<PAGE>
---------------------------------------------------------------
THE
THAI FUND,
INC.
---------------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
THE THAI FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
Barton M. Biggs
CHAIRMAN OF THE BOARD
OF DIRECTORS
Michael F. Klein
PRESIDENT AND DIRECTOR
Peter J. Chase
DIRECTOR
John W. Croghan
DIRECTOR
David B. Gill
DIRECTOR
Graham E. Jones
DIRECTOR
Sukri Kaocharern
DIRECTOR
John A. Levin
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Snoh Unakul
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
ASSISTANT TREASURER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment 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
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726 or visit our website at
www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- ----------
For the six months ended June 30, 1999, The Thai Fund, Inc. (the "Fund") had a
total return, based on net asset value per share, of 43.42% compared to 45.87%
for the U.S. dollar adjusted Securities Exchange of Thailand (SET) Index (the
"Index"). For the period since the Fund's commencement of operations on February
16, 1988 through June 30, 1999, the Fund's total return, based on net asset
value per share, was 8.86% compared to 6.82% for the Index. On June 30, 1999,
the closing price of the Fund's shares on the New York Stock Exchange was
$10 1/4, representing an 88.1% premium to the Fund's net asset value per share.
Economic data coming out of Thailand over first half of 1999 have indicated
economic stabilization and recovery. The trend of economic recovery is clearly
exemplified by the industrial production numbers which have moved up from a
growth of 0.1% year-over-year in January 1999 to a 6% year-over-year growth in
May. The external sector has disappointed in the first quarter of the year,
registering year-over-year declines. However, we have seen a turnaround in
exports in the second quarter of 1999 on the back of rapid recovery in
intra-asian trade. Exports in May were up 8.6% year-over-year and June numbers
are reported to be up 8% too. Retail sales appear to have troughed and a pick up
in consumption expenditure in the second half of 1999 could produce Gross
Domestic Product (GDP) growth for 1999 in the 2-3% range. GDP growth numbers for
the year are likely to surprise on the upside, with official estimates still
remaining at 1%.
With inflation below expectations and the balance of payment underpinning the
Thai baht, the Bank of Thailand has been keeping the interbank market flush with
liquidity to reactivate bank lending. So far, the accommodative policy has
visibly lowered interest rates rather than sparked recovery in the quantity of
credit. Demand for credit remains weak, as it has been difficult for banks to
find creditworthy borrowers.
The health of the banking system in Thailand is key to the country's ability to
grow again. The successful capital raising exercise done by Siam Commercial Bank
in April this year could be a blue print for bank recapitalizations in Thailand.
The central bank's policy mix, which has successfully combined historically low
interest rates and a stable baht, has to a large extent helped repair balance
sheets in the corporate and banking systems. The consensus is growing that a
workable framework for the banking sector and non-performing loan recovery is in
place. We are likely to see non-performing loans (NPLs) starting to decline in
the third quarter of 1999. Most banks believe NPLs had peaked by the first
quarter of 1999. However, given that most Thai banks need more capital in the
next two years, the valuation levels for most of the banks on a fully diluted
basis is stretched. Thai Farmers Bank recently announced a big rights issue. The
announcement was made probably much sooner than expected. But this will prove
beneficial in the long run, as a better capitalized bank has improved earnings
potential and is better overall for the system. Other positive events this year
have been an indication of NPLs peaking in the second quarter and international
rating agencies upgrading ratings at the sovereign and individual bank levels
(i.e. Siam Commercial Bank and Thai Farmers Bank). This served to outweigh the
huge discount of 82% from the FRA's second auction.
There have been several positive developments in the corporate sector over the
last two quarters. The Shinawatra Group announced a number of positive
restructuring efforts. Advance Info Services continued to benefit from resurging
cellular subscriber growth, translating into spectacular stock outperformance in
the second quarter. Delta Electronics, a large overweight position for the Fund,
also benefited as the company altered its product mix to enhance margins.
The Thailand market has sharply rebounded from the distressed levels in 1998 in
the wake of easing concerns over survivability of corporates and the bottoming
of the economy. The divergence in stock performances in the second quarter
indicate that the market may increasingly focus on individual earnings growth
and returns on capital. Continued evidence of macroeconomic recovery,
particularly in the domestic sector, completion of bank recapitalization needs,
passage of creditor security reforms and increasing momentum in debt
restructuring will be key drivers of sentiment over the rest of the year.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
JULY 1999
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED.
- --------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
www.msdw.com/institutional/investmentmanagement.
2
<PAGE>
The Thai Fund, Inc.
