<PAGE>
-----------------------------------------------------------
THE
THAI FUND,
INC.
-----------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 2000
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
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
John D. Barrett II
DIRECTOR
Gerard E. Jones
DIRECTOR
Graham E. Jones
DIRECTOR
John A. Levin
DIRECTOR
Andrew McNally IV
DIRECTOR
William G. Morton, Jr.
DIRECTOR
Samuel T. Reeves
DIRECTOR
Fergus Reid
DIRECTOR
Frederick O. Robertshaw
DIRECTOR
Stefanie V. Chang
VICE PRESIDENT
Arthur J. Lev
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Belinda A. Brady
TREASURER
Robin L. Conkey
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
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
--------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
================================================================================
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/im.
<PAGE>
LETTER TO SHAREHOLDERS
---------
For the six months ended June 30, 2000, The Thai Fund, Inc. (the "Fund") had a
total return, based on net asset value per share, of -29.95% compared to -35.41%
for the U.S. dollar adjusted Securities Exchange of Thailand (SET) Index (the
"Index"). For the period from the Fund's commencement of operations on February
16, 1988 through June 30, 2000, the Fund's total return, based on net asset
value per share, was -20.10% compared to -37.36% for the Index. On June 30,
2000, the closing price of the Fund's shares on the New York Stock Exchange was
$5 3/16, representing a 29.7% premium to the Fund's net asset value per share.
The banks bore the brunt of the selling, falling by over 40% during the period
and the telecommunications stocks fell by over 25 % while the energy sector
declined by 16.8%.
The Thai economy expanded by 5.2% year-over-year during the first quarter of
2000, a slowdown from the fourth quarter of 1999 figure of 6.5%. Exports were
the main growth engine, expanding by 20.0% year-over-year in the first half of
2000. Manufacturing exports experienced favorable growth while lower prices led
to a contraction in agricultural exports. Domestic demand also improved
moderately. Consumption continued to expand as reflected by improvements in
several indicators such as automobile sales, value-added tax (VAT) collection
and retail sales. However, high non-performing loan (NPL) levels (1.9 trillion
baht or 36% of total loans), poor agricultural prices and limited improvements
in employment made the recovery fragile. This led the government to postpone the
planned increase in VAT (from 7 to 10%) from April 2000 to October 2000 in order
to support recovery in consumption. Private investment also showed signs of
pick-up, as seen in the pick-up in machinery and equipment expenditure as well
as construction. Board of Investment statistics suggested a potential rise in
direct investment, especially in electronics, agro-industry and chemical
sectors. On the external front, the trade surplus remained healthy, reaching
U.S. $3.2 billion for the first five months of 2000.
Inflation remained subdued because of falling agricultural prices and relatively
weak demand, which helped moderate the 50% rise in oil prices during the past 15
months. Headline inflation rose only 1.2% and core inflation rose 0.6%,
significantly below the Bank of Thailand's (BoT) upper bound inflation target of
3.5%. Therefore, we believe that the BoT will maintain its loose monetary policy
stance for the next 6-12 months to support the recovery. Excess liquidity
remains in the banking system and the interbank rate remains low at 1.75-2.5%,
while deposit rates are at historical lows of 3.5-4.0%. This has induced some
depositors to move their money into the bond market, which offers higher
returns. Commercial bank loans contracted at an annual rate of 1.4% while
deposits grew at 3%. The monetary base and narrow money supply have consistently
declined from the end of 1999 as the BoT continued to absorb excess liquidity
injected during December 1999 in preparation for Y2K.
Disagreement over the budget has led to the resignation of 97 opposition
politicians and the call for an immediate election. The existing government
resisted this, preferring to pass the 2001 budget and election law reforms
before dissolving parliament. General elections must be held before November of
2000 with Thai Rak Thai party (under Thaksin Shinawatra) likely to play a major
role in the new government, possibly in a coalition with the democrats.
During the past six months, good progress was made on corporate restructuring
with several merger & acquisitions. Major deals included HSBC's purchase of a
75% stake in a government bank and Telenor's acquisition of 30% of Total Access
Communication and 24.8% of UCOM. An Effective Planner Company was also installed
to oversee the debt restructuring proposal of TPI. Otherwise, the first quarter
of 2000 corporate earnings were largely within expectations and improved
financial performance had broadened to include more medium-sized corporates.
