directors' Fees and
Expenses on the Statement of Net Assets.
H. During December 1997, the Board declared a distribution of $0.05 per share,
derived from net investment income, payable on January 30, 1998, to shareholders
of record on December 31, 1997.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (UNAUDITED):
For the year ended December 31, 1997, the Fund designates $1,522,000 as long-
term capital gain at the 28% tax bracket. The Fund also expects to pass through
to shareholders foreign tax credits of approximately $589,000. In addition, for
the year ended December 31, 1997, gross income derived from sources within
foreign countries amounted to $6,252,000.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Thai Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Thai Fund, Inc. (the "Fund") at December 31, 1997, 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 generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1997 by correspondence with the
custodians and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 18, 1998
14
<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,
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
1-800-730-6001
15