Investment Summary as of June 30,1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL TOTAL RETURN (%)
INFORMATION ------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
--------------------- ---------------------- ---------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE 74.47% -- 43.42% -- 45.87% --
ONE YEAR 78.26% 78.26% 93.95 93.95% 123.28 123.28%
FIVE YEAR -45.59 -11.46 -74.06 -23.65 -72.17 -22.57
TEN YEAR 32.58 2.86 -19.57 -2.15 -39.43 -4.89
SINCE INCEPTION* 104.73 6.50 8.86 0.75 6.82 0.58
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED
JUNE 30,
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share..$18.88 $13.08 $15.41 $20.69 $39.42 $28.30 $24.89 $15.63 $3.81 $3.80 $5.45
Market Value Per Share ....$32.25 $16.00 $16.25 $18.75 $36.88 $22.38 $22.38 $16.38 $5.25 $5.88 $10.25
Premium/(Discount) ........ 70.8% 22.3% 5.5% -9.4% -6.4% -20.9% -10.1% 4.8% 37.8% 54.7% 88.1%
Income Dividends .......... $0.36 $0.21 $0.21 -- $0.36 $0.35 $0.11 $0.32 $0.11 $0.19 --
Capital Gains
Distributions ........... $2.09 $1.68 $0.47 -- $0.51 $4.62 $3.38 $0.08 $0.12 -- --
Fund Total Return (2) ..... 109.87% -20.44% 23.08% 34.26% 98.90% -10.40%+ -0.10% -35.93% -75.17% 2.88% 43.42%
Index Total Return (3) .... 120.97% -28.59% 15.80% 24.71% 88.14% -17.63% -6.17% -36.25% -75.54% 22.43% 45.87%
</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, expressed in U.S. dollars.
* 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, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[PIE CHART]
<TABLE>
<S> <C>
Equity Securities (94.7%)
Short-Term Investments (5.3%)
</TABLE>
- --------------------------------------------------------------------------------
SECTORS
[PIE CHART]
<TABLE>
<S> <C>
Other (18.3%)
Transportation-Airlines (4.2%)
Telecommunications-Wireless (4.7%)
Telecommunications (5.8%)
Food & Household Products (6.5%)
Energy Sources (4.3%)
Banking (19.3%)
Beverages & Tobacco (5.6%)
Broadcasting & Publishing (4.8%)
Building Materials & Components (14.4%)
Electrical & Electronics (12.1%)
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Thai Farmers Bank Co., Ltd. 8.0%
2. Siam Cement Co., Ltd. 7.7
3. Bangkok Bank Co., Ltd. 7.3
4. Siam City Cement Co., Ltd. 6.8
5. Delta Electronics Public Co., Ltd. 6.3
6. Shinawatra Computer Co., Ltd. 5.8
7. The Serm Suk Co., Ltd. 5.6
8. Siam Commercial Bank Co., Ltd 5.5
9. BEC World Co., Ltd. 4.8
10. Advanced Information Services Co., Ltd. 4.7
----
62.5%
----
----
</TABLE>
4
<PAGE>
FINANCIAL STATEMENTS
- --------
STATEMENT OF NET ASSETS (UNAUDITED)
- --------
JUNE 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
THAI INVESTMENT PLAN (98.6%)
- --------------------------------------------------------------------------------
THAI COMMON STOCKS (93.4%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
AUTOMOBILES (1.6%)
Thai Stanley Electric Co., Ltd. 715,000 U.S.$ 795
Thai Storage Battery Co., Ltd. 390,600 365
------------------------
1,160
------------------------
- --------------------------------------------------------------------------------
BANKING (19.3%)
(a)Bangkok Bank Co., Ltd. 2,430,750 5,305
Siam Commercial Bank Co.,
Ltd. (Foreign) 2,071,900 2,865
Thai Farmers Bank Co., Ltd. 2,874,050 5,766
------------------------
13,936
------------------------
- --------------------------------------------------------------------------------
BEVERAGES & TOBACCO (5.6%)
The Serm Suk Co., Ltd. 869,300 4,030
------------------------
- --------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (4.8%)
BEC World Co., Ltd. 557,300 3,445
------------------------
- --------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS (14.4%)
Siam Cement Co., Ltd. 295,800 5,549
Siam City Cement Co., Ltd. 1,271,945 4,897
------------------------
10,446
------------------------
- --------------------------------------------------------------------------------
CHEMICALS (1.9%)
National Petrochemical Co.,
Ltd. 1,526,300 1,355
------------------------
- --------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS (12.1%)
Delta Electronics Public Co.,
Ltd. 542,955 4,534
Shinawatra Computer Co.,
Ltd. 953,700 4,214
------------------------
8,748
------------------------
- --------------------------------------------------------------------------------
ENERGY SOURCES (4.3%)
PTT Exploration & Production
Public Co., Ltd. 408,800 3,103
------------------------
