<PAGE>
-----------------------------------------------------------
THE
THAI FUND,
INC.
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THIRD QUARTER REPORT
SEPTEMBER 30, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
THE THAI FUND, INC.
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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
TREASURER
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U.S. INVESTMENT ADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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THAI INVESTMENT ADVISER
The Mutual Fund Public Company Limited
30th-32nd Floor, Lake Rajada Building
193-195 Ratchadaphisek Road
Khlong-Toey, Bangkok 10110 Thailand
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ADMINISTRATOR
The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108
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CUSTODIANS
The Thai Farmers Bank Public Company Limited
1 Soi Thai Farmers
Ratburana Road, Ratburana
Bangkok, Thailand
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, New York 11245
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SHAREHOLDER SERVICING AGENT
Boston Equiserve
Investor Relations Department
P.O. Box 644
Boston, Massachusetts 02102-0644
(800) 730-6001
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LEGAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
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For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726 or visit our website at
www.msdw.com/institutional/investmentmanagement.
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the nine months ended September 30, 1999, The Thai Fund, Inc. (the "Fund")
had a total return, based on net asset value per share, of 11.05% compared to
- -1.91% 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 September 30, 1999, the Fund's total return, based on
net asset value per share, was -15.71% compared to -28.16% for the Index. On
September 30, 1999, the closing price of the Fund's shares on the New York Stock
Exchange was $8 1/8, representing a 92.7% premium to the Fund's net asset value
per share.
The market corrected sharply during the third quarter due to slow progress in
debt restructuring and bank recapitalization. The economic crisis of the past
two years devastated the financial condition of much of corporate Thailand.
Economic contraction, poor corporate cash flows, high debt levels and weak
foreclosure laws created a situation in which about half of the loans in the
Thai banking system became non-performing by the second quarter of 1999. Over
the past two years, Thai banks have periodically rallied sharply on successful
capital raisings or progress towards creating a workable bankruptcy and
foreclosure process. A successful capital raising by Siam Commercial Bank in
late March, some notable progress in corporate debt rescheduling and the passage
of a package of bankruptcy laws fueled optimism and a sharp rally in the second
quarter.
However, banks fell sharply in the third quarter as new evidence emerged of the
depth of the bad loan problems at Krung Thai Bank (KTB). KTB is a government
controlled bank that became the largest Index constituent after several huge
capital injections by the government. KTB has massive non-performing loans of at
least 58% of loans. Mismanagement of the bank became a contentious political
issue and the stock halved during the third quarter, dragging other banks and
the Index down with it. The announcement of the third capital raising by Thai
Farmers Bank in two years, this one in the form of a deeply discounted rights
issue, highlighted the continuing capital needs of the banking sector and
contributed to poor sentiment. Notwithstanding these market setbacks, corporate
debt restructuring picked up pace in the third quarter. Aggregate non-performing
loans for the bank sector are trending down and this trend is likely to
accelerate. Foreign banks entering Thailand could drive positive loan growth in
2000, providing fuel for better economic growth.
The Thai economy is recovering, with better domestic consumption and positive
year-on-year export growth. Consumer durable purchases like autos bottomed in
late 1998 and have accelerated in 1999. Growth drivers include improved consumer
confidence and new sources of financing from new entrants into the financial
market, including foreign banks. Non-durable consumer product sales have also
picked up. Although the corporate and commercial real estate markets are
massively overbuilt and will take years to recover, sales of residential housing
have picked up in 1999, allowing some developers to clear unsold inventory and
complete some stalled projects. Export growth, while lagging regional peers, has
turned solidly positive in 1999 and is contributing to GDP growth. Although
economic statistics for 1998 have been revised down, creating a lower base of
comparison, 1999 GDP growth will likely be positive and the outlook for 2000 is
stronger.
Monetary policy is expected to remain loose. Thai banks, with their significant
non-performing loan portfolios, need low rates to limit the carrying cost of bad
loans. A large number of debt restructurings involve extending loan maturities
and fixing interest rates at low levels for 2-3 years. This creates a growing
interest rate mismatch, creating further incentive for the Bank of Thailand to
keep interest rates low. In these circumstances, the government is likely to
allow the baht to weaken modestly before tightening monetary policy to defend
the currency.