The country's external balance remained strong with a sustainable current
account surplus of about U.S. $800-900 million per month which is financing
foreign debt repayment of the private sector. The BoT revised up the country's
external debt from U.S. $72 billion to U.S. $92 billion after a more detailed
survey of the non-bank (corporate) external debt position. The upward revision
increases concerns over capital outflow, weakening baht sentiment in the medium
term. However, generous current account surpluses allow continued repayment of
foreign debt without pushing international reserve below critical levels.
Currently, reserves are 1.8 times short-term debt.
2
<PAGE>
Following the reduction of its weight in the MSCI Asia ex-Japan Index, the Thai
corporates face an uphill task of attracting foreign investors amidst a backdrop
of near-term political uncertainties and moderate economic growth. NPL
reduction, an important confidence booster, is likely to be gradual. With easing
concerns about the threat of a hard landing for the U.S. economy, the banks and
other interest-rate sensitive stocks could do well in the short term. However,
we are still underweight the sector as they are unlikely to solve the
unrestructurable NPLs in an acceptable timeframe. We continue to prefer the
export and consumer sectors, especially those with good management quality and
strong balance sheets.
Sincerely,
/s/ Harold J. Schaaff, Jr.
Harold J. Schaaff, Jr.
PRESIDENT AND DIRECTOR
July 2000
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.
FOREIGN INVESTING INVOLVES CERTAIN RISKS, INCLUDING CURRENCY FLUCTUATIONS AND
CONTROLS, RESTRICTIONS ON FOREIGN INVESTMENTS, LESS GOVERNMENTAL SUPERVISION AND
REGULATION, LESS LIQUIDITY AND THE POTENTIAL FOR MARKET VOLATILITY AND POLITICAL
INSTABILITY.
--------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT www.msdw.com/im.
3
<PAGE>
The Thai Fund, Inc.
Investment Summary as of June 30, 2000 (Unaudited)
================================================================================
<TABLE>
<CAPTION>
HISTORICAL
INFORMATION TOTAL RETURN(%)
------------------------------------------------------------------
MARKET VALUE(1) NET ASSET VALUE(2) INDEX(3)
-------------------- -------------------------------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
YEAR TO DATE -33.60% -- -29.95% -- -35.41% --
ONE YEAR -49.39 -49.39% -26.61 -26.61% -41.37 -41.37%
FIVE YEAR -76.15 -24.93 -83.42 -30.19 -85.30 -31.85
TEN YEAR -58.43 -8.40 -66.06 -10.24 -79.76 -14.77
SINCE INCEPTION* 3.62 0.29 -20.10 -1.80 -37.36 -3.71
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
--------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[CHART]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED
JUNE 30,
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share ..... $13.08 $15.41 $20.69 $39.42 $28.30 $24.89 $15.63 $3.81 $3.80 $5.71 $4.00
Market Value Per Share ........ $16.00 $16.25 $18.75 $36.88 $22.38 $22.38 $16.38 $5.25 $5.88 $7.81 $5.19
Premium/(Discount) ............ 22.3% 5.5 -9.4% -6.4% -20.9% -10.1% 4.8% 37.8% 54.7% 36.8% 29.7%
Income Dividends .............. $ 0.21 $ 0.21 -- $ 0.36 $ 0.35 $ 0.11 $ 0.32 $0.11 $0.19 -- --
Capital Gains Distributions ... $ 1.68 $ 0.47 -- $ 0.51 $ 4.62 $ 3.38 $ 0.08 $0.12 -- -- --
Fund Total Return (2) ......... -20.44% 23.08% 34.26% 98.90% -10.40%+ -0.10% -35.93% -75.17% 2.88% 50.26% -29.95%
Index Total Return (3) ........ -28.60% 15.80% 24.71% 88.40% -17.76% -6.11% -36.25% -75.54% 22.43% 32.41% -35.41%
</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, 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.
4
<PAGE>
The Thai Fund, Inc.