- --------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS (6.5%)
(a)Charoen Pokphand Feedmill
Co., Ltd. 1,251,580 1,951
Compass East Industry
Public Co., Ltd. 348,700 1,428
Thai Union Frozen Products
Public Co. Ltd. 380,200 1,319
------------------------
4,698
------------------------
- --------------------------------------------------------------------------------
INSURANCE (1.3%)
Bangkok Insurance Co., Ltd. 248,100 935
------------------------
- --------------------------------------------------------------------------------
REAL ESTATE (1.4%)
Golden Land Property
Development Public Co.,
Ltd. 1,850,000 U.S.$ 1,028
------------------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS -- WIRELESS (4.7%)
Advanced Information
Services Co., Ltd. 349,800 3,376
------------------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (5.8%)
Shinawatra Satellite Public Co.,
Ltd. 2,331,100 2,165
TelecomAsia Corp. Public
Co., Ltd. 2,184,800 2,073
------------------------
4,238
------------------------
- --------------------------------------------------------------------------------
TEXTILES & APPAREL (1.9%)
Saha-Union Co., Ltd. 1,483,600 654
(a)Thai Rung Textile Co., Ltd. 958 -- @
Thai Wacoal Co., Ltd. 347,013 705
------------------------
1,359
------------------------
- --------------------------------------------------------------------------------
TRANSPORTATION -- AIRLINES (4.2%)
Thai Airways International Public
Co. Ltd. 1,630,300 3,072
------------------------
- --------------------------------------------------------------------------------
UTILITIES -- ELECTRICAL & GAS (3.6%)
Electricity Generating Public
Co. Ltd. 1,783,300 2,587
------------------------
- --------------------------------------------------------------------------------
TOTAL THAI COMMON STOCKS
(Cost U.S.$65,471) 67,516
------------------------
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
- --------------------------------------------------------------------------------
WARRANTS (1.5%)
- --------------------------------------------------------------------------------
BANKING (1.5%)
(a)Siam Commercial Bank Co., Ltd.,
expiring 5/10/02 (Cost U.S.$--) 1,687,800 1,087
------------------------
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (3.7%)
(Interest Bearing Demand Account)
Thai Baht
(Cost U.S.$2,632) THB 97,451 2,642
------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.6%)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (1.6%)
Chase Securities, Inc. 4.55%,
dated 6/30/99, due 7/1/99,
to be repurchased at
U.S.$1,185, collateralized by
U.S.$1,105 United States
Treasury Bonds, 7.25%, due
5/15/16, valued at
U.S.$1,228 (Cost U.S.$1,185) U.S.$ 1,185 U.S.$ 1,185
------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(Cost $69,288) 72,430
------------------------
- --------------------------------------------------------------------------------
OTHER ASSETS (3.4%)
Receivable for Investments Sold 2,409
Dividends Receivable 10
Interest Receivable 4
Other Assets 35
2,458
---------------------- ------------------------
- --------------------------------------------------------------------------------
LIABILITIES (-3.6%)
Payable For:
Investments Purchased (2,365)
Directors' Fees and Expenses (50)
U.S. Investment Advisory Fees (49)
Shareholder Reporting Expenses (44)
Professional Fees (39)
Thai Investment Advisory Fees (21)
Administrative Fees (12)
Custodian Fees (1)
Other Liabilities (33)
(2,614)
------------------------ ------------------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 13,267,713, issued and
outstanding U.S.$0.01 par value shares
(30,000,000 shares authorized) U.S.$ 72,274
------------------------
------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 5.45
------------------------
------------------------
- --------------------------------------------------------------------------------
<CAPTION>
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
Common Stock U.S.$ 132
Capital Surplus 189,857
Accumulated Net Investment Loss (13)
Accumulated Net Realized Loss (120,915)
Unrealized Appreciation on Investments and
Foreign Currency Translations 3,213
- --------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 72,274
------------------------
------------------------
- --------------------------------------------------------------------------------
</TABLE>
(a) -- Non-income producing.
@ -- Value is less than U.S.$500.