A parliamentary election is due to be held by late 2000. More contentious
relations with the IMF are likely as the ruling party moves to associate itself
with more popular economic policies than the austerity of the IMF package. It is
unlikely that much of the promised privatization program will occur before the
formation of a new government. Fiscal policy is also likely to remain loose into
the election to support economic growth.
We remain invested in a concentrated basket of stocks that emphasize companies
that are genuinely restructuring, are geared to the economic recovery or offer
the best exposure to improving asset quality in the banking system.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
October 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.
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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 September 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
HISTORICAL
INFORMATION
TOTAL RETURN (%)
------------------------------------------------------------------------
MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3)
---------------------- ---------------------- ----------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR TO DATE 38.30% -- 11.05% -- -1.91% --
ONE YEAR 80.56 80.56% 55.72 55.72% 47.49 47.49%
FIVE YEAR -63.52 -18.26 -83.13 -29.95 -83.99 -30.67
TEN YEAR -25.09 -2.85 -45.71 -5.93 -64.51 -9.84
SINCE INCEPTION* 62.34 4.26 -15.71 -1.46 -28.16 -2.81
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
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RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
NINE MONTHS
ENDED
SEPTEMBER 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 $ 4.22
Market Value Per Share.......$ 32.25 $16.00 $16.25 $18.75 $36.88 $22.38 $ 22.38 $16.38 $ 5.25 $ 5.88 $ 8.13
Premium/(Discount)........... 70.8% 22.3% 5.5% -9.4% -6.4% -20.9% -10.1% 4.8% 37.8% 54.7% 92.7%
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% 11.05%
Index Total Return (3)....... 120.97% -28.59% 15.80% 24.71% 88.14% -17.63% -6.17% -36.25% -75.54% 22.43% -1.91%
</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 September 30, 1999 (Unaudited)
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DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (96.9%)
Short-Term Investments (3.1%)
</TABLE>
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INDUSTRIES
[CHART]
<TABLE>
<S> <C>
Banking (15.8%)
Beverages & Tobacco (5.8%)
Broadcasting & Publishing (5.6%)
Building Materials & Components (13.2%)
Electrical & Electronics (13.9%)
Energy Sources (9.8%)
Miscellaneous Materials & Commodities (5.5%)
Telecommunications (5.3%)
Telecommunications--Wireless (4.9%)
Transportation--Airlines (3.9%)
Other (16.3%)
</TABLE>
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TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Delta Electronics Public Co., Ltd. 8.6%
2. Thai Framers Bank Co., Ltd. 7.2
3. Siam City Cement Co., Ltd. 6.9
4. Siam Cement Co., Ltd. 6.3
5. The Serm Suk Co., Ltd. 5.8
6. BEC World Co., Ltd. 5.6
7. Charoen Pokphand Feedmill Co., Ltd. 5.5
8. Shin Corp. Public Co., Ltd. 5.3
9. Bangkok Bank Co., Ltd. 5.3
10. PTT Exploration & Production Public Co., Ltd. 5.1
----
61.6%
-----
-----
</TABLE>
4
<PAGE>
FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (000)
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<S> <C> <C>
THAI INVESTMENT PLAN (97.0%)
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THAI COMMON STOCKS(92.5%)
(Unless otherwise noted)
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AUTOMOBILES (1.6%)
Thai Stanley Electric Co., Ltd. 715,000 U.S. $ 694
Thai Storage Battery Co., Ltd. 390,600 217
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911
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BANKING (12.5%)
Bangkok Bank Co., Ltd. 2,581,050 2,946
Siam Commercial Bank Co.,
Ltd. (Foreign) 1,711,900 1,411
Thai Farmers Bank Co., Ltd. 2,916,250 2,670
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7,027
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BEVERAGES & TOBACCO (5.8%)
The Serm Suk Co., Ltd. 869,300 3,269
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BROADCASTING & PUBLISHING (5.6%)
BEC World Co., Ltd. 564,800 3,117
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BUILDING MATERIALS & COMPONENTS(13.2%)