Portfolio Summary as of June 30, 2000 (Unaudited)
================================================================================
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
<TABLE>
<S> <C>
Equity Securities (97.6%)
Short-Term Investments (2.4%)
</TABLE>
--------------------------------------------------------------------------------
INDUSTRIES
[CHART]
<TABLE>
<S> <C>
Banks (15.5%)
Beverages (4.1%)
Communications Equipment (4.5%)
Construction Materials (16.6%)
Diversified Telecommunication Services (11.8%)
Electronic Equipment & Instruments (8.0%)
Food Products (7.1%)
Media (4.4%)
Oil & Gas (4.6%)
Wireless Telecommunication Services (7.4%)
Other (16.0%)
</TABLE>
--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
------------
<S> <C>
1. Siam City Cement Co., Ltd. 8.5%
2. Thai Farmers Bank Public Co., Ltd. 8.1
3. Siam Cement Co., Ltd. 8.1
4. Advanced Information Services Co., Ltd. 7.4
5. TelecomAsia Corp. Public Co., Ltd. 6.9
6. Charoen Pokphand Feedmill Co., Ltd. 5.5
7. Shinawatra Satellite Public Co., Ltd. 5.0
8. Delta Electronics Public Co., Ltd. 4.7
9. PTT Exploration & Production Public Co, Ltd. 4.6
10. Shinawatra Computer Co., Ltd. 4.5
----
63.3%
====
</TABLE>
5
<PAGE>
FINANCIAL STATEMENTS
---------
STATEMENT OF NET ASSETS (UNAUDITED)
---------
JUNE 30, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (000)
--------------------------------------------------------------------------------
<S> <C> <C>
THAI INVESTMENT PLAN (99.4%)
--------------------------------------------------------------------------------
THAI COMMON STOCKS (97.2%)
(Unless otherwise noted)
--------------------------------------------------------------------------------
AIRLINES (2.3%)
(a)Thai Airways International Public Co., Ltd. 1,329,900 U.S.$ 1,231
------------
--------------------------------------------------------------------------------
AUTO COMPONENTS (0.4%)
Thai Storage Battery Co., Ltd. 390,600 217
------------
--------------------------------------------------------------------------------
BANKS (15.1%)
(a)Bangkok Bank Public Co., Ltd. 2,898,050 2,256
(a)Siam Commercial Bank Public Co., Ltd. (Foreign) 2,533,900 1,423
(a)Thai Farmers Bank Public Co., Ltd. 6,137,200 4,308
------------
7,987
------------
--------------------------------------------------------------------------------
BEVERAGES (4.1%)
The Serm Suk Co., Ltd. 869,300 2,175
------------
--------------------------------------------------------------------------------
CHEMICALS (2.2%)
National Petrochemical Co., Ltd. 1,526,300 1,149
------------
--------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (4.5%)
(a)Shinawatra Computer Co., Ltd. plc 489,000 2,372
------------
--------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (16.6%)
(a)Siam Cement Co., Ltd. 387,300 4,291
(a)City Cement Co., Ltd. 1,271,945 4,513
------------
8,804
------------
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (11.8%)
(a)Shinawatra Satellite Public Co., Ltd. 3,649,575 2,632
(a)TelecomAsia Corp. Public Co., Ltd. 3,435,600 3,639
------------
6,271
------------
--------------------------------------------------------------------------------
ELECTRIC UTILITIES (2.7%)
Electricity Generating Public Co., Ltd. 1,950,800 1,457
------------
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (8.0%)
Delta Electronics Public Co., Ltd. 374,990 2,489
Hana Microelectronics Public Co., Ltd. 234,000 1,780
------------
4,269
------------
--------------------------------------------------------------------------------
FOOD PRODUCTS (7.1%)
Charoen Pokphand Feedmill Co., Ltd. 1,966,696 2,937
Thai Union Frozen Products Public Co., Ltd. 380,200 810
------------
3,747
------------
--------------------------------------------------------------------------------
HOUSEHOLD DURABLES (2.0%)
Compass East Industry Public Co., Ltd. 348,700 1,037
------------
--------------------------------------------------------------------------------
INSURANCE (1.2%)