June 30, 1999 exchange rate-- Thai Baht (THB) 36.885 = U.S. $1.00.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
- --------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends ........................................................................ U.S.$ 546
Interest ......................................................................... 36
- --------------------------------------------------------------------------------------------------------
Total Income ........................................................................ 582
- --------------------------------------------------------------------------------------------------------
Expenses
U.S. Investment Advisory Fees .................................................... 243
Thai Investment Advisory Fees .................................................... 106
Administrative Fees .............................................................. 67
Directors' Fees and Expenses ..................................................... 55
Shareholder Reporting Expenses ................................................... 43
Professional Fees ................................................................ 41
Custodian Fees ................................................................... 24
Transfer Agent Fees .............................................................. 5
Other Expenses ................................................................... 11
- --------------------------------------------------------------------------------------------------------
Total Expenses ................................................................. 595
- --------------------------------------------------------------------------------------------------------
Net Investment Loss .......................................................... (13)
- --------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold .......................................................... (5,873)
Foreign Currency Transactions ....................................................... (3)
- --------------------------------------------------------------------------------------------------------
Net Realized Loss .............................................................. (5,876)
- --------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments ...................................................... 27,763
Depreciation on Foreign Currency Translations .................................... (3)
- --------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ................................. 27,760
- --------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation .......... 21,884
- --------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. U.S.$ 21,871
- --------------------------------------------------------------------------------------------------------
- ------------------------------------------------- ------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Loss ....................................... U.S.$ (13) U.S.$ (489)
Net Realized Loss ......................................... (5,876) (82,498)
Change in Unrealized Appreciation/Depreciation ............ 27,760 84,842
- --------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations ...... 21,871 1,855
- --------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ..................................... - (2,433)
- --------------------------------------------------------------------------------------------------------
Total Distributions .......................................... - (2,433)
- --------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Reinvestment of Distributions (0 and 129,475 shares) ...... - 869
- --------------------------------------------------------------------------------------------------------
Total Increase ............................................ 21,871 291
Net Assets:
Beginning of Period ....................................... 50,403 50,112
- --------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of
U.S.$(13) and U.S.$0, respectively) ....................... U.S.$ 72,274 U.S.$ 50,403
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</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 JUNE 30, 1999 ------------------------------------
DATA AND RATIOS: (UNAUDITED) 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD U.S.$ 3.80 U.S.$ 3.81 U.S.$ 15.63
- --------------------------------------------------------------------------------------------------------
Offering Costs ...................... -- -- --
- --------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ........ 0.00# (0.03) 0.33
Net Realized and Unrealized Gain
(Loss) on Investments ............. 1.65 0.21 (11.92)
- --------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.65 0.18 (11.59)
- --------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ............ -- (0.19) --
In Excess of Net Investment Income -- -- (0.11)
Net Realized Gain ................ -- -- --
In Excess of Net Realized Gain ... -- -- (0.12)
- --------------------------------------------------------------------------------------------------------
Total Distributions ............. -- (0.19) (0.23)
- --------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to
Capital Share Transactions ....... -- -- --
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ...... U.S.$ 5.45 U.S.$ 3.80 U.S.$ 3.81
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD U.S.$ 10.25 U.S.$ 5.88 U.S.$ 5.25
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ..................... 74.47% 15.43% (67.35)%
Net Asset Value (1) .............. 43.42% 2.88% (75.17)%
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) U.S.$ 72,274 U.S.$ 50,403 U.S.$ 50,112
- --------------------------------------------------------------------------------------------------------
Ratio of Expenses Before Thai Tax to
Average Net Assets ............... 2.16%* 2.32% 1.44%
Ratio of Expenses After Thai Tax to
Average Net Assets ............... 2.07%* N/A N/A
Ratio of Net Investment Income to
Average Net Assets ............... (0.05)%* (0.97)% 3.14%
Portfolio Turnover Rate 41% 78% 22%
- --------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
SELECTED PER SHARE ------------------------------------
DATA AND RATIOS: 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD U.S.$ 24.89 U.S.$ 28.30 U.S.$ 39.42
- --------------------------------------------------------------------------------------------------------
Offering Costs ...................... -- -- (0.05)
- --------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ........ 0.31 0.38 0.32
Net Realized and Unrealized Gain
(Loss) on Investments ............. (9.15) (0.19) (5.08)
- --------------------------------------------------------------------------------------------------------
Total from Investment Operations (8.84) 0.19 (4.76)
- --------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income ............ -- (0.06) (0.35)
In Excess of Net Investment Income (0.32) (0.05) --
Net Realized Gain ................ (0.08) (3.23) (4.62)
In Excess of Net Realized Gain ... -- (0.15) --
- --------------------------------------------------------------------------------------------------------
Total Distributions ............. (0.40) (3.49) (4.97)
- --------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to
Capital Share Transactions ....... (0.02)+ (0.11)+ (1.34)++
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ...... U.S.$ 15.63 U.S.$ 24.89 U.S.$ 28.30
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD U.S.$ 16.38 U.S.$ 22.38 U.S.$ 22.38
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ..................... (25.33)% 13.70% (24.30)%+++
Net Asset Value (1) .............. (35.93)% (0.10)% (10.40)%+++
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) U.S.$204,209 U.S.$312,965 U.S.$ 343,840
- --------------------------------------------------------------------------------------------------------