Siam Cement Co., Ltd. 295,800 3,525
Siam City Cement Co., Ltd. 1,271,945 3,851
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7,376
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CHEMICALS (2.1%)
National Petrochemical Co., Ltd. 1,526,300 1,193
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ELECTRICAL & ELECTRONICS (13.9%)
Delta Electronics Public Co., Ltd. 542,955 4,799
Shin Corp. Public Co., Ltd. 831,700 2,965
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7,764
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ENERGY SOURCES (9.8%)
Electricity Generating Public Co., Ltd. 2,605,200 2,656
PTT Exploration & Production
PublicCo., Ltd. 408,800 2,835
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5,491
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FOOD & HOUSEHOLD PRODUCTS (2.0%)
Compass East Industry Public
Co., Ltd. 348,700 1,132
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INSURANCE (1.4%)
Bangkok Insurance Co., Ltd. 248,100 763
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MISCELLANEOUS MATERIALS & COMMODITIES (5.5%)
Charoen Pokphand Feedmill
Co., Ltd. 1,251,580 3,056
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MULTI-INDUSTRY (0.8%)
Saha-Union Co., Ltd. 1,483,600 453
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REAL ESTATE (0.9%)
Golden Land Property
Development Public Co., Ltd. 1,850,000 519
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TELECOMMUNICATIONS (5.3%)
Shinawatra Satellite Public Co., Ltd. 2,913,875 1,476
TelecomAsia Corp. Public Co., Ltd. 2,184,800 1,467
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2,943
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TELECOMMUNICATIONS--WIRELESS (4.9%)
Advanced Information Services
Co., Ltd. 335,100 2,766
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TEXTILES & APPAREL (1.0%)
Thai Rung Textile Co., Ltd. 958 --@
Thai Wacoal Co., Ltd. 347,013 585
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585
-------------
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TRANSPORTATION--AIRLINES (3.9%)
Thai Airways International
Public Co., Ltd. 1,630,300 2,189
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WHOLESALE & INTERNATIONAL TRADE (2.3%)
Thai Union Frozen Products
Public Co., Ltd. 380,200 1,262
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TOTAL THAI COMMON STOCKS
(Cost U.S.$66,962) 51,816
-------------
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<CAPTION>
NO. OF
RIGHTS
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<S> <C> <C>
RIGHTS (2.4%)
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BANKING (2.4%)
Thai Farmers Bank Co., Ltd.,
expiring 9/15/02
(Cost U.S.$--@) 3,207,850 1,371
-------------
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<CAPTION>
NO. OF.
WARRANTS
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<S> <C> <C>
WARRANTS (0.9%)
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BANKING (0.9%)
Siam Commercial Bank Co., Ltd.,
expiring 5/10/02 (Cost U.S.$--@) 1,687,800 484
-------------
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5
<PAGE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (1.2%)
(Interest Bearing Demand Account)
Thai Baht (Cost U.S.$747) THB 27,892 U.S. $ 681
-------------
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SHORT-TERM INVESTMENTS (1.8%)
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REPURCHASE AGREEMENT (1.8%)
Chase Securities, Inc., 5.05%,
dated 9/30/99, due 10/1/99,
to be repurchased at U.S.$1,026
collateralized by U.S.$960
United States Treasury Bonds,
7.125%, due 2/15/23, valued
at U.S.$1,035
(Cost U.S.$1,026) U.S.$ 1,026 1,026
-------------
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TOTAL INVESTMENTS (98.8%)
(Cost U.S.$68,735) 55,378
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OTHER ASSETS AND LIABILITIES (1.2%)
Other Assets U.S.$ 2,002
Liabilities (1,336) 666
-------------
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NET ASSETS (100%)
Applicable to 13,267,713 issued and
outstanding U.S.$0.01 par value shares
(30,000,000 shares authorized) U.S.$ 56,044
-------------
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NET ASSET VALUE PER SHARE U.S.$ 4.22
-------------
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@--Amount is less than U.S.$500.
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</TABLE>
6