Bangkok Insurance Co., Ltd. 248,100 652
------------
--------------------------------------------------------------------------------
MEDIA (4.4%)
BEC World Co., Ltd. 397,900 2,336
------------
--------------------------------------------------------------------------------
OIL & GAS (4.6%)
PTT Exploration & Production Public Co., Ltd. 501,900 2,434
------------
--------------------------------------------------------------------------------
REAL ESTATE (0.5%)
(a)Golden Land Property Development Public Co.,
Ltd. 1,850,000 250
------------
--------------------------------------------------------------------------------
SPECIALTY RETAIL (0.2%)
Siam Makro Co. Ltd. 110,100 131
------------
--------------------------------------------------------------------------------
TEXTILES & APPAREL (2.1%)
Saha-Union Co., Ltd. 1,483,600 407
(a)Thai Rung Textile Co., Ltd. 958 --@
Thai Wacoal Co., Ltd. 347,013 691
------------
1,098
------------
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (7.4%)
(a)Advanced Information Services Co., Ltd. 425,800 3,935
------------
--------------------------------------------------------------------------------
TOTAL THAI COMMON STOCKS
(Cost U.S.$68,703) 51,552
------------
--------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
--------------------------------------------------------------------------------
WARRANTS (0.4%)
--------------------------------------------------------------------------------
BANKS (0.4%)
(a)Siam Commercial Bank Public Co., Ltd.,
expiring 5/10/02 (Cost U.S. $--@) 1,687,800 198
------------
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (1.8%)
(Interest Bearing Demand Account)
Thai Baht (Cost U.S.$976) THB 38,191 U.S.$ 975
------------
--------------------------------------------------------------------------------
TOTAL THAI INVESTMENT PLAN
(Cost U.S.$69,679) 52,725
------------
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.6%)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.6%)
Chase Securities, Inc., 6.15%, dated
6/30/00, due 07/03/00, to be repurchased
at U.S.$295, collateralized by U.S.$210
United States Treasury Bond, 13.25%,
due 5/15/14, valued at U.S.$310
(Cost U.S.$295) 295 295
------------
--------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost U.S.$69,974) 53,020
------------
--------------------------------------------------------------------------------
OTHER ASSETS (0.5%)
Receivable for Investments Sold 213
Dividends Receivable 47
Interest Receivable 4
Other 26 290
--------- ------------
--------------------------------------------------------------------------------
LIABILITIES (-0.5%)
Payable For:
Directors' Fees and Expenses (72)
Shareholder Reporting Expenses (49)
U.S. Investment Advisory Fees (40)
Professional Fees (39)
Administrative Fees (24)
Thai Investment Advisory Fees (19)
Custodian Fees (6)
Other Liabilities (28) (277)
--------- -----------
--------------------------------------------------------------------------------
<CAPTION>
AMOUNT
(000)
--------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS (100%)
Applicable to 13,267,713, issued and outstanding
U.S.$ 0.01 par value shares
(30,000,000 shares authorized) U.S.$ 53,033
============
--------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 4.00
============
--------------------------------------------------------------------------------
AT JUNE 30, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------------------
Common Stock U.S.$ 132
Capital Surplus 189,371
Undistributed Net Investment Income 575
Accumulated Net Realized Loss (120,161)
Unrealized Depreciation on Investments and
Foreign Currency Translations (16,884)
--------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 53,033
============
--------------------------------------------------------------------------------
(a) -- Non-income producing.
@ -- Value is less than U.S.$500.
June 30, 2000 exchange rate -- Thai Baht (THB) 39.175=
U.S.$1.00.