Ratio of Expenses Before Thai Tax to
Average Net Assets ............... 1.19% 1.17% 1.13%
Ratio of Expenses After Thai Tax to
Average Net Assets ............... 1.43% 1.30% 1.22%
Ratio of Net Investment Income to
Average Net Assets ............... 1.42% 1.35% 1.01%
Portfolio Turnover Rate ............. 24% 26% 22%
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
# Amount is less than U.S.$0.01.
+ 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.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- ----------
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
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<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 may use derivatives to achieve its investment objectives. The Fund may
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 may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund may utilize
and their associated risks:
5. 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 its 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.
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<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 generally
will expose the Fund to credit risks of the underlying instruments as well
as of the issuer of the Structured Security. 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-dividend 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 net operating
losses, 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 Dean Witter Investment 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
0.90% of the Fund's first $50 million of average weekly net assets, 0.70% of the
Fund's next $50 million of average weekly net assets and 0.50% 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 0.40% of the Fund's first $50 million of average weekly net
assets, 0.25% of the Fund's next $50 million of average weekly net assets and
0.20% of the Fund's average weekly net assets in excess of $100 million.
D. The Chase Manhattan Bank, through its corporate affiliate Chase Global Funds
Services Company (the "Administrator"), provides administrative services to the
Fund under an Administration Agreement. Under the Administration Agreement, the
Administrator is paid a fee computed weekly and payable monthly at an annual
rate of 0.05% 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.
E. The Chase Manhattan Bank, acts as custodian for the Fund's assets held in the
United States. Custody fees are payable monthly based on assets held in custody,
investment purchases and sales activity and account maintenance fees, plus
reimbursement for certain out-of-pocket expenses.
F. During the six months ended June 30, 1999, the Fund made purchases and sales
totaling $21,780,000 and $22,212,000, 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
June 30, 1999, the U.S. Federal income tax cost basis of securities was
$66,656,000 and, accordingly, net unrealized appreciation
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<PAGE>
for U.S. Federal income tax purposes was $3,132,000, of which $24,703,000
related to appreciated securities and $21,571,000 related to depreciated
securities. At December 31, 1998, the Fund had a capital loss carryforward for
U.S. Federal income tax purposes of approximately $108,851,000 available to
offset future gains of which $23,692,000 will expire on December 31, 2005 and
$85,159,000 will expire on December 31, 2006. To the extent that capital gains
are offset, such gains will not be distributed to the shareholders.
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, 1999 totaled
$50,000 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 June
21, 1999. The following is a summary of each proposal presented and the total
number of shares voted:
<TABLE>
<CAPTION>
Votes in Votes Authority Votes
PROPOSAL: Favor of Against Withheld Abstained
- -------- -------- ------- -------- ---------
<S> <C> <C> <C> <C>
1. To elect the following Directors: Peter J.Chase ................... 6,848,875 -- 130,811 --
David B. Gill ................... 6,859,451 -- 120,235 --
Michael F. Klein ................ 6,832,419 -- 147,268 --
2. To ratify the selection of PricewaterhouseCoopersLLP as independent
accountants of the Fund ........................................... 6,911,638 34,979 -- 33,069
</TABLE>
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<PAGE>
YEAR 2000 DISCLOSURE (UNAUDITED):
The investment advisory services provided to the Fund by the Advisers depend on
the smooth operation of their computer systems. Many computer and software
systems in use today cannot recognize the year 2000, but revert to 1900 or some
other date, due to the manner in which dates were encoded and calculated. That
failure could have a negative impact on the handling of securities trades,
pricing and account services. The Advisers have been actively working on
necessary changes to their own computer systems to deal with the year 2000
problem and expect that their systems will be adapted before that date. There
can be no assurance, however, that they will be successful. In addition, other
unaffiliated service providers may be faced with similar problems. The Advisers
are monitoring their remedial efforts, but, there can be no assurance that they
and the services they provide will not be adversely affected.
In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
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<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
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