--------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
-------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends ........................................................................ U.S.$ 1,197
Interest ......................................................................... 14
-------------------------------------------------------------------------------------------------------------
Total Income ..................................................................... 1,211
-------------------------------------------------------------------------------------------------------------
EXPENSES
U.S. Investment Advisory Fees .................................................... 275
Thai Investment Advisory Fees .................................................... 119
Administrative Fees .............................................................. 70
Professional Fees ................................................................ 40
Directors' Fees and Expenses ..................................................... 31
Custodian Fees ................................................................... 23
Shareholder Reporting Expenses ................................................... 19
Transfer Agent Fees .............................................................. 14
Other Expenses ................................................................... 33
------------------------------------------------------------------------------------------------------------
Total Expenses ................................................................... 624
-------------------------------------------------------------------------------------------------------------
Net Investment Income ............................................................ 587
-------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold ....................................................... 1,457
Foreign Currency Transactions .................................................... (115)
-------------------------------------------------------------------------------------------------------------
Net Realized Gain ................................................................ 1,342
-------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Depreciation on Investments ...................................................... (24,680)
Depreciation on Foreign Currency Translations .................................... (3)
-------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation ................................... (24,683)
-------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation ....... (23,341)
-------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. U.S.$ (22,754)
=============================================================================================================
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) ........................................ U.S.$ 587 U.S.$ (467)
Net Realized Gain (Loss) ............................................ 1,342 (6,495)
Change in Unrealized Appreciation/Depreciation ...................... (24,683) 32,346
-------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations ..... (22,754) 25,384
-------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................................. 75,787 50,403
-------------------------------------------------------------------------------------------------------------
End of Period (including undistributed net investment
income/(accumulated net investment loss) of
U.S.$575 and U.S.$(12), respectively) ............................... U.S.$ 53,033 U.S.$ 75,787
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED PER SHARE DATA SIX MONTHS
AND RATIOS: ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... U.S.$ 5.71 U.S.$ 3.80 U.S.$ 3.81 U.S.$ 15.63 U.S.$ 24.89 U.S.$ 28.30
------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ............. 0.04 (0.03) (0.03) 0.33 0.31 0.38
Net Realized and Unrealized Gain (Loss)
on Investments ........................... (1.75) 1.94 0.21 (11.92) (9.15) (0.19)
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations ......... (1.71) 1.91 0.18 (11.59) (8.84) 0.19
------------------------------------------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income .................... -- -- (0.19) -- -- (0.06)
In Excess of Net Investment Income ....... -- -- -- (0.11) (0.32) (0.05)
Net Realized Gain ........................ -- -- -- -- (0.08) (3.23)
In Excess of Net Realized Gain ........... -- -- -- (0.12) -- (0.15)
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions ...................... -- -- (0.19) (0.23) (0.40) (3.49)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to
Capital Share Transactions ............... -- -- -- -- (0.02)+ (0.11)+
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ........... U.S.$ 4.00 U.S.$ 5.71 U.S.$ 3.80 U.S.$ 3.81 U.S.$ 15.63 U.S.$ 24.89
====================================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD .... U.S.$ 5.19 U.S.$ 7.81 U.S.$ 5.88 U.S.$ 5.25 U.S.$ 16.38 U.S.$ 22.38
====================================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value ............................. (33.60)% 32.98% 15.43% (67.35)% (25.33)% 13.70%
Net Asset Value (1) ...................... (29.95)% 50.26% 2.88% (75.17)% (35.93)% (0.10)%
====================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) .... U.S.$53,033 U.S.$75,787 U.S.$50,403 U.S.$50,112 U.S.$204,209 U.S.$312,965
------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets .. 1.97%* 2.04% 2.32% 1.44% 1.43% 1.30%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................... 1.85%* (0.78)% (0.97)% 3.14% 1.42% 1.35%
Portfolio Turnover Rate .................. 8% 50% 78% 22% 24% 26%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
+ Decrease due to shares issued on reinvestment of distributions.
(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.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
---------
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 under procedures
approved by the Board of Directors, 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 accrues and
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: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
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) due to securities transactions
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. dol-
10
<PAGE>
lar equivalent amounts actually received or paid. Net unrealized currency
gains (losses) from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of
unrealized appreciation (depreciation) on investments and foreign currency
translations in the Statement of Net Assets. The change in net unrealized
currency gains (losses) on foreign currency translations for the period is
reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S. dollar
denominated transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
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 assets as
segregated on the Fund's records. 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
11
<PAGE>
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.
Risks also arise from potential losses from adverse market movements, and
such losses could exceed the related amounts shown in the Statement of Net
Assets.
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: Securities and other derivative instruments that
may be purchased or sold by the Fund may 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.
During the six month period ended June 30, 2000, the Fund's investments in the
derivative instruments described above only included foreign currency exchange
contracts.
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 by the Fund are determined in accordance with Federal income tax
regulations, which may differ from generally accepted accounting
principles. The book/tax differences are either considered temporary or
permanent in nature.
Temporary differences are attributable to differing book and tax treatments
for the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassifications
among undistributed net investment income (loss), accumulated net realized
gain (loss) and paid in capital.
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.
12
<PAGE>
F. During the six month period ended June 30, 2000, the Fund made purchases
and sales totaling $6,525,000 and $5,141,000, 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, 2000, the U.S. Federal income tax cost basis of
securities was $68,998,000 and, accordingly, net unrealized depreciation for
U.S. Federal income tax purposes was $16,953,000, of which $9,792,000 related to
appreciated securities and $26,745,000 related to depreciated securities. At
December 31, 1999, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $111,623,000 available to offset future
gains of which $23,693,000 will expire on December 31, 2005, $85,158,000 will
expire on December 31, 2006 and $2,772,000 will expire on December 31, 2007. To
the extent that capital gains are offset, such gains will not be distributed to
the shareholders.
G. 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.
H. 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 "Compensation Plan"). Under the Compensation 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 Compensation Plan. At June 30, 2000 the
deferred fees payable, under the Compensation Plan totaled $72,000 and are
included in Payable for Directors' Fees and Expenses on the Statement of Net
Assets.
I. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Fund was held on June 15, 2000.
The following is a summary of the proposal presented and the total number of
shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
PROPOSAL: FAVOR OF AGAINST ABSTAINED
--------- ---------- --------- -----------
<S> <C> <C> <C>
1. To elect the following Directors: Andrew McNally IV ............ 6,763,312 144,418 --
Frederick O. Robertshaw ...... 6,775,705 132,025 --
Harold J. Schaaff, Jr. ....... 6,773,425 134,305 --
Fergus Reid .................. 6,764,260 143,470 --
Graham E. Jones .............. 6,774,955 132,775 --
John D. Barrett II ........... 6,764,827 142,903 --
Samuel T. Reeves ............. 6,760,186 147,544 --
Gerard E. Jones .............. 6,762,821 144,909 --
</TABLE>
The Annual Meeting of the Stockholders of the Fund was reconvened on August 1,
2000. The following is a summary of the proposal presented and the total number
of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES VOTES
PROPOSAL: FAVOR OF AGAINST ABSTAINED
--------- ---------- --------- -----------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP as independent
accountants of the Fund ......................................... 6,751,813 11,895 62,271
</TABLE>
--------------------------------------------------------------------------------
CHANGE IN INDEPENDENT ACCOUNTANTS:
ON JULY 5, 2000, PRICEWATERHOUSECOOPERS LLP RESIGNED AS INDEPENDENT ACCOUNTANTS
OF THE FUND. THE REPORTS OF PRICEWATERHOUSECOOPERS LLP ON THE FINANCIAL
STATEMENTS OF THE FUND FOR THE PAST TWO FISCAL YEARS CONTAINED NO ADVERSE
OPINION OR DISCLAIMER OF OPINION AND WERE NOT QUALIFIED OR MODIFIED AS TO
UNCERTAINTY, AUDIT SCOPE OR ACCOUNTING PRINCIPLE. IN CONNECTION WITH ITS AUDITS
FOR THE TWO MOST RECENT FISCAL YEARS AND THROUGH JULY 5, 2000, THERE HAVE BEEN
NO DISAGREEMENTS WITH PRICEWATERHOUSECOOPERS LLP ON ANY MATTER OF ACCOUNTING
PRINCIPLES OR PRACTICES, FINANCIAL STATEMENT DISCLOSURE, OR AUDITING SCOPE OR
PROCEDURE, WHICH DISAGREEMENTS, IF NOT RESOLVED TO THE SATISFACTION OF
PRICEWATERHOUSECOOPERS LLP, WOULD HAVE CAUSED THEM TO MAKE REFERENCE THERETO IN
THEIR REPORT ON THE FINANCIAL STATEMENTS FOR SUCH YEARS. THE FUND, WITH THE
APPROVAL OF ITS BOARD OF DIRECTORS, AUDIT COMMITTEE AND SHAREHOLDERS, ENGAGED
ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS AS OF AUGUST 1, 2000.
13
<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. 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
14